Corporate Social Responsibility in Indonesia: Regulation and Implementation Issues

By Fajar, Mukti | Journal of Legal, Ethical and Regulatory Issues, January 1, 2018 | Go to article overview

Corporate Social Responsibility in Indonesia: Regulation and Implementation Issues


Fajar, Mukti, Journal of Legal, Ethical and Regulatory Issues


INTRODUCTION

Corporate social responsibilities is strictly regulated in Indonesia, there are Law No.25 year 2007 concerning Investment. Law No.40 year 2007 concerns Limited Liability Company (LLC Act, 2007) and Law No.19 year 2003 concerning State Owned Corporation (SOC Act, 2003). This condition happens regarding to the Constitution of Republic Indonesia 1945 which stated that national economic and social welfare must be regulated by the government in order to the biggest society's wealth. Besides, in line to continuous developing principle, government wants to prevent and decrease the environmental damage which caused by corporate operation without caring the environment and society condition. But, this condition raises many controversies.

First

Many parties stated that CSR is done based on voluntary principle. Hence, CSR can not measure up to mandatory (Sutton, 2003). For example, International Labour Organization stated that:

"CSR is an area of voluntary initiatives in which enterprise develop their own approaches that go beyond legally required action to consider the impact of their activities on their workers, communities of operation and stakeholders (Diller, 2004.) ".

Second

Make CSR compulsory is contradicted with the nature of companies which is profit taking, not to do such a social activities.

"A business corporation is organized and carried on primarily for the profit of the stakeholders. The powers of directors are to be employed for that end (Review I.C.a.C.L, 2002).

Third

The wide range of CSR both theoretical and practical is rapidly increased. CSR which in the very beginning only purposed to protect the labor, it has included the environmental system, human right issues, until anti-corruption (Meeting U.G.C.o.t., 2007). Therefore, it is become not easy for "law" to regulate CSR; it is because law has limitation (Jenkins, 2014).

Forth

Related to the financial sources. In the act of government business organization article 88 subsections 1 SOC Act 2003, stated that:

"BUMN can set aside some part of their net profit to develop the small business/koperasi and development of society surrounding government business organization."

Meanwhile LLC 2007 Act article 74 subsections 2 explicitly stated that:

"Social and environment responsibilities are an obligation for each corporation which is budgeted and calculated as corporate expenses which fair and proper. "

Fifth

Regarding the variance of CSR. Before it is obligatory programmed in Indonesia, there were many corporate which already run this program in so many motif and its model. There are several corporate did it for "do well and to look good", part of promotion, up to corporate sustainability strategies. It has so many forms. There were donations, partnership or community development society empowering (Kotler & Lee, 2008).

From above explanation, research of CSR in Indonesia became important to be done, in order to answer these several questions. First, how the CSR regulation in Indonesia, it is a must or voluntary? Second, how does the scope of CSR regulation implemented in Indonesia? And third, how are the problems during the implementation CSR in Indonesia?

This research used reflexive law theory for the needs of analysis. Reflexive law theory is used to overcome the deadlock condition of formal law approach. (Hess, 1999). Reflexive law theory is trying to minimize the complexity and diversion of society trough extensive law. Reflexive law theory tries to solve the limit of law in controlling the society which is complex and effective. The purpose of regulation whish based on reflexive law theory is to support the proactive and responsive management toward the social problems, by directing the corporate behavior pattern by self regulation.

RESEARCH METHODS

This study is conducted by using normative legal research and socio-legal research. …

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