The President finally signed the long awaited implementing regulation for Article 74 section 4 of Law No. 40/2007 regarding Limited Liability Companies (“Law”). The regulation was issued on 4 April 2012 as Government Regulation No. 47/2012 (“GR”) regarding Social and Environmental Responsibility of Limited Liability Companies.
Article 2 of the GR provides that every company has social and environmental responsibility. Article 3 provides further in its section 1 that this social and environmental responsibility is an obligation for companies that are engaged in the business field of or related natural resources.
The elucidation of Article 3 explains that what is meant by ‘companies that are engaged in the business field of natural resources’ are companies which business activities are managing and exploiting natural resources; whereas what is meant by ‘companies which business activities are related to natural resources’ are companies that do not manage and do not exploit natural resources, but which business activities have an impact on the function of natural resources and environmental sustainability.
As such, the GR answers the controversial question of whether the corporate social responsibility (“CSR”) is obligatory or voluntary for a company. The issue arose following the promulgation of the Law and became a debated issue with corporations arguing that since they are profit oriented institutions the CSR should be voluntary for them.
The GR does not stipulate sanctions for non-compliance with the obligation, but states that the sanctions may be imposed under other regulations. It became effective immediately upon its issue.
