Navigating the CSR Paradox in Extractive Industries: AMultivariate Study onCSR Performance and Social Acceptance of Local Communities

Abstract

Extractive industry operations often face social challenges, particularly in gaining
acceptance from local communities. One common strategy employed by company to
secure Social License to Operate(SLO) is through implementation of Corporate Social
Responsibility (CSR) programs, which typically take the form of either charity-based
initiatives or empowerment-oriented interventions. CSR programs that are responsive
to the needs and expectations of the community have the potential to foster harmonious
relationships between companies and local stakeholders. In contrast, low levels of
social acceptance may escalate into community resistance and conflict. Building on
this context, the present study aims to examine the differential relationship between
CSR performance and social acceptance, based on the distinct characteristics of
charity-based and empowerment-oriented CSR programs. This study highlights a
paradox in the objectives of CSR practices within extractive industries: the pressure to
secure short-term social support through charitable programs often stands in contrast
to the long-term commitment to sustainable development through community
empowerment initiatives. Data were collected through a structured survey involving
449 respondents residing in proximity to geothermal operations in West Java,
Indonesia, utilizing a stratified sampling method. The findings indicate that CSR
performance has a moderately strong influence on social acceptance. Moreover,
multivariate analysis reveals that CSR performance significantly affects social
acceptance, with charity-based programs exerting a stronger influence than
empowerment-based ones. This disparity is largely attributed to the characteristics of
the local community, which tend to be pragmatic, possess limited formal education,
and prioritize immediate tangible benefits.