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CSR in Chevron Indonesia Company (Business Ethic)
CSR in Chevron Indonesia Company (Business Ethic)
Case Summary
As a part of the topics we have learned in our Business Ethic class, Corporate Social
Responsibility (CSR) is a chosen one that we want to discuss in detail in our group’s case study.
Our case study is about Chevron Indonesia Company (CICo) as the multinational oil and gas
company that we want to observe further regarding to its CSR program that has been
implemented in specifically 2000-2005. The form of CSR we will point out in this company is
the Community Development (CD) program, and the location is in East Kalimantan where one
of the company’s exploration and production fields is operated.
CICo is a well known multinational oil and gas company in the world. Its production
sharing contract with Indonesia’s local oil and gas company has brought some benefits to
Indonesia Government.
East Kalimantan is one of the Indonesia’s provinces that are rich in natural resources,
such as: oil, natural gas, coal, and woods / forest. This resource contributes to the
Indonesia economic growth and export potential-value.
The concern about community’s life around the CICo whom might be affected by the
impacts of company’s operational cycle either negatively or positively.
To figure out what company’s efforts to show its responsibility and awareness to the
community and environment, and also the benefits of this program to population.
Table of Contents
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Case Summary.............................................................................................................................................1
Introduction.................................................................................................................................................2
Observation.................................................................................................................................................3
East Kalimantan...........................................................................................................................................3
Landscape....................................................................................................................................................4
Population...................................................................................................................................................4
Physical Attributes Condition.......................................................................................................................4
The Economic Condition..............................................................................................................................5
The CICo Operational area...........................................................................................................................6
Findings.......................................................................................................................................................7
Corporate Social Responsibility (CSR) in Chevron........................................................................................7
Community Development (CD)...................................................................................................................7
Discussion....................................................................................................................................................8
The Implementation Method of Community Development.........................................................................8
Four Sectors of Community Development Implemented by CICo ..............................................................9
Economic Revitalization...............................................................................................................................9
Health........................................................................................................................................................13
Education...................................................................................................................................................14
Environment..............................................................................................................................................16
Conclusions and Recommendations..........................................................................................................18
References.................................................................................................................................................19
Appendixes................................................................................................................................................19
Introduction
Chevron Indonesia Company (CICo) is a branch of Chevron Inc. The aim of this
company expanding to developing countries is to control the market and to increase profit, but
this existence causes negative implications. However, Chevron running its business line with a
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socially and ethically responsible. Under Government and Public Affairs Department, Chevron
has a Community Development Team. Chevron’s basic principles, vision, and mission of its
Community Development are to support, assist, and complement the local government to
increase the society’s life quality.
The districts which are direct in touch with the location of Chevron exploration and
production area in East Kalimantan are Kabupaten Penajam Paser Utara, Kabupaten Kutai
Kartanegara and Kotamadya Balikpapan.
CSR is the actions of an organization that are targeted toward achieving a social benefit
over and above maximizing profits for its shareholders and meeting all its legal obligations [1].
CICo has been conducting various community programs to support the CSR, so called
”Community Development” in order to assist the community around company’s operational area
to be able to live independently and to develop to get better life quality.
Observation
East Kalimantan
Since reformation era, East Kalimantan province is divided into 12 local administration
districts:
Landscape
The province’s landscape consists of lowland, mountains, forest, wide rivers. It also has a
huge potential of natural resources, which some of those have been utilized for industrial,
agriculture, and mining activity. Other resources can also be explored further, such as: mineral
resources (coal, gold, oil, natural gas) and sea resources.
Population
The majority population in East Kalimantan is from Java Island, Sulawesi Island and
other provinces in Kalimantan Island. There was non-balancing distribution in people’s
education, income, and development. The level of unemployed population was also high. The
economic focused on coal, oil and gas, and the forest industry. This leads East Kalimantan to
become an export-oriented industry area and fragile to external pressure.
To overcoming the health problem, there are Puskesmas, Secondary Puskesmas, midwife,
practical doctor, and indigenous medical practitioner / shaman. By now, in Kabupaten PPU
(Penajam Paser Utara) has not been built any hospital, so the people who needs health
consultation from specialize doctor or any intensive aid must do some effort to go to Balikpapan
city. The vehicle pollution was contributing as well to the society health problem. In several
villages, the ability of people there were still low regarding to keep the source and availability of
water to be uncontaminated, difficulties to control the water sourced by well and river unless it is
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well equipped to protect from the dirty source. The increase of population and not enough
sanitation water have affected the decrease of pure water availability for the society to be
consumed. Those are affecting higher living cost because of the need to allocate some amount of
their money to health recovery and buying pure water.
The level of prosperous family in East Kalimantan is getting better in recent years [See
Picture 3]. The population migration is one of factors due to the alteration of population volume
in this province. In 2002, kecamatan PPU got a chance to upgrade its territory into kabupaten
PPU, therefore there were a lot of new comers from the city and other areas around kabupaten
PPU to fulfill the demand of human resources in development, the experts in construction, local
government employee and other opportunity to build the businesses or trading.
There were only few people who are participating in local economic organization, such
as: cooperation / koperasi. This indicate that there was lack of understanding to the importance
of creating a group to form such cooperation which will help the members developing their
businesses, in addition it was also lack of society access to funding resources. Population in East
Kalimantan is not evenly disseminated, this condition also happened in both education and the
income sector.
The activity related to oil, gas, coal, and woods / forest become very important for the
economic development in East Kalimantan. The Liquid natural gas, refinery, gas mining, oil
mining, coal mining, and woods processing has been contributing the most (more than 50% of
total production, added value, and export value) in East Kalimantan. The economics of East
Kalimantan are concentrated on export-oriented industrial sector: oil, gas, coal, and woods,
because more than 30% of those products are being exported to other countries. This province’s
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economics depend on world prices due to certain products that mean the economics is relatively
susceptible to external changes if the world price goes down. The economic growth in East
Kalimantan has contribution to national economic growth in Indonesia [See Picture 4].
Other alternative potential industrial sectors are construction, land transportation service,
water transportation service. But these sectors are difficult to be developed further.
The level of unemployed population in East Kalimantan is relative high, therefore the
development of several sectors which create the employment will be beneficial, like agricultural
sector that have many kind of works to do [See Picture 1].
The exploitation of natural resources which is not under control has degraded the quality
of environment, especially in the coastal area. The improper openings of embankment also
damage the existing ecosystem. Other affected factors are water pollution, air pollution, and low
productivity in fish farm. The community’s careless has a role as well due to the environment
damage. The efforts expected to overcome this bad condition must be conducted
comprehensively and in responsible ways. It is not just through material compensation, but the
strategy to divert the real issue as well. The population’s lifestyle has been transformed from
mutual-cooperation into individualist and materialist.
o In North area, covering Attaka Field, Kerindingan, Melahin, Santan, Serang, and
Santan Terminal. The oil productions in these fields were being processed in
Santan Terminal.
o In South area, covering Sepinggan Fields, Yakin, Seguni, Mahoni, Sejadi, Lawe-
Lawe Terminal, and Penajam Supply Base (PSB). The oil productions in these
fields were being processed in Lawe-Lawe Terminal.
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Findings
Corporate Social Responsibility (CSR) in Chevron
CICo cooperate with other communities to identify and develop the programs which can
provide continuous economic and social growth for the society. CICo has implemented CSR
concept in running the business and obtained various appreciations in CSR.
One of CSR type in CICo that we will elaborate further is Community Development.
CICo has a team particularly formed to organizing community development to assist the
society to improve their prosperity. This team is under Government and Public Affairs
Department in CICo.
Discussion
The process of planning and implementation of community development in CICo
program was involving many parties. Human resources in CICo who are getting involved in
conducting the program are in minor quantity, they used partnership style which emphasized in
coordination between CICo, Government, and Community. This program was focused on health,
education, environment, and the main point was in economic revitalization [see Picture 5].
CICo was not only responsible on negative effects to the society and environment,
moreover it is also being active participate to enhance the prosperity by doing something with
positive impact.
The process to start up the program was initiated through these phases:
Consultation plan
Output
Socialization
Outcome
Evaluation
Economic Revitalization
Issue:
Unutilized waste fish, low chance of jobs and business, minimum local capacity, low
product quality that obstruct the traffic flow of CICo pipe line.
Objective: to build Workplace, local capacity improvement, provide the job, enhance skill
and product, maintain well run pipeline.
Partnership: CICo and Village Unit Cooperation (Koperasi Unit Desa) of Fajar Damai
Issue:
Objective: to help local Government in developing Fish farm sector. Increase fishpond
production, capacity building, and creating agribusiness actors.
Issue:
Issue:
Program Effort: Research for Adan rice plant (Local Potential Development)
Objective: to maintain the local potential in long term, to increase agriculture aspects
Issue: The proposal from the society and the need of access to economic growth
Issue: High level of unemployment, high level expectation to work in CICo, and the need
of capacity building of job seeker to find a job, creating new business
Partnership: Resident and Labor Office of PPU, and Shared Forum / Forum Bersama
(Forbes)
Objective: To give intensive training for the farmers to expand their knowledge about
integrated agricultural in Kabupaten Kutai Kertanegara, Kabupaten Penajam Paser Utara
Objective: To maximize a utilization of unused field and making use of sleep access land
to be opened and developed in further.
Issue: The company’s intention to contribute farmers of dyke / fish ponders to make
increment in their production
Program Effort: Production Increment and Fish Ponders Income Growth Program
Partnership: Dyke Agriculture Group “Lestari” with Fish and Sea Department of Samboja
o Planning Training Program for society and village staff in 13 regions of Penajam
Paser Utara
o Bridge Construction Program and Public Toilet at Kerok Laut and Kayu Api,
Penajam Paser Utara
Health
Issue: the need of uncontaminated water
Objective: Built proper construction to fit community requirement level, so the water
distribution will be well organized
Issue: The difficulty to find uncontaminated water in coastal area and bad quality of
daily-used water
Location: Kabupaten Penajam Paser Utara (Sungai Parit, Sesumpu, Tanjung Tengah, and
Saloloang)
Objective: To get uncontaminated-water that suitable for the community, and along with
it can increase the health degree
Objective: To build fit construction to the level of society need, and water distribution
organized properly
Issue: the environment condition has a potential to emerge demam berdarah / bloody
fever disease
Program Effort: The Moat Hoard Program in effort to Improve Village Sanitation
Objective: To avoid demam berdarah / bloody fever disease and to improve village
sanitation
Issue: The pervious building structure condition of Floating Hospital is not suitable for
used
Education
Issue: Based on Proposal and survey, the building of Manunggal Junior High School
needs some renovation
Objective: to improve education quality in village, and after finishing the program, this
school’s status was converted from private become public junior high school of 5
Issue: Lack of local community education skill (formal and informal) with regard to
government plans to develop the agribusiness sector, especially in encouraging the
emergence of local entrepreneurs in agribusiness.
Program Effort: send 27 farmers to the Centre for Education and Training (Training
Center) “Kerja Nyata”, Cinagara, Bogor to empowerment the local farmers.
Objective: to develop the farming business so as to improve their living standards and
able to absorb new labor environment; to prepare agribusiness sector as a relatively safe
and profitable; to develop leadership, entrepreneurship and self-reliance among farmers
and young farmers.
Cost: -
Program Effort: conduct the Achievement Motivation Training (AMT) and skills training
in automotive (16 participants), in electronic services (16 participants), in carpentry (16
participants).
Cost: Rp.26.405.000,00
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Environment
Issue: based on proposal from local community.
Objective: to support local government program in fishery sector and environment issue.
Cost: -
Issue: based on proposal from local community and seashore condition to prevent to
abrasion and erosion.
Issue: poor manage of waste turn out to be environmental issues (unpleasant smell, a lot
of flies, flooding), in other hand it is potential to be transformed to compos and recycle
goods.
Objective: to recycle the waste and to add value of waste (compose and recycle goods);
to create clean and healthy environment.
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Issue: based on proposal from local community and seashore condition to prevent to
abrasion and erosion.
Issue: based on proposal from local community and seashore condition to prevent to
abrasion and erosion.
Program Effort: prepare the forest protection in order to support the re-acknowledge
Orangutan to their origin habitat program
Objective: to save Orangutan from Illegal Trafficking and bring them to their origin
habitat.
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Cost: -
Indonesia is a developed country that has plentiful of natural resources, such as oil and
gas contained in East Kalimantan. Even though the education and prosperity level in East
Kalimantan is high and getting better, the ability in organization is still low. In addition, the
society’s income in East Kalimantan is not well distributed, even though the income for each
worker is relative higher compared with other province.
In centralized government era, the development in East Kalimantan is not spread evenly,
but since the local autonomy concept was implemented, the development in East Kalimantan is
being conducted under local government.
Chevron is the fifth biggest oil and gas company in the world. Chevron is conducting
exploration, exploitation, and production activity in Indonesia through CICo. While doing those
activities, CICo hold tightly the company values, vision and mission. CICo consciousness about
social responsibility resulting CICo received many appreciations in society program. CICo has
specific team to run community development as its CSR.
To implement this community development program, the parties who get involved in
should firstly synchronize their perception about the definition of community development,
because the variation of perceptions could cause a bad performance in program implementation.
According to the program implementation analysis, it has shown positive sides from the
existence of multinational company in developed country.
References
[1]. Andrew W. Ghillyer, “Business Ethics A Real World Approach”, 2e, McGraw Hill, 2010
[2]. www.kaltim.go.id/spandang/sejarah.html
Appendixes
Picture 1. Lapangan Pekerjaan di Kalimantan Timur dan Indonesia, 1998
ECONOMIC
HEALTH ENVIRONMEN EDUCATIO
REVITALIZATION
T N