Today’s Challenges for Sustainability among Indonesia’s Enterprises: Focus Discussion on Technology & Data for ESG in Indonesia

The concept of sustainability has transitioned from a peripheral concern to a central element of corporate strategy, particularly in Indonesia. As one of the most dynamic economies in Southeast Asia, Indonesia's enterprises face unique challenges and opportunities in integrating Environmental, Social, and Governance (ESG) principles into their business models. Our AIBP ASEAN recent discussion together with Bukalapak , explores how Indonesian businesses are navigating the complexities of implementing ESG initiatives, the role of digital innovation in facilitating this transition, and the critical importance of accurate data in measuring and driving sustainable outcomes.?

Awareness and Initial Steps in Sustainability

Indonesian enterprises are largely aware of the importance of sustainability and its implications on their businesses. However, priorities in the near term lie in?

• Focus on aligning group strategy with ESG initiatives across diverse industries and business units in emissions management
• Sustainability efforts involve risk management and compliance
• Integrating digitalisation and sustainability indices to measure GHG reduction and waste management
• Addressing data accuracy challenges for metrics and tracking of sustainability factors

The initial steps to define and begin the sustainability journey is hardest, especially in aligning stakeholder, shareholder, and group strategy for a cohesive ESG roadmap. Key issues include costs, harmonisation of metrics for tracking various sustainability factors across diverse industries and business units.

The Role of Technology and Data in ESG Initiatives

Around 62% of Indonesia’s enterprises believe that technology and innovation is essential for addressing ESG challenges, compared to the ASEAN average of 53%, according to the 2023/24 ASEAN Enterprise Innovation Market Overview Survey.

The varied experiences underscore the complexity and importance of tailoring sustainability approaches to fit the unique contexts of different organisations.

“In 2012, we invested ~US$30 million (into driving sustainability), because we have to start a lot of things with the best plan in mind, but the investments have gone down to less than US$10 million now because we are now maintaining our initiatives, and our core team is already experienced. We previously worked with consultants who helped us to write everything. Since last year, we have started to implement 50-50 production, where our (internal) team writes 50% and we’ve started to come up with the strategy ourselves.”

Elim Sritaba , Chief Sustainability Officer, APP Sinar Mas

Diversified businesses have their work cut out for them when it comes to piecing together metrics used for different industries - this is where data and data visibility may play a role to enable data-driven decisions.

“In terms of scalability, being able to reach millions of merchants would not have been possible without technology. It enables customer service driven by AI, so that merchants can provide instant first responses. That is not scalable with human agents responding to orders. Also, the community basics is based on technology platforms, because we need to connect people in remote communities to enable them to communicate and share information.”

Boyd Whalan , Vice President of Strategic Partnerships and ESG, Bukalapak

One's scope 3 emissions are another's scope 1 emissions - regardless of the technology used to visualise and track emissions, cooperation is necessary to gain a clear view of the current state of sustainability factors, especially with regards to carbon emissions and waste management for Indonesian enterprises.

“In the Sustainability Index, we encounter grey areas especially in addressing GHG emission reduction, a significant challenge in our portfolio. We are currently developing a framework for scope three emissions, and we face complexities in data collection from diverse sources, involving upstream and downstream processes. Waste management is another intricate aspect, requiring meticulous calculations and investigation into supplier practices”

Fransiskus Xaverius Rian Wicaksono, Supervisor, PT Isuzu Astra Motor Indonesia

Banking and financial services play a crucial role - both in green financing to support sustainability initiatives, and internally in managing their own emissions. The use of data is primarily important for compliance reporting and strategic outcomes.?

“We prioritize financing as one of our key initiatives while maintaining our mission as our top priority. However, the challenge lies in data management and improvement. Although we effectively manage business for our temporary, scope three emissions pose challenges due to the complexity of functions and approximation. Despite acquiring carbon credits to enhance our efforts, big banks' inefficiencies delay precise mission assessment, leading to significant deviations from our estimations.”

Cahyo Yekti Widoyoko, Head, Enterprise Risk Management, OCBC Indonesia

Humanising sustainability initiatives to effect tangible benefits for people on the ground will drive awareness and support from the grassroots level - additional costs to workers already making minimum wage matter.

"I believe our work extends beyond traditional corporate social responsibility (CSR) as innovation continues to disrupt the landscape. As an early advocate for carbon projects in Indonesia and now the Chairman of the Indonesia Trade Association, I've witnessed a shift where sustainability is no longer just compliance; it's a necessity. Reflecting on my past experience at a company that ignored sustainability and faced bankruptcy, I emphasize the importance of humanizing our approach, preserving culture, and restoring environmental concern in every project. This holistic focus, extending beyond ESG, involves substantial investment in community development. We no longer term it as CSR but dedicate a significant portion of our budget—30%—to initiatives like health education, bolstering the local economy, and implementing visible waste management practices throughout the value chain."

Riza Suarga , Chairman, Indonesia Carbon Trade Association

Sustainability efforts play out differently at different levels. Initiatives span from driving sustainability at the national, municipal, city and organisational level, particularly focusing on collecting and utilizing key metrics for success, monthly and quarterly reporting, and involving multiple stakeholders for impactful results. The Ministry of State-Owned Enterprises (SOEs) of Indonesia have selected 7 SOEs with the largest emissions footprints to map out short, medium and long term sustainability roadmaps as well.

“The government established a greenhouse gas emission baseline, consistent with international emission accounting standards, for seven SOEs with the largest emission footprint (Pertamina, Perusahaan Listrik Negara, Semen Indonesia, Pupuk Indonesia, Mining Industry Indonesia, Perhutani, and Perkebunan Nusantara). These 7 SOEs may select their own initiatives for short, medium and long term based on that data. It also designated climate change focal points in these SOEs responsible for developing and implementing decarbonization plan”

Ni Kadek Yuliartani, Sub-coordinator of Economy Analysis and Industrial Sector, BUMN

A survey of ASEAN’s largest enterprises on their perspectives around the impact of technology on sustainability initiatives, found that 71% believe technology will support data-driven decision-making for ESG risk management.?

Jakarta Smart City is supporting data-driven sustainability beyond Jakarta, into the region by work closely with supranational, regional, and technology partners.

"In essence, our approach involves pragmatic and concrete reports, utilizing a carbon price strategy. Engaging with various smart city initiatives, we prioritize serious commitment and efforts based on data. Key metrics are crucial for success measurement, and in Jakarta, we implement a strategy that involves continuous monitoring and reporting, both at the provincial and national levels. Working closely with diverse organizations, including Google, we aim to drive action by leveraging data integration and employing key metrics across various initiatives. Our focus is on using data to influence and drive strategic actions for sustainable practices at regional and global levels.”

Juan Kanggrawan Intan, Head of Digital Products & Data Analytics, Jakarta Smart City

Moving forward, a key goal in sustainability practices encourages a beyond-compliance mindset for lasting impact and positive change. We look forward to furthering these fruitful conversations and driving partnerships for sustainability in the region!

If you missed your chance to be a part of this discussion, you may still explore further topics at the IBM Consulting Forum [CXO Connect] Reinventing Business Value in the Era of Generative AI this Wednesday, 29 November at The Westin - seats are limited on first-come-first-served. You may reserve your seat here

Do also stay tuned for the full 2023/24 ASEAN Enterprise Market Overview Report detailing key focus areas, challenges and expected outcomes for ASEAN’s businesses in digitalisation to be published on 14 December 2023.

Register your interest to access the full report on 14 December 2023 here , or drop me a note.