globalisation and csr - grounding of norwegian companies in local context

Grounding of global business – the case of Norwegian companies in Indonesia

Tarje I. Wanvik

Background !  1990s: mobilisation within humanitarian student organisation !  2000s: Head of advocacy division: campaign activist with

speciality within CSR and corporate conduct in poor countries: "  Coffee, water, sugar, agriculture

"  Weapon production, export and marking/tracing

"  Textile

"  Trade rules and regulations, foreign debt,

!  2008-2010: private business, focus på CSR consulting and strategy development communication and fund raising.

!  2011-2013: Master in Geography: CSR and Norwegian companies in Indonesia

Filling the gap

Activism

Research Consulting

“Anything can be located anywhere”

“Every firm, every economic function is – quite literally, grounded in specific locations”

Motivation Access to (cheap) semi skilled / skilled labour

Access to cheap unskilled labour

Access to Indonesian / South East Asian consumer market Access to natural resources

Profitable regulatory framework

“Localised” risks 0% 20% 40% 60% 80% 100% 120%

Corruption

Bureaucracy

Political instability

Economic instability

Regulatory issues

Safety issues

Environmental issues

Workers rights' issues

Competition issues

Other

Presentation, part 1 !  Research questions

!  Empirical and theoretical sources and definitions

Part 2

!  What do I see? (CSR law, CSR practice)

!  Why do I see this? (motivation, target groups, objectives)

!  Discussion: attachment versus detachment forces and strategies and grounding effects.

Research question

Can Corporate Social Responsibility work as

a catalyst for grounding foreign companies to

local communities in Indonesia?

Empirical sources

1.  CSR law of 2007, article 74

2.  9 Norwegian companies and their CSR activities

3.  Stakeholders and other relevant actors

4.  Documents: web pages, articles, internal presentations,

strategy papers, evaluations etc.

Theoretical entry points

!  Theories of place and globalisation

! Network and power theory

! CSR and stakeholder theory

What is place? !  Three-part definition of place (Agnew)

"  Location (where; longitude, latitude, relative) "  Locale (what; material context of social life:

buildings, roads, parks, fields, social relations) "  Sense of place: (how; the way in which place is

given meaning)

!  Place interweaves all three realms and cannot be reduced to any of them (Sack)

Community = place ! Many spatial corresponding

characteristics: "  Tolerance (Walzer 1997) " Reciprocity (Putnam 2000) "  Trust (Grimen 2009)

! Closely linked to Social Capital (Bourdieu 1991): " Networks, norms and trust facilitate

cooperation

Space vs Place

!  Investing in a place (Tuan)

Assemblages

! Assemblages (DeLanda 2006) " Material, immaterial and representational " Components brought together "  Product of historical process " Unique and singular individuals

(communities, organisations, atoms, species, ecosystems etc.)

" Own capacities and tendencies: new parts can enter, assemblage can constitute new relations

Assemblages !  Connects material to expressive !  Connects territorialisation with de-

territorialisation !  Places have

"  Material aspects (topography, texture) "  Expressive aspects (sense of place) "  Territorial aspects (political boundaries, labelling,

mapping, place promotion, naming etc.) "  De-territorial aspects (capital flight,

communication tech, mobility)

Harmony VS Conflict

! Putnam criticised ! Place is ”saturated with notions of

power” (Cresswell 2011, Amin 2002) ! A zero sum-geography: centre-periphery

(Ong, Massey)

What is power?

! Reward power ! Coercive power !  Legitimate power

"  Position " Reciprocity "  Equity " Responsibility

! Referent / Expert power

Power as potential

! Possessed by virtue, by role or organisation (Norwegian companies by default in Indonesia)

!  Zero-Sum games and spatial division of power (Massey, Allen)

! Scales (Global vs local) ! Not all places can be winners

Power as mobilising of resources

! Power is a resource to achieving diverse ends (Allen, Giddens, Thrift)

! Power to, not power over ! Pooling of resources ! Power as a fluid medium ! Power as a networked concept (Amin

and Thrift 1994)

What is a stakeholder?

!  critical to the company's goals, either directly or indirectly

!  directly or indirectly affected by the company’s operations, and

!  form the social and geographical framework that companies operate within.

! Critical issue: power relation between stakeholder and company

An example

20

According to Freeman (1984) the aim of the stakeholder theory is to improve the understanding and relationship between a company and its stakeholders. If a compa-ny is successful with satisfying their closest stakeholders, the company can gain long-term economical benefit as well as competitive advantages.

3.5.1 Refined Stakeholder Theory Stakeholders making increasing demands on a company, and companies have differ-ent kind of responsibilities towards its stakeholders and its action affects the sur-rounding environment. The theory is a useful guide when a company is to identify valuable stakeholders who might be of importance for a company’s CSR perfor-mance (Grafström et al 2008). It is central that each stakeholder is treated with re-spect from its own expectations and demands (Borglund et al 2009). Some stake-holders influence the corporation more than others and Freeman (1994) claims that customers, employees, local community, management (seen as agent), owners and supplier can be seen as stakeholders with direct relation to a company. Freeman (Fassin 2008) refined his model in 2003 (Figure 4, p. 21) whereby he estab-lished five different internal (primary) stakeholders; suppliers, financiers, customers, communities and employees. Further Freeman designed a framework to divide them from six stakeholder groups that he recognized as external (secondary) stakeholders; NGOs, Environmentalists, Governments, Media, Critics and Others. The outer circle

Firm

Local CommunityOrganiza-

tionsOwners

Consumer Advocates

Customers

Competit-ors

MediaEmployees

SIG

Environ-mentalists

Suppliers

Govern-ments

Figure 3 Stakeholder view of firm (Freeman 1984, p.25)

Primary or secondary

20

According to Freeman (1984) the aim of the stakeholder theory is to improve the understanding and relationship between a company and its stakeholders. If a compa-ny is successful with satisfying their closest stakeholders, the company can gain long-term economical benefit as well as competitive advantages.

3.5.1 Refined Stakeholder Theory Stakeholders making increasing demands on a company, and companies have differ-ent kind of responsibilities towards its stakeholders and its action affects the sur-rounding environment. The theory is a useful guide when a company is to identify valuable stakeholders who might be of importance for a company’s CSR perfor-mance (Grafström et al 2008). It is central that each stakeholder is treated with re-spect from its own expectations and demands (Borglund et al 2009). Some stake-holders influence the corporation more than others and Freeman (1994) claims that customers, employees, local community, management (seen as agent), owners and supplier can be seen as stakeholders with direct relation to a company. Freeman (Fassin 2008) refined his model in 2003 (Figure 4, p. 21) whereby he estab-lished five different internal (primary) stakeholders; suppliers, financiers, customers, communities and employees. Further Freeman designed a framework to divide them from six stakeholder groups that he recognized as external (secondary) stakeholders; NGOs, Environmentalists, Governments, Media, Critics and Others. The outer circle

Firm

Local CommunityOrganiza-

tionsOwners

Consumer Advocates

Customers

Competit-ors

MediaEmployees

SIG

Environ-mentalists

Suppliers

Govern-ments

Figure 3 Stakeholder view of firm (Freeman 1984, p.25)

23

3.5.3 Primary stakeholders Communities Communities can be described as the surrounding society wherein a company per-forms its CSR activities. The community often expects something in return from the company in order to accept and give them legitimacy. Generally in developing coun-tries companies give something back by employing local people in remote and rural areas (Carroll 1998; Garriga & Melé 2004; Porter & Kramer 2006). Customers Customers are considered as a highly valuable source for a company, without any customers there is hardly any business to be done. If customers are unsatisfied with a company’s products or a certain behavior (i.e. using non-environmental friendly products) they can stop buying their products or pressure the company by an orga-nized consumer boycott (Grafström et al 2008). Employees Are one of the most important resources for a company, their competence is needed for a company to carry out its strategies and are thereby a major part of a company’s core business. A company many times struggles to keep their employees satisfied, this could i.e. include fair salaries and provided health care (Grafström et al 2008).

Figure 5 CSR-company and Stakeholders Model (authors own version 2009), based on Freemans adapted version of the stake-holder model from 2003 (Fassin 2008, p.115)

NGOs

Critics

Others

Media

Govern-ments

Environ-mentalists

Company using CSR

Customers

Financiers Suppliers

Employees

Commun-ities

21

has been drawn according to Freeman to show that there are no possible linkages by arrows between external stakeholders and a “firm” (Fassin 2008).

Carroll (Nygaard & Bengtsson 2002) among others (Grafstöm et al 2008) divide a company’s stakeholders into primary and secondary groups, whereas the primary stakeholder can be seen as vital for a company’s survival, usually customers, em-ployees, owners and suppliers. According to Carroll (Nygaard & Bengtsson 2002) categorizing stakeholders into primary and secondary groups will make it possible for a company to aim its strategic actions towards the stakeholder and be able to ful-fill that particular stakeholder’s demand. If a company fails to satisfy these demands, Grafström et al (2008) argue that the company will not survive. Media, interest groups and authorities can be looked upon as secondary stakeholders. This group is not important for a company’s survival and will mainly influence the company through opinions. Freeman and Reed (Freeman 1994) have also made a similar division, though primary stakeholder is seen as “narrow” and secondary stakeholders “wide”. According to Mitchell et al (1997 p.857) a narrow view of stakeholders is generally looked upon as a group that has “direct relevance to the firm’s core economic inter-est”. Mitchell et al also separate stakeholders into primary as well as secondary divi-sions, though the authors have a more dynamic and describing approach whereas the two groups different characteristics are balanced toward each other, i.e. voluntary or

Figure 4 Freemans adapted version of the stakeholder model from 2003 (Fassin 2008, p.115)

NGOs

Critics

Others

Media

Govern-ments

Environ-mentalists

Firm Customers

Financiers Suppliers

Employees

Commun-ities

Selskap Selskap

Sup-pliers

Employees

Com-munity

Custo-mers

NGOs

Subcontractors

Media

Owners

Corp.

Stakeholder network relations

Stakeholder differenciation

7

6

5

3

4

2

1

POWER

LEGITIMACY URGENCY

1.  Dormant stakeholder

2.  Discretionary stakeholder

3.  Demanding stakeholder

4.  Dormant stakeholder

5.  Dangerous stakeholder

6.  Dependent stakeholder

7.  Definitive stakeholder

What is CSR?

! CSR is the commitment of businesses to behave ethically and to contribute to sustainable economic development by working with all relevant stakeholders to improve their lives in ways that are good for business, the sustainable development agenda, and society at large

Methodology

1.  Document analysis

2.  Interviews

3.  Key informants

4.  Field visits

5.  Survey

6.  Participatory observation

Presentation, part 2 !  Research questions

!  Empirical and theoretical sources and definitions

Part 2

!  What do I see? (CSR law, CSR practice)

!  Why do I see this? (motivation, target groups, objectives)

!  Discussion: attachment versus detachment forces and strategies and grounding effects.

Law 40 / 2007, article 74 1.  Limited liability companies in natural resource sectors (or

connected with natural resources) are obliged to implement Corporate Social and Environmental Responsibility.

2.  Corporate Social and Environmental Responsibility, represents a responsibility of a limited liability company that is budgeted for and calculated as an expense of that company,

3.  Limited liability companies that do not implement their obligation will incur sanctions in accordance with the provisions of legislative regulation.

4.  Further provisions will be laid down in a Government Regulation (Peraturan Pemerintah).

“The intention of the law is to create a relationship between companies and the environment, values, norms, and culture of local communities that is harmonious, balanced and appropriate” Elucidation to art. 74, law 40/2007

CSR activities Do your company engage in CSR activities? (N=9)

Yes No

CSR activities 0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Rights promotion

Labour union facilitation

Environmental projects

Educational projects

Health projects

Other social projects

Other

“It is only the local people and the local communities that are the target groups of our CSR work. Local government is not a target”. “Concerning stakeholders, we are looking for the ones that are the needy” (CEO, Company B)

Stakeholders 0% 20% 40% 60% 80% 100%

Owners Workers

Shareholders Subsidiaries

Under-subsidiaries Indonesian media

International media Norwegian media

Local NGOs International NGOs

Norwegian NGOs Local government

Regional government National government

Norwegian authorities, including Customers

Indonesian consumer market International consumermarket Norwegian consumer market

Other

Primary stakeholders All stakeholders

Stakeholders 0% 20% 40% 60% 80% 100%

Owners Workers









Other


Local communities

Stakeholders 0% 20% 40% 60% 80% 100%

Owners Workers









Other


Government

“It is not easy to do business in Indonesia now. Before, Suharto and his inner circles were the only real stakeholders. Today, there are so many more stakeholders, and they are not easy to please. But you need their signature”. (Publish What You Pay Indonesia)

“We have very little contact with the Indonesian authorities, and quite frankly we try to avoid it as much as possible” (CEO, Company H)

Company B

BP Migas

National government

Local Government

Local Community

CSR

GLOBAL LOCAL

Stakeholder management

“Sub district head and local government give positive feedback on projects, and refers to our company as “best practice” in meeting with both the local communities and other stakeholders in the area” (CSR adviser, Company B)

Triangulation Company B

Local Community Local community

National Government

Local Government BP Migas

Company C

Workers

Local government

Local Community

CSR

CSR

Stakeholder management C

“ Our workers are by far the most important stakeholder of this company, together with the surrounding communities. Our proactive relation to our workers and their communities gives us leverage in the re-occurring demonstrations towards this industrial estate. Protests have made us proactive” (CEO, Company C)

“We do CSR projects, and we like to see our name on the project. This is documented in our tenders, and that is very important. CSR is part of the tender selection of the government” (CEO, Company A)

“Local government bodies are very worried about community impact. Unrest is the last thing they want. There is a strong pressure that we conduct various levels of socialisation” (CEO, Company F)

Eksternal and internal influence Attachment forces (external) Detachment forces (external)

Attachment strategies (internal) Detachment strategies (internal)

Eksternal and internal influence Attachment forces (external) Detachment forces (external) CSR Law Standard Operational Prosedure Tenders Competence transfer Attachment strategies (internal) Detachment strategies (internal)

Eksternal and internal influence Attachment forces (external) Detachment forces (external) CSR Law Standard Operational Prosedure Tenders Competence transfer Attachment strategies (internal) Detachment strategies (internal) Profile reports, CSR-recommendations Local staff handling CSR and Government relations** Local recruiting CSR reports

Eksternal and internal influence Attachment forces (external) Detachment forces (external) CSR Law Corruption* Standard Operational Prosedure (Protectionism) Tenders (Bureaucracy) Competence transfer Attachment strategies (internal) Detachment strategies (internal) Profile reports, CSR-recommendations Local staff handling CSR and Government relations** Local recruiting CSR reports

Eksternal and internal influence Attachment forces (external) Detachment forces (external) CSR Law Corruption* Standard Operational Prosedure (Protectionism) Tenders (Bureaucracy) Competence transfer Attachment strategies (internal) Detachment strategies (internal) Profile reports, CSR-recommendations

Lack of CSR strategies and plans

Local staff handling CSR and Government relations**

Weak ownership to CSR internally

Local recruiting Absence of vital stakeholders CSR reports Negative sentiments towards

locals Local staff handling CSR and Government relations**

(“The Paradoxes in Communicating Corporate Social Responsibility,” Sandra Waddock and Bradley K. Googins in “The Handbook of Communication and Corporate Social Responsibiliy” – Øivind Ihnen, Jennifer L. Bartlett and Steve May [eds.], 2011)

Stages of Corporate Citizenship

Elementary Engaged Innovative Integrated Transforming

B C A E G H D I F

Passive Altruism

Active Self- interest

Integrated

Elementary

Carefully selected programs in order to contribute in the most efficient way for the benefactors

Carefully selected programs in line with core activities in order to manage relevant stakeholders

Randomly selected projects or partners to avoid attention, often international NGOs.

Randomly selected projects in order to please close stakeholders

Passive Altruism

Active Self- interest

Integrated

Elementary

Carefully selected programs in order to contribute in the most efficient way for the benefactors

Carefully selected programs in line with core activities in order to manage relevant stakeholders

Randomly selected projects or partners to avoid attention, often international NGOs.

Randomly selected projects in order to please close stakeholders

F

B

E

D

H G

A C

I

CSR law and its consequences

Law

Tenders

SOP Expectation

CSR reporting

Corruption

CSR activity

Plan & budget

Sanctions Stakeholder mapping

Resource transfer

Contact

Grounding

“To us, CSR is a social investment strategy” “I would claim that CSR curb inquiries of bribes and other forms of corrupt practices”. (CEO, Company B)

Research questions

Can Corporate Social Responsibility work

as a catalyst for grounding foreign

companies to local communities in

Indonesia?

“CSR ties our company to the local communities. And vice versa. We build common trust and tolerance of each other’s different roles and responsibilities. It is like with friends: you have to get to know them before you can do something together” (CEO, Company B)

Thank you for your attention! Tarje I. Wanvik [email protected] +47 970 70 987

globalisation and csr - grounding of norwegian companies in local context

Education

power relation

coercive power

place promotion

theoriesof place

place tuan

networkand power theory

space vs place

notions of power cresswell