Can Indonesia make CSR mandatory?

CO: Indonesia has passed legislation making CSR mandatory for resource firms, now it has to figure out what that actually means

• The Jakarta Post reported the passage of the legislation on July 21, 2007

  • Article 74 of the law provides that a company that operates in any business field related to natural resources is required to institute social and environmental responsibility programs, and that sanctions will be imposed on non-compliant firms

• Article 74 is obviously vague but it shows the government's intention to enforce CSR despite corporate objections. At a minimum, Art. 74 seems to require that companies put in place programs that fulfill social and environmental responsibilities. If the government adopted a reasonableness standard, the minimum standard could be based on best practices and comparative standards from other countries.

• See the reaction of the Wall Street Journal and the surprising acceptance by Indonesia business groups below

• The question is what is Canada waiting for before it actually adopts the CSR Roundtables Recommendations?

CSR becomes mandatory for most companies

July 21, 2007 - Andi Haswidi, The Jakarta Post, Jakarta

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The commentary also states that the money used to fund a CSR program can be considered as part of a company's annual operating costs, which means that it can be set off against tax.

"The CSR obligation is not only confined to those exploiting natural resources. Business sectors that produce dangerous waste, such as hospitals, are also covered," explained Akil Mochtar, head of the special House committee that drafted the bill.

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Earlier this week, the Indonesian Chamber of Commerce and Industry (Kadin), together with Indonesian Business Links and dozens of other business associations launched a joint statement saying that making CSR obligatory violated the principals of good governance and best practice, and that it was counterproductive to the concept of CSR itself as this was supposed to be voluntary.

The Wallstreet Journal is unenthusiastic:

Do Good – or Else

August

Adam Smith once warned against people who "affected to trade for the public good," but apparently Indonesia never got the message. The President is expected to sign a bill this month requiring companies to spend money on "corporate social responsibility" programs. It would be the first instance we know of world-wide that CSR is mandated by law.

If you're not sure what corporate social responsibility is, well, neither are we...

CSR road show taking place in four major cities

July 5, 2007 The Jakarta Post, Jakarta

The time for protests is over. The controversial corporations bill has been passed into law and corporate social responsibility (CSR) has become mandatory. It is now time to consider what CSR program will be most suitable for each firm and most beneficial to the community.

This is the message that the Corporate Forum for Community Development (CFCD) is trying to convey. Together with the country's largest cigarette producer, PT HM Sampoerna Tbk, it is bringing a road show to promote CSR to four cities in Indonesia from Aug. 3 through Sep. 9.

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"We hope that through this kind of activity, more companies will be motivated to get involved in CSR so that communities will be able to benefit from the firms operating around them," said CFCD secretary-general Iskandar Sembiring in a press statement Thursday.

If more companies and government institutions were to approach CSR the right way, the country's economy and human resources would improve, and poverty, in turn, would be reduced, he said.

Sampoerna director for government and community relations Hadi Fauzan added that corporations and government institutions were not the only targets of the road show.

"We also wish to increase public awareness of CSR benefits for the development of their regions, especially through the empowerment of small and medium enterprises," he said.

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