Legal Analysis of the Company’s obligation to carry out the Environmental and Social Responsibility

As one of the national economy activator, a company holds a very vital role in the development of the State. The effort was realized in organize the public benefit, fostering incomes, provide services, employment, and so on. In addition to these roles, the company also has Environmental and Social Responsibility because the company is very closely related to the parties that support the passage of operations or commonly referred to stakeholders, both internal and external.

The government issued several regulations that govern environmental and social responsibility. Among them are: Article 74 of Law No. 40 of 2007 on Limited Liability Company, Article 15 of Law No. 25 of 2007 on Investment and Government Regulation No. 47 of 2012 on Corporate Social Responsibility and Environmental of Limited Liability Company. In article 1 number 3 of Law No. 40 of 2007 on Limited Liability Company, Environmental and Social Responsibility or Tanggung Jawab Sosial dan Lingkungan (TJSL) is defined as: “a Company’s commitment to taking part in sustainable economic development in order to improve the quality of life and environment, which will be beneficial for the Company itself, the local community and society in general”. When studied in depth, there are some legal issues that can be found in the rules, which are: (a) Environmental and Social Responsibility as a legal duty (b) the restrictions of the company which is required to implement the Environmental and Social Responsibility (c) synchronization and harmonization with other legislation.

A fundamental premise of Environmental and Social Responsibility is often considered to be the core of business ethics is that the company not only has economic obligations and legal (to shareholders), but also the obligations to the other parties concerned (stakeholders), for example with customers, suppliers, creditors, employees, government, public, especially those who live in the territory where it carries on its operational activities. This can be done in various ways in accordance with the strategy and core business of the company, for example: economic development in the fields of agriculture, cooperatives and Small and Medium Enterprises (SMEs), health and nutrition education, environmental management, scholarships, etc.

With the Environmental and Social Responsibility, companies can build good relationships with stakeholders, maintain and boost the company's reputation and brand image, get a license to operating socially, and help build the economics of the country for the better.

Environmental and Social Responsibility principle applied in Indonesia is a legal obligation that must be adhered to any company as defined in Article 74 paragraph (1) of Limited Liability Company Law. The concept is contrary to the concept of voluntary that used by various foreign countries and indirectly to negate the concept of economic democracy which is mentioned in Article 33 paragraph (4) of UUD 1945. This shows the Environmental and Social Responsibility program is “forcing” which requires compliance with the law and in the end only be limited to a mere formality. But on the other hand, the company can undertake responsibilities in addition to those already become obligations as referred in Article 8 of Government Regulation No. 47 of 2012. In a regulation, this statement was strange, because the previous rule has been determined an obligation to do, but also allowed to perform some obligations outside the responsibility have been determined.

Lawmakers determine that the company is required to carry out environmental and social responsibility is a company dealing with natural resources. This provision was expanded in the Explanation of Article, companies whose business activities to manage and utilize natural resources, and/or the company does not manage and utilize natural resources, but its operations have an impact on the function of the ability of natural resources. The statement is very broad because it does not mention what type of resource is meant by lawmakers. Therefore, it is necessary to sense the restrictions in order to avoid extensive interpretation. This can be done by issuing Government Regulation that regulates the scope and limitations of the company which must conduct Environmental and Social Responsibility according to Article 74 paragraph (1).

Environmental and Social Responsibility concept is also defined as a company's obligation to comply with legal obligations or restrictions that are set in a variety of sectorial legislation, it was found that some articles in several laws relating to Environmental and Social Responsibility, which are:
1. Law No. 7 of 2004 on Water Resources, in particular Article 47 paragraph (3), 52, and 83.
2. Law No. 41 of 1999 on Forestry, in particular Article 30, 32, 48 paragraph (3), and 50 paragraph (2).
3. Law No. 22 Year 2001 on Oil and Gas, in particular Article 40 paragraph (2), (3), and (5).

The regulations implicitly relating to the formulation of Article 74 paragraph (3) of the Limited Liability Company Law and its explanation states that the company which is not conduct the Environmental and Social Responsibility obligations can be sanctioned in accordance with the provisions of the relevant legislation. However, with the spread of the norm shows that there are overlaps between the regulation of Environmental and Social Responsibility in Indonesia with a variety of sanctions, it rises to legal uncertainty. In fact, some of the above rules are not entirely set sanctions for companies that do not comply with the obligations that have been mandated in the previous articles. The vacuum of sanction provision can cause quite complicated issue remember that Article 74 paragraph (3) actually refer to the legal sanctions in the relevant Law if a company does not carry Environmental and Social Responsibility. Therefore, the government should include sanctions explicitly that will be applied to the company that does not perform its legal obligations, conversely, the government also provide some sort of rewards in the form of incentives, subsidies, discounts or tax cutting for companies which comply the obligation of Environmental and Social Responsibility well. It would be more effective to encourage companies to conduct the Environmental and Social Responsibility obligations and give some positive effect on the business world as well as the national economy as a whole.

Government regulations as intended by Article 74 paragraph (4) is needed for more legal certainty for businessman and the companies. In addition, government regulations are also needed to prevent the implementation of the regulation on Environmental and Social Responsibility the company unilaterally and different at the level of the area through local legislation.