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Corporate social responsibility under Indonesian law

Indonesia's 2007 Company Law requires a company that engages in the natural resources business or activities related to the natural resources business to conduct corporate social and environmental responsibility (CSR) activities

Freddy KaryadiOene Marseille
Indonesia's 2007 Company Law requires a company that engages in the natural resources business or activities related to the natural resources business to conduct corporate social and environmental responsibility (CSR) activities. In this regard, the government issued Government Regulation No 47 of 2012 on Corporate Social and Environmental Responsibility on April 4 2012.

Regulation 47 covers:

  • companies that engage in the natural resources business (managing and using natural resources);
  • companies that engage in a business related to natural resources (may impact the functionality of natural resources, including the preservation of the environmental functions, but not relating to the management or use of natural resources);
  • state-owned companies; and
  • companies that engage in business in the fields of industry, forestry, oil and gas, geothermal, water resources, coal and mineral resources, electricity, environmental protection and management, anti-monopoly and unfair business competition, human rights, labour, and consumer protection.

Companies that are subject to Regulation 47 can discharge their mandatory CSR obligations by conducting CSR activities themselves or through third parties, provided that the implementation costs are included in their annual business plan and the activities are conducted by the board of directors and approved by the board of commissioners or a general meeting of shareholders, in accordance with their respective articles of association, except otherwise provided by applicable law. Budget realisation for CSR activities are required to be calculated as part of a company's operational costs and must be included in the annual report provided to shareholders at the company's general meeting.

Failure to implement the mandatory CSR activities as required under Regulation 47 will subject a company to sanctions in accordance with prevailing laws and regulations. Although there are no laws or regulations that impose such sanctions, further implementing regulations are expected to be passed.

Oene Marseille and Freddy Karyadi

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