The Effectiveness of Corporate Social Responsibility (CSR)

of Plantation Company on Sustainable Development Perspective in

Riau Province

Zulkarnain

Lecturer Faculty of Economics and Business, Universitas Riau

Jl.Bina Widya Km 12,5 Simpang Baru Pekanbaru-Riau 28293

Keywords: Corporate Social Responsibility, Community Empowerment, Sustainability.

Abstract: The obligation to implement the Corporate Social Responsibility (CSR) program is regulated in various

laws and regulations and other sector laws, such as the Company as well as on the environment. Therefore,

companies that want to achieve sustainable business, then in making the CSR program in addition must pay

attention to socioeconomic aspects, also must be concerned about environmental aspects. The purpose of

this research is to know the type of Corporate Social Responsibility (CSR) program of Plantation Company

in Riau and the effectiveness of the program to local people in Riau Province. As the company that became

the largest enterprise in its environment, the plantation company must be aware of its responsibility to the

community. CSR is a form of self-regulation of a company that is integrated into the business model. One of

the CSR activities of the plantation company is the empowerment of the community in its territory namely

Riau Province. The type of CSR program conducted by Plantation Company in Riau to the community is in

the form of community and village empowerment movement. This program has an impact on the

improvement of management and community economic independence. In addition, the Plantation Company

conducts ongoing assistance and evaluation of activities that have been implemented.

1 INTRODUCTION

Corporate Social Responsibility (CSR) is the

commitment of companies or the business world to

contribute to sustainable economic development by

paying attention to corporate social responsibility

and emphasizing a balance between attention to

economic, social and environmental aspects (Budi,

2009). The practice of corporate social generosity

today is experiencing rapid development in line with

the development of the concept of Corporate Social

Responsibility. It is related to the world mandate not

to solely seek profit, but must also be ethical and

play a role in the creation of social investment

(Nursahid, 2006).

The company as one of the economic actors in a

region, be it the village, sub-district, regency,

province and state is required to produce maximum

profit. But the principle that companies are only

profit-oriented has begun to be abandoned. The

company must also have social responsibility in

relation to its existence in the midst of the

community environment (Solihin, 2010).

The company as a system in sustainability and its

balance cannot stand alone. The existence of

companies in the community environment influences

social, economic and cultural life. Companies have

the potential to develop the region because the

operation of companies in a community area can

invite the activities of local communities. Likewise,

the absorption of local labor by companies,

including the phenomenon of the proliferation of

local people who open new businesses to meet the

needs of employees and also all parties related to the

company's activities. Palm oil has an important role

globally, as a raw material for food, non-food and

energy. The global demand for palm oil has

increased sharply due to an increase in the global

population, prices that are more competitive than

other vegetable oils and the diverse uses of oil palm.

The participation of the business community in

sustainable development is to develop a program of

corporate concern to the surrounding community

464

Zulkarnain, .

The Effectiveness of Corporate Social Responsibility (CSR) of Plantation Company on Sustainable Development Perspective in Riau Province.

DOI: 10.5220/0009904700002480

In Proceedings of the International Conference on Natural Resources and Sustainable Development (ICNRSD 2018), pages 464-469

ISBN: 978-989-758-543-2

called Corporate Social Responsibility (CSR). This

is related to the frequent occurrence of social

inequalities and conflicts between the company and

the community and the increasing awareness of the

impact of environmental damage. Along with this,

various groups, both private, government,

community organizations, and the world of

education seek to formulate and promote corporate

social responsibility in relation to society and the

environment.

Palm oil has its own strategic value in supporting

national development. In 2015 this commodity

contributed 8% of GDP in the form of the third

largest export value (USD 18.1 billion, equivalent to

13.7% of Indonesia's total exports). In the same year,

this commodity contributed IDR 22.27 trillion in

state revenues in the form of taxes; while in 2016

has contributed IDR 11.7 trillion in state revenue

from export levies through BPDPKS).

In various rural and inland areas in Riau, oil

palm plantations and palm oil mills are the main

economic drivers that stimulate agribusiness

development from upstream to downstream. This

sector has created employment opportunities (3.4

million workers in gardens and PKS, Directorate

General Of Plantations 2015), has become a source

of income for the community and planters; and

generate added value which can ultimately increase

national income.

Given the importance of oil palm for Indonesia,

oil palm development planning needs to be carried

out with due regard to sustainable principles. The

national palm oil industry has produced many

benefits, but at the same time still faces various

challenges so that the strategy needs to be improved

in maintaining the sustainability of the national

petroleum industry.

One of the challenges of the palm oil industry at

this time is how to increase the commitment of the

parties involved in sustainable palm oil

development. To balance the economic, socio-

cultural and environmental preservation goals of oil

palm development, the Government issued a

regulation on the Indonesian Sustainable Palm Oil

Certification System (ISPO) stipulated in

Agricultural Ministry Regulation No. 11/2015.

A number of programs and initiatives to support

sustainable plantations have been carried out by the

government and other stakeholders such as land

mapping, fostering planters on good garden

management practices, efforts to protect peat lands,

prevention of forest and land fires and governance of

high biodiversity areas and high conservation values

in the plantation landscape.

2 DISCUSSION

Conway (1986) states that there are four sustainable

agroecosystem properties, namely productivity,

stability, sustainability, and equity. Through the

identification of economic, socio-political and

ecological aspects, the development of oil palm

plantations is expected to not only have high

productivity and stability, but also promote a sense

of equality and values of local wisdom that are high

on the environment.

The participation of the business community in

sustainable development is to develop a program of

corporate concern to the surrounding community

called Corporate Social Responsibility (CSR). This

is related to the frequent occurrence of social

inequalities and conflicts between the company and

the community and the increasing awareness of the

impact of environmental damage. Along with this,

various groups, both private, government,

community organizations, and the world of

education seek to formulate and promote corporate

social responsibility in relation to society and the

environment.

Corporate social responsibility today is no longer

voluntary in nature by the company in taking

responsibility for its company's activities, but is

obligatory or an obligation for some companies to

do or implement it. This is regulated in Law Number

40 of 2007 concerning Limited Liability Company

(High Court Regulations) Article 74 which was

ratified on July 20, 2007 which reads:

1. Companies that carry out their business activities

in the field of and/or related to natural resources

must carry out social and environmental

responsibilities.

2. The social and environmental responsibilities as

referred to in paragraph (1) are the Company's

obligations that are budgeted and calculated as

the company's costs which are carried out by

observing propriety and fairness.

3. Companies that do not carry out the obligations

as referred to in paragraph (1) are subject to

sanctions in accordance with the provisions of

the legislation.

The concept of Corporate Social Responsibility

(CSR) referred to in the Act is to prioritize

sustainable development in the form of

strengthening the people's economy and long-term

social programs. Such development programs can be

felt directly by the community and have a direct

effect on life. The community has a stake and

responsibility in its implementation, both in program

The Effectiveness of Corporate Social Responsibility (CSR) of Plantation Company on Sustainable Development Perspective in Riau

Province

465

planning and in implementing it. Corporate social

responsibility or Corporate Social Responsibility

(CSR) arises as a result of the fact that basically the

natural character of each company is to look for

profit as much as possible without considering the

welfare of employees, society and the natural

environment.

According to Rosyida and Fredian (2011), a

company as a system in sustainability and its

balance cannot stand alone. The existence of

companies in the community environment influences

social, economic and cultural life. In its journey, the

activities carried out by the company intersect, both

directly and indirectly with the community and the

environment. Therefore, companies need to

remember and pay attention to socio-cultural

aspects. One of them is to foster good relations that

are reciprocal (reciprocal) with other stakeholders,

both government, private sector, and from various

levels of society elements. This good relationship

can be formed from the interaction between

stakeholders in relation to the implementation of

Corporate Social Responsibility (CSR) programs.

Corporate social responsibility is needed to help

the government in development, among others,

through programs to increase community

productivity and social economic societal

capabilities independently and sustainably.

Elkington (1997) states that good companies not

only pursue economic profit but also have concern

for environmental sustainability (planet) and

people's welfare.

The implementation of Corporate Social

Responsibility (CSR) itself actually aims to

strengthen the company by building cooperation

between stakeholders facilitated by the company

concerned by developing development programs for

the surrounding community. Besides that, the

implementation of Corporate Social Responsibility

(CSR) helps companies to adapt to their

environment, communities and stakeholders related

to companies, both locally, nationally and globally,

because the future development of Corporate Social

Responsibility (CSR) refers to the concept of

sustainable development. The limitation of

government funds for development in various

sectors is one reason that the role of Set and

cooperation between the government and the

company is very necessary.

2.1 Corporate Social Responsibility

(CSR) Program in the Form of

Community Empowerment.

The partnership program is a program to improve

the ability of small businesses to become resilient

and independent through the use of funds from the

State Owner Enterprise (SOE) profit section. This

program is a business collaboration between small

and medium enterprises or with large accompanied

by fostered and developed by medium-sized

businesses or large businesses with the principle of

mutual need, mutual reinforcement, and mutual

benefit this program includes:

1) Providing loans to finance working capital and or

purchase of fixed assets in order to increase

production and sales.

2) Providing special loans used to finance the

funding needs for implementing additional and

short-term assisted Partners business activities in

order to fulfill orders from business partners of

Foster Partners.

3) Providing partnership development funds used to

finance education, training, apprenticeship,

marketing, promotion and matters relating to

increasing the productivity of assisted partners as

well as research related to the Partnership

Program.

The partnership program that can be done is:

1) Financing working capital and investment. The

use of loan funds can be divided into several

sectors, including: Industrial Sector, Trade

Sector, Agriculture Sector, Livestock Sector,

Plantation Sector, Fisheries Sector, Service

Sector and other sectors.

2) Special Loans (Short Term).Grants, such as:

Education, Training, Apprenticeship, Marketing,

Promotion, Exhibition, and others.

The corporate social responsibility program is

based on the concept of sustainable development

which relies on three achievements that are

economically, socially and environmentally

beneficial (triple bottom lines). The company also

bases this program on the Five Pillars Framework

for Sustainable Development. In addition, the

objectives of the UN millennium development in

2000 also inspired the corporate social responsibility

program. As mentioned below, the Five Pillars cover

the fields of education, economics, health, social

culture, religion, sports and security.

Corporate social responsibility activities are

centered on four different projects that provide

ICNRSD 2018 - International Conference on Natural Resources and Sustainable Development

466

employment opportunities in areas with scarce

employment opportunities, offer income for people

without income, change people's mindsets about

hygiene and sanitation in and around their villages,

and more importantly again, opens opportunities to

mobilize community involvement and development

in activities that have economic value and provide

sustainable social benefits in the long term.

The implementation of corporate CSR programs

can lead to changes and impact on ecological

aspects, social structure, community culture,

people's standard of living, community assessment

and other stakeholders on CSR characteristics, and

the synergy of the four reality policies and programs

then constructs community perceptions and other

stakeholders on corporate CSR. These changes,

impacts, and perceptions can conceptually provide

"feedback" to re-formulate corporate CSR policies

and programs. The implementation of targeted

money programs can have an impact on improving

the living standards of the lower classes of society.

With the existence of CSR programs can reduce: 1)

Alleviate poverty, by using workers from around the

company they can contribute to the increase in the

number of the workforce by creating jobs, providing

training, providing products provided by people

from the lower classes then directly will have an

impact on the lower class.

Figure 1: Chart of CSR Effectiveness insustainable

development.

2.2 Output of Corporate Social

Responsibility (CSR) Program

Output is everything that is expected to be directly

obtained from an activity that can be tangible or

intangible.

2.2.1 There Is Educational Assistance and

Scholarships

Support efforts made by the local government,

especially at the village and community level to

improve the education sector and provide

scholarships around the company's activities. The

social condition of a society is always related to the

living conditions of the people in an area such as

education.

2.2.2 The Existence of Poverty Alleviation

and Regional Economic Development

The meaning of poverty in general is a lack of

essential human abilities, especially in terms of

income. Besides that, it is also interpreted as a lack

of income so that it is unable to meet consumption

needs. Poverty is a situation where there is an

inability to fulfill basic needs such as food, clothing,

shelter for education, and health. Poverty can be

caused by scarcity of basic needs fulfillment tools,

or difficult access to education and employment.

2.2.3 Presence of Public Facilities

Maintenance

Public facilities held by the government or private

parties that can be utilized by the general public in

the environment. Examples of public facilities such

as roads, health centers, markets, places of worship,

sports venues and so on.

2.3 Outcome of Corporate Social

Responsibility (CSR) Program

Outcome is the result given by the product of a

program or can also be referred to as an advanced

result of output. Outcomes obtained from the

effectiveness of the companiesas follows:

2.3.1 For Company

a. The company's image has increased.

Companies that carry out CSR activities will be

seen as having high values of concern in the

community. Positive community assessment of

the company will improve the image of the

company itself.

b. Collaboration with stakeholders is better.

In carrying out CSR activities, companies do not

work alone. Usually the company will work with

the local government or related agencies to

cooperate in carrying out their CSR programs.

The establishment of relations between the

The Effectiveness of Corporate Social Responsibility (CSR) of Plantation Company on Sustainable Development Perspective in Riau

Province

467

company and stakeholders will develop

cooperation between them in the future.

c. Society becomes more innovative.

CSR is not just a momentary activity carried out

by the company to the community. CSR is a

continuous activity in order to empower the

community. With this CSR, companies can

actually produce innovation and learning that can

increase the influence of companies in society,

industry, and even the government.

2.3.2 For the Government

Through CSR, the company helps the government

and will create relations between the government

and the company in overcoming social problems

such as poverty, education and health. The task of

the government to create prosperity for its people

becomes lighter with the participation of the

company through CSR activities. CSR that can play

a role in overcoming social problems.

2.3.3 For the Community

CSR also makes a positive contribution to the

relationship between the company and the

community. The implementation of CSR is believed

to be able to reduce conflicts between companies

and society. Companies that do not participate in

people's lives can trigger conflict. CSR will have a

positive impact on the community, this really

depends on the orientation and capacity of the

company. There is a sense of caring for the

surrounding community and community relations

that can be broadly described which can be briefly

understood to increase the participation and position

of an organization in a particular community. This is

done in various ways to get mutual benefits for the

organization and the community. Companies

outcomes for the community surrounding as follows:

a. There are scholarships for disadvantaged

children in the area.

Scholarships are gifts in the form of financial

assistance given to individuals, students or

students who are used for the continuity of

education pursued. Students can be given by

government institutions, companies or

foundations.

b. The welfare of the surrounding community is

increasing.

Economic condition is the condition of a person

or community in an area that is seen in terms of

economics, such as employment, and income.

c. Public facilities are maintained.

The community can maintain each other's

existing public facilities. Without the existence

of public facilities and adequate social facilities,

it would make the living more difficult. Because

people's lives cannot be separated from these

public facilities. Therefore public facilities must

be maintained so as not to cause harm to the

community itself.

3 CONCLUSION

The conclusions that can be drawn from this paper

include:

1. From the effectiveness of the Corporate Social

Responsibility program in plantation companies

in Riau Province, it was concluded that the

output of the CSR program was first the

existence of educational assistance and

scholarships, second, the existence of poverty

alleviation and regional economic development

and the maintenance of public facilities.

2. Outcome from CSR programs for plantation

companies in Riau Province itself has been

effective because the company has directly felt

the impact of conducting CSR activities, one of

which is maintaining good relations between the

company and the surrounding community to

avoid conflicts that can harm and threaten the

company's continued operation. Whereas for the

government and the community it has not been

effective, because the program has not been

sustainable and the program has not yet had a

target and synergized to improve the economy of

the community only to carry out mere

obligations.

4 SUGGESTION

Related to this writing the suggestions that can be

given are as follows:

1. In an effort to support local governments,

especially at the village level, provide

opportunities for working for the surrounding

community, and alleviate poverty and improve

regional economic development, it is

recommended that CSR programs be sustainable,

targeted and synergized, and do not carry out

programs just run obligation but make it an

awareness.

2. It is recommended to make programs that come

into direct contact with the community not only

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468

in the form of physical assistance, and are

expected to be more active.

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