A Sustainability Report is a document published by an organization that discloses its economic, environmental, and social impacts caused by its daily operations. It provides transparent insights into a company’s sustainability strategy, goals, and performance, helping stakeholders including investors, regulators, customers, and the public understand how the company manages its Environmental, Social, and Governance (ESG) responsibilities.
Purpose of a Sustainability Report
- Transparency & Accountability – Demonstrates how a company integrates sustainability into its business model.
- Stakeholder Communication – Engages investors, employees, regulators, and communities in corporate sustainability efforts.
- Risk Management – Identifies and mitigates risks related to environmental impact, labor practices, and governance.
- Regulatory Compliance – Helps businesses align with international frameworks and local sustainability regulations.
- Competitive Advantage – Builds corporate reputation and attracts sustainability-conscious investors and customers.
Key Components of a Sustainability Report
A well-structured sustainability report typically includes:
- CEO Statement – A message from leadership outlining the company’s sustainability vision.
- Organizational Profile – Overview of the company’s business operations.
- Materiality Assessment – Identification of key sustainability issues relevant to stakeholders.
- Environmental Performance – Reporting on emissions, energy consumption, waste management, and biodiversity impact.
- Social Impact – Workforce diversity, employee well-being, community engagement, and human rights policies.
- Governance & Ethics – Corporate governance structure, anti-corruption policies, and compliance with regulations.
- Sustainability Goals & Progress – Tracking against previously set targets and future commitments.
Global Standards for Sustainability Reporting
Several frameworks provide guidelines for sustainability reporting, including:
- Global Reporting Initiative (GRI) – One of the most widely used sustainability reporting standards.
- Sustainability Accounting Standards Board (SASB) – Focuses on industry-specific ESG disclosure requirements.
- International Sustainability Standards Board (ISSB) – A new standard for global sustainability reporting integration.
- Task Force on Climate-Related Financial Disclosures (TCFD) – Provides recommendations on reporting climate-related financial risks.
- Integrated Reporting Framework (IIRC) – Combines financial and non-financial reporting for holistic decision-making.
Evolution of Sustainability Reporting in Indonesia
The journey of sustainability reporting in Indonesia has been marked by progressive regulatory frameworks and increasing corporate awareness. A pivotal moment was the issuance of Otoritas Jasa Keuangan (OJK) Regulation No. 51/POJK.03/2017 in 2017, which mandated the implementation of sustainable finance for financial services institutions, issuers, and public companies. This regulation required these entities to publish sustainability reports, with banks starting in 2019 and listed companies in 2020.
The enforcement of this regulation was postponed to 2021 due to the COVID-19 pandemic. Notably, in the second year of its enforcement, 88% of Indonesian listed companies submitted their 2022 sustainability reports, indicating substantial compliance and growing recognition of the importance of sustainability disclosure.
Regulatory Framework and Guidelines
The OJK serves as the primary regulatory body overseeing sustainability reporting in Indonesia. In addition to Regulation No. 51/2017, the OJK issued Circular Letter No. 16/SEOJK.04/2021, providing detailed guidelines on the preparation and submission of sustainability reports. These guidelines aim to standardize reporting practices, ensuring consistency and comparability across organizations.
Furthermore, Indonesia has developed the Taksonomi Hijau Indonesia (THI), a green taxonomy to classify sustainable economic activities. The THI aligns with global standards and supports the country’s sustainable finance roadmap by guiding investments toward environmentally friendly projects.
Adoption and Compliance
The adoption of sustainability reporting in Indonesia has seen a positive trajectory. As of 2022, 88% of listed companies had submitted their sustainability reports, reflecting a significant increase from previous years. This upward trend indicates a growing acknowledgment among Indonesian corporations of the importance of ESG factors in their operations and reporting practices.
However, the quality and comprehensiveness of these reports vary. Some organizations have fully embraced global reporting standards, such as the Global Reporting Initiative (GRI), while others are still in the nascent stages of integrating ESG considerations into their reporting frameworks.
Challenges in Implementation
Despite regulatory support and increasing adoption, several challenges hinder the effective implementation of sustainability reporting in Indonesia:
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Resource Constraints: Many organizations, particularly small and medium-sized enterprises (SMEs), lack the necessary resources and expertise to prepare comprehensive sustainability reports.
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Data Availability and Quality: Collecting accurate and reliable ESG data remains a significant challenge, affecting the credibility of the reports.
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Stakeholder Engagement: Limited engagement with stakeholders can result in reports that do not fully address the concerns and expectations of all interested parties.
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Awareness and Understanding: There is still a need to enhance awareness and understanding of sustainability issues among corporate leaders and employees to ensure genuine integration of ESG principles into business strategies.
Case Studies of Sustainability Reporting
Several Indonesian companies have set benchmarks in sustainability reporting:
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Asia Pacific Resources International Holdings (APRIL): In June 2015, APRIL became the first Indonesian forest company to receive sustainable forest management certification from the Programme for the Endorsement of Forest Certification (PEFC). The company has also committed to eco-restoration projects, expanding its efforts to restore degraded peat forests.
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Indonesian Forestry Certification Cooperation (IFCC-KSK): Established in 2011, IFCC-KSK promotes sustainable forest management through certification and labeling of forest-based products originating from certified forests. It develops standards and requirements for forest certification in consensus-based, multi-stakeholder processes.
Future Directions
The future of sustainability reporting in Indonesia is poised for further advancement:
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Integration with Global Standards: Aligning Indonesian sustainability reporting standards with international frameworks will enhance the credibility and comparability of reports, attracting global investors.
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Capacity Building: Investing in training and development programs will equip organizations with the necessary skills and knowledge to prepare high-quality sustainability reports.
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Technological Adoption: Leveraging technology can streamline data collection and reporting processes, improving efficiency and accuracy.
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Enhanced Stakeholder Engagement: Engaging stakeholders in the reporting process will ensure that reports address material issues and reflect stakeholder concerns, enhancing transparency and trust.
Conclusion
The implementation of sustainability reporting in Indonesia has made significant progress over the years, driven by regulatory mandates, corporate responsibility awareness, and global ESG trends. The introduction of OJK Regulation No. 51/POJK.03/2017 marked a critical milestone, requiring financial institutions, listed companies, and issuers to disclose their sustainability practices. This has led to a growing adoption of sustainability reporting across industries, with compliance rates reaching 88% among listed companies by 2022.
Despite this progress, several challenges remain. Many companies, particularly SMEs, struggle with limited resources, inadequate data collection processes, and a lack of expertise in preparing comprehensive sustainability reports. Additionally, stakeholder engagement and awareness of ESG principles need to be strengthened to ensure meaningful and transparent reporting.
Looking ahead, several key strategies can enhance the effectiveness of sustainability reporting in Indonesia:
- Aligning with global reporting standards such as GRI, SASB, and ISSB to improve comparability and credibility.
- Investing in capacity building and training programs to equip businesses with the necessary knowledge and skills.
- Leveraging technology and digital tools to streamline data collection and improve reporting accuracy.
- Enhancing stakeholder engagement to ensure reports address material ESG issues relevant to investors, regulators, and the public.
With continued regulatory support, corporate commitment, and technological advancements, sustainability reporting in Indonesia is expected to play an increasingly vital role in promoting corporate transparency, attracting responsible investments, and driving sustainable economic growth. By embracing sustainability reporting as a fundamental business practice, Indonesian companies can contribute to a more resilient, ethical, and environmentally responsible future.
