Andina Diah Hapsari

29118130

BUSINESS ETHICS’ INDIVIDUAL ASSIGNMENT

AQUA DANONE KLATEN CASE

http://www.wajibbaca.com/2015/12/isu-bahaya-air-mineral-aqua-produk.html

1. SUMMARY BASED ON GROUP OVERVIEW

Of the many brands of bottled mineral water on the market, Aqua is the most attached brand in
mind consumer. That's all because Aqua is the first mineral water brand in Indonesia; so many people
call mineral water under the name Aqua even though it is drunk with other brands. Aqua has succeeded
in making its brand always remembered by consumers because Aqua comes from selected springs with
all the purity and natural mineral content that is maintained. Aqua is a brand of bottled drinking water
that was established in 1973 in Indonesia produced by PT Aqua Golden Mississippi. At present, there are
14 factories that produce Aqua with different ownership. 3 factories are owned by PT Tirta Investama,
10 factories are owned by PT Aqua Golden Mississippi and a factory in Brastagi, North Sumatra is owned
by PT Tirta Sibayakindo.

In 2002, Aqua Danone expanded its business by adding a factory in Polanharjo, Klaten, Central Java,
and was inaugurated in 2003 which is the 13th factory of the Aqua Group. Since the operation of Aqua
Danone in Polanharjo, Klaten, Central Java, various pro and contra responses have emerged from the
surrounding community. Especially the rampant resentment of citizens against Aqua Danone and
various community actions carried out to thwart the operation of the factory. Protests began to appear
since 2004 or two years after the establishment of the company. The protest that was raised was that
the community refused to operate the Aqua Danone company.

About 10 years have been established in Klaten, at the end of 2012 yesterday the Aqua factory
owned by PT. Tirta Investama was demonstrated by the community around the factory and the Village
Heads. Aqua is considered uneven in carrying out Corporate Social Responsibility (CSR) programs to
surrounding communities. According to residents, PT. Tirta Investama is considered not participating in
helping the district government to prosper the surrounding community even though it is one of the
conditions for investing in Klaten. Finally, hundreds of residents and the village head of the Polanharjo
sub-district attacked the Aqua factory in Wangen village, Polanharjo, Klaten. They asked for CSR
programs for 12 villages worth Rp 200 million per month for each village, equal distribution of labor,
environmental impacts due to transportation vehicles, the impact of reduced water flow, factory
awareness on the environment, and openness of PT. Tirta Investama and Klaten Regency Government
regarding retribution returned to Polanharjo District.

Between 2013 and 2014 there were disputes between groups which is called the Gugat Aqua
Community Alliance (AMGA) with the Aqua Support Society Alliance (AMPAQ). Society on behalf of him
as AMGA with the institution others such as the Institute for Assessment and Performance Monitoring
Government Apparatus (LPPKAP), held Aqua action Danone and refused to exist. On the other hand
AMPAQ is present to support the existence of the Aqua-Danone company (Solo Post 2014). The pros and
cons above show that every corporation those present in the destination country are not necessarily
without obstacles but various obstacles including the protests experienced by Aqua Danone. In the
midst of the protest Aqua Danone was able to survive run his business in Polanharjo, Klaten with
confrontation various corporate strategy solutions.
 Poverty and inequality certainly occur because of various factors, one of which is the unevenness of
corporate responsibility towards the surrounding environment. In addition, job vacancies are only
limited to people who are native to the village and there are also age restrictions. Another thing is also
the uneven distribution of labor in the distribution of Aqua Danone. Issues that arise like that can
disrupt and burden the company, and can damage the image and reputation of Aqua that has been built
up so far. Moreover, Aqua has a commitment to managing a business that is responsible for society and
the environment. In this commitment there are 4 pillars to carry out Danone's mission. The 4 pillars are
about Health (Human), Humans (People), Environment (Nature), and For All (For All).

The Emergence of Community Protests after the Implementation of CSR

After Aqua Danone operated, the water flow dropped dramatically. In fact, to fulfill irrigation
facilities, the farmers were only rely on the spring. Previously, during the dry season, the community
could plant rice well because of sufficient irrigation facilities. However, during the dry season, the
community could no longer afford to plant rice. When in the rainy season, if there was no rain in two
weeks, the farmers were abuzz rely on a groundwater pump to take water (Suparlan 2015). Even in
fulfilling daily needs, citizens must buy water at a price that was not cheap. That matter occurs due to
community’s well which was close to Aqua Danone's company have a drought. That matter triggered
public protests. People used to get water freely and abundant, but now begin to experience difficulty in
accessing water. The location of the water withdrawal carried out by Aqua Danone is not far from the
source of the PDAM water which was used to distribute to the people of Solo and its surroundings. The
impact was very large because not all of the society enjoys the water (Suparlan 2015).
It was observed that the regional disparity began to appear. The evidenced was the job openings
until the development assistance of a village. The environment that was far from the location of
operation of the Aqua-Danone company, the community was still depend on agriculture and the
unemployment rate is still enough high. The presence of different developments in the surrounding
environment the Aqua-Danone company in Polanharjo has made a difference striking. Poverty and gaps
that occur within a country also opens up opportunities for war civil or intra-state conflict, which was
more than 30 percent of civil war occurs in populations experiencing poverty (Rice 2006).
Poverty and inequality were certainly due to the inequality of company responsibility towards the
surrounding environment. It was observed that the ones who Aqua Danone employed were the
community which was not far from the existence of the company. In addition, the job vacancies was
only limited to the original community villagers and there was also age restrictions.
 Aqua Danone provided funds to villages that have the water resources which were used by Aqua
Danone in carrying out its business and whereas villages which cannot be utilized by Aqua Danone
would not get financial assistance. The distribution of funding was not as expected by the surrounding
community. As happened in Wangen and Ponggok Villages, previously these two villages were the
poorest villages but with the help of funding from Aqua Danone both of them became the richest
village. Then protests arised from the villagers emerged asking for funding with a total of one hundred
million per year however only filled with fifty million per year (Suyanto 2015).
David Crowther (2010 in Sari, 2013 in Zain, 2015), revealed the identification of CSR through three
main principles, they are: First, sustainability. This principle relates to the actions of a company that is
carried out now, then impacts or influences the steps taken in the future. Second, accountability; an
organization or group must recognize any direct or indirect activities that have an impact on the outside
environment, or be interpreted as responsible for the actions taken. This is to identify the consequences
of what is caused by the company for actions taken both internally and externally. Third is transparency
(openness) which is known as the principle when an external impact is reported in a real way without
being hidden. This transparency is closely related to the CSR principle because both are the
responsibility for the impact that the company has on stakeholders (Sari, 2013 in Zain, 2015).
The community has the basic right to know and obtain information about what the government
is doing, and why a policy or program is carried out (Stiglitz, 1999 in Zain, 2015), and how the
organization runs its operations (Silver, 2005 in Zain, 2015). The community has the right to know the
impact of taking water resources used by the Aqua Danone Company.
Aqua Danone said that it has a license of fifty liters cubics per day which is equivalent to fifty-
eight liters per second. But in fact, Walhi said that Aqua had taken sixty-four liters of water with a profit
of up to hundreds of billions of rupiah. Aqua Danone Klaten explained that it took three liters per second
a day so it was responsible for daring to return. Aqua Danone showed the public that it was responsible
for not only taking but also being able to return.
The Aqua Danone Company only mentions granting funds to the regions and awards to
communities and villages. But they do not provide clear and honest information in the company's
income information or the benefits obtained as well as regarding environmental management by taking
water resources.
2. PROBLEM DISCUSSION
Since the operation of Aqua Danone in Polanharjo, Klaten, Central Java in 2002, various pro and
contra responses have emerged from the surrounding community. Especially the rampant resentment
of citizens against Aqua Danone and various community actions carried out to thwart the operation of
the factory. Protests began to appear since 2004 or two years after the establishment of the company.
The protest that was raised was that the community refused to operate the Aqua Danone company.
About 10 years have been established in Klaten, at the end of 2012 yesterday the Aqua factory
protested again by the community and the Village Heads. Aqua is considered uneven in carrying out
Corporate Social Responsibility (CSR) programs to surrounding communities. Poverty and inequality
certainly occur because of various factors, one of which is the unevenness of corporate responsibility
towards the surrounding environment. In addition, job vacancies are only limited to people who are
native to the village and there are also age restrictions. Another thing is also the uneven distribution of
labor in the distribution of Aqua Danone. Issues that arise like that can disrupt and burden the company,
and can damage the image and reputation of Aqua that has been built up so far. Moreover, Aqua has a
commitment to managing a business that is responsible for society and the environment. In this
commitment there are 4 pillars to carry out Danone's mission. The 4 pillars are about Health (Human),
Humans (People), Environment (Nature), and For All (For All).
The people's demands have been answered by PT. Tirta Investama for CSR, starting in 2013 will
touch all villages in Polanharjo Subdistrict, equal distribution of labor has been carried out, has repaired
road damage due to the transportation of Aqua products, and has continuously repaired irrigation
channels. But that is still lacking because residents still demand the provision of money for each month.
According to residents, PT. Tirta Investama is considered not participating in helping the district
government to prosper the surrounding community even though it is one of the conditions for investing
in Klaten. Finally, hundreds of residents and the village head of the Polanharjo sub-district attacked the
Aqua factory in Wangen village, Polanharjo, Klaten. They asked for CSR programs for 12 villages worth
Rp 100 million per year for each village, equal distribution of labor, environmental impacts due to
transportation vehicles, the impact of reduced water flow, factory awareness on the environment, and
openness of PT. Tirta Investama and Klaten Regency Government regarding retribution returned to
Polanharjo District.
3. Aqua Danone Collaboration with Non-Governmental Organizations and Mass Media
CSR implementation by collaborating is a momentum to reshape mutual trust and other
elements of social community in the society. Collaboration or partnerships in the form of CSR programs
have two important dimensions for (private) company stakeholders. CSR can be said to be successful if
the program has been able to increase the social capital of stakeholders. To achieve the life goals of the
community, a sustainable CSR program must focus on the development of civil society. In order for the
goals of corporate social responsibility to be truly achieved and to reach the community to the
maximum, the company can cooperate with Non-Governmental Organizations (NGOs).
Aqua Danone with the NGO Lestari joined as a force to take a new approach to the existing
problems and then decide what programs could be given as a solution. As in the Danone Aqua CSR
program in collaboration with Sustainable NGOs through an environmental empowerment program. In
addition, Aqua Danone also gave an idea of the program which was then run by NGOs. For example in
the Cooperative CSR program Pusur Lestari Agribusiness Development Institute or Cooperative "LPA
Pusur Lestari". In the implementation of the program, Aqua Danone partnered with the NGO Bina
Swadaya Konsultan. The idea of the program came from the Aqua Danone company, but in its
implementation, NGOs played a direct role in the field and at the same time carried out guidance and
assistance to the society.
Aqua Danone also recruited one of Walhi's personnel to join the CSR team. Communication
between companies and NGOs shows that partnerships or collaborations can encourage alliances that
contribute to sustainable development. Although not always giving a good impact, at least the company
is motivated to develop its business by complying with all existing legal rules or norms. In addition, the
Aqua Danone company can avoid the risks that will bring it failure in carrying out its business.
From Figure above, it can be concluded that the role of NGOs can motivate companies to carry
out their CSR programs, so that CSR programs that are implemented can be run and accepted by the
community. Between companies and NGOs can decide what programs are good for the environment
and society. To improve the image and support the company's reputation, Aqua Danone collaborated
with the mass media for reporting on its CSR program. This aims to build the image of the company and
disseminate it to the public. Therefore, Aqua Danone often holds gatherings such as workshops and
debriefing about the environment and other outdoor activities with journalists so that partnerships with
media people are always maintained.

With the collaboration between Aqua Danone and NGOs and Mass Media, the company will be
motivated in carrying out CSR programs and later able to gain trust and be accepted by the community.
The interaction of the Aqua Danone company with mass media is illustrated, for example when the
company makes an event, both CSR programs and other events, Aqua Danone Klaten always presents
journalists and ask them to cover the program in the media. For the Aqua Danone Klaten company, the
role of the media is very important for the sustainability of the company, because without media
coverage, the breakthroughs made by the company will not be known to the public. Aqua Danone often
holds gatherings such as workshops and debriefing about the environment and other outdoor activities
with journalists so that partnerships with media people are always maintained. The management
responsible for CSR activities at Aqua Danone Klaten always opens communication with the mass media
in covering activities so that information on CSR activities can be conveyed with accurate data to help
with balanced reporting.

4. FRAMEWORK
1. Stakeholders Theory
The traditional definition of a stakeholder is any group or individual who can affect or is affected by the
achievement of the organization’s objectives. This definition is firstly published by Freeman in 1984.
The general idea of the Stakeholder concept is a redefinition of the organization. In general the concept
is about what the organization should be and how it should be conceptualized. Friedman (2006) states
that the organization itself should be thought of as grouping of stakeholders and the purpose of the
organization should be to manage their interests, needs and viewpoints. This stakeholder management
is thought to be fulfilled by the managers of a firm.

Source:https://www.smartsheet.com/what-stakeholder-theory-and-how-does-it-impact-organization

In one of his latest definitions Freeman (2004) defines stakeholders as those groups who are vital to the
survival and success of the corporation. In this principle in his opinion the consideration of the
perspective of the stakeholders themselves and their activities is also very important to be taken into
the management of companies. He states the principle of stakeholder recourse. Stakeholders may
bring an action against the directors for failure to perform the required duty of care (Freeman 2004).
All the mentioned thoughts and principles of the stakeholder concept are known as normative
stakeholder theory in literature. Normative Stakeholder theory contains theories of how managers or
stakeholders should act and should view the purpose of organization, based on some ethical principle
(Friedman 2006). Another approach to the stakeholder concept is the so called descriptive stakeholder
theory.

This theory is concerned with how managers and stakeholders actually behave and how they view their
actions and roles. The instrumental stakeholder theory deals with how managers should act if they want
to flavor and work for their own interests. In some literature the own interest is conceived as the
interests of the organization, which is usually to maximize profit or to maximize shareholder value. This
means if managers treat stakeholders in line with the stakeholder concept the organization will be
more successful in the long run.

The premier theory of stakeholders is consists of Stakeholder, employee, creditor, supplier and
wholesaler. In addition, the business world also has non-market interactions with other groups or
parties that have a secondary relationship with the business world. This secondary linkage is a
consequence of the primary goals in the existing business world. Although it is called secondary, it does
not mean that these parties do not matter. The business world however needs to pay attention to the
interests of the secondary stakeholders

 The Government from the central level to the regions as a source of regulation, licensors and
tax recipients

 Non-Government Organization groups that fight for the interests or demands of the community

 Mass Media with an interest in reporting on business activities to the public as well as providing
business promotion event

 Business Support Groups advisor, convenience, and research results for smooth and sustainable
business

 Local Community affect the work climate in business locations and they also have an opinion
based on acceptance or rejection of the business world. They can be called as the Social
Approval and Social Disapproval
 Source: Etika Dasar Dan Terapan by Tim Dosen Etika Unpar - Pusat Kajian Humaniora,
Universitas Katolik Parahyangan Bandung, 2005
2. Right-Based Ethics

Rights-based ethics is a concept that because one is a human being that person is entitled to certain
rights. These rights are natural rights and conventional rights as created by the society in which that
person lives in. as the lecturer said that Ethics based on basic human rights, either inherent rights or
conventional rights, focused on human dignity. The concept of rights based ethics is that there are some
rights, both positive and negative, that all humans have based only on the fact that they are human.
These rights can be natural or conventional. That is, natural rights are those that are moral while
conventional are those created by humans and reflect society's values.

Source: Life, Liberty, and Security Essay - 123helpme

https://www.123helpme.com/life-liberty-and-security-preview.asp?id=276851
There are some Right-Based Ethics considerations that can be implemented from some factors, which
are:

 Right to education
Education as a human right means: the right to education is legally guaranteed for all without
any discrimination. States have the obligation to protect, respect, and fulfill the right to
education. There are ways to hold states accountable for violations or deprivations of the right
to education.
 Right to leisure
Everyone has the right to rest and leisure, including reasonable limitation of working hours and
periodic holidays with pay. For centuries, laborers have demanded the right to rest and leisure,
which is often guaranteed through paid holidays and limits on working hours.
 Right to own property
The Human Right to Own Property. Article 17 of the UDHR states: Everyone has the right to own
property alone as well as in association with others. No one shall be arbitrarily deprived of his
property
 Right to equality
 These rights include the right to live free from violence, slavery, and discrimination; to be
educated; to own property; to vote; and to earn a fair and equal wage. As the now-famous
saying goes, “women's rights are human rights.” That is to say, women are entitled to all of
these rights
 Right to belief and religion
Everyone has the right to freedom of thought, conscience and religion; this right includes
freedom to change his religion or belief and freedom, either alone or in community with others
and in public or private, to manifest his religion or belief, in worship, teaching practice and
observance
 Right to opinion
Everyone has the right to freedom of opinion and expression this right includes freedom to hold
opinions without interference and to seek, receive and impart information and ideas through
any media and regardless of frontiers
 Right to life, liberty, and personal security
The right to Life, Liberty, and Security, is one of the most important citizen rights that you can
have. With the right to life, it means that any individual has the right to live, and shouldn’t be
killed by anyone. With the right to Liberty, it means that we have the right to be free, and do
almost anything we want. Lastly, the right to security means that you are guaranteed to be
protected the best way possible, while you are in that country. Even though it is just one of
many rights, they all fall under the right to freedom which everyone just wants the right to do
what they want, and to stand up for what they believe in.

Source: Business Ethics, Law, and Sustainability, Week 2 presentation, Andika Putra Pratama,
School of Business Management ITB, Bandung

5. PERSONAL ANALYSIS
Based on the case chosen by the writer’s group which is about the issue regarding with the factory of
Aqua Danone located in Klaten, and after going through several considerations and exchange of
thoughts, the writer and her group decided to choose 2 from 9 theories which given in the lecture. We
choose these theories from the compatibility between the issues and the definition of the theories
themselves. We have analyzed some key factors which can be the indicators of our consideration to the
theory that should be taken with these following steps, which are:
  What is the main problem from our case,
 What is the aspect that can trigger the problem to occur,
 Who are the people who take roles in this case,
 What is the impact of the firm’s decision,
 What is the social value that naturally occur in this case, and
 What is the real ethical concern that impacting the situation between the key roles.
Therefore, with those factors; Stakeholders Theory and Right-Based Ethics are the most compatible
theories that can be implemented to observe the ethical concern in the real situation of the Danone’s
business.
With the fact that Aqua Danone is an entity that must provide benefits to its stakeholders, the
company's activities are certainly influenced by external and internal factors. The survival of the
company also depends on the support of its stakeholders; so the company must try to get their support
and trust. Based on the theory of stakeholders, the writer tried to analyze by seeing from several
positions toward the Aqua Danone Company which are: mass media, communities, and government.
(Stakeholders Theory)
a. From the side of mass media, Aqua Danone received assistance that was quite influential,
especially in the formation of brand image and reputation repayment, which initially
experienced threats due to ongoing protests from the surrounding community, namely by
helping to report on the planned CSR program. Aqua Danone presents journalists and journalists
to cover the program in the media with the aim of rebuilding the image it once had. By
establishing a good relationship with journalists, indirectly the relationship formed with the
public will improve. With the help of the mass media in publishing a good corporate image, the
company can survive and continue to run its business properly in accordance with existing
regulations in the country and in the area of the company's existence.
b. From the side communities, disputes occur between groups in the name of Aliansi Masyarakat
Gugat Aqua (AMGA) and Aliansi Masyarakat Pendukung Aqua (AMPAQ). The community on
behalf of themselves as AMGA held an action to sue Aqua Danone and reject its existence. On
the other hand AMPAQ was present to support the existence of the Aqua Danone Company. The
hope of driving change so that the local community around the Aqua Danone Klaten is better
actually results in regional disparities. The occurrence of different developments in the
environment around the Aqua Danone company in Polanharjo resulted in a striking difference.
 c. From the side of government, The Regent of Klaten, Haryanto Wibowo, responded to the
people's protests through KRAKED even though until now there was no clarity even though he
had threatened to close the PT. Tirta Investama provided that PT. Tirta Investama or Aqua
Danone has been proven to be violating by exploiting the Sigedang water source which can
harm the community. In addition, the village head of Polanharjo urged Aqua Danone to get off
the field and face protests from farmers who demanded the right to water resources.
Through the theory of Rights-Based Ethics, organizational responsibility is related to impacts, decisions,
and activities in society and the environment, through transparent and ethical behavior that contributes
to sustainable development, health and welfare of people and the environment, through transparent
and ethical behavior that contributes to sustainable development, health and community welfare;
taking into account stakeholder expectations, is in accordance with applicable law and consistent with
international behavioral norms, and is integrated throughout the organization and practiced in its
relationship. The community or people in Klaten who protested to Aqua Danone Company can be
analyzed by their actions to earn their rights:
a. Farmers' representatives from 15 sub-districts agreed to reject the privatization and exploitation
of water. Farmers carried out a long march from the local town square to the DPRD building by
voicing their desire to immediately close the Aqua Danone factory because the company was
considered to have taken away their water rights and caused drought. Not only that, its
existence resulted in gaps in the surrounding area by fighting for water, even physical fights
which led to fights between farmer groups. (Right to Life, Liberty and Personal Security)
b. The community made demands that were emphasized on equal distribution of CSR, labor,
environmental impacts caused by transportation vehicles, the impact of decreasing water flow,
factory awareness of the surrounding environment and the openness of the company and the
Klaten Regency government regarding retribution returned to Polanharjo. (Right to Equality &
also Right to Opinion)
c. Poverty and inequality occur because of a variety of factors, one of which is the unevenness of
corporate responsibility towards the surrounding environment. The fact is that only people who
are employed by Aqua Danone are not far from the company. In addition, job vacancies are only
limited to people who are native to the village and there are also age restrictions. Another thing
is also the uneven distribution of labor in the distribution of Aqua Danone. (Right to Equality)
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