The Indonesian government requires business actors to adhere to the applicable laws and regulations in Indonesia, this includes provision on corporate social responsibility. While mandatory for certain sectors, the laws do not confine corporate social responsibility into a set of certain conducts. This article will elaborate rules and regulations surrounding corporate social responsibility in Indonesia.
Governing law and regulation
- Law No. 40/2007 concerning Limited Liability Company as amended by Law No. 11/2020 on Job Creation
- Government Regulation (PP) No. 47/2012 concerning Corporate Social Responsibility
- Government Regulation (PP) No. 96/2021 concerning the Implementation of Mineral and Coal Mining Business Activities
- Law No. 25/2007 concerning Investments as amended by Law No. 11/2020 on Job Creation
Definition
Law No. 40/2007 defines corporate social and environmental responsibility (CSR) as the commitment of a company to participate in sustainable economic development in order to enhance the quality of life and environment that are beneficial for the company itself, local communities, or the public in general.
Businesses obligated to implement CSR
PP No. 47/2012 regulates that company that conducts business activities in the field of and/or related to natural resources must implement CSR.
In the field would be understood as companies whose business activities involve managing and utilizing natural resources. Whereas, related to is recognized for companies who do not manage or utilize natural resources but conduct business activities which may have an impact on the function of potential natural resources.
Business sectors in the field or related to natural resources is elaborated by PP No. 47/2012 as forestry, oil and gas, geothermal water resources, mineral and coal mining, electricity, environmental protection and management businesses, prohibition of monopolistic practices and unfair business competition, human rights, employment and consumer protection.
For foreign investments, the CSR responsibility is regulated in Law No. 25/2007, which states that every investor shall have the obligations to implement corporate social responsibility. However, in this law, CSR is elaborated differently than in PP No. 47/2012. In Law No. 25/2007, CSR is explained as the responsibility inherent in each investment company to keep creating a harmonious, balanced, and suitable relationship with the environment, values, norms, and culture of the local community.
Programs
The CSR implementation programs would vary, some municipal regulations as well as some specific business sectors would illustrate the types of CSR program business should opt for.
The following are some instances of CSR programs based on varying regions and sectors:
- increasing community empowerment;
- salvaging natural resources;
- increasing quality of the environment and habitations;
- improve and foster micro, small and medium enterprises through partnerships; or
- disaster management.
There are numerous fields companies can choose to implement their CSR, ranging from education, health, social welfare, environmental protection and management, renewable energy, infrastructure, and other fields that significantly impact the quality of life of the community. CSR can be in the form of direct activities to the community or through participation in local government programs.
Incentives
Companies that have participated in carrying out social and environmental responsibility may be given an award by the authorized agency.
Compliance
Companies who failed to implement CSR, will be subject to sanctions in accordance with provisions of laws and regulations. Similar to the form of CSR programs, sanctions on non-compliance of CSR will result in varying sanctions depending upon the regional and sectoral regulations.
If an investor does not carry out his obligations to implement CSR, then based Law No. 25/2007, investors may be subject to administrative sanctions in the form of:
- written warning;
- restrictions on business activities;
- freezing of business activities and / or investment facilities; or
- evocation of business activities and / or investment facilities.
Referring to PP No. 23/2010 and its changes, mining companies that failed to implement CSR are subject to administrative sanctions in the form of:
- written warning;
- temporary suspension of Production Operation IUP (Mining Permit) or mineral or coal Production Operation IUPK (Special Mining Permit); and/or
- revocation of IUP or IUPK.
