Introduction

In this decade, most industries practice Corporate Social Responsibility as a part of their

business. Companies used to have concern on maximizing their profits but started broadening

their concern in society and environment to make their business become more sustainable.

Corporate Social Responsibility (CSR) is a form of responsibility that modern companies

should comply. 1Corporate Social Responsibility can be referred as the concept where

companies integrate social and environmental concerns in their business operations and in their

interaction with their stakeholders on a voluntary basis. Investors have an obligation to make

sure that the owner’s company generate profits. In addition, companies must also become

responsible to the stakeholders such as consumers, employees, governments, communities, and

the environments. Indonesia is a developing country that has many business opportunities.
2
Indonesia is the only South East Asia representative of G20. 3The Group of 20 (G20) is an

international convention that gathers the world’s 20 leading economies. This group covers 85%

of the world GDP or two-thirds of its population. 4It was stated in McKinsey Global Institute

that Indonesia has the potential to be seventh biggest economy in the world by 2030 due to vast

range of archipelago. 5In addition, PWC predicted that Indonesia will be ranked in the fourth

place as the country who has the biggest economy. As a potential country who has a great

prospect of the economy, Indonesian companies must be more aware of the social and

environment value while running a company. Indonesia is a country where there are many

commodity-based companies, such as mining, plantation, fishery, and forestry. All countries

1
See, in particular Carmelo Reverte, Determinants of Corporate Social Responsibility Disclosure Ratings by
Spanish listed firms (Journal of Business Ethics, 88(2), 2009) at page 351-366.
2
G20, ‘G20 members’, ‘G20’ http://g20.org.tr/about-g20/g20-members/ accessed on 30 October 2018
3
Jamil Mustafa, ‘What is the G20?’, ‘Telegraph’, https://www.telegraph.co.uk/business/0/what-is-the-g20-
and-how-does-it-work/ accessed on 30 October 2018
4
See, in particular McKinsey & Company, The Archipelago Economy: Unleashing Indonesia’s Potential
(McKinsey Global Institute, 2012) at page 2
5
PWC, ‘The World in 2050’, ‘PWT’ https://www.pwc.com/gx/en/issues/economy/the-world-in-2050.html
accessed on 30 October 2018
including Indonesia demand Indonesian companies to run a business responsibly. Even though

there are many Indonesian companies that can contribute to Indonesian’s economy, there are

problems that needs to be solved. Corruption has been an issue in Indonesia, currently
6
Indonesia is placed on 96th place out of 180 countries when it comes to corruption. There are

a lot of companies that does not practice a proper work safety regulation, labour rights,

consumer protection, and environment protection. These are all caused by corruption which

either the executive director, non-executive director, and shareholder takes the budget for

practicing CSR into their account. Even though the government already issued a 7legislation

for company, there are companies that are still commit against the company law. Indonesia still

has a long way in order to achieve as one of the countries that has the strongest economy.

This research will be focusing on the reformation of CSR legislation in Indonesia. The

government already established legislation specified for CSR which are 8Law no 25/2007 on

investment and 9Law no 40/2007 on limited liabilities company. But the fact that some

companies still commit against this legislation suggest that something needs to be changed.

This research aims to research and suggest the CSR legislation in Indonesia. In order to satisfy

the outcome of this research, the writer will examine the current CSR implication and

legislation in Indonesia. Next, the writer will critically analyse the problem of the application

of CSR legislation in Indonesia followed by comparing Indonesian CSR Legislation with CSR

legislation from UK, USA, and Germany. Finally, the writer will suggest changes to the

legislation that can improve the awareness of CSR in Indonesia.

6
Anonymous, ‘Indonesia’, ‘transparency.org’ https://www.transparency.org/country/IDN accessed on 30
October 2018
7
Undang-Undang no 40 Tahun 2007
8
Undang-Undang no 25 Tahun 2007
9
See no 7
 The writer will approach Qualitative Comparative Analysis and will be applying the

“Research Onion” to conduct research for this dissertation. 10Qualitative Comparative Analysis

is an interest in interpreting a question of why the similarities and differences case exist and

the need of collecting 2 or more data’s or cases which share the similar frameworks.

Comparative analysis is the most suitable methodology for this research, because the writer

feels that comparing CSR legislation from different countries can be a contribution to answer

the criticism of CSR legislation in Indonesia. As for the data collection, the writer will access

journals that are related to this research by accessing Hein Online, Westlaw, Emerald Journal,

and Business Source Complete. The writer will narrow down the search into CSR definition,

CSR in Indonesia, CSR in UK, CSR in USA, and CSR in Germany. The writer will also look

at textbooks to find insight about CSR from different authors. The scope of this research will

be limited to CSR in Indonesia, UK, USA, and Germany. The writer will take 1-2 case studies

as an example of CSR application as it is not possible for the writer to compile information

about CSR practices in the respective countries. The writer will also need to access the CSR

legislation from respective countries through the official websites.

This research will be divided into 6 chapters. The literature review of Corporate Social

Responsibility will be discussed in the first chapter. It is important for the reader to know about

the overview of CSR and the development of CSR. In the second chapter of this research, the

writer will mainly focus on CSR in Indonesia. The scope of the discussion will be limited to

the current trend of CSR in Indonesia, the development of CSR in Indonesia, and the

application of CSR in Indonesian companies which will be supported by case studies as an

example. The third chapter of this research will be focusing on CSR in UK, USA, and Germany.

There will be explanations about current trend of CSR in the following countries, followed by

10
See, in particular Chris Pickvance, The Four Varieties of Comparative Analysis: The Case of Environmental
Regulation (2005) at page 2
case studies and the legislations. The fourth chapter consist of comparison between the CSR

legislation from UK, USA, and Germany towards CSR in Indonesia. In this chapter, the writer

will lay out Indonesian, UK, USA, and Germany CSR strengths and criticism followed by case

studies to prove how they are implemented. The fifth chapter will consist of suggestions for

CSR legislation in Indonesia. After laying out the criticism of CSR legislation in Indonesia, the

writer will choose the strengths of CSR legislation from UK, USA, and Germany and decide

which legislation suits the best for Indonesia. To solidify the arguments from the writer, the

writer will analyse a CSR related case in Indonesia and will make an attempt to resolve the

dispute by using parts of CSR legislation from UK, USA, and Germany.