The Indonesia Stock Exchange (IDX) requires ESG reporting through mandated disclosures aligned with OJK Regulation No.51/POJK.03/2017, focusing on sustainability, and newer 2025 guidelines. Companies submit ESG metrics via Form E020 on SPE-IDXnet, covering 7 environmental, 12 social, and 9 governance metrics, often adopting ASEAN Common Core Metrics. 

Backgrounds

With the increasing awareness of Environmental, Social, and Governance (ESG)-related issues that are part of the Company's non-financial information, especially from the perspective of the impact of ESG aspects on corporate sustainability and medium to long-term corporate performance, ESG aspects are not merely additional assessments in investor decision-making but have become an important and inseparable part in making investor investment decisions and in disclosing information transparency by companies.

Besides business aspects, from compliance aspects, several Indonesian regulations also become the main   driving factors for Listed Companies to implement and report ESG as part of their non-financial information submitted to the public, as follows: 

  • “Golden Indonesia 2045” in Law Number 59 of 2024 regulates the National Long-Term Development Plan (RPJPN) for 2025–2045 in supporting the realization of the Vision of Golden Indonesia 2045.
  • Law Number 4 of 2023 concerning the Development and Strengthening of the Financial Sector requires    financial sector business actors, issuers, and public companies to prepare sustainability reports as part of their accountability for the performance of implementing Sustainable Finance.
  • Law Number 16 of 2016 concerning the Ratification of the Paris Agreement enshrines the Paris Agreement into Indonesian national law, which aims to limit global temperature increases to below 2°C.
  • POJK 51/POJK.03/2017 is issued as an important foundation in directing Listed Companies to be more concerned about the social and environmental impacts of business operations. Currently, finalization of the existing regulations updates are still on-going, with the plan to issue the new POJK and PADK on the implementation of Sustainable Finance for Financial Sector Business Actors, Issuers, and Public Companies.
  • SEOJK Number 16/SEOJK.04/2021 includes information that must be reported by issuers, such as financial reports, corporate governance, and information related to ESG aspects.

Key Points

Double Materiality Concept

By using the Double Materiality Concept, the Listed Companies are expected to prepare their ESG Report that inform the impact of a company’s activities on the environment, society and economy (“inside-out” impacts) is equal to the impact of external factors on the company’s financial performance (“outside-in” impacts).

ESG Reporting Principles

Listed Companies need to prepare their ESG reports in accordance with ESG Reporting principles, as follows:

  • Data Quality — To support the delivery of accurate and credible information to company stakeholders, it is recommended to refer to the approach in calculating and reporting indicators as in the reporting framework recognized locally and internationally.
  • Transparency — ESG reporting discloses information about the environmental, social and governance aspects of the Listed Company.
  • Coverage — It is recommended to report data that covers the entire spectrum of the Listed Company’s operations.
  • Assurance — It is recommended for Listed Companies to obtain assurance from a certified third party to ensure the credibility of the ESG metrics.

ESG Theme Issues Classification 

  • Environmental (E) focuses on greenhouse gas emissions, energy consumption, water utilization, waste management, and biodiversity conservation.
  • Social (S) covers employment practices, diversity, occupational health and safety, community engagement, and human rights compliance.
  • Governance (G) relates to board composition, anti-corruption policies, shareholder rights, transparency, and tax compliance.

ESG Reporting Indicators

  • Environmental performance includes greenhouse gas emissions, electricity consumption, water consumption, and waste generated.
  • Social performance includes gender equality, employee turnover, employee training and development, number of work accidents, and corporate social responsibility (CSR).
  • Governance performance includes management diversity and independence, attendance of directors and commissioners, code of ethics and/or anti-corruption, and prevention of conflicts of interest.

Key Considerations

Stakeholder Engagement involves engaging with stakeholders to understand their priorities, concerns, and expectations regarding ESG performance.

Materiality Assessment identifies material issues that are significant both for the organization and its stakeholders.

 CONCLUSION

ESG Reporting aims to increase transparency and accountability of companies for environmental, social and governance impacts. It improves the company’s reputation, encourages sustainable business practices, and helps companies identify ESG-related risks and opportunities. Companies are expected to use internationally recognized standards, conduct data collection systematically, and prepare ESG reporting annually with           recommended third-party assurance.

RECOMMENDATION

A structured approach is needed when preparing the ESG Report. This includes defining objectives, conducting materiality assessments, collecting and prepare relevant data, analyzing performance, developing and publishing the report, ensuring compliance, independent third-party assurance, and continuously improving based on feedback.

 

by GMB Daniel Probo, Consulting Practice