Corporate Social Responsibility at Tesda - Essay Example

The main developmental, sustainability and CSR issues relating to the production of palm oil in Indonesia relate to the dependence on wealthy nations for development - as purported by dependency theory; stakeholder rights; and environmental issues. These are issues which face several countries that depend on multinational corporations to achieve economic growth.

The essence of dependency theory is that a core of wealthy nations dominates the production of goods in the periphery of poor nations that provide cheap labour and raw materials. The countries involved here are the United Kingdom and Indonesia. The UK is the wealthy nation which dominates the poor nation of Indonesia which has an abundance of cheap labour and land on which palm oil can be grown successfully. Instead of development, the production of palm oil in Indonesia takes place at a cost to the indigenous people and to the environment. The benefits derived from the production of palm oil also accrue mainly to the developed country at the expense of the relatively undeveloped Indonesia where land which should be preserved for the protection of the environment and biodiversity is being burnt to supply palm oil cheaply to Tesda’s supermarket chain and other company’s. Instead of development, Indonesia is faced with a displacement of its people and the depletion of its resources. The soot from burning has affected the operations of the airline industry and will therefore hurt the economic development of the country.

The preservation of the environment is important in the development of any country. The burning of the forests will have dire environmental consequences for the people of Indonesia. With the increasing and negative effects of climate change countries around the world are taking the necessary steps to reduce the emission of greenhouse gases in the atmosphere while this is taking place in Indonesia.

These events indicate that Tesda has not adopted a model for corporate social responsibility with all the negative events including corruption, lack of dialogue between groups affected by the production of palm oil and poor labour standards employed. These along with the death of persons who speak for their rights are unacceptable.

The stakeholders that have legitimate claims on Tesda are the indigenous people of Indonesia whose lives have been negatively affected by plantations in which Tesda has a stake, the people who work on these plantations, suppliers to its processing plant in the Netherlands and Tesda’s customers as well as shareholders. Stakeholder theory sees values as a necessary part of business. Businesses that operate consistently with stakeholder theory see the importance of values and relationships with stakeholders as keys to success (Freeman et al., 2004).

The stakeholder that has the power to influence Tesda is the customer. According to Alexander et al (2005), Porter in his 5 forces model recognised the importance of customers when he included the bargaining power of customers when he formulated his Five Forces model of competition. The customer can decide whether or not to buy Tesda’s products. Customers are the only ones who can determine whether Tesda remains in business. Customers are becoming increasingly concerned about climate change and corporate social responsibility. To get Tesda to become socially responsible, customers as a group can boycott Tesda’s products. This will send a clear signal to Tesda.

A strategic stakeholder management policy that should be adopted by Tesda urgently involves some of the 20 critical elements of CSR (Welford, 2004 and 2005). They are as follows:
- Statement on normal working hours and fair wage structures.
- The protection of human rights within the company's operations.
- Policies relating to labour standards adopted by suppliers in developing countries.
- Commitment to the protection of human rights in the company’s sphere of influence.
- Commitment to local community protection and engagement.
- Policies on the protection of the indigenous population and their rights.
- Direct support for third-party social sustainable development-related initiatives.
- Commitment to the reporting on corporate social responsibility and or sustainable development.
- Policies and procedures for engaging a wide range of stakeholders in two-way dialogue.
- Code of ethics including information relating to bribery and corruption.

Companies like Tesco have included in the policy the provision of information on their products that will guide consumers in making healthy and other choices (Tesco, 2010).

Several groups and organisations have supported integrated reporting which encompasses not just separate sustainability and corporate sustainability reports but involves a set of integrated reports which will help stakeholders make better decisions (Eccles and Krzus, 2010; KPMG, 2010; International Integrated Reporting Committee, 2011; PricewaterhouseCoopers, 2010). These will provide competitive pressures for companies that do not have sound operational practices. Companies that are only profitable because of bad environmental practises, and poor labour and other relations and policies may have to leave the market when stakeholders get serious.

Several companies like Tesda are involved in operations which have negative implications for development, sustainability of resources and the environment. They do not have adequate corporate social responsibility policies in place to protect stakeholders. It is important that companies accord stakeholders respect and fair dealing, and that adequate CSR policies be implemented to gain and maintain competitive advantage.