General Overview Of Corporate Social Responsibility In Indonesia

Nusantara Legal Partnership


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Corporate Social Responsibility, commonly known as ("CSR"), is a movement associated with campaigns and/or programs to manifest a company's ethics and values.
Indonesia Corporate/Commercial Law
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Overview of CSR

Corporate Social Responsibility, commonly known as ("CSR"), is a movement associated with campaigns and/or programs to manifest a company's ethics and values. From a business perspective, CSR provides transparency to society on how a company observes genuine concerns of the communities and environment, thus serves and aligns its CSR programs with the organization's core products and services. Furthermore, CSR is known to benefit a company by maximizing shared value among organizations, employees, customers, shareholders, and community members.

In general, the legal obligations of a company in implementing CSR programs are regulated under Law No. 40 of 2007 on Limited Liability Company as amended by Law No. 6 of 2023 on Enactment of Government Regulation in Lieu of Law No. 2 of 2022 on Job Creation as Law ("Company Law"). Based on the Company Law, CSR is defined as a company's commitment to participate in sustainable economic development to improve the quality of life of people and the environment, thus benefitting the company, local community, and society (Article 1 (3) of Company Law). Moreover, any company that engages in natural resources activities is mandated to implement a CSR program (Article 74 of Company Law).

We note that the Indonesian Government has fully supported the implementation of CSR programs in Indonesia. This is demonstrated by the government's initiative through the issuance of Government Regulation No. 47 of 2012 on Social and Environmental Responsibility of Limited Liability Companies ("GR 47/2012"), which provides further provisions and technical guidance for the implementation of CSR.

A. Implementation of CSR in Indonesia

As stipulated under Company Law and Article 2 of GR 47/2012, Indonesian companies are legally obligated to conduct CSR, which implementation scheme shall be decided by the Board of Directors under the company's annual plan. The CSR plan shall include the scheduled activities and required budget approved by the Board of Commissioners or from the General Meeting of Shareholders ("GMS") (Article 4 of GR 47/2012). Furthermore, upon the completion of their CSR program shall be included in the company's Annual GMS (Annual General Meeting of Shareholders or "AGMS") (Article 6 of GR 47/2012).

Although GR 47/2012 requires all Indonesian companies to implement CSR, this regulation is silent on limitations or restrictions on how the companies could implement their CSR programs. In practice, companies may allocate their funds or resources for plenty of social and environmental development programs at their own discretion. For instance, companies may provide training and development programs, or health or sports facilities in their own office, even educational subsidies for children of their own employees.

In addition to the above, companies may also implement CSR programs in the form of environmental and social welfare improvements. This approach is generally applied by companies that are closely associated with utilization of natural resources in their business activities. Many Indonesian companies have implemented more sustainable programs, such as waste management, use of renewable energy, or reclamation activities. On the other hand, social welfare programs can also be implemented by Indonesian companies as part of their CSR efforts, which involve activities that improve the quality of life or welfare of employees or surrounding communities. Such improvement programs can include educational aids, life-skills trainings, or public health facilities.

Another common form of CSR is philanthropy programs. This is usually in the form of donations and/or humanitarian aids to those in need that include people of low-income communities, the impoverished, and/or the sick. Similarly, companies may also engage in economic empowerment for struggling businesses, focusing on empowerment schemes, trainings, or funding for Micro, Small, and Medium Enterprises.

Please note that Indonesia's prevailing laws and regulations are not only silent on the specifics of CSR implementation, but also on budgeting of CSR activities. In this regard, companies may have their own discretion whether they want to implement small-or-large scale CSR programs.

B. NLP Commentary on the Implementation of CSR in Indonesia

The implementation of CSR not only serves as a compliance measure with the prevailing regulations but also beyond the mere fulfillment of obligations. As part of a company's longterm commitment, CSR will improve the quality of life for its internal stakeholders (i.e., shareholders and employees) and external stakeholders (i.e., society and the environment). CSR encompasses activities that address social concerns, education, skills training, and economic development.

Having regard to the above, the implementation of CSR by a company will consequently provide positive influence to the company's internal as well as external parties (i.e., clients, society, and government). Moreover, since CSR is mandatory as mandated under Company Law and GR 47/2012, any company must implement CSR to comply with Indonesia's prevailing laws and regulations.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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