Corporate Social and Environmental Responsibility Regulation and

Implementation in Indonesia: Contribution for Sustainable

Development or Legalized Robbery?

Tresnawati

Faculty of Law, Maranatha Christian University, Jl. Surya Sumantri No. 65, Bandung, Indonesia

Keywords: Corporate Social Responsibility, Corporate Environmental Responsibility, Sustainable Development Goals,

CSR.

Abstract: Initiated from Burtland Reports in 1987, sustainable development is the idea that human societies must live

and meet their needs without compromising the ability of future generations to meet their own needs.

Corporate Social and Environmental Responsibility (CSER), or commonly known as CSR is the

implementation of sustainability development. CSR in Indonesia are perceived merely from financial aspects.

Condition is even worsening due to the fact that there is no limitation regulation on how much a company

shall contribute, or who will authorize how much has the company contribute while the total amount will

reduce their taxable income? Every Province, City and Regent also has different regulations relating to

Corporate Social and Environmental Responsibility, which leads to overlapping regulations with Central

Government Regulation. Not to mention another burdensome compulsory cost, national or territorial tax.

Those overlapping regulations are applicable to the same object, Company or Corporation. No wonder,

planning for enactment of Corporate Social and Environmental Responsibility has faced many rejections,

particularly from business actors. Undeniably, there must be balance on regulations and implementations of

Corporate Social and Environmental Responsibility, or this might also affect the assessment of ease of doing

business in Indonesia. Some recommendation on this matter will be offered in this article. This article would

use the statute and comparative approach, in a normative scheme.

1 INTRODUCTION

Sustainable Development seems to be unpopular

issues in Indonesia. As aforementioned, sustainable

development is the idea that human societies must

live and meet their needs without compromising the

ability of future generations to meet their own needs.

Despite of its unpopularity, Indonesia has enacted

Presidential Decree No. 59 Year 2017 regarding

Implementation of Sustainability Development

Goals.

Corporate Social and Environmental

Responsibility, also known as Corporate Social

Responsibility (“CSR”) is a concept that were

implemented in Indonesia since 1990s, but later ruled

in Law No. 40 Year 2007 concerning Limited

Liability Company. Following regulations in CSR

will be elaborated in this article. These provisions

https://orcid.org/0000-0002-6247-256X

also include sanction on companies who violates the

provision.

However, the concept of CSR in Indonesia is

merely seen as source of fund that is available for

government and local people in context of social and

environment which is obviously far off from the

characteristic of CSR as implementation of

sustainable development goals.

CSR, having no clear implementation regulation

at present, is being implemented and interpreted in

different way, in provincial government, or

city/regent government of Indonesia. Some of them

have clearer regulation, and some of them even claim

that CSR fund has to be accrued in State Budget.

These overlapping regulations has been troublesome

for companies because there is no authority can

confirm that their contribution by CSR has reached a

proper amount.

312

Tresnawati, .

Corporate Social and Environmental Responsibility Regulation and Implementation in Indonesia: Contribution for Sustainable Development or Legalized Robbery?.

DOI: 10.5220/0010751400003112

In Proceedings of the 1st International Conference on Emerging Issues in Humanity Studies and Social Sciences (ICE-HUMS 2021), pages 312-321

ISBN: 978-989-758-604-0

Having a business in Indonesia means that you

also must be ready for local people, who claim for

charity or contribution from you company in the

name of CSR. Main problem of this condition is that

no institution could confirm who is eligible and who

is not. And how much is proper enough for a company

in a year to contribute social and environmental

activities? And how about the accounting issues,

whether such charity or contribution may be posted

as cost in the balance of payments, as it would not be

taxable, but is that always the case?

Tax will not be discussed in this article; however,

it is no secret that companies are always profit

oriented. Companies are different in its nature with

foundations, another type of legal entity available for

social purposes in Indonesia. If there is any possible

legal recourse to reduce the cost whatsoever,

including to reduction of tax, every business will

choose it. Therefore, keeping on perception that

companies are alternative source of funding, would

be contrary to better investment climate. When larger

investment invited, the most important question is

what do we have to offer them?

Undeniably, there must be a balance of interest

between company’s intention for profit making,

governments and local people’s interest in CSR fund,

and the big concept of sustainable development. If

there is no blueprint which is concrete enough to be

implemented, the concept of CSR in Indonesia will be

lost on translation or might even affect the Ease of

Doing Business index as published by World Bank

Group.

Some possible solutions would be proposed after

the conclusion of research questions abovementioned

has been reached.

2 METHODS AND MATERIALS

Main research questions of this research are whether

Indonesian CSR Regulation and Implementation has

been in line with the sustainable development goals.

The second question which is featured in the title,

how shall CSR Regulation in Indonesia so that it

would not legalized robbery for investors, either local

or foreign investors. The third issue is how would we

balance all the interest of CSR’s stakeholders?

As well as other legal research, this article will be

elaborated using the conceptual and statute approach.

Comparative method will be added in some parts and

all problem will be observed and resolved in

normative scheme.

2.1 CSR Regulation and

Implementation in Indonesia

Nowadays, terminology of CSR is quite popular in

business activities in Indonesia. CSR in the past was

merely refer to social function of companies, as a

balance to its function as economic tools for profit

making. This terminology was growing broader as

Indonesian Company Law No. 40 Year 2007 had

included company’s environmental responsibility.

Even though the definition does not change legally

since then, CSR is not a single independent concept.

CSR is inherently related with Sustainable

Development Goals (SDG), which the vision of leave

no one behind, try to balance every stakeholder.

Former scope of CSR is enlarged in many aspects, as

it presently includes seven cores that are human

rights, labour practices, environment, fair operating

practices, consumer issues, community development

and involvement (ISO, 2018). In practice, CSR deals

with all cost centres of a company, while profit

centres are the core of the company. Due to its

expenditure nature side of the business, no wonder,

CSR is considered unfavourable, in short term.

However, when one considers for long term

objectives, as it is in SDG, CSR is definitely crucial.

CSR was originated from the idea of Andrew

Carnegie, Founder of U.S. Steel, the author of The

Gospel of Wealth. As early as 1899, he delivered in

that book two basic principles of corporate

responsibilities, charitable principles, and

stewardship principles, as referred in Citeman (1999).

. These CSR concepts were evolving gradually since

then, although was considered as exception to

mainstream culture during those time.

Donation and charities have been practised as

culture in Indonesia before CSR regulation was

enacted. Initiatives on CSR in Indonesia was begun

as early as 1999, when Ministry of State Owned

Enterprises (SOE) of Indonesia issued a Ministerial

Decree No. Kep-216/M-PBUMN/1999, followed by

promulgation of Law Number 19 year 2003

concerning SOEs and later by issuing SOE Minister

Regulation Number Per-05/MBU/2007 concerning

SOEs partnership with small enterprises and

environmental management program. As referred by

Ridho (2017), all aforementioned law and regulations

stated that every SOE had to allocate 4% of its net

profit on partnership with small and medium

enterprises and environmental management

programs, equally 2% each for partnership program

and for environmental management programs.

Corporate Social and Environmental Responsibility Regulation and Implementation in Indonesia: Contribution for Sustainable Development

or Legalized Robbery?

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2.1.1 CSR Regulation in Indonesia

CSR had been implemented in Indonesia voluntarily

since 1990s, before any enactment of CSR in the

Republic ever existed. The first regulation of CSR

was Article 74 of Law No. 40 Year 2007 concerning

Limited Liability Company rules as follows: “The

Company having its business activities in the field of

and/or related to natural resources, shall be obliged to

perform its Social and Environmental

Responsibility.” On those days, it was a breakthrough

in Indonesian legal system to enclose the provision.

Supported by obligation to report in Annual Report

(Article 66 par 2 b), unfortunately no clarity in the

regulation, as it is only referring to appropriateness

and fairness, and that CSR Provision will further

regulated in Government Regulation.

It took another five years, before the Government

Regulation No. 47 Year 2012 regarding Corporate

Social and Environmental Responsibility of Limited

Liability Company was enacted back then. Stated in

this regulation that there will be sanctions for

companies having its business activities in the field of

and/or related to natural resources (Article 7), which

violates this provision but there is no measurable

standard on condition of which a company violates

this provision. The procedure for CSR in this

Government Regulation only applicable to

companies on natural resources related field, which is

unfair and partial from perspective of business, CSR

shall be implemented by composing annual work plan

which shall obtain approval from Board of

Commissioners or General Meetings of Shareholders,

and its implementation shall be included in

Company’s Annual Report and presented to General

Meeting of shareholders (Article 6). In conclusion,

there is no external control mechanism to CSR

scheme of companies. Therefore, there might be

companies submit fully to the provisions, and those

who don’t, and both are still treated equally by the

government. Well, there is a mechanism of carrot and

stick in this regulation, as there is a sanction involved,

but there is no clarity on the regulation on how the

sanction will be imposed. There will be also awards

for Companies implement this CSR, but would it be

worth for the Company?

Considering Company’s nature in profit making,

CSR award does not sound promising yet. CSR award

is prestigious for public companies, as it would

leverage their corporate values, but CSR are not

Economic Review and Marketing.co.id are two

magazines which program to award companies’ CSR

Implementation.

merely for listed companies, it even applies to any

kind of companies

. The vision of CSR as

implementation of sustainable development goals, is

also too far-reaching objectives for people and

common business actors of Indonesia. Different view

is applicable in many developed countries, but reality

is as is it in Indonesia.

Back again to the issue of natural resources

industry, Indonesia Constitutional Court’s verdict

No. 53/PUU-VI/2008 was based on Article 33 par.

(3) 1945 Constitution. The basic principle here is the

more you take, the more you must pay back.

However, as there is no CSR obligation on companies

in non-natural resources related business, this is also

unfair for the natural resources business. There must

be a balance between those two classifications, as all

the companies have taken from Indonesia, they also

have obligations to pay back to Indonesia, although it

might be in different prerequisite conditions. This

opinion is in line with Constitutional Court Verdict,

as they said that obligation in implementing CSR is

also applicable to other business entities, such as

Cooperatives, Commanditaire Venootschap, Firm

and Business based on Article 15 Law No. 25 Year

2005 regarding Investment, which stated every

investor is obliged to: carry out corporate social

responsibility. Fully agree to the provision, as it is all

business’ obligation to contribute to sustainable

development (SDG) in Indonesia.

Law No. 22 Year 2001 concerning Oil and Gas

implies only one provision in Article 11 paragraph (3)

letter p, which states, "Cooperation Contracts as

referred to in paragraph (1) must contain at least the

main provisions, namely: development of the

surrounding community and guarantee of the rights of

indigenous peoples." This is regarded as provision

related to CSR, as development of surrounding

communities and guarantee of right of indigenous

people are always referred as part of CSR.

Moreover, Mineral and Coal Mining (Minerba)

Law No. 4 Year 2009 does not explicitly mention

CSR, as Oil and Gas Law. It uses terminology of

community development and empowerment

programs. Article 108 paragraph (1) of the Minerba

Law states that "Holders of IUP (Mining Business

Permit) and IUPK (Special Mining Business Permit)

are required to prepare community development and

empowerment programs." Article 1 point 28 of the

Minerba Law defines community empowerment as

"an effort to improve the capacity of the community,

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both individually and collectively, so that their life

level will be better." However, as CSR definition is

broad, these articles is regarded to be referred as CSR

provision.

Fortunately, such UU Minerba has been replaced

by Law No. 3 Year 2020 regarding Amendment of

Law No. 4 Year 2009. In this prevailing version, the

Article 108 paragraph 1 was added provision of

paragraph 2 which states that IUP and IUPK holders

are required to allocate funds for the implementation

of development programs and community

empowerment in the minimum amount determined by

the Minister. Although efforts to limit the CSR

realization use minimum approach, this is better from

the previous version. Paragraph (3) of this Article 108

states that compilation of the program as referred to

in paragraph (1) is consulted with the Minister, the

Government Region, and community. This is a

something new, although still immeasurable,

Government’s good faith to protect company’s

interest is being clearer in this provision, as it required

coordination between government officials and local

communities concerning CSR realization. This will

reduce hassle for companies in their good faith in

implementing CSR.

In its implementation Regulation, Government

Regulation No. 2003 Year 2010 regarding

Implementation of Mineral and Coal Mining

Business Activities, there is one special chapter,

namely Chapter XII, which consists of four articles

that regulate community development and

empowerment. Article 108 of the said chapter states,

"Every holder of a Production Operation IUP and a

Production Operation IUPK is obliged to submit a

report on the realization of the community

development and empowerment program every 6

(six) months to the minister, governor, or regent /

mayor in accordance with their authority." Violation

of this obligation may be subject to administrative

sanctions. This semester report will help

coordination, which reduce overlapping and over

charging.

Another provision of CSR is as stated in Law of

21 Year 2014 concerning Geothermal, of which

Article 65 paragraph (2) letter b states: "In

implementing Geothermal management, the

community has the right to: get benefits from

Geothermal exploitation activities through the

company's obligation to fulfill corporate social

responsibility and / or develop the surrounding

community."

Most of the provisions mentioned above are

natural resource related business, but this is not the

case with Law Number 13 Year 2011 Concerning

Handling of the Poor. There are at least two articles

that pertain to CSR in Law no. 13 of 2011. First,

Article 36 paragraph (1) letter c, which states that one

of the sources of funding in handling the poor is funds

set aside from corporate companies. This provision is

reinforced by Article 36 paragraph (2) which reads,

"Funds set aside from corporate companies as

referred to in paragraph (1) letter c shall be used

maximally for handling the poor." Apart from that,

there is also Article 41 which uses the term

community development. Article 41 paragraph (3)

explains that business actors participate in providing

community development funds as a manifestation of

social responsibility for handling the poor.

In addition, Regulation of the State Minister for

State-Owned Enterprises No. PER-05 / MBU / 2007

of 2007 concerning the Partnership Program for

State-Owned Enterprises (SOE) with Small-scale

Businesses and Community Development Programs

as last amended by Regulation of the Minister for

State-Owned Enterprises No. PER-08 / MBU / 2013

of 2013 concerning the Fourth Amendment to the

Regulation of the State Minister for State-Owned

Enterprises No. PER-05 / MBU / 2007 concerning the

Partnership Program for State-Owned Enterprises

with Small Businesses and Community Development

Programs ("Permen BUMN 5/2007"). This regulation

regulates the obligations of Limited Liability

Companies ("Persero"), Public Companies

("Perum"), and Public Company Companies

("Limited Liability Companies").

According to Article 2 of Permen BUMN 5/2007,

Persero and Perum are obliged to carry out the

BUMN Partnership Program with Small Businesses

and the Community Development Program.

Meanwhile, the Public Limited Liability Company

can carry out the BUMN Partnership Program with

Small Businesses and the Community Development

Program based on the SOE Ministerial Regulation

5/2007 which was established based on the GMS

decision. The BUMN Partnership Program with

Small Businesses is a program to improve the ability

of small businesses to become resilient and

independent through the use of BUMN funds (Article

1 number 6 Permen BUMN 5/2007). Meanwhile, the

Community Development Program is a program to

empower the community's social conditions by

BUMN through the use of BUMN funds (Article 1

number 7 Permen BUMN 5/2007).

Despite of the national regulations on CSR, it is

noteworthy that local governments also have

regulations on CSR. West Java and East Java

Province are two provinces which are seriously

regulate CSR. Local Regulations are something to be

Corporate Social and Environmental Responsibility Regulation and Implementation in Indonesia: Contribution for Sustainable Development

or Legalized Robbery?

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watched, besides the national level regulation. For

example, Article 23 paragraph (1) of East

Kalimantan’s Local Government Regulation No.

3/2013

even set bottom lines that CSR allocation

shall reach at least three percent of the total profit

annually.

Another issue which must be observed is new

regulation of PT (limited liability company),

according to Law on Job Creation No. 11 Year 2020,

which allows PT being established by one person

only, and with less capital than fifty million Rupiahs.

This was even called PT UMKM or SME Company.

Considering that SME Company is also obliged by

Indonesian Limited Liability Act and Investment Act,

means that CSR obligation is also applied to the SME

Company, while in practice, CSR in Indonesia is

obligatory and executable merely for natural

resources related industry. CSR’s application in

Company Law only, as it is not stated in another

regulation, implies that CSR is applicable for ‘big

businesses only. So how Indonesian CSR would be

applied to this SME Company?

Examining on these articles, conclusively,

Indonesian perspective of CSR is that it is a mere

alternative funding for social or environmental issues,

particularly in relation with natural business-related

companies. Although, as stated beforehand, it is

wrong to comprehend that CSR only applicable to

natural business-related industry, as it is obligatory to

every company in Indonesia. The problem is that no

sanction imposed in case of violation, which makes

these provisions are not executable. Lex imperfecta,

the law that is imperfect and ineffective because it has

no sanction, one said.

2.1.2 CSR Implementation in Indonesia

As one is aware of the character of Indonesian rules

on CSR, we would also realize the fact of unclarity of

CSR provision will influence its implementation.

CSR in Indonesia is implemented in obligatory based

or voluntary based, as a result that that obligatory

companies are natural resources related companies

according to Indonesian Company Law. Yet, as

aforementioned, in essence CSR is applicable to any

kind of business in Indonesia.

This has been discussed by Permatasari E. in

Hukumonline (2020) How much total CSR amount shall

be budgeted by Companies?

In 2002-2007, I was a Corporate Legal Section Head of

PT. Astra Honda Motor, handled Contractual and

Entities Affairs of the Company. PT Astra Honda Motor

Astra Group, a leading automotive industry in

Indonesia, always separate its business and social

activities. Business affairs are managed in companies,

while social affairs are managed in foundations

. Or

in other words, they must form a new foundation to

manage social related affairs. But that is only a model

of it. There are many companies who directly

involves in community development, with their own

legal entity and trademark, to engage more with the

community and to promote their companies more.

In the previous section, it is mentioned that

Indonesian government and people’s perspective on

CSR is merely perceive CSR as source of funding for

social and environmental related activities. This

hypothesis was confirmed in a study to find the

relationship between CSR implementation and

company’s performance, which results indicates that

the understanding of majority of CSR managers in

Indonesian listed companies regarding CSR was still

limited to donation and community development

activities (Ridho, 2017). It is long way to go from the

current concept of CSR as implementation of SDG.

Thorough understanding on CSR shall be pronounced

from time to time or, misunderstanding on concepts

of CSR would lead to legalized robbery to company’s

profit in the name of CSR.

Semanggi Interchange, which was built when

Ahok was being Governor of DKI Jakarta, was one of

example of CSR implementation in Indonesia. The

construction of this road did not use the APBD at all.

As cited by A.D. Afriyadi, Detikfinance (2019),

based on the records of the DKI Provincial

Government, this project was financed from a

compensation fund for the excess building area

coefficient (KLB) from PT Mitra Panca Persada, a

Japanese subsidiary, Mori Building Company.

However, this plan gained negative responses from

some legislator, as some of them said that the fund

shall be regarded as income of Provincial

Government and accrued in State Budget

The current case has shown how CSR in Indonesia

is interpreted differently even between executives and

legislatives. Yet, this policy was deemed as positive

breakthrough in view of others. This raised a question

in my mind, is there any specific guidance on how we

implement CSR? Or is there any competent

authorities, with preventive character and out-of-

is a subsidiary of PT Astra International Tbk, holding

company of Astra Group in Indonesia.

A well known public polemic was occurred between

Basuki Tjahaja Purnama (also known as Ahok) as part

of Governor of DKI Jakarta and Fahri Hamzah as

People’s Representative Council’s Deputy Speaker

during those time.

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court, who becomes the authority in CSR

implementation? And how much shall be contributed

by companies for CSR, is there any specific target on

how much shall be donated, so that the Company

could reject any other CSR proposal? Does CSR

Implementation always have to be in form of

funding? And what if the funding accrued in State

Budget is corrupted, as it is happen to many cases of

social funding assistance? Is donating included in

category of CSR implementation, or not? There are

many questions involved in CSR implementation.

Another phenomenal CSR case was PT Djarum

which was alleged to conduct child exploitation by

Indonesian Child Protection Commision (KPAI). The

allegation was never confirmed, but this was also

CSR implementation case, as Djarum Foundation is a

separate legal entity with PT Djarum,and Djarum

Foundation is the one who hold the badminton

audition, the event accused by KPAI to be exploited

by PT Djarum. Exploitation alleged was simply using

promotional materials in children’s badminton sports

attire. Djarum Foundation even terminated its

Badminton Audition in 2019 due to KPAI’s

recommendation. The dispute was resolved in

mediation with the good offices of Minister of Youth

and Sport Imam Nahrowi, which results that

Badminton Audition will not use Djarum’s

trademark, brand image of Djarum

. Will this case be

‘persuasive’ precedents in Indonesia, that all CSR

shall detached from its donator? So far, the use of

trademark is justified, so that the Company can

promote its brand, while also implement CSR. This

kind of trade off is even exist in small school events,

when you receive donation, you must give something

in return, delivering your gratitude in form of

attaching the logo or trademark of the Company.

There must be further scrutiny on this precedent.

Nevertheless, none of examples were given to

disregard the urgency of CSR implementation in

Indonesia. When CSR was introduced in 2007, this

concept was foreign and might be inacceptable for

some business actors as it is contrary to their nature

of profit making. However, the tendency changes

gradually. More enthusiasm in CSR can be seen in

some factors. This is authorised by Ridho (2017)’s

study to CSR implementation in Indonesia from

2014-2015 which has resulted on CSR

implementation had positive and significant impact

on company’s financial performance, measured both

by ROE and ROA and there was a change of the

impact of CSR to customer, from no influence in

According to Detik, this conflict was settled in

Mediation.

2014 to become positively influenced the customer in

2015. As an addition, since 2017, Sucofindo is

expanding on CSR social mapping. This service is

combined with ISO 26000 which was not intended for

international certification but a guidance

. Most

likely, many event organizer’s on CSR awards has

educated and gradually changed Indonesian’s

perspective on urgency of CSR. However, so far the

perspective remains the same, CSR is source of

funding, or viewing companies as a mere object on

CSR Regulation.

2.2 Sustainable Development Goals in

Indonesia

In 2015, all members of United Nation universal

adopted Sustainability Development Goals, as

universal call to action to end poverty, protect the

planet, and ensure that by 2030 all people enjoy peace

and prosperity. The 17 SDGs are integrated—they

recognize that action in one area will affect outcomes

in others, and that development must balance social,

economic and environmental sustainability. Those 17

SDGs are:

1. End Poverty in all its form everywhere;

2. End hunger, achieve food security and

improved nutrition and promote sustainable

agricultures;

3. Ensure healthy lives and promote well-being

for all at all ages;

4. Ensure inclusive and equitable quality

education and promote lifelong learning

opportunities for all;

5. Achieve gender equality and empower all

women and girls;

6. Ensure availability and sustainable

management of water and sanitation for all;

7. Ensure access to affordable, reliable, and

sustainable modern energy for all;

8. Promote sustained, inclusive and sustainable

economic growth, full and productive

employment and decent work for all;

9. Build resilient infrastructure, promote

inclusive and sustainable industrialization and

foster innovation;

10. Reduce inequality within and among

countries;

11. Make cities and human settlements inclusive,

safe, resilient and sustainable;

12. Ensure sustainable consumption and

production pattern;

Sucofindo is one of certification institution in Indonesia

to obtain ISO certification

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13. Take urgent action to combat climate change

and its impacts;

14. Conserve and sustainably used of the oceans,

seas and marine resources for sustainable

development;

15. Protect, restore and promote sustainable use of

terrestrial ecosystems, sustainably manage

forests, combat desertification, and halt and

reverse land degradation and halt biodiversity

loss;

16. Promote peaceful and inclusive societies dor

sustainable development, provide access to

justice for all, and build effective, accountable,

and inclusive institutions at all;

17. Strengthen the means of implementation and

revitalize the global partnership for

sustainable development.

In supporting SDGs, Indonesia has special

website to support fulfilment of targets of SDGs,

https://www.sdg2030indonesia.org/. To facilitate

implementation and monitoring in Indonesia,

according to Bappenas, 17 Goals and 169 targets of

the SDGs are also grouped into four pillars, namely:

1. Social development pillars: covering Goals 1,

2, 3, 4 and 5

2. Economic development pillars: covering

Goals 7, 8, 9, 10 and 17

3. Environmental development pillars: covering

Goals 6, 11, 12, 13, 14 and 15

4. Law development and governance pillars:

encompassing Goal 16

Presidential Regulation Number 59 of 2017

concerning the Implementation of the Sustainable

Development Goals shows the consistency of the

government in institutionalizing the SDGs agenda

into the national development program. This SDGs

Presidential Decree emphasizes the involvement of

all stakeholders, through four participation platforms,

namely, the Government and Parliament,

Philanthropy and Business, Mass Organizations,

Academics and Experts in order to make the

implementation of the SDGs agenda successful. In

addition, the SDGs Presidential Decree aims to

maintain the improvement of people's welfare in a

sustainable manner, to maintain the sustainability of

the social life of the community, to maintain the

quality of the environment and to develop inclusive

and to implement governance that is able to maintain

the improvement of the quality of life from one

generation to the next

SDGS has been included in National Medium Term Plan

2020-2024.

2.3 Correlation between CSR and

SDGs

Obviously, CSR is in line with SDGs. CSR is claimed

to be corporate concept of sustainable development.

Referring to Behringer, K., & Szegedi, K. (2016),

CSR is a business model which promotes business

contributions to sustainable development i.e, it

creates a balance between economic interests,

environmental needs and social expectations by

integrating the spirit of Sustainable Development into

the business strategy.

Interaction between the concept of CSR and

sustainable development has strengthened in recent

years. This is proven by the fact that CSR is deemed

as an integral part of sustainable development.

Corporate sustainability is the company version of

sustainable development, while CSR is a voluntary

managerial approach to sustainable development.

Corporate responsibility and corporate sustainability

are regarded as the same concept, as stated by

Behringer, K., & Szegedi, K. (2016).

Obviously, CSR, as the company’s version, is an

integral part of SDGs. To reduce the concept of CSR

merely as alternative source of funding for

governments and local people, would impact on

reduction of SDGs. SDGs was never established as

short term objectives, neither was CSR. Involvement

of ISO 26000 in strengthening concept that CSR is

integral part of SDGs is inevitable. Otherwise,

Indonesia would be stagnant in CSR regulation and

implementation.

If there is no improvement on clarity of CSR

Regulation and Implementation in Indonesia, the

direct impact is each company’s version in

implementing CSR. As Company is being viewed

merely as an alternative source of funding, this would

enlarge business risk burdens both for local and

foreign investors. To be precise, foreign investors

have many other choices, other than Indonesia as host

of investment. Clearly, business actor will choose any

place which facilitate and accommodate his/her

interest, with legal and economic predictability.

Therefore, this is also an option for Indonesia,

whether to make is easier for foreign (and local

investor, definitely) to predict their business risk by

providing clear CSR system, or just let it to the

market, as it happens at the moment. By leaving it to

invisible hands, current investor may remain

investing in Indonesia, but no new investors, because

there is no certainty or at least predictable business

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risk including CSR. This might need further study on

how much the opportunity loss by Indonesian

scholars, as a base of recommendation for

government, when Indonesia abandons legal certainty

on business risk regulation and implementation,

including on CSR.

2.4 Stakeholders of CSR in Indonesia

As we have discussed above, there are some

stakeholders of Company’s CSR in Indonesia, which

comprises:

1. National Government

2. Provincial Local Government

3. City/Regent Local Government

4. Local Communities/People

5. The company

3 RESULTS AND DISCUSSION

After listing all the CSR’s stakeholder in the previous

section, let us move to the regulations enacted by

Stakeholders number one up to number 4. Starting

with last number as local people has no authority to

enact any regulation whatsoever, but they may ask for

charity, in the name of CSR, as CSR was meant for

community development, social cultural

arrangement, surrounding community empowerment,

environmental measures and so on. Please note that

there is no blueprint on most activities, which might

end up that those activities were only social

arrangements, without having any particular

objectives. Considerably, this is far from SDGs’

objectives, because those social arrangements most

likely do not relate directly to the targets of SDG’s.

There are 169 targets of SDG, so there are plenty to

be chosen whatsoever.

This might also raise another question, does

charity/philanthropy action counts as CSR? Cause if

it is not, then business risk of company is even

greater. Aforementioned, in Indonesia, running a big

business means that directors have to be ready of local

people’s visits to ask for philanthropy or charity at

any time. This is also unpredicted amount of funding

which must be expended.

Number one, National Government, has all the

central regulations as legal base on CSR

implementation, however, as I have mentioned, none

of those regulation stated in Section 2.2. of this

Article is clear enough on how CSR shall be

implemented in Indonesia. No methods of

implementation described, and no measurement on

target of CSR fulfilment of each company.

Another critic to the regulation is that it only rules

on company in natural resources related business,

which makes other companies has no obligation in

CSR. Although this was mentioned on Investment

Act, it was only one article while CSR is regulated in

more than five Acts in Indonesia which refers to

natural resources related business. It is so human that

most of companies will interpret the law according to

their own interests.

Another drawback of national CSR Regulation is

that it has no blueprint, which makes possibilities of

overlapping with local regulation as applied by local

governments. Provincial Government and

City/Regent Government also applies CSR

Regulation and Tax to the same object, Companies.

And according to the phenomenal Job Creation Act,

definition of limited liability company is even

broader, as there is possibility for SME who has

capital under than 50 million Rupiahs to establish a

limited liability company. An ease of doing business

for sure, but it also raises the mandatary obligation to

submit to the CSR provision. When you have small

capitals, and many people asking for your charity,

imagine how devastating it will be for beginner

businessman. However, this might no be applicable,

if we interpret that Company Law CSR regulation

only applies to natural resources related business.

Though, this is unequal treatment for natural

resources related business, in my opinion.

Consistency between national, provincial and

city/regent will also have to coordinated. There must

be big design on company’s CSR, and therefore it

must be measurable and predictable. Otherwise, the

interest of Company as the last stakeholder will be

forsaken. Business actors are abused when there is no

coordination between government authorities. There

are some measures required in this case, such as

regulations on maximum percentage of net profits use

for CSR implementation. This was already used by

some local governments, such as Government of East

Kalimantan Province, and was regulated in 1999

Minister of SOE’s regulation and need to be followed

by another region. If the SOE’s CSR is limited, then

the private sector companies shall be treated equally.

Therefore, there will be a limit of business risks for

investors, either local or foreigner, when they invest

in Indonesia.

CSR, as abovementioned are company’s version

of SDGs. Conservative perception that Company

must be rich and therefore shall do charity is the

mindset that has to be depleted in Indonesian people

mindset. Companies do have their limits. Therefore,

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319

it is Government’s responsibility to protect both

interest of government, local government, local

people and the company.

Pursuing SDGs without referring to company’s

nature of profit making is also unrealistic. No one

would feel voluntary when he is robbed, either legally

or illegally. Therefore, as a sovereign welfare state,

Indonesia has responsibility to protect all its citizens,

including the companies.

4 CONCLUSIONS

In the light of those arguments, all in all, to conclude

the following matters:

1. CSR is in line with SDGs. CSR is claimed as

mini version of SDG. Balancing the same

thing, economic social and environmental

aspects, CSR is applicable for companies,

while SDG applies to member states of United

Nations. Hence, CSR is the micro version, and

SDG is the macro version.

2. Indonesian Regulation on CSR shall be

revised to get more measurable limitation on

CSR realisation. Limitation would lead to

legal certainty that would reduce business risk

of both foreign and local investor. Moreover,

Indonesia’s conservative mindset on

company’s obligation to do charity must be

altered and be balanced with company’s

interest in profit making. Overcharging CSR

will be deemed as legalized robbery in

Company’s point of view.

3. Central/national Government shall coordinate

with local government, either in Provincial

Level or City/Regent Government, so that

there will be no overlapping and over charging

of CSR implementation to a company.

Overcharging and overlapping might end up in

legalized robbery to the Company.

Coordination of governmental authorities and

community has been realised in Minerba Law,

which also include semester report on CSR

implementation, but only applied in this

limited sector. More sectors, or general

application in Indonesian Limited Liability

Company is highly expected.

ACKNOWLEDGEMENTS

This is to acknowledge that this research was inspired

by Gerry Alvindo, an alumnus of Faculty of Economy

of Maranatha Christian University, who is presently

finishing his Master Thesis in Business Law Program

in Atmajaya Catholic University Yogyakarta

regarding CSR as part of SDG. Without his intriguing

questions, this research would have never been

started.

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