Implications of the Presidential Decree on National Strategy for Business and Human Rights on Corporate Management

Economic development must also ensure that human rights are respected.

The following article was translated using both Microsoft Azure Open AI and Google Translation AI. The original article can be found in Implikasi Perpres Stranas Bisnis dan HAM pada Pengelolaan Korporasi

On September 26 2023, President Joko Widodo signed Presidential Regulation Number 60 of 2023 concerning the National Strategy for Business and Human Rights or National Strategy for Business and Human Rights. At first glance, the name of the presidential decree gives a somewhat confusing impression because the word business strategy is usually associated with company management. How can the government regulate a company's business strategy? It turns out that the contents of the presidential decree are different from the initial impression.

The National Business and Human Rights Action Plan is a national policy direction that contains strategies and steps to be used as a reference by ministries, institutions, and local governments (K/L/D), business actors, as well as other stakeholders for the progress of the business world, while paying attention to the protection and recovery of human rights. This Presidential Regulation regulates (1) the obligation of K/L/D to protect human rights in business activities, (2) the responsibility of business actors to respect human rights, and (3) access to recovery for alleged human rights violations victims in business activities.

This regulation can function as a guide for government departments and agencies to carry out planning, implementation, as well as monitoring of business and human rights. Furthermore, it also serves as a guide for business actors and other stakeholders to participate in upholding human rights in the business sector.

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The business sector plays a central role in economic development. For example, in investment for the production of goods and services, improving efficiency through the implementation of new technology, increasing state income through taxes, and creating jobs that can improve the welfare of society and reduce poverty rates.

On the other hand, businesses may also raise issues that can lead to human rights violations such as violations of labor wage regulations, exceeding working hours and overtime provisions, ignoring leave entitlements, prohibition of religious worship, discrimination, recruitment of child labor, environmental pollution, land conflicts, and so on. In a certain sense, corruption can also be categorized as a human rights violation.

The government needs to encourage the role of business actors in economic development while ensuring the respect for human rights. The government is also obliged to provide access to recovery for victims of alleged human rights violations in business activities. This concept is called the three pillars of business and human rights, namely the state's obligation to protect human rights, the responsibility of business actors to respect human rights, and the right of victims of human rights violations to access recovery.

The government needs to encourage the role of business players in economic development while ensuring respect for human rights is upheld.

This national strategy is held through Business and Human Rights Action which is implemented by task forces at both national and regional levels and consists of government elements (K/L/D) and non-government partners in under the coordination of the minister who handles government affairs in the field of law and human rights. Business and Human Rights Action is a further elaboration of the National Strategy for Business and Human Rights to be implemented by K/L/D, business actors and other stakeholders.

The Business and Human Rights Action consists of three strategies. First, increasing understanding, capacity, and promotion of business and human rights for all stakeholders. Second, developing regulations, policies, and guidelines that support the protection and respect for human rights. Third, strengthening effective recovery mechanisms for alleged human rights violations against business operations.

KOMPAS/PANDU WIYOGA

Thousands of people flocked to the Badan Pengusahaan Batam office in the Riau Islands on Wednesday (23/8/2023). They oppose the plan to evict the indigenous village on Rempang Island.

Implications for corporations

Corporations are directly affected by the National Strategy for Business and Human Rights because business actors are the second pillar in the initiative. However, actually the discourse on corporate social responsibility is not a new idea. There has been an understanding of corporate social responsibility (corporate social responsibility/CSR) for quite some time.

Recently, there has been the idea of ​​Sustainable Development Goals (Sustainable Development Goals/SDGs, sponsored by the UN) which also involve the role of corporations. More recently, there is the concept of environmental, social, and governance (ESG). Respect for human rights can be understood as the embodiment of the ‘S’ element in ESG initiatives. These initiatives provide guidance on how corporations need to behave and act in realizing their responsibilities as global citizens.

Stranas Business and Human Rights can be understood as a detailed explanation of one of the important elements of the initiative, which is specifically related to human rights. Stranas Business and Human Rights are expected to be able to explicit the aspirations contained in those initiatives into tangible and measurable actions, which can be tracked and provide guidance for performance improvement.

The business strategy and human rights (HAM) can be understood as a detailed aspect of the important initiative, which is specifically related to HAM.

Corporations need to realize the current global trend that indicates ESG implementation is no longer a voluntary decision, but has become a legal obligation that is closely inherent in investment strategies and other corporate actions. Stranas Business and HAM can be seen as examples of initiatives that will direct concepts which were initially voluntary into legally binding actions. Therefore, early anticipation to face this is very necessary.

In the business sector, the need for upholding governance, risk management and compliance (GRC) has long been recognized as a prerequisite for achieving company performance. GRC is a three-step strategy intended to ensure an organization focuses on achieving its goals by explicitly considering uncertainty and acting with integrity. Taking into account developments in the implementation of ESG initiatives and more specifically the National Strategy for Business and Human Rights initiatives, it seems that implementing GRC that takes these initiatives into account will or has even become an inevitability.

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Concrete steps that need to be taken by corporations in dealing with the above developments are to proactively evaluate the extent to which GRC has been implemented in the context of implementing ESG and more specifically anticipating the implementation of the BHAM National Strategy, including by identifying weak points in the risk management process, integrating a culture of respect. Human rights in corporate culture, complaint system policies (whistle blowing system), HR development, data-based evaluation, and reporting systems.

DS Priyarsono, Professor IPB University; Member of the SNI Governance, Risk Management and Compliance Committee, National Standardization Body