In Indonesia’s upstream sector, the law requires corporate social responsibility and the regulator is explicit: social license can make or break multi‑decade projects. Field evidence shows early, transparent engagement and shared‑benefit programs reduce costly delays and opposition.
In Indonesia, upstream oil and gas companies do not just chase seismic lines and drilling permits. They are legally obliged to invest in communities, with Company Law (UU No. 40/2007, Pasal 74) requiring all firms in natural‑resource sectors to allocate and budget CSR (corporate social responsibility) and environmental programs as ordinary business costs (lindungihutan.com) (lindungihutan.com).
The government reinforces that mandate in the oil patch. SKK Migas (Indonesia’s upstream body) requires each contractor (KKKS) to implement a Program Pemberdayaan Masyarakat (PPM, community empowerment program) that is well‑planned, measurable, and directed to produce broad community benefits (antaranews.com).
The rationale has hardened into policy. At a June 2025 forum, the Director of Upstream Community Programs underscored that long‑term projects need legal permits and “guarantees of local acceptance (social license to operate)” to work smoothly for decades—warning that without community “penerimaan,” technically viable projects are “threatened by social conflict leading to project delays, higher costs, or even halted operations” (migas.esdm.go.id) (migas.esdm.go.id). That causal link—poor engagement leading to costly opposition—also runs through industry guidance, including an API (American Petroleum Institute) pipeline engagement standard urging proactive, inclusive dialogue to “build mutual trust” and avoid reputational and regulatory risks (api.org) (boreal-is.com).
Regulatory context and social license
Indonesia’s legal baseline—UU No. 40/2007, Pasal 74—turns CSR/community development and environmental programs into routine business costs, not discretionary charity (lindungihutan.com). Industry rules go further: SKK Migas directs KKKS operators to mount PPM programs that are planned, measurable, and broadly beneficial (antaranews.com).
Officials frame this as protecting investment. In long‑duration projects, social license—ongoing local acceptance—sits alongside permits as a precondition for decades of stable operations; without it, social conflict can trigger delays, higher costs, or shutdowns (migas.esdm.go.id). API’s RP 1185 (Recommended Practice) echoes that stance across a pipeline’s life cycle (api.org), while an industry infographic is blunt: “poor engagement leads to delays, opposition, regulatory challenges, and reputational risks” (boreal-is.com).
Early, inclusive stakeholder engagement
The playbook starts before plans are final. Best practice is to conduct a social baseline study and stakeholder mapping—local leaders, NGOs, land boundaries, and more—at the start of exploration. IFC (International Finance Corporation) Performance Standard 1 and API RP 1185 call for inclusive, two‑way dialogue with all stakeholders throughout the project life, including officials, community groups, indigenous or tribal representatives, and landowners (api.org) (ipieca.org).
One oil‑gas project in a high‑risk region established monthly community meetings led by dedicated liaison officers, enabling residents to shape design and raise concerns in real time; the process documented local issues by community and gave regulators evidence that each affected village was consulted (ipieca.org) (ipieca.org). Indonesian authorities draw the same line from proactive engagement to fewer disruptions (migas.esdm.go.id).
Transparent communication and grievance systems
Engagement is not a one‑off town hall. Sustained, culturally respectful communication—disclosure in local languages and forums—matters. A randomized program in Uganda found villages given transparent information saw higher satisfaction and civic engagement, with increased transparency and trust measured after repeated sessions (pnas.org). Indonesian experience echoes this: a Bojonegoro study found that engaging respected local NGOs as communication channels helped empower beneficiaries and maintain trust (scielo.org.za).
Systems matter as much as meetings. Operators are using grievance mechanisms and feedback loops—community liaisons, hotlines, or apps—to log complaints and resolve them promptly. One LNG (liquefied natural gas) operator implemented a digital stakeholder‑CRM, accessible even offline, so that each village inquiry, issue, or grievance is recorded against a profile; the tool ensured continuity even if personnel changed, aligning with IFC best practice (ipieca.org). The counterfactual remains clear in industry materials: poor engagement yields delays, opposition, regulatory challenges, and reputational risks (boreal-is.com).
Benefit‑sharing and program design
SKK Migas emphasizes a dual objective for PPM—improve local welfare and mitigate social risk to protect the investment—framing social programs as shared value rather than one‑way charity (migas.esdm.go.id). In practice this means co‑designing projects—education, health, microenterprise, infrastructure—based on local input. PetroChina’s Batam programs illustrate the breadth: seven areas spanning the local economy, health, education, environment, infrastructure, disaster relief, and support for remote communities (metrojambi.com) (metrojambi.com).
Typical initiatives include vocational training, scholarships, mobile libraries, clinic support, and SME incubators—think local coffee, batik, or compost businesses (metrojambi.com) (metrojambi.com). As programs target environment and infrastructure, community water access and quality are often front‑of‑mind; examples in such contexts include ultrafiltration as pretreatment for drinking water drawn from surface or groundwater (/products/ultrafiltration) and containerized seawater reverse‑osmosis units for temporary or emergency needs during disaster relief (/products/rental-units). In settlements near exploration areas, packaged sewage systems can minimize impacts while improving public health baselines (/products/compact-sewage-plants).
SKK Migas notes that PPM success is measured not just by social impacts but by how well programs “improve quality of life and welfare in a sustainable, measurable way around the operations,” aligned with national and regional objectives (migas.esdm.go.id) (antaranews.com).
Local jobs and procurement targets
Sharing benefits also means local hiring and sourcing. Projects often set workforce targets (with higher shares for unskilled roles) and boost supplier development. In 2024–2025, the Indonesian government directed that small upstream contracts (≤US$1M) use all domestic vendors. Results to mid‑2025: upstream projects were achieving roughly 58–59% “local content” on government projects, far above modest targets (indonesiabusinesspost.com). Of US$3.58 billion in procurement contracts to mid‑2025, US$1.83 billion (≈51%) went to domestic suppliers (indonesiabusinesspost.com). Notably, the 58% local‑content realization in special strategic projects far exceeded the 18% target, and even normal projects beat their 57% goal (indonesiabusinesspost.com).
Monitoring, KPIs, and outcomes
Best practice now means quantitative KPIs (key performance indicators) and feedback loops. One LNG case developed metrics capturing the number and type of stakeholder engagements, the count of resolved grievances, and surveys of community understanding and satisfaction; every event and issue was logged in a central system so field officers could update records in real time (ipieca.org) (ipieca.org). Management could then monitor in‑country trends—rising concerns, common misconceptions, needed outreach—and hold teams accountable for engagement targets (ipieca.org) (ipieca.org).
Another project tracked living‑standard outcomes by logging the number of complaints (e.g., about livelihood impacts) and an aggregate “community satisfaction” score, comparing before‑and‑after values (ipieca.org). Because Indonesian contractors must report regularly to SKK Migas, many publish social KPIs—scholarships, wells or schools built, landholders compensated, local hires or contracts. Evidence backs the effort: a 2019 randomized trial in Uganda found that villages randomly chosen for stakeholder‑engagement workshops saw significantly higher trust, civic participation, and satisfaction on local resource issues; control villages without such dialogue lagged behind (pnas.org).
Integrated best‑practice recommendations
- Early and transparent engagement: stakeholder mapping and consultative meetings during planning, open sharing of project information, solicitation of input into design, and respect for local knowledge (including customary land claims). This two‑way approach builds trust and surfaces conflicts early (migas.esdm.go.id) (api.org).
- Continuous engagement with feedback channels: regular dialogue (e.g., monthly community forums) and accessible grievance mechanisms, with local NGOs or liaison officers as bridges; digital tools can support real‑time issue tracking and transparent progress sharing (scielo.org.za) (ipieca.org).
- Co‑operative, strategic benefit design: alignment of programs with expressed local needs—education, health, livelihoods, infrastructure—and integration into core business strategy as “strategic social investment” creating shared value; tangible returns such as jobs, training, and infrastructure help communities view projects as beneficial (migas.esdm.go.id).
- Measurable targets and public reporting: KPIs such as local hire percentages, vendor contract value, number of community projects delivered, and survey scores; mid‑2025 local‑content data (~59%) shows supplier and skills programs can yield far more local procurement than the minimum requirement (indonesiabusinesspost.com) (indonesiabusinesspost.com).
- Regulatory and international alignment: adherence to Indonesia’s CSR budgeting law (UU 40/2007) and to international norms such as IFC stakeholder engagement and indigenous peoples standards and OECD guidelines; documentation supports lender and regulator expectations (lindungihutan.com).
The throughline is consistent across official statements, case studies, and field experiments: well‑managed social programs address community needs and protect investment (migas.esdm.go.id) (antaranews.com). Companies that adopt data‑driven engagement and genuine sharing of benefits significantly reduce social conflicts and are far more likely to sustain profitable operations over time.
