CSR program and delicious porridge

“The form of corporate social responsibility (CSR) is not just to distribute basic necessities, although that is also essential,” said Vice President Boediono last January after witnessing the award ceremony of Wirausaha Muda Mandiri (Young Independent Entrepreneurs) of Bank Mandiri, which thousands of Indonesian students participated in.

Sofjan Wanandi, the Chairman of the Indonesian Employers Association (Apindo), commented on CSR last November saying: “We do not just want to give a sum of money to street bullies (preman) around our factory and consider it CSR.”

CSR was first promulgated in the 2007 Indonesian Company Law.  Article 74 (1) of the law states: “A company that engages in the business activities of and/or related to natural resources must conduct Corporate Social and Environmental Responsibility.”  

However, as stated in another paragraph of the Article, to be effective the provision needs an implementing regulation (IR). Pending such an IR, companies experiment with their own ways of conducting CSR, as demonstrated by the above Bank Mandiri event.

CSR was initially intended to apply to all limited liability companies. Nevertheless due to the public’s responses against the concept, CSR will only be applied to companies that are engaged in the field of natural resources or activities that have an environmental impact on the “functional capability” of natural resources – as explained in Article 74(1). The shifting of this application is not proper at all, because the CSR obligation for such companies has already been intensively regulated by sectored regulations such as the oil and gas law, the minerals and coal law, the forestry law and the environmental law itself.

Now, it is actually no longer relevant to debate on the need to have the CSR provisions in the company law as the Constitutional Court in a decision last year maintained the CSR article.

For this reason, the analogy expressed by a corporate law expert last December that: “The rice has turned into porridge. Now we just need to work out how we can make the porridge delicious,” reflects the current CSR situation well.

 CSR can actually be assessed from another approach. For example, the economic promotions approach, as an alternative to a regulatory approach.

A company is encouraged to compete through CSR as a promotional event. Company A for example helped build roads in a remote lake area so that school children would no longer need to perspire and paddle a canoe up a lake. They could also build new walls in an elementary school that once made from bamboo.

Companies could even create a stage to increase the legal consciousness of a remote society. CSR may even be in the form of building houses of worship or providing a creative medium for senior citizens. Or the competition to win the WMM Bank Mandiri award as illustrated above.

The government may then create a performance system index, as well as providing performance rewards. Referring to company law, conducting CSR via this approach may be formalized by having it is as an agenda in the annual company budget – as required by article 74(2).

The economic promotions approach above has been frequently used. Even by non-limited liability companies, such as professional services organizations.  

A law firm in Jakarta, for instance established a non-profit organization for the purpose of providing scholarships, professors for regional universities and support to build schools that are in ruins, as well as writing popular articles in the media to increase legal consciousness.

So, turning back to the IR of CSR, will we be able to make it delicious porridge? It all depends on which recipe we use.

What will certainly not make the porridge appetizing is if CSR requires financial obligations. First, it will be difficult to refuse the allegations of CSR as being double taxation, and this violates the rules of the business community. Secondly, there will be a very potential hazard of managing funds. Understandable!


The writer is a member of the board of trustees of the ABNR Foundation.