Introduction: Environesia as Environmental Consultant
Indonesia has a strict law regulating how a company will operate. One of the laws required companies to have an AMDAL document before they can begin operations on projects that may disrupt the environment. This AMDAL document explains the environmental impact analysis of the company’s operation plan, in which the government will then give the company’s operating permit based on the assessment in the document. Sustainability-related conflict of interest usually arises around the creation of this document.
The law also required that companies should use third-party independent consultant services to develop this document. So then environmental consulting companies, such as Environesia, arise as the solution. Companies would use the consultant’s services to give insight and recommendations on how to make their operation more environmentally sustainable and how, in the end, the AMDAL document can be obtained. Here, the interaction between companies and the environmental consultant is very prone to conflict of interest (COI).
The particular type of COI includes a gift from the company to the individual from the environmental consultant. Some companies, knowing that they would not pass the environmental analysis impact would go bribe the analyst or even the consultant company. While the consultant company is supposed to give an honest, reliable, and accountable view of the environmental impact analysis of their client’s business, the company also gets its payment from the client.
These consultant companies are prone to face a conflict of interest whether to hold the public interest in providing an accountable AMDAL document or to hold their client’s interest to start their business sooner and free from the hassle of analyzing environmental impact.
Apparently, ethical challenges in business often emerge as conflicts of interest (Lawrence & Weber, 2019) and this paper will discuss an example of it, taking Environesia, an Indonesian environmental consulting company, as a case study.
Laws that Discourage the Conflict of Interest
Sadly, in nine out of ten cases, the interests of profit conspicuously conflict with the interests of people and the planet (Eisenstein, 2014). So government should have a law to prevent COI. In the case of the Indonesian environmental consultant, the COI is included in the corruption law, regulated in Indonesian Law no. 31, 1999 (named UU no. 31, 1999). So, any bribery and falsehood in the environmental analysis document will be punished as nasty corruption. Bribery can happen between companies, consultants, and government officials. Indonesian Corruption Eradication Commission (KPK), an institution regulated by Indonesian Law no.19, 2019 (named UU no. 19, 2019) has the authority to enforce the law as well as to educate the right audience as a prevention measure.
The laws also require the consultant to have certain certifications and processes that will ensure the employees have high ethical standards. It also requires consultant companies to have a certain standard of transparency and accountability.
However, in 2020, the government passed a bill that simplifies the process of environmental impact analysis, hoping that the economy will grow faster. Many environmental activists saw this as a threat that can amplify the unethical behavior (Kartodihardjo, 2020)
Organizational Policies that Discourage the Conflict of Interest
Environesia is one of the leading environmental consultants in Indonesia. The company claimed to have a high commitment to sustainable business principles, proven by the acquisition of international certification from a prestigious world accreditation body, namely the British Royal Charter. Many other professional certifications were also acquired, such as ISO 9001, ISO 14001, and ISO 45001. The company also put commitment and integrity as the corporate value, along with safety and eco-friendly (Profil, n.d.). The policy to stick to these certifications is a good sign of how the company discourages unethical and unprofessional behavior.
However, there is not enough evidence that the company has a specific policy that discourages conflict of interest. While certification may reflect professionalism and allegiance to ethical conduct, it still needs to be enforced at the individual level. In an organization that is very prone to conflict of interest, this company should have at least a guideline that all their employees should follow when they face this conflict of interest. Many ethicists believe that even the appearance of a conflict of interest should be avoided because it undermines trust (Lawrence & Weber, 2019).
Managers’ Way to Utilize Policy and Laws to Discourage Employees’ Conflict of Interest
Environesia managers should communicate in a very clear manner to every employee, especially field analysts and government relation staff, that accepting a gift is a serious offense to the rule of law, and it can be punished severely using Corruption Law. They can arrange a special program to instill this information along with comprehensive ethical training.
The managers should be role models in holding a high ethical standard, then they can use a visible reward and punishment system to maintain the ethical awareness of the employees. Lastly, they should establish a safety mechanism where employees can discuss ethical issues and dilemmas, or report unethical behavior without the fear of being reprimanded.
Do Laws and Policies Sufficient to Promote Ethical Behavior?
On paper, laws and policies are enough to promote ethical behavior. However, the practicality of it should be enforced by the people with the power to do so. Government should strengthen law enforcement institutions, while top management should create and maintain a positive corporate culture that promotes ethical behavior. Indonesian Corruption Eradication Commission (KPK) still found many corruption cases related to conflict of interest in AMDAL document creation. This is a red flag sign that the laws and policies are not enough (Korupsi Amdal Sumber Kerusakan Lingkungan, 2017).
Profession association should also have a high standard code of conduct that discourage, or even punish, any unethical behavior. The smaller the place to act unethical, the better. When an individual or a company fails to disclose a conflict of interest, it may represent deception in and of itself and may hurt the person or organization on whose behalf judgment has been exercised.
Conclusion and Suggestions for Improvement
The laws and policies are already in place to cover such conflicts of interest in the case study. However, it is still insufficient to discourage conflict of interest in a practical manner. There are several improvements that can be done to improve the situation.
While the punishment is severe enough, the law enforcement institution is still in a weak state to take on these cases. The public official should design a specific bill to handle this specific issue. The bill should reach deeper, allowing law enforcement institutions to conduct a thorough audit of the process of analyzing the environmental impact of consultant companies.
Companies should also create policies regulating a system of complaint handling. It can be built as a safety mechanism where employees can discuss ethical issues and dilemmas, or report unethical behavior without the fear of being reprimanded. Managers should use a visible reward system for employees showing high ethical standards and visible punishment for employees showing unethical behavior. The company should also create a healthy culture in which members of the organization will value transparency and accountability.
References Eisenstein, C. (2014, January 8). Let’s be honest: real sustainability may not make business sense. The Guardian. https://www.theguardian.com/sustainable-business/blog/sustainability-business-sense-profit-purpose Kartodihardjo, H. (2020, October 19). Korupsi Pembuatan Amdal. Forest Digest. Retrieved April 12, 2022, from https://www.forestdigest.com/detail/793/seluk-beluk-korupsi-penyusunan-amdal Korupsi Amdal Sumber Kerusakan Lingkungan. (2017, September 26). Kompas. Retrieved April 12, 2022, from https://www.kompas.id/baca/ilmu-pengetahuan-teknologi/2017/09/26/korupsi-amdal-sumber-kerusakan-lingkungan Lawrence, A., & Weber, J. (2019). Business and Society: Stakeholders, Ethics, Public Policy (16th ed.). McGraw Hill. Profil. (n.d.). Environesia. Retrieved April 12, 2022, from https://environesia.co.id/profil/
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