The president has finally signed the long-awaited implementing regulation for Article 74(4) of Law on Limited Liability Companies (40/2007). The regulation was issued on April 4 2012 as the Regulation on the Social and Environmental Responsibility of Limited Liability Companies (47/2012).
Article 2 of the regulation provides that every company has social and environmental responsibilities. Article 3(1) goes further in stating that such responsibilities constitute an obligation for companies that are engaged in the natural resources sector or a related industry. Article 3 defines 'companies that are engaged in the business field of natural resources' as companies whose business activities are managing and exploiting natural resources; whereas 'companies whose business activities are related to natural resources' are companies that do not manage or exploit natural resources, but whose business activities have an impact on natural resources and environmental sustainability.
The regulation answers the controversial question of whether corporate social responsibility is voluntary or obligatory for companies. The issue arose following the promulgation of the law and has been hotly disputed, with many corporations maintaining that since they are profit-oriented institutions, corporate social responsibility should be voluntary.
The regulation does not stipulate penalties for non-compliance with the obligation, but states that penalties may be imposed under other regulations. It became effective on its date of issue.
For further information on this topic please contact Hamud Balfas at Ali Budiardjo, Nugroho, Reksodiputro by telephone (+62 21 250 5125), fax (+62 21 250 5121) or email ([email protected]).
