Regulation on Corporate Social and Environmental Responsibility (CSER) in Indonesia: Changing Concept of Corporate Social Responsibility (CSR) from Voluntary to Mandatory

The purpose of this paper is to describe the results of the research on the regulation of Corporate Social Responsibility (CSR) in Indonesia as well as its development, as regulated in Chapter V Article 74 of Law No. 40 of 2007, using the term Corporate Social and Environmental Responsibility (CSER). The research method employed is legal research, which is analyzed prescriptively, to produce novelty about alterations in the concept and regulation of CSER which is in force Indonesia, changed from voluntary (morale obligation) to mandatory (legal obligation). The existence of the CSER regulation, which has been passed by the Government and House of Representatives, is intended to improve the welfare of society in its environment. Moreover, it is intended to create legal certainty regarding the implementation of CSER for limited liability companies running their business activities in the field of and/or related to natural resources. However, the existence of such regulations is not without problems, which will be discussed in this paper.


Introduction
At the time of the application of Law No. 40 of 2007 on Limited Liability Companies, the obligation of social and environmental responsibility for limited liability companies shall be subsequently regulated in article 74 Law No. 40 of 2007, which states that: (1) Corporations doing business in the field of and/or in relation to natural resources must put into practice environmental and social responsibility.
(2) The environmental and social responsibility contemplated in paragraph (1) constitutes an obligation of the corporations which shall be budgeted for and calculated as a cost of the Company performance of which shall be with due attention to decency and fairness. (3) Companies who do not put their obligation into practice as contemplated in paragraph (1) shall be liable to sanctions in accordance with the provisions of legislative regulations. (4) Further provisions regarding Environmental and Social Responsibility shall be stipulated by Government Regulation.
Based on the elucidation of article 74 Law No 40 of 2007 on Limited Liability Companies,, the provision was intended to maintain relations the harmonious, the company balanced, and in accordance with the environment value, the norms, and the culture of the local community. It also that the company having its business activities in the field of natural resources is the company which manages and take advantage of natural resources. It also explains the meaning of "the company having its business activities pertaining to natural resources" is the company which does not manage and don't take advantage of natural resources, but its business activities impact on the function of the ability of natural resources. Meanwhile, what is meant by be imposed with sanction in accordance with the provisions of legislations is charged with all forms of sanctions will be regulated in the legislations which are related.
Based on both of the provisions. It means that all kinds of corporations are subject to CSR in Indonesia before the enactment of the Law No. 40 of 2007. However, after the enactment of Law No. 40 of 2007 and Government Regulation No. 47 of 2012 on Social and Environmental Responsibility of limited liability companies (GR-CSER), it appears that the obligation of CSR not only addressed to all kinds of companies, but only addressed to limited liability companies (Limited liability companies having is business activities in the field and/or pertaining to natural resources).
At the beginning of the enactment of article 74 Law No. 40 of 2007 which requires the implementation of CSER it created pros and cons among enactment. The reason is simple, because the concept of CSR is a form of social responsibility a corporation that is supposed to be performed voluntary by business. Nevertheless in its development, the trend in the regulation of CSR envisaged in the legislation into a duty that is potentially additional burdens for entrepreneurs in addition, with other such as a tax bureaucracy straightly, and others.
Even the rejection of the Constitutional Court's to review article 74 Law No. 40 of 2007 through the decision No. 53 / PUU-VI / 2008, is to stress the implementation of CSER which should be based on the corporate social awareness (voluntary based) now turned into the obligation of business players by the mechanisms of regulation (compliance fee-based). Hence, it is the enactment of GR-CSER, as a delegation regulation article 74 of Law No. 40 of 2007 (that the company is obliged to make CSER as part of its business objectives and should be set aside its budget for CSER program).
Thus, the concept of CSER which becomes legal obligation in Indonesia is actually a morale obligation in countries such as : Singapore (Sri Bakti Yunari 2009), Hongkong (Sri Bakti Yunari 2010) and Australia (Sri Bakti Yunari 2011). Therefore, CSER in Indonesia as a legal obligation is a reflection of corporate culture derived from the desire of Indonesian to create a sustainable economic development in order to increase the quality of life and environment which are useful for the local community and society in general and the company itself in order to establish harmonious relations, in accordance with the environmental value, norms, and culture of the local community.
The phenomenon of a trend to apply CSR as mandatory, compliance is not only exist in Indonesia, because formerly several countries in Europe such as England and France also have implemented CSR as compliance Actually, the concept of CSER in Law No. 40 of 2007 in Indonesia show how important CSR is for the survival of the business world especially for the company whose field of business related to natural resources. However lack of coordination in the process of the formation of laws and regulations, it was lack of coordination and involvement of expert in laws and limited access the role of society to participate in the process of the formation of legislation weakness. As a result, there is a weakness. There also weaknesses in the implementation of GR-CSER. This paper presents the existing weaknesses in the regulation of CSER as results of the study of the authors entitled: "An Inventory of CSR Regulation as a Legal Obligation for Corporation in Indonesia" (Sri Bakti Yunari & Siti Nurbaiti 2012). It is expected to present an overview of the regulation of CSR as a legal obligation in Indonesia together existing problems, the change paradigm of CSR from voluntary to mandatory. Consequently, it can become the inspiration for others countries who want to apply CSR as the legal obligation.

Research Method
The methodology of research applied in this study is legal research method (Peter Mahmud 2005), considered as doctrinal research (Anwarul Yaqin 2007) applying a library-based research, then focusing on reading and analyzing the primary and secondary materials, related to setting CSER in Indonesia. Besides, the analyzing of CSER regulation in Indonesia is performed to produce a legal reasoning (Ellsworth, Phoebe C 2005), as a prescription in solving legal issues faced. The CSER law materials are in the form of legislation, references, research results and articles, obtained from library studies in Indonesia, subsequently prescriptively analyzed, employing 'statute and concept approach as an instrument of learning and knowledge'. It is the process of identifying the rules which govern an activity and finding materials which explain or analyze those rules (Terry Hutchinson 2002). Furthermore, legal research is conducted to obtain legal reasoning on weaknesses of CSER regulation in Indonesia.

The Premise of CSER as Legal Obligation for Corporations in Indonesia
The concept of CSR in Indonesia has become legal obligation, it binds the companies to implement it. The basic reason of Corporate Social and Environmental Responsibility (CSER) in Limited Liability Companies Law is to create sustainable economic development in order to increase the quality of life and environment that are useful for the local community and society in general and the company itself in order to establish relations the harmonious, the company balanced, and in accordance with the environment value, the norms, and the culture of the local community. Where a proposal known as CSR in the discussion of the draft law on Investment has been supported by "Partai Keadilan Sejahtera" in the house of representatives factions, which are ultimately approved for legalized as Investment Law on March 29, 2007 (see minute of meeting draft investment law 2006). As for the proposal is supported by the following reasons: a. the recognition of and respect for the community, so as not to utilized exploited for commercial purposes; b. the obligation of investor to get involved in the development of the local community while maintaining local wisdom. Similarly, the concept of social and environment responsibility (CSER) in the discussion of the draft Limited Liability Companies law 2006, which are controlled by legislation in the House of Representatives faction -Republic of Indonesia, because of some considerations (see minute of meeting draft Limited Liability Companies law 2006), as follows: a. First, CSR concept as long as it is voluntary is not able to move the company's proven to be more caring towards society and the environment, because of the company's Indonesia 22.7 million, it is estimated that only 10% of CSR program has been running in earnest. Therefore, in a manner required (mandatory). Then all companies carry out CSR can be forced, so open a level playing field to all. If State-owned Enterprises only can be encouraged to do a mandatory CSR with the Partnership and Community Development Program, why not private business entities. b. Second, the voluntary approach in the management of CSR funds are very diverse, often gives rise to a debate between the company and the community. The company claims to have done with the CSR, building roads and bridges in residential community around, but at the same time also pay salaries of its employees under the minimum wage as well as polluting the environment. Consequently, within legislation in the legislation, it will be available a standard implementation and reporting of the implementation of CSR in each company, so that the public will be able to oversee the implementation of with ease. c. Third, the powers around the private business in the era of globalization has grown so strong and the role of the State is increasingly minimal. In some respects, the conditions of this kind can be very alarming if must be off. The Government as the regulator must ensure private business sector does indeed give you the benefits of short term and long term for the continuity of the national economy. Based on the noble consideration finally the existence of setting CSER as the legal obligation in article 74, Law No. 40 of 2007 on Limited Liability Companies was passed. The existence of article 74 is based on Hans Kelsen "stufen theory" (Hans Kelsen 2012), the existence of the article is in accordance with 1945 Constitutions, specifically article 33 (4) stipulation that: "The national economy organized by the principle of mutuality of economic democracy, fairness, efficiency, environmentally sustainable, independence, as well as by maintaining a balance, progress, and unity of the national economy". Therefore, In conclusion based on article 74 (3) the elucidation of Law No. 40 of 2007 on limited liability company is to enforce or in accordance with the provision of article 33 (4) of the 1945 Constitutions. Also known as the provision has given certainty and justice for the company or companies to try and find neither profit nor for people and the environment protection, to obtain sustainability and an absence of sustainable development to the optimal public welfare.  not carry out CSER according to what is mandated in law and order as depending from the ability of corporate financial and potential risks of the corporate itself. If the corporate considers inappropriate the reasonableness and fairness, then those corporations do not need to perform their obligations to carry out its social and environment responsibility, both inside and outside the corporate. The implication is the obligation to run social and environmental responsibility are determined by the legislation can be a voluntary based. b. Sanctions, prescribed in article 7 GR-CSER;

Regulation of CSER as The Legal Obligation for Corporate in Indonesian Legislation
Actually sanction in GR-CSER is just reaffirmed article 74 (3) Law No. 40 of 2007, which later reaffirmed in article 7 GR-CSER: 'the corporate no confidence social and environmental responsibility get sanction in accordance with prevailing regulation. Sanction meant in this article all sorts of sanctions regulated in the legislations sectoral related. The problem after discussed and analyzed, apparently from 17 legislation sectoral related fields which regulates CSR, there are 5 (five) legislation referred to by article 74 (3)

Conclusion
The premise of CSER as the legal obligation in Indonesia is a result of the people's untrust towards the good faith corporations. Hence, it is considered necessary to protect the rights of citizens, in the form of social responsibility of the corporate. CSER is required as a form of recognition and respect for the customary rights. It should not be used for commercial interests and responsibilities of investors to engage in the development of the local community to maintain local wisdom. Whereas the CSER obliged as a form of corporate concern for society and the environment. Thus, it is with the mandatory approach, the management of the fund will have a standard implementation of CSR and reporting are clear in their respective corporations, this could facilitate supervision. In addition, the Government as the regulator must ensure private business sector does indeed give you the benefits of short term and long term for the continuity of the national economy. Similarly, the existence of a hierarchy of CSER settings, in Indonesia, both legislations vertically and horizontally using Stufen Theory, then norm setting in It still has shortcomings, where from 17 (seventeen) of the Laws, 5 (five) of them don't govern sanctions for corporations which do not carry out obligations of CSER. Therefore, of course, may give rise to legal uncertainty in its application. Besides, understanding on the implementation of CSER in the Government Regulation No. 47 of 2012 that states should due observance to the reasonableness and fairness, of course can give rise to understanding of different instructions; in other words can generate multi interpretations which cause the vague of norms in the application. Because indicator of reasonableness and fairness submitted to it each of the corporate without supervision and yardstick clear good related forms or magnitudes CSER by law. Can provide opportunities for the corporate for not need to carrying out their obligations to implement social and environmental responsibility either in or out the corporate. The implication is an obligation to run social and environmental responsibility prescribed by statute (compulsory based) can become voluntary based.