Indonesia's National Strategy on Business and Human Rights and expectations in relation to human rights due diligence

In September 2023, the Indonesian government released its National Strategy on Business and Human Rights (the Strategy). The Strategy is captured in Presidential Regulation No. 60 of 2023 (the Regulation), which came into effect on 26 September 2023. The Regulation is only available in the Indonesian language.

This bulletin provides an overview of some of the key features of the Regulation and Strategy. The Strategy's ongoing implementation is likely to become increasingly significant following Indonesia's commencement of Organisation for Economic Co-operation and Development (OECD) accession talks in February 2024.

Framework

According to the Regulation, Indonesia's Strategy will be subject to an initial implementation period running until 2026. The Strategy will serve as the government’s primary legal basis and reference for implementing regulations, as well as for developing Indonesia's regulatory framework. The Strategy is intended to provide guidance to both Indonesian government agencies and ministries, as well as "business actors" and other stakeholders. As explained further below, the Strategy also sets out implementation obligations applicable to Indonesian public authorities in relation to certain milestone targets.

Definition of "business actors"

Article 1(7) of the Regulation defines "business actors" as any businesspeople or corporations that are established in Indonesia and carry out business activities in Indonesia. The language "and" is important, as this would mean, in line with Indonesian laws, that the concept of a business actor excludes foreign corporations servicing Indonesian customers.

Neither the Regulation nor the Strategy specifies a minimum size threshold which a business actor would need to meet before the Strategy's guidance became applicable. In this regard, the Strategy takes a similar approach to Japan's Guidelines on Respecting Human Rights in Responsible Supply Chains (see our previous post here).

By contrast, the EU's draft Corporate Sustainability Due Diligence Directive only envisages imposing obligations on companies satisfying certain turnover thresholds. Minimum thresholds are also contemplated in a proposed South Korean Bill on Human Rights and Environmental Protection for Sustainable Business Management (see our previous posts here and here).

Scope of the Strategy

The Regulation and Strategy draw on the "Protect, Respect and Remedy" framework established in the UN Guiding Principles on Business and Human Rights (the UNGPs). Article 2(2) of the Regulation specifies that the Strategy will cover primarily:

• the duty on government ministries and agencies, as well as local governments, to protect human rights;
• the responsibility of business actors to respect human rights; and
• access to remedy for victims of alleged human rights violations arising from business activities.

The Regulation does not refer to specific human rights, instead providing a general definition of human rights as inherent rights associated with human dignity. The preamble to the Strategy does however recall that Indonesia is bound by a number of human rights treaties and has supported soft law standards such as the UNGPs.

Additionally, the Strategy's preamble specifically highlights labour rights violations, discrimination, child labour, land use abuses, and environmental pollution as issues of concern. Both adverse human rights and environmental impacts are expressly covered by international standards such as the OECD Guidelines for Multinational Enterprises on Responsible Business Conduct (the OECD Guidelines), a set of highly influential recommendations to businesses (see our previous post here).

Human rights due diligence

The promotion of human rights due diligence amongst business actors is a key aspect of the Strategy. As set out in the UNGPs, human rights due diligence entails a business continuously evaluating human rights risks, and undertaking steps to prevent and mitigate adverse human rights impacts involving the business.

Although the Strategy does not strictly impose a mandatory requirement on business actors to conduct human rights due diligence, the strategy emphasises its grounding in the UNGP framework, under which human rights due diligence represents a central aspect of business's responsibility to respect human rights. The Strategy further recalls that under the UNGPs, the scope of human rights due diligence extends to human rights risks arising from the activities of a business actor's business partners. As explained below, the Regulation and Strategy envisage the potential introduction of further implementing regulations – it is possible that these could eventually prescribe a mandatory human rights due diligence obligation.

The Strategy also encourages further adoption of the Human Rights and Business Risk Assessment Module (in the Indonesian language, PRISMA) by business actors, a tool designed to facilitate human rights due diligence. PRISMA provides businesses with indicators against which they can assess their policies and practices, including in relation to their policy commitment to human rights, the environment, indigenous people, and supply chains.

The Strategy’s implementation

The Regulation recognises that the Strategy is not an operative regulatory requirement – operative regulations are needed to impose regulatory requirements. Indeed, the Strategy refers to itself as "dynamic" and subject to evolution over time. The Strategy, however, has provided initial indications as to what regulatory requirements may be introduced by implementing regulations.

The Strategy is centred around three policy priorities, namely:

• enhancement of understanding and capacity building in relation to business and human rights;
• the development of regulations, policies and guidelines supporting protection and respect for human rights; and
• strengthened redress mechanisms.

In order to coordinate the implementation of the Strategy at the national level, the Regulation established a National Task Force on Business and Human Rights, which is expected under the Strategy to provide the Indonesian government with annual progress reports.

The Strategy's milestone targets  

The Strategy also sets certain more concrete milestone targets:

• By 2024, the Ministry of Home Affairs should finalise a regulation and a government policy on protection of customary law (hukum adat) rights by corporations.
• By 2024, the Ministry of Law and Human Rights should finalise PRISMA for further adoption in 2025.
• By 2025, all sectoral ministerial agencies should ensure that corporations have adopted human rights-related policies on the protection of workforce members, children, women, local communities, persons with disabilities, and the environment.
• By 2025, the Ministry of Protection of Women and Children should finalise guidelines on the prevention of and actions against workforce-related abuse. The guidelines would require corporations to adopt them.

Conclusion

The Indonesian government's release of the Strategy represents an important milestone for business and human rights in Indonesia. Although the Strategy focuses on Indonesian business actors and is to be supplemented by more detailed guidance, the introduction of the Strategy is consistent with a sharpened regulatory focus on responsible business conduct generally. Similar trends can be observed in other Asian jurisdictions, with Nepal recently adopting its own National Action Plan on Business and Human Rights, and Malaysia committing to finalising one in 2024.

The Strategy has been given a renewed significance in light of Indonesia's recent steps towards OECD membership, which could see Indonesia become an adhering government to the OECD Declaration on International Investment and Multinational Enterprises, the international agreement underpinning the OECD Guidelines, which also set out an expectation that business enterprises should carry out human rights due diligence.