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Understanding ESG from a Legal Perspective in Indonesia: Environment, Social, and Governance

 

In recent years, three key factors related to sustainability have become a major focus for companies worldwide, namely environment, social, and governance (ESG). Along with the increasing awareness of the importance of sustainability and the need to manage the environmental and social impact of business, ESG has become a key factor in business decision-making.

 

However, ESG is not only a concern for businesses, but has also become a concern for regulators in Indonesia. In this article, we will discuss ESG from a legal perspective in Indonesia, including the obligations of companies and the sanctions that may be imposed if companies violate applicable rules.

 

Environment

 

The environment is the first factor in ESG. Companies must consider the environmental impact of their business activities, such as the use of natural resources, pollution and waste, and climate change. In Indonesia, companies must comply with various laws and regulations related to the environment, such as Law No. 32 of 2009 on Environmental Protection and Management.

 

Companies must also have an Environmental Impact Assessment (AMDAL), issued by the Environmental Agency (BLH). AMDAL is an important document that must be obtained by companies before conducting business activities that may have an impact on the environment. If a company violates environmental rules, it may be subject to administrative and criminal sanctions, including fines, suspension of permits, or even business closure.

 

Social

 

Social is the second factor in ESG. Companies must consider the social impact of their business activities, such as workers' rights, occupational health and safety, and social and community contributions. In Indonesia, companies must comply with various laws and regulations related to employment, such as Law No. 13 of 2003 on Employment.

Companies must also comply with standards set by international organizations such as the International Labour Organization (ILO) and the United Nations Global Compact. If a company violates employment rules, it may be subject to administrative and criminal sanctions, including fines, business closure, or even imprisonment.

 

Governance

 

Governance is the third factor in ESG. Companies must have good governance, including transparency, accountability, and integrity. In Indonesia, companies must comply with various laws and regulations related to corporate governance, such as Law No. 40 of 2007 on Limited Liability Companies.

Companies must also comply with the principles of good corporate governance set by the Indonesian Stock Exchange (IDX). If a company violates corporate governance rules, it may be subject to administrative and criminal sanctions, including fines, suspension of permits, or even business closure.

 

Key Takeaways:

 

ESG is an important factor for businesses to consider in their decision-making process. Companies must comply with various laws and regulations related to the environment, employment, and corporate governance in Indonesia. Failure to comply with these rules may result in administrative and criminal sanctions, including fines, suspension of permits, or even business closure. It is therefore essential for companies to prioritize ESG in their operations and ensure compliance with applicable rules to avoid any legal consequences.