ESG Reporting Requirements In Indonesia.
For private companies in Indonesia, Environmental, Social and Governance (ESG) reporting generally aligns with the requirements outlined in the Company Law (Law No. 40 of 2007 regarding Limited Liability Companies, as last amended by the provisions of the Job Creations Law) and Government Regulation No. 47 of 2012 concerning the Social and Environmental Responsibilities of Limited Liability Companies (GR 47/2012).
However, it is essential to note that these requirements are relatively basic and not comprehensive. In fact, Article 74 of the Company Law specifically mandates companies engaged in natural resource-related business activities to implement sustainable economic practices to enhance the quality of life for communities and the environment (Corporate Social and Environmental Responsibility). This suggests that only companies operating in this sector have an obligation to fulfil Corporate Social and Environmental Responsibility. There have been no significant developments in this regard.
The Company Law does not stipulate further requirements or considerations concerning the implementation of Corporate Social and Environmental Responsibility, except for requiring companies to allocate budgets for these obligations and to ensure that reports on the implementation of Corporate Social and Environmental Responsibility are included in every company’s annual reports, as stipulated in Article 74, paragraph 2 and Article 66, paragraph 2 of the Company Law, respectively.
Similarly, Article 3, paragraph 1 of GR 47/2012 only mandates that companies involved in natural resources implement Corporate Social and Environmental Responsibility. There are few differences regarding Corporate Social and Environmental Responsibility requirements under the Company Law and GR 47/2012. GR 47/2012 essentially reinforces provisions previously established in the Company Law, such as:
- requiring the board of directors of relevant companies to allocate funds for the implementation of Corporate Social and Environmental Responsibility in the company’s annual work-plan and execute the Corporate Social and Environmental Responsibility outlined in the annual work-plan approved by the board of commissioners or general meeting of shareholders (GMS), as determined in the company’s articles of association (as per Article 4 of GR 47/2012); and
- ensuring that reports on the implementation of Corporate Social and Environmental Responsibility are included in the company’s annual reports (as per Article 6 of GR 47/2012).
In addition to the aforementioned considerations, the Financial Services Authority (Otoritas Jasa Keuangan or OJK) has mandated separate ESG reporting requirements for private companies operating as financial institutions, as regulated in OJK Regulation No 51/POJK.03/2017 concerning the Implementation of Sustainable Finance for Financial Service Institutions, Issuers, and Public Companies (OJK Reg 51/2017).
Public Companies
OJK Reg 51/2017 mandates a specific ESG disclosure for public companies and financial institutions. This regulation primarily imposes the obligation for financial institutions and public companies to integrate sustainable economic practices and provide relevant disclosures to both the OJK and the public. The requirement for sustainable economic practices entails the submission of a sustainability report, either as an integral part of the annual report or as a separate document, on an annual basis.
The OJK also issued Circular Letter No 16/SEOJK.04/2021, which delineates guidelines for ESG disclosures within the annual reports of public companies. These guidelines necessitate, among other provisions, the detailed inclusion of information concerning the actions taken by companies to fulfil their social and environmental responsibilities.
Excerpted from the Corporate Governance 2024 Chambers Global Practice Guide, published by Chambers and Partners.
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