- 04/12/2023
- Category: Press Release
(The speakers and participants in CfDS’s dialogue session at Ashley Hotel Tanah Abang, Jakarta)
Jakarta, October 31, 2023 – ESG (Environmental, Social, and Governance) is a crucial framework that must be incorporated into the operations of every company. No industrial sector can afford to ignore its responsibility in evaluating environmental and social considerations. Numerous industries are now embracing ESG principles to tackle the growing complexities of social and environmental challenges. This approach is particularly aimed in enhancing business sustainability by strengthening its ties with society, demonstrating a commitment to environmental preservation, and fostering accountability and transparency in business practices.
Center for Digital Society (CfDS) UGM, as a research center focusing on the impact of digital technology on the economic and social aspects, underlines the importance of ESG implementation by the company to spread impacts in society. Therefore, the optimization of ESG within the industry is what really matters.
In one of its dialogue sessions, CfDS invites academics, government, and Indonesia’s key players in the financial and environmental services industry to observe ESG values and the potential for its implementation.
As one of the speakers, Oktofa Yudha Sudrajad (Lector of the Business and Financial Risk, School of Business and Management, Bandung Institute of Technology [SBM ITB]) stated that currently ESG exists with various definitions. ESG impact is an important consideration in terms of profit and social impact. In Indonesia, the framework for implementing ESG is still considered as a challenge.
“Credit ratings are often used because they are already established. But, this consequently conflicts with the ESG rating. If we talk about sustainable finance, there is green financing, ethical investment, and the list still goes on. However, sustainable development covers everything. In the scope of research, ESG still correlates to CSR, then it has developed alongside with the aspect of environment,” said Oktofa.
The government has drafted regulations and various incentives for the financial technology industries to adopt green investments. According to Binsan Siregar (Young Expert Investment Management Manager at the Ministry of Investment/BKPM), the Ministry of Investment is currently making several breakthroughs, such as improving the investment climate, building an Online Single Submission (OSS) system for several platforms, and simplifying the administration and permits in MSME business operations. BKPM also encourages the acceleration of investment, downstream, and compiling investment opportunity maps related to the issues of ESG.
“However, we must continue to keep up with the global trends, particularly in the scope of climate finance. We need to learn how to face and deal with the current trend by paying attention to sustainable investment,” Binsan added.
According to Karaniya Dharmasaputra (President Director at OVO), the aspect of social and governance play a vital role in improving the financial technology industry. “The financial industry is heavily regulated. As we innovate to be more inclusive, we also need to think about its boundaries. From its inception, which has been beneficial to the society, digital tech has been embedded within the value of ESG,” he stated.
Another perspective from DANA, one of the leading financial technology services in Indonesia has actually been implementing ESG within the industry operations, according to the Head of Government Relations, Felix Sharief. From the perspective of the environment, many non-profits are currently discussing the issue of waste management. Additionally in the aspect of governance, we see that self-governance has been carried out by the digital financial industry and has implemented a zero data-sharing policy. Thus, the ESG values are certainly needed in the financial industries,” explained Felix.
The implementation of ESG cannot be solely assigned to one party only. Benchmarking and applying frameworks are the challenges for future discussions in the study of ESG. The principle of ESG does not start from the governance, yet it comes from the global public awareness of environmental problems, along with other complex and cross-sectoral problems.
The successful implementation of ESG necessitates the government’s complete attention. Binsan clarified that there are indeed various incentives for industries that have adopted ESG practices, particularly those in the extractive sector. In future planning, the government will duly take into account various sectors, exploring both fiscal and non-fiscal incentives with the aim of facilitating business operations.
The lack of a standardized guidebook for implementing ESG in companies underscores the need for customized guidelines that cater to each company’s unique needs and challenges. The implementation of ESG across different sectors poses a challenge that is not fully understood at present. This can prompt companies to explore alternative solutions to meet the urgent need for addressing ESG values.
