Managing the cost of conflict in corporate social responsibility activity a case study in an oil and gas company / Holly Deviarti … [et al.]

An oil and gas company from Indonesia encountered social conflict with the local workers and the local community. They protested that the company’s policy was detrimental to their welfare. The policy drew attention to complaints about the issues of job opportunity, infrastructure, and bad environment. The conflicts raised uncontrollably, unquantifiable and unforeseen cost of CSR. The purpose of this paper is to review the ways the Indonesian oil and gas company manage the cost of the CSR arising from the company-community conflict. In a production sharing contract (PSC) scheme, the cost recovery means that the contractor earns all the reimbursements of the operating cost and non-operating cost including the CSR cost. If all the cost of CSR activities could be recovered by SKK Migas (Indonesian Government), ideally the company would not have difficulty in fulfilling the stakeholders’ pressure demand. But, that is not the reality. The research methodology uses an interpretive case study because of focus on social phenomena in a natural setting concerned with the costs of CSR activity. Stakeholder and institutional theory would be the basis in the research framework in explaining the cost conflict. The key findings of this paper are SKK Migas (government) intervention and the policy of financial operation department. The policy is the reason for spending the cost of CSR, because of the government request or because of the projects. The contribution of this policy is new additional literature in the deeper insights for the understanding of social conflict in Indonesian oil and Gas Company, the Indonesian government policy and the management of the uncontrollable cost of CSR.