Indonesia "first nation on earth to legislate Corporate Social Responsibility": legislature passes bill

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25 July 2007

Corporate social responsibility now the law in Indonesia

Author: Noke Kiroyan, managing partner of Kiroyan Kuhon Partners consulting firm, in Jakarta Post

It is now official. Indonesia has become the first nation on earth to legislate Corporate Social Responsibility (CSR) after the House of Representatives dismissed all objections from the business sector to pass the bill on Limited Liability Companies...the country needed such legislation because of the lack of understanding of CSR among Indonesian business people -- evident by their non-observance of existing laws on the environment... Initially, CSR was to be mandatory for all limited liability companies. But less than one week before the bill was passed into law, heavy opposition from the Indonesian Chamber of Commerce & Industry (KADIN) and other representatives of the business world compelled parliament to amend paragraph 74 on CSR by making it compulsory for companies in the natural resources sectors only... Almost as an afterthought, in verbal explanations by lawmakers, those industries producing hazardous waste such as hospitals are also included... CSR has entered into the laws of the country, but laws require implementing regulations within the next three months to make them operable.

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25 July 2007

[PDF] CSR law in Indonesia

Author: Erin Lyon, CSR Asia Weekly, vol. 3 week 30

...At the centre of the debate is the move by the Indonesian government to include CSR as a mandatory requirement in its latest revision to company law...In summary, Indonesian company law states that companies with an impact on natural resources must implement CSR which is to be budgeted for as a cost. Beyond that we await further regulations – both to define CSR in this context and to determine how it should be implemented and to clarify which companies are actually affected. Currently the law applies to companies ‘engaged in natural resources or those in business in connection with natural resources’, but it isn’t clear what is covered by the term ‘natural resources’. There are also concerns about how any ‘CSR fund’ will be administered, with many expressing fears that it will be a new avenue for corruption. We also await further regulations on how this law will relate to existing legislation – for example environmental laws and how sanctions will work. It is part of global trend that governments are looking to legislate for CSR, which I would argue is both inevitable and necessary. The question is has Indonesia, as the first country to legislate, got it right? Until we see the further regulations we just don’t know.

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