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Optimizing Private Sector Engagement in Disaster Risk Reduction in
Indonesia
A report by Mercy Corps Indonesia and R3ADY Asia-Pacific
Part 1: Background
Situated on the “Pacific Ring of Fire” and subject to frequent
climatic phenomena such as “el niño”, Indonesia is highly prone
to natural hazards and has a relatively high incidence of
earthquakes, tsunamis, landslides and volcanic eruptions.
Perennial flooding and other disasters cause substantial
disruptions to the country, especially its commercially vibrant
capital, impacting the private sector, government, and society.
The Government of Indonesia acknowledges the need for an integrated approach to disaster management
involving government, private sector, and civil society stakeholders (the three pillars); of which the role of the
private sector, a vibrant mix of multinationals (MNCs), national companies (NCs), small medium enterprises
(SMEs) and a vast informal economy, is often underestimated.
Mercy Corps Indonesia and R3ADY Asia-Pacific conducted a scoping study on optimizing private sector
engagement (PSE) in disaster risk reduction (DRR) with the objective to prioritize actions to strengthen PSE in
DRR and resilience efforts in Indonesia. Such optimization will strengthen not only the resilience of internal
business functions, but also of the societies, of which businesses are a part.
To this end, the study explored the following research questions:
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What are the existing patterns of PSE in DRR initiatives?
What are the gaps and opportunities related to PSE in DRR and resilience?
The study draws preliminary conclusions by investigating the areas of policy, capacity, coordination, and
communication. The methodology involved collecting data from private sector stakeholders in Indonesia’s
economic hub and capital, Jakarta. 71 key informants (17 from government, 28 from the private sector, and 26
from civil society) cooperated in in-depth interviews, followed by a verification de-briefing.
Part 2: The Indonesian private sector and DRR
DRR stakeholder landscape
The study outlines the Indonesian government’s structure for DRR and roles and responsibilities it has assigned
to various actors (government, private sector, civil society, and international organizations) during the three
DRR phases (pre-disaster, emergency response, and post-disaster). The government has assigned the following
responsibilities for the private sector:
Phase
Pre-disaster
Emergency response
Post-disaster
Private Sector Role and Responsibilities
- Conduct education, training and coaching on DRR and resilience
- Develop the facilities and infrastructure to reduce the disaster risk
- Conduct emergency response, based on expertise
- Assist with rehabilitation and reconstruction, based on the business entity’s capacity
Impact of disaster risk on the business processes
All private sector respondents reported experiencing impacts from disasters; among the most mentioned of
these impacts were: asset damages, financial losses, supply chain disruption, and reduced operational
performance. The motivations of a company to participate in DRR vary, depending on the nature of the
business, size, assets, company policy, and culture, among other factors. However, the overarching motivation
[of the private sector] was safeguarding business continuity and limiting vulnerability to disasters. By
reducing risk from small but frequent disasters, a business can be much more competitive in the long run1. The
interviews revealed another motivation, spurred by witnessing the loss of others: the desire or feeling of
responsibility to help affected communities.
Patterns of private sector DRR activities in Indonesia
The study summarizes the type of DRR activities, in which private sector actors (categorized by company size)
are engaged, by phase of the DRR cycle. A few interesting observations were identified relating to company
size, type of DRR activity, mechanisms, and government policy, as summarized below:
Standard Operative Procedures (SOPs) and Business Continuity Plans (BCPs)
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Most large companies and some medium-sized companies consider disasters to which they are most vulnerable in SOPs.
Most MNCs develop BCPs to reduce the risk of disruption, while only some big and medium NCs have these.
Most small and micro companies’ institutional policies consist of verbal safety regulations (no written policy, eg. BCPS/ SOPs).
Long-term vs. Short-term Considerations
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Big companies tend to have strategies and plans for the short and long term, post-disaster.
SMEs tend to be more dependent on short-term benefits, resulting in a more short-term focus.
Types of Activity
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Securing supply chain/assets: A secondary DRR priority of larger companies involves securing their supply chain,
infrastructure assets, and the stakeholders with whom they share geographic location or direct inputs.
Large-scale disaster first response: Private sector actors will often be first to act (while the government works to mobilize) –
mostly at their own expense and for the benefit of the community, providing an opportunity for positive brand exposure.
Donations: In other instances, e.g. when expertise does not match response efforts, private sector actors will donate to
well-organized response initiatives, financially or in kind.
Pro bono assistance: MNCs and large NCs tend to provide recovery and reconstructive assistance as well as communitycentered initiatives. Often this is initially pro bono, after which, their services can be acquired on a commercial basis.
DRM Mechanisms
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Companies’ policies, mission and vision: MNCs generally develop BCPs as dictated by company headquarters (HQ). In cases
where this drive by HQ is absent, BCPs are less common, indicating the importance of HQ policy.
Forum participation: Several forums have been established to facilitate multi-sector dialogue between stakeholders.
Champion leader and/or focal point: Having a leader on DRR issues within a company, in either an official or unofficial role,
can help to facilitate coordination of DRR matters, especially if the person is higher in the hierarchical structure.
Corporate social responsibility (CSR) initiatives: Interviewed companies reported conducting DRR activities as part of CSR.
Government Policy
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1
Need for companies to better understand the roles and responsibilities of different government actors involved in DRR;
Need for coaching and/or assistance to clarify how businesses can meet regulatory requirements;
Need for capacity building, specifically among SMEs, to meet regulatory requirements; and
Need for regulatory incentives and harmonization of disaster risk management (DRM) policies to prioritize resilience
building.
United Nations International Strategy for Disaster Reduction (UNISDR), Disaster Risk Reduction Private Sector Partnership (DRR-PSP)
Membership Pack, UNISDR, 2014.
The following diagram highlights the motivations that exist for private sector actors to engage in DRR, as well
as the major gaps in the DRR framework that PSE and cross-pillar collaboration could address in order to build
a resilient society.
Part 3: Private sector involvement in DRR partnerships
The study discusses private sector partnerships with regard to DRR and groups types of partnerships into the
following categories: coordination, consultation, co-investing, and collaboration.
Forms of private sector involvement/partnership encountered in the study:
Category
Forms of involvement encountered
Coordination
(Company
with other
parties)
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Consultation
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Coinvestment
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Collaboration
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Company has a government relations officer/department and/or company has a civil society engagement
officer/department which communicates and coordinates directly with DRR actors;
Company has established a Yayasan (foundation, separate legal entity) with specific purpose to engage with
civil society regarding DRR activities; and
Company uses CSR programs, either ad-hoc or continuous, to address DRR.
Company consults government authorities about how best to assist after disaster and in which capacity; and
Company consults non-governmental organizations (NGOs) or civil society organizations (CSOs) about
specific skill training and facilitating contacts with communities.
Company makes financial donations to other actors who do the actual implementation; and
Company makes tangible in kind donations, intangible in kind donations (dedicate skills and time) or a mix.
Company is responsible for direct implementation of specific DRR activities, complementing activities of
other actors, each with a specific role;
Company is responsible for implementation support of specific DRR activities, e.g. company organizes
logistics for DRR event in which government/CSO provides staff, and NGO facilitates the discussion; and
Company is co-responsible for implementation, e.g. company insures individual community members
against disaster, government verifies impact intensity upon claim, and NGO provides specific skills training
for CSOs who are point of contact for insurance in the community.
The study also found that actors’ perceptions of roles and responsibilities of other actors affect their
willingness to engage in DRR, as well as engage in partnerships in DRR. The following highlights those
perceptions:
 Roles of other actors are very specific to their
function in a partnership (between different pillars)
and based on expertise;
 There is an inherent gap in the “before disaster”
phase that neither government, nor the private
sector proactively and consistently appear to initiate
the policy dialogue and actions for disaster
preparedness;
 Trust between actors in the different pillars must be
strengthened to overcome perceptions about other
actors’ effectiveness, accountability, and motives;
 Company priorities are preparedness and emergency
response of the company internally, then resilience
of supply and value chain actors. The priority of civil
society is to care for the constituents they serve.
Government priorities are aligned with their ministry
or department’s priorities;
 CSOs and government agencies try to approach DRR
in an integrated manner (internal resilience with
community resilience), and companies tend to view
these as two widely separate activities; and
 High-level commitment messages need to be sent to
indicate an actor is serious about an initiative or
relationship and contributes to trust.
Part 4: Gaps and opportunities
In Partnerships
Optimizing communication
Communication is often cited as one of the “usual suspects” when discussing obstacles to partnerships. With
good internal communication all partners benefit from a greater understanding of the other actors’ point of
view, incentive systems, and way of working and thinking. Many private actor informants suggested to
spread DRR-related info and outreach through external communication and regular business channels, e.g.
chambers of commerce, professional associations, sector forums, etc.; which would establish clear access
channels to information concerning DRR policy, best practices, and methods, shared and utilized by each of
the three pillars as per their sector, expertise, and needs. Partnership development would also benefit from
the practice of disseminating information about an actor’s purpose, strategies and business-, governance- or
social-DRR goals to potential partners in order to facilitate aligned and productive partnerships.
Realizing public expectations
The 2014 results of the Edelman Trust Barometer show that business remains the most trusted in Indonesia
by the general public2, and that there is significant public expectation that business leaders play a
leadership role in shaping society and in addressing the nation’s challenges, including DRR. Public
expectations are generally a good motivator for the private sector and present an opportunity to engage in
DRR to gain positive brand exposure and reputational benefits, which are often key business drivers.
Indonesia is a big market opportunity and with increasing public awareness, through widespread social media
and online news access, the “social license” for businesses to operate effectively in Indonesia is very
important. Thus, building trust and meeting public expectations is becoming a priority and provides an
incentive for businesses to invest in DRR (a major issue faced by millions of people across the country).
Building trust leads to better coordination
Multi-stakeholder partnerships require trust. Stakeholders may have preconceived perceptions about other
actors’ effectiveness, accountability or motives for DRR engagement. The private sector tends to put more
faith in other private sector actors than in government when it comes to efficiency, for example. The study
confirmed that this tendency exists in the Indonesian private sector, and thus trust-based relationships will
have to be fostered. Building such trust can be achieved through familiarization with different actors in the
field; one way to do this is thorough interaction at conferences or networking events. The importance of
trust and coordination was highlighted by a representative of an oil and gas company who stated that, “the
only way that these strategies will be effective is if other companies operating in the same geographies are
also using these same strategies, if not then we will have limited impact and there is little incentive for us to
engage.”
In Private sector DRR activities
Incorporating smaller enterprises and community at large in BCPs
Most MNCs and some medium-sized companies have BCPs. Although these plans are designed to address the
company’s needs, this does not mean they cannot be used constructively for the benefit of the community at
large – raising the question of whether smaller enterprises could benefit from what bigger companies are
doing. Is there a way to bypass the learning curve bigger companies have gone through, in terms of business
continuity? Or can smaller related businesses be shielded from risk due to their relation to a large company
with a comprehensive plan (e.g. big companies who try to build DRR capacity along their supply chain)?
Sharing of DRR knowledge in the private sector
In the private sector there tends to be a greater incentive to
share DRR information about mitigation and response
practices and business continuity planning vertically, along
the value chain, rather than horizontally. Because one
business relies on other businesses in the same supply chain,
there is solid motivation for sharing knowledge and DRM
systems vertically. However, horizontal incentives are not as
straight forward, as sharing information may lead to increased
2
Edelman Indonesia (2014). Edelman Trust Barometer Global. http://www.edelman.id/edelman-indonesia/ further-rise-in-trust-inindonesia-with-business-as-the-most-trusted-institution-in-the-country-says-the-2014-edelman-trust-barometer.
efficiency or resilience of direct competitors, which may weaken one’s own competitive position. There are,
however, forums where companies share their experiences horizontally, such as Indonesia Business Links or
the forum for sustainable agricultural development (PISAGRO). While these forums are currently limited,
their existence demonstrates a changing mindset and provides more opportunities for sharing information
across companies.
There
In the Indonesian context:
SME sector: gap or opportunity?
SMEs in Indonesia contribute 60%3of annual GDP to the national economy, and provide livelihoods for 97%4
of the workforce. If DRR can be mainstreamed in SMEs, the majority of the economy would be more
resilient. To close the capacity gap, resources are required; and since resources are concentrated with bigger
companies and the government, partnership is the most logical way to start engaging the huge number of
SMEs. Different models of partnership can be piloted, and successful ones replicated.
Role of CSR in DRR
Indonesia finds itself in a unique position to leverage the role of CSR for DRR. Indonesian Law 40/2007
regulates CSR and mentions that all companies are required to conduct CSR activities as a form of their
responsibility towards society. For some sectors and for State Owned Enterprises (SOEs), there is a
mandatory percentage of the annual budget to be spent on CSR. The study found that most private sector
actors who do not engage in DRR due to company policy or guidelines, initially engaged in DRR through adhoc CSR activities. CSR is often an entry point for companies to engage in DRR.
In the Enabling Environment for Private Sector Engagement
Regulatory framework, incentives, motivation
 Need for harmonization of policy and regulations.
 Opportunity for the government to leverage regulations, e.g. by placing requirements on private
sector actors, and/or as incentives, using awards or fiscal incentives to motivate the private sector.
Access to information, knowledge, technology and data
 Most data related to natural hazards in Indonesia is publicly available through government agencies.
 Uniformity in data and information allows different actors to develop common definitions and ways
of evaluating outcomes and progress.
Forums that provide actors of different pillars a platform for discussion
 Multi-stakeholder forums have great potential as platforms where actors from the three pillars can
exchange views, engage in networking and matchmaking, etc. Currently in Indonesia, there are
several DRR focused forums, such as the government-initiated Plannas at the national level. There
are also local forums, often initiated by different government authorities, such as the municipality,
BPBD, etc.
There are also forums purely for business purposes as well as organizations in the cross-section of
business and society. The study found that these private sector forums have been underutilized.
3
Indonesian Ministry of Cooperatives/APEC Policy Support Unit, Policy Brief no 8- SMEs in the APEC Region, December 2013.
4
ibid.
Part Five: Conclusions and Recommendations
1. Make the business case for DRR
 Articulate business incentives for DRR engagement through core business cases
o
Use evidence of positive cost-benefit calculations to show the cost and schedule benefits of integrating disaster
preparedness.
 Use supply and value chain approach for strengthening partnership for disaster preparedness.
o
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Shares responsibilities, risks, and costs across parties.
Reduces business disruption in time of disaster.
Strengthens continuity for the consumer.
 Focus on micro-, small- and medium-sized enterprise (MSME) opportunities.
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MSMEs make up 97% of the Indonesian workforce; however more capacity building around DRR is needed.
MSMEs often depend on short-term benefits; to engage MSMEs, private sector actors should incorporate some shortterm tangible results.
2. Create enabling environment for commitment to disaster preparedness [Government lead role]
ffff
 Harmonize policy at national level and regulations at local level for coherence.
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Map DRR policy from national-subnational levels for the use of government departments, civil society and private
sector.
In this process of harmonization, private sector and civil society must be involved in policy dialogue and development.
Without their take on specific DRR related issues, a design that includes their perspective is extremely difficult to
achieve. The government, though very interested in the private sector perspective, does not yet have a coherent
strategy for effectively elucidating it. The private sector must be ready and willing to contribute their perspective.
 Facilitate access to information.
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Identify reliable sources of information and DRR/Resilience partners.
Create, expand and strengthen multi-stakeholder forums.
 Promote engagement through incentives.
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Requirement to have a BCP to register a business.
Recognition and awards for excellent business DRR.
Facilitate development of Public-Private Partnerships (PPPs).
3. Public-Private Partnerships: using a SHARED VALUE approach
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Select partners based on function, capacity and network.
Form partnerships with clear roles and responsibilities for each partner.
Identify common goal that will bring increased value to all [SHARED VALUE].
Design a steering mechanism and corresponding lines and modes of communication.
Ensure high-level commitment from all parties.