Home Blog How Green Building Benefits Business in Indonesia Business Advisory | ESG Advisory | Indonesia How Green Building Benefits Business in Indonesia InCorp Editorial Team 19 June 2024 5 minute reading time Table of Contents The Identification of Green Buildings The Growing Importance of Sustainable Development in Indonesia The Importance of Green Buildings for Indonesia's Future Benefits of Green Buildings Challenges for Green Building Implementation Build A Sustainable Future with InCorp Indonesia As Indonesia continues its development journey, embracing sustainable practices is no longer optional. Sustainability has become an essential aspect to ensure the country’s future progress. One element of sustainability is the development of green building infrastructure. Green building involves designing and constructing environmentally responsible structures, offering a powerful solution that promises a future where economic growth and environmental well-being go hand in hand. The Identification of Green Buildings Green or environmentally friendly buildings are designed to be efficient and eco-friendly. They aim to minimize their environmental impact from planning to operation and maintenance. Green buildings optimize natural resources and minimize the overconsumption of building materials. They enhance resource utilization, including energy, water, and materials, all the while mitigating their effects on human health and the environment. In Indonesia, adopting environmentally friendly building concepts has recently gained momentum, driven by both the government and the private sector. This is because Indonesia is vulnerable to climate change impacts such as floods, droughts, and landslides. The Growing Importance of Sustainable Development in Indonesia The National Development Planning Agency (Bappenas) underscores that the efficient execution of Environmental, Social, and Governance (ESG) practices will contribute to the realization of the Nationally Determined Contribution (NDC) by 2030. In the NDC document, Indonesia targets a 31.89 percent reduction in emissions through domestic efforts and a 43.20 percent reduction with international support by 2030. In the National Medium-Term Development Plan (RPJMN) 2020-2024, three priority national programs support the NDC: Improving environmental quality Enhancing disaster resilience and climate change adaptation Promoting low-carbon development READ MORE:5 Ways To Integrate ESG Investing Into Business GrowthIs The ESG Implementation Strategy Beneficial For Business?Indonesia’s Path Towards Sustainable Development Goals The Importance of Green Buildings for Indonesia’s Future The demand for office spaces that align with environmental, social, and governance (ESG) principles is on the rise, particularly in the wake of the COVID-19 pandemic. There is a noticeable preference among multinational corporations for eco-friendly office rentals with green building certifications. Senior Advisor Research at Knight Frank Indonesia, Syarifah Syaukat, stated that throughout 2023, the total area of green office buildings in Jakarta reached 1 million square meters (m²). This area increased by 15 percent from the green building stock in 2022. Demand for office buildings with green certification continues to grow, with occupancy rates remaining relatively stable at around 70 percent. List of Green Buildings in Indonesia There are several green buildings in Indonesia: Istiqlal Mosque BCA Tower Jakarta Sequis Center Sampoerna Strategic Square Ministry of Public Works and Public Housing (Kementerian PUPR) Loreal Indonesia BCA Foresta Building Benefits of Green Buildings In its “Global Consumer Insights Pulse Survey” reports for June 2022, February 2023, and June 2023, PwC stated that ESG principles have influenced consumer behavior. The survey findings show consumers are willing to pay 5-10 percent more for environmentally friendly and sustainable products or services. Fifty percent of respondents trust companies that embrace ESG principles, while 40-50 percent prefer products made from environmentally friendly and sustainable materials. Other than the given data, green buildings offer several benefits for a better life: Improves Quality of Life Green buildings can create comfort and health for their occupants by having designs that consider ventilation, lighting, temperature, noise, and indoor air quality. Saves Water Resources Green buildings can use rainwater, recycled water, or groundwater to save water usage. This water can be used for sanitation, irrigation, or cooling purposes. Reduces Operational and Maintenance Costs of Buildings Green buildings can reduce operational and maintenance costs by saving electricity usage. This can be achieved by utilizing renewable energy, such as solar panels or wind turbines, or using energy-efficient electrical equipment, such as LED lights or inverter ACs. Reduces Carbon Footprint as A Step Towards Saving the Environment Green buildings can reduce the building sector’s carbon footprint or greenhouse gas emissions by reducing fossil energy consumption, such as coal or oil. Buildings Can Be Used for A Long Time Green buildings can be used for a long time with flexible and adaptive designs that respond to environmental changes. This can be done using building materials that are easy to assemble or modify or modular systems that can be adjusted to the occupants’ needs. Challenges for Green Building Implementation Numerous challenges and obstacles must be addressed when implementing green buildings in Indonesia. Regulations From a regulatory perspective, Indonesia already has some regulations that encourage the implementation of green buildings. However, existing regulations need to be synchronized or integrated to accommodate the principles of green building. Land and Building The second challenge is related to land and buildings. The biggest challenge in this aspect is that most office buildings, especially in the government sector, are old or legacy buildings that have yet to be designed using green building concepts. Misperception Many business actors believe that green building development incurs high costs. The costs involved in investing in and maintaining green buildings are considered very high. Difficult to Sell Another financial-related challenge is related to building developers. Office building developers will only adopt green building concepts if the application of green building can make the building more expensive and/or the building is not sold. Guide to Doing Business in Jakarta Mailchimp Free eBook Indonesia Business Insight Full NameEmail I have read InCorp's Privacy Policy and agree to InCorp using my information provided to contact me about related content, and services.*Subscribe Build A Sustainable Future with InCorp Indonesia InCorp understands the importance of green building practices for a sustainable Indonesia. We go beyond just reports – we help businesses integrate these practices into their core operations. We can assist with developing comprehensive ESG reports aligning your sustainability efforts with your company’s vision. Our team of ESG consultants specializes in identifying key performance indicators for companies, aligning critical issues with the company’s vision, and implementing relevant policies. Let InCorp handle the complexities of ESG so you can concentrate on driving your business forward by filling out the form below. Read Full Bio Pandu Biasramadhan Senior Consulting Manager at InCorp Indonesia An expert for more than 10 years, Pandu Biasramadhan, has an extensive background in providing top-quality and comprehensive business solutions for enterprises in Indonesia and managing regional partnership channels across Southeast Asia.
Home Blog ESG Advisory for Green Financing in Indonesia Business Setup | ESG Advisory | Indonesia ESG Advisory for Green Financing in Indonesia InCorp Editorial Team 19 June 2024 5 minute reading time Table of Contents Understanding The Benefits of Green Financing The Advantages of Green Financing in Indonesia Green Financing Trends in Indonesia 5 Types of Green Financing The Challenges for Green Financing in Indonesia How ESG Advisory Can Support Green Financing in Indonesia Start Implementing ESG with InCorp Indonesia Indonesia is undergoing a transformative financial revolution. One of the initiatives comes in the form of green financing. The plan will help Indonesia to make significant strides towards a more eco-conscious future. Indonesia is embracing the concept and reshaping its financial landscape, focusing on environmental sustainability. This paradigm shift is opening the door to many opportunities for the environment, businesses, and investors alike. Understanding The Benefits of Green Financing Green financing can be defined as getting and using money to protect the environment and provide a fair profit for investors or lenders. It is all about funding projects that are good for the environment, whether the government or private companies run them. Green financing will focus on investments in products and services that help the environment and activities that reduce environmental and climate harm. In public policies, green finance also involves financing policies supporting projects or initiatives for environmental protection and reducing environmental damage. Green finance aims to increase the flow of money from financial institutions to businesses involved in projects and activities that help the environment, all in pursuit of sustainable development goals. READ MORE:ESG Integration in the Extractive Industry5 Ways To Integrate ESG Investing Into Business GrowthRenewable Energy Investment In The Manufacturing Sector The Advantages of Green Financing in Indonesia Indonesia has shown a solid commitment to green finance practices over a decade ago through Bank Indonesia’s (BI) regulation No. 14/15/PBI/2012, which focuses on assessing the environmental management practices of borrowers in credit distribution. In collaboration with the Environment and Forestry Ministry, BI also signed various agreements between 2011 and 2013 to evaluate the suitability of granting credit to borrowers based on Environmental Impact Analysis (AMDAL). The latest regulation, POJK No. 14/2023, pertains to carbon trading via carbon exchanges. This regulation aims to increase support for green financing and make it more accessible to the public. Green financing is vital in dealing with climate change, advancing sustainable development, and helping Indonesia shift toward a low-carbon economy. It also contributes to reducing air pollution, improving public health, and creating opportunities in the green sector. Green Financing Trends in Indonesia Numerous banks in Indonesia have taken the initiative to allocate substantial funds for green financing. Some of these forward-thinking financial institutions include: 1. Bank Rakyat Indonesia (BRI) PT Bank Rakyat Indonesia Tbk (BBRI) is strengthening its commitment to sustainable green finance. In 2022, they reached IDR 694.9 trillion, equivalent to 67.5% of the bank’s total loans. 2. Bank Central Asia (BCA) Meanwhile, the private bank owned by the Djarum Group, PT Bank Central Asia Tbk (BBCA), reported that their sustainable financial portfolio (KKUB) increased by 14.9% to IDR 183.2 trillion in 2022, or 25.4% of the bank’s total portfolio (loans and corporate bonds). Out of this KKUB amount, BCA extended KUBL loans amounting to IDR 80.9 trillion (a 13.5% year-on-year increase), which represents 44.2% of the total KUBL loans. 3. Bank Mandiri In 2022, PT Bank Mandiri Tbk (BMRI) demonstrated a strong commitment to sustainable financing through KKUB, disbursing a noteworthy IDR 228.7 trillion, accounting for 24.5% of Bank Mandiri’s total loans (bank only). This represented an impressive 11.6% year-on-year growth. BMRI’s green financing alone accounted for an impressive IDR 101 trillion. 5 Types of Green Financing Various forms of green financing are available, each with its own characteristics and benefits. 1. Green Mortgages Green mortgages enable lenders to offer more favorable terms to homebuyers who purchase properties with high environmental sustainability ratings or commit to improving a property’s environmental performance. 2. Green Credit Cards Green credit cards allow consumers to direct their spending toward environmental finance, creating a long-term positive ecological impact. 3. Green Banks Green banks function similarly to traditional banks but utilize public funds to stimulate private investments in renewable energy and other eco-friendly projects. 4. Green Loans Green loans are used to back environmentally friendly projects like household solar panels, electric cars, energy-efficient upgrades, and more. 5. Green Bonds Green bonds make up the majority of green funding. These are bond investments, and the proceeds are used to support various green initiatives, including renewable energy, clean transportation, conservation, and more. The Challenges for Green Financing in Indonesia Since the green financing practice in Indonesia is still in its early stage of development, the market mechanisms still need to mature fully. More work must be done on both the regulatory and governance fronts. On the regulatory side, the government should establish a clear regulatory landscape that encourages green financing and sustainable investments. Offering incentives, tax advantages, subsidies, or other financial policies to financial institutions and investors would encourage their involvement in environmentally friendly projects. Moreover, the financial industry should align its green financing standards with international best practices to attract more foreign investment. It is also essential to raise awareness and educate businesses and the public about the benefits of green financing and its positive effects on the environment. How ESG Advisory Can Support Green Financing in Indonesia ESG Advisory services are designed to facilitate clients’ transition towards sustainable business models by offering sustainable financing products and top-notch advisory services. Moreover, guiding ESG practices can assist clients in implementing plans that promote decarbonization and uphold long-term social and economic sustainability. Furthermore, the ESG reporting service support can help clients create a comprehensive report aligned with market standards, effectively showcasing their sustainability efforts. Guide to Doing Business in Jakarta Mailchimp Free eBook Indonesia Business Insight Full NameEmail I have read InCorp's Privacy Policy and agree to InCorp using my information provided to contact me about related content, and services.*Subscribe Start Implementing ESG with InCorp Indonesia InCorp Indonesia offers ESG Advisory services to help your business thrive and stay ahead of the curve amid Indonesia’s growing demand for sustainable practice. Get in touch with our expert to kickstart your ESG investing journey by completing the form below. Read Full Bio Pandu Biasramadhan Senior Consulting Manager at InCorp Indonesia An expert for more than 10 years, Pandu Biasramadhan, has an extensive background in providing top-quality and comprehensive business solutions for enterprises in Indonesia and managing regional partnership channels across Southeast Asia.
Home Blog Why Internal Audit is Necessary for Business Indonesia | Internal Audit Why Internal Audit is Necessary for Business InCorp Editorial Team 19 June 2024 5 minute reading time Table of Contents What is The Role of Internal Audit? What are The Benefits of an Internal Audit? 5 Reasons Why Internal Audit is Important Types of Internal Audit Services Start Auditing with InCorp Indonesia Why internal audit is necessary for a business organization? Moreover, the question has become a standing issue in the corporate world for businesses grappling with an increasingly complex and volatile global environment. Organizations must navigate intricate financial, operational, and regulatory landscapes to thrive and adapt in today’s dynamic marketplace. Central to this pursuit is the critical practice of internal audit, a vital process that safeguards an organization’s stability, integrity, and long-term success. This article will explore why internal audit is necessary, highlighting its indispensable role in ensuring an organization’s sound governance and resilience. What is The Role of Internal Audit? Internal audits assess a company’s internal controls, encompassing corporate governance and accounting procedures. They equip management with the means to enhance operational efficiency by pinpointing issues and rectifying deficiencies before external audits uncover them. These audits also assure adherence to legal requirements, ensuring financial reporting and data collection accuracy and timeliness. Companies employ internal auditors to serve their management teams. Read more: Guide on Filing Corporate Annual Tax Return (SPT) in Indonesia What are The Benefits of an Internal Audit? Performing internal audit standards offers several benefits to your company. Those are: 1. Enhanced Internal Controls Internal audits assess your internal controls, encompassing actions, systems, and processes, ensuring they are well-designed and effectively implemented, regardless of personnel changes. 2. Increased Efficiency Internal audits can save time and money by identifying redundancies in your business practices, procedures, and governance. It also offers recommendations to streamline operations. 3. Strengthened Security Internal audits identify vulnerabilities in digital systems and provide guidance to address security gaps. These audits scrutinize your cybersecurity measures, pinpointing digital assets and assessing their compliance with your policies. 4. Ensured Integrity Internal audits uncover risks of human errors or system failures, such as software issues that could lead to critical losses. It also assures process integrity, ensuring systems operate as intended and align with management’s promises. 5. Risk Mitigation By considering identified risks, internal audits analyze the effectiveness of your risk mitigation measures. If deficiencies are found, audit reports offer solutions to address these issues. 6. Enhanced Compliance Internal audits verify your organization’s compliance with relevant laws, regulations, and industry standards. When non-compliance is detected, auditors suggest corrective actions to rectify the situation. 5 Reasons Why Internal Audit is Important Understanding the importance of an internal audit can prompt you to explore the benefits they offer. We highlight some points that make internal audit important to your business: 1. Detect Risks and Prevent Fraud Internal audits assist in the early identification of potential risks and fraudulent activities within your company. Internal auditors can uncover unauthorized transactions, embezzlement, and other fraudulent behaviors by examining financial records, policies, and procedures. This early detection helps protect your business from considerable financial losses and damage to its reputation. 2. Streamline Operational Efficiency By thoroughly reviewing your processes, auditors can assess redundant or unnecessary steps, bottlenecks, or waste areas. Hence, internal audits can pinpoint inefficiencies in your business operations. Eliminating these inefficiencies reduces costs, increases productivity, and improves overall business performance. 3. Ensure Compliance with Laws and Regulations Internal audit evaluates your policies, procedures, and operations. Auditors identify areas of non-compliance and guide corrective actions to prevent legal penalties or fines. As a result, internal audits ensure your business complies with applicable laws and regulations. 4. Enhance Financial Reporting Accuracy Internal audits enhance the precision and reliability of your financial reporting. Auditors examine your financial statements to identify errors or inconsistencies, helping you implement corrective measures to improve your financial reporting accuracy. Accurate financial reporting is crucial for well-informed decision-making and attracting investors. 5. Offer Stakeholder Assurance Internal audit delivers an independent evaluation of your business processes and financial reporting. Internal auditors boost stakeholder confidence in your company. This process assures stakeholders such as investors, creditors, and regulators that your business operations and financials are trustworthy and reliable. Types of Internal Audit Services The internal audit’s scope is thorough, encompassing all aspects of the organization, both financial and non-financial, with a focus on promoting constructive improvements. 1. Compliance Audit Compliance audits assess adherence to relevant laws, regulatory policies, and procedures. Failure to comply with these laws, depending on the organization’s industry, can lead to fines or legal action, significantly affecting the organization’s finances. 2. Environmental Audit Environmental audits gauge the impact of a company’s activities on the environment and assess compliance with pertinent environmental laws and regulations. 3. Security and Technology Audit Security and technology audits scrutinize the company’s information technology systems and the underlying infrastructure to verify the accuracy and security of data, information, or intellectual property. 4. Performance Audit Performance audits evaluate whether a company is meeting internal targets, achieving key performance indicators, and fulfilling other goals set by management. 5. Financial Audit Financial audits validate or recalculate internal financial reporting concerning the overall business, assets, budget, or special projects. 6. Operational Audit Operational audits assess a company’s overall effectiveness, efficiency, and reliability. 7. Special Projects and Investigations Special Projects and Investigations involve audits and reviews conducted at the specific request of management, often focusing on Fraud and forensic investigations. Guide to Doing Business in Jakarta Mailchimp Free eBook Indonesia Business Insight Full NameEmail I have read InCorp's Privacy Policy and agree to InCorp using my information provided to contact me about related content, and services.*Subscribe Start Auditing with InCorp Indonesia An internal audit can help your business sustain itself over the long term as it evaluates various aspects of the company’s performance, including compliance with laws and regulations, financial practices, and operational efficiency. Businesses can opt for the types of internal audits based on their specific needs at any given time. If your company is considering conducting an internal audit, InCorp Indonesia can provide you with internal audit services tailored to your needs. Fill in the form below to assess and improve various areas of your business, ensuring its long-term success. Read Full Bio Pandu Biasramadhan Senior Consulting Manager at InCorp Indonesia An expert for more than 10 years, Pandu Biasramadhan, has an extensive background in providing top-quality and comprehensive business solutions for enterprises in Indonesia and managing regional partnership channels across Southeast Asia.
Home Blog ESG Integration in the Extractive Industry Company Registration | ESG Advisory | Indonesia ESG Integration in the Extractive Industry InCorp Editorial Team 19 June 2024 6 minute reading time Table of Contents What is the Extractive Industry? The Types of Extractive Industries Key Players in the Extractive Industries The Impact of Extractive Activities Sustainability Initiatives in Extractive Industries Start Implementing ESG with InCorp Indonesia The extractive industry, which encompasses mining, oil, and gas extraction, is pivotal in the global economy. This massive industry offers valuable natural resources that power various sectors. However, the operational side often raises environmental, social, and governance (ESG) concerns. Therefore, ESG reporting has become an essential tool for ensuring ethical operations, especially in this era. Not only that, ESG implementation in the extractive industry will also open profitable opportunities in your business practices. What is the Extractive Industry? Extractive industries refer to businesses that engage in managing natural resources. Their operations encompass the extraction of raw materials up to the production phase in factories. Extractive enterprises are usually located in resource-rich regions. The chosen locations often have sufficient raw materials to meet the production equipment requirement. This necessitates business operators to understand the environmental conditions of natural resources. The comprehensive plan will ensure the preservation and sustainability of raw material stocks. In addition to acquiring and processing natural resources, extractive businesses are responsible for preserving and utilizing natural resources to create products beneficial to humans. READ MORE:5 Ways To Integrate ESG Investing into Business Growth The Types of Extractive Industries If we look at the processes and activities, extractive industries possess unique features that set them apart from other enterprises. One is the “utilization of natural resources,” where extractive businesses focus on harnessing natural resources for processing into valuable products. Another characteristic is “direct extraction from nature,” which involves processing natural resources into end products. Given that these businesses deal with natural resource processing, each type of extractive business has different processing methods and end products. Based on their sectors of activity, here are some types of extractive businesses: 1. Agriculture Various crops and agricultural products are the focus of extractive businesses in this field. 2. Livestock The extractive industry also encompasses livestock farming, where farm animals are processed and utilized. Types of livestock used in extractive industries include goats, cows, chickens, and more. 3. Plantations Plantations yield raw materials from specific crops that are processed into valuable products. Proper management is crucial for optimal results. 4. Marine Fisheries The rich marine life is a resource for the extractive industry in marine fisheries. Activities include catching, packaging, and distributing fish. 5. Salt Manufacturing Seawater can be processed into salt by drying it into crystals or land-based mining. 6. Forestry Extractive businesses in forestry utilize forest resources for processing various products such as paper, furniture, and construction materials. 7. Mining The mining sector involves exploring and processing mineral resources like copper, gold, coal, petroleum, and natural gas. Key Players in the Extractive Industries The key stakeholders in the extractive industry that business should engage are: 1. Employees, Partners, and Contractors These people work directly with the company or have a business relationship. They are often overlooked, but it is essential to maintain a positive relationship with them as it can impact how the community sees the company. 2. Communities near Mining Sites To gain community support, companies must show that the benefits of a project outweigh the risks. This involves engaging with community members, addressing their concerns, and planning for the community’s long-term future together. 3. Environmental Advocates Engaging with groups that may oppose mining projects can be difficult. Still, it is essential for understanding different viewpoints and addressing concerns, even if both sides do not change their stance. 4. Small-Scale Miners Small-scale or artisanal miners traditionally used many areas before large-scale mines arrived. 5. Agriculture Industry and Farmers Extractive companies can collaborate with agriculture to tackle water shortages and quality issues. 6. Government The government plays a role as a regulator and receives royalties from the extractive industry. Sometimes, the government is responsible for providing community services, so businesses should understand government priorities and roles in maintaining and funding community projects. 7. Indigenous Communities Indigenous peoples have special rights to their land and resources. Because of these rights and the unique impacts mining can have on them, companies should be incredibly considerate when engaging and seek free, prior, and informed consent (FPIC) through consultation. READ MORE:Is The ESG Implementation Strategy Beneficial For Business? The Impact of Extractive Activities The government plays a role as a regulator and receives royalties from mining. Sometimes, the government also sets environmental standards and monitors compliance, ensuring responsible extraction practices in the extractive industry. Here, we’ll explore the impact from both economic and environmental aspects. Economic ImpactEnvironmental ImpactMaximizing Natural Resources’ Potential:The primary purpose of this economic activity is to process natural resources into valuable products.Resource Depletion:Extractive activities can lead to the depletion of finite natural resources, which can have long-term consequences for future generations.Creating Job Opportunities:Extractive businesses can generate new job opportunities, helping to reduce unemployment rates.Ecosystem Disruption:Mining and drilling can disrupt ecosystems, destroying habitat, soil erosion, and biodiversity loss.Increasing Profits:Harnessing and processing natural resources often produces substantial profits for companies engaged in extractive activities.Pollution & Climate Change:Releasing pollutants, such as greenhouse gases and the extraction of fossil fuels, can contribute to climate change, air and water pollution, affecting human and environmental health.Providing An Alternative:Products derived from natural resource processing can serve as substitutes for various needs, allowing people to fulfill their requirements.Water Usage & Generation:Extractive activities often require significant water usage and generate waste and tailings, which can strain local water resources, impact nearby communities, and pose environmental risks if not properly managed. Sustainability Initiatives in Extractive Industries Based on the United Nations document “Transforming Extractive Industries for Sustainable Development,” transforming the extractives sector can be divided into six areas, namely: Financing for development: debt, liquidity, taxation, and illicit financial flows. Governance and revenue management. The green economy. A just transition to sustainable systems. Technology, innovation, and a circular economy; and Regional and global collaboration. Guide to Doing Business in Jakarta Mailchimp Free eBook Indonesia Business Insight Full NameEmail I have read InCorp's Privacy Policy and agree to InCorp using my information provided to contact me about related content, and services.*Subscribe Start Implementing ESG with InCorp Indonesia The extractive industry offers various economic benefits, including job creation and increased national profits through natural resource processing. Integrating sustainability consulting can help your extractive business thrive, ensuring financial success and minimal environmental impact. In this regard, InCorp Indonesia can support your business by offering ESG advisory and company registration services. These services will guide your business through the complex process of ESG integration and ensure alignment with relevant regulations. Read Full Bio Pandu Biasramadhan Senior Consulting Manager at InCorp Indonesia An expert for more than 10 years, Pandu Biasramadhan, has an extensive background in providing top-quality and comprehensive business solutions for enterprises in Indonesia and managing regional partnership channels across Southeast Asia.
Home Blog Renewable Energy Investment in The Manufacturing Sector Business Licenses | ESG Advisory | Indonesia Renewable Energy Investment in The Manufacturing Sector InCorp Editorial Team 19 June 2024 6 minute reading time Table of Contents The Importance of Renewable Energy in the Manufacturing Sector How Can Renewable Energy Benefit the Manufacturing Sector? Renewable Technologies for Manufacturing Opportunities in Renewable Energy Investment The Challenges Conclusion The importance of renewable energy investment must be balanced in the manufacturing sector. As industries increasingly prioritize sustainability and cost-effective energy solutions, this article delves into why investing in renewable energy is vital for manufacturing. The Importance of Renewable Energy in the Manufacturing Sector There is a growing demand for environmental standards from exporting countries and multinational companies that emphasize the Indonesian government’s speed up the shift to cleaner energy sources in the manufacturing domain. Indonesia’s industrial sector is the second-largest energy user, right after transportation. The anticipation of accelerating the manufacturing sector’s energy transition seems imminent. Especially when the European Union has demonstrated its intention to apply a carbon border adjustment mechanism (CBAM) with its trade partners. It could affect Indonesian exports if the government doesn’t fast-track the move to renewable energy within the manufacturing sector. How Can Renewable Energy Benefit the Manufacturing Sector? Utilizing renewable energy in manufacturing can benefit manufacturers in several ways. Among others are: 1. Reducing Own Emission The most straightforward and impactful way for a business to reduce its emissions is by opting for renewable energy sources over fossil fuels. Manufacturers operating heavy machinery during daylight hours can lower their emissions tied to electricity generation by up to 80%. When considering costs, renewable energy is rapidly gaining competitiveness against fossil fuels. It matches and surpasses cost-effectiveness in certain instances, making it an attractive option for manufacturers committed to reducing their environmental impact. 2. Reduce Supply Chain Emissions The third parties, which usually provide several manufacturers, are often located at a distance, which can result in emissions being produced during transportation. By encouraging their supply chain partners to adopt renewable energy, manufacturers can decrease emissions and contribute to the fight against climate change. 3. Attract Employees Employees are growing concerned about how their work can affect the environment. A survey conducted by the Carbon Trust found that almost half of the employees would think about leaving their current jobs if they knew it was harming the planet. Therefore, employers who show concern for the environment are seen as more trustworthy and appealing to potential employees. This approach attracts better talent and will likely retain valuable staff for longer. 4. Outperform Competitors with ESG Policy Developing and implementing a comprehensive ESG policy helps companies stand out from competitors and positions them for lasting success. Companies with transparent ESG policies are seen as ethical and socially responsible. They are shifting to clean energy sources like wind and solar, addressing climate change, air quality, and community health concerns. 5. Manage Price Hikes and Save Long-Term Costs Getting energy from a large-scale renewable source can shield manufacturers from potential increases in electricity costs and make their input expenses more foreseeable. This stability arises from the consistent pricing of renewable energy. As technology advances, renewable energy becomes more economical, while the expense of traditional fossil fuels keeps rising. READ MORE:Why You Should Establish a Manufacturing Company in Surabaya Renewable Technologies for Manufacturing Manufacturers are innovatively developing renewable energy methods to enhance the competitive edge of clean energy across different sectors. There are some examples of renewable energy technologies applicable to the manufacturers. 1. Solar Thermal Systems Solar thermal systems hold substantial potential for global industrial process heating. Although these systems are mainly utilized for lower-temperature needs, recent innovations have extended their usage to applications demanding temperatures of up to 400°C. Sectors with smaller-scale plants and less energy-intensive industries, such as textiles and food production, have considerable opportunities for embracing renewable energy via solar thermal systems, both from a technical and financial standpoint. 2. Electrification Decarbonizing the power industry is crucial, but alternative ways exist to boost the electricity sector’s renewable capacity. Some practical approaches involve moving industries closer to renewable power plants and generating electricity from renewable sources on-site. These techniques are applied in different ways in commercial manufacturing. It includes energy-efficient and autonomous facilities and plants that operate entirely on renewable energy, like wind turbines and solar panels. 3. Biomass Biomass can replace fossil fuels effectively, fueling local energy production and generating heat at various temperatures. Regarding the economic side, biomass offers advantages like lower production costs, high energy concentration, shorter transportation distances, and more choices for transportation methods. Opportunities in Renewable Energy Investment The growing demand for renewable energy also provides businesses with investment opportunities in Indonesia. Among others are: 1. Electrification Indonesia has a significant chance to make its mark in the worldwide shift towards renewable energy and transitioning to electrification. This opportunity stems from its abundant nickel reserves, the largest globally at 21 million tonnes. Nickel is vital in developing electric vehicle (EV) batteries and is used in numerous solar panel setups. Indonesia has used this advantage, along with other eco-friendly minerals like copper and bauxite, to entice investment in manufacturing. 2. Energy-Intensive Industries Industries like steel and cement can adopt eco-friendly construction materials powered by renewable energy. Electric cars can significantly cut their carbon footprint by 70% when their batteries are charged using renewable electricity, while the reduction is only 10-20% with coal-generated power. Opportunities exist in untapped software areas like energy management, trading, and asset management. The financial sector will gain, too, if policymakers establish a reliable environment for green financing. 3. Making Renewable Energy Reliable Indonesia is the world’s largest archipelago country, leading to a fragmented national grid and off-grid systems. This situation allows companies to introduce effective technologies for producing, storing, and transmitting energy. Efficient transmission technology is crucial for clean energy implementation. Since solar and wind power generation is dispersed, companies can provide solutions to create a versatile and practical grid. This approach minimizes energy loss and enables new business models in the future. The Challenges There are some challenges in the energy transition for the manufacturing industry. 1. Infrastructure Inadequate infrastructure, including high emissions from the power grid and limited capabilities for natural gas transmission and waste management, poses significant challenges. 2. Technological Readiness The high cost makes it difficult to embrace established energy-efficient options compared to traditional choices. Moreover, the challenge adds to the need for established standards like Minimum Energy Performance Standards (MEPS) and Conservation Labelling (CL) for industrial motors. 3. Skill Gap A lack of skills comes from inadequate education and limited teamwork among universities, industries, the government, and users. 4. Government Commitment Indonesia’s primary focus on environmental responsibilities is directed toward the power plant industry, resulting in the manufacturing sector needing more emissions reduction goals. 5. Institutional Limitation The government’s limited involvement in offering technical support, advocacy, and incentives contributes to institutional limitations. At the same time, unclear incentive methods and illegal activities undermine trust in regulatory procedures. Guide to Doing Business in Jakarta Mailchimp Free eBook Indonesia Business Insight Full NameEmail I have read InCorp's Privacy Policy and agree to InCorp using my information provided to contact me about related content, and services.*Subscribe Conclusion With the increasing emphasis on renewable energy adoption, the manufacturing sector should aim to accelerate its energy transition efforts. InCorp Indonesia can assist with ESG advisory and business license services for those manufacturers that wish to stay ahead of competitors and gain better trust from customers by applying green business practices. Read Full Bio Pandu Biasramadhan Senior Consulting Manager at InCorp Indonesia An expert for more than 10 years, Pandu Biasramadhan, has an extensive background in providing top-quality and comprehensive business solutions for enterprises in Indonesia and managing regional partnership channels across Southeast Asia.
Home Blog Navigating EU Deforestation Regulation with Ad Hoc JTFs Business Licenses | ESG Advisory | Indonesia Navigating EU Deforestation Regulation with Ad Hoc JTFs InCorp Editorial Team 19 June 2024 6 minute reading time Table of Contents Deforestation Concerns on Environmental Impacts The New EU Deforestation Regulation Ad Hoc JTF Importance in EUDR Ensure Compliance with InCorp Indonesia EU deforestation regulation is critical to the union’s unwavering commitment to environmental sustainability. At the forefront of this regulatory framework lies the integral role of Ad Hoc Joint Task Forces (JTFs), a powerful and dynamic instrument in the EU’s strategy to combat deforestation. In this article, we delve into the pivotal function of Ad Hoc JTFs. We will explore their formation, operations, and impact on the broader global discourse surrounding environmental conservation. Deforestation Concerns on Environmental Impacts Forests cover 30% of the earth’s land and provide crucial services for human well-being and the environment. They are rich in biodiversity, hosting most of the world’s land-dwelling animal, plant, and fungal species. Forests can also ensure clean water, offer a renewable source of raw materials, prevent soil erosion, protect against natural disasters, and create job opportunities, such as wood production, forest management, and recreational activities. Moreover, forests act as important carbon sinks, helping mitigate climate change by absorbing greenhouse gasses. Unfortunately, in recent years, deforestation has been a significant issue. According to the World Resources Institute, an area of forest equivalent to 10 football pitches is lost globally every minute. The expansion of agricultural land stands as the foremost catalyst for deforestation, driven by population growth and heightened food demand. This transformation frequently results in converting forests into farmland, with a predominant focus on maximizing agricultural output. READ MORE:The Impact of EU’s Palm Oil Ban on Indonesia The New EU Deforestation Regulation On June 29, 2023, the European Union introduced a new regulation called the “EU Deforestation Regulation” (EUDR). The law addresses the EU market’s impact on global deforestation and forest degradation. Here are ten critical points for companies to be aware of: 1. Wide Product Coverage The EUDR covers a variety of products, including commodities like cattle, cocoa, coffee, oil palm, rubber, soya, and wood. Also, many derived products like meat, leather, chocolate, and more are included. Companies should check the specific products covered based on their tariff classification. 2. Market Access Restrictions Starting from December 30, 2024 (or June 30, 2025, for micro or small businesses), the EU will place an export restriction on the market in the regions. However, companies can still engage in trading if they meet specific criteria under the regulation. These products must be “deforestation-free.” It means that the productions must comply with local laws and be accompanied by a due diligence statement indicating a negligible risk of non-compliance. 3. Legal Deforestation Included The EUDR considers both illegal and legal deforestation and forest degradation. As per the country of production laws, legal deforestation is also addressed. 4. Compliance with Local Laws Products must adhere to the relevant legislation of the country of production concerning land use rights, environmental protection, forest-related regulations, and more. 5. Future Impact While the primary obligations of the EUDR begin in 2024, today’s production practices will affect the ability to market products in the future. Products entering the EU market should come from something other than land deforested or degraded since December 31, 2020. 6. Company Responsibility Starting December 30, 2024, companies introducing products to the EU market must submit a due diligence statement to their national authority, utilizing a specialized system established by the European Commission. 7. Transparent Due Diligence The EUDR outlines the due diligence process, involving collecting detailed information, conducting risk assessments for each product, and mitigating risks through surveys, audits, documentation, or collaboration with suppliers. 8. National Authority Checks Competent authorities in EU Member States will enforce the EUDR, conducting checks (typically without prior notice) on operators and traders to ensure compliance. 9. Private Party Oversight Private parties can raise concerns with operators or competent authorities if non-compliance with the EUDR occurs. 10. Potential Fines Companies could face significant penalties for failing to comply with the EU Deforestation Regulation (EUDR). While each EU country’s laws will determine the exact fines and punishments, the EUDR outlines potential consequences, which might include: a. Fines Penalties are calculated based on the extent of environmental damage and the product’s value, with repeat offenses incurring higher fines. These fines can reach a substantial portion, at least 4%, of the company’s EU turnover from the previous year and may even exceed the economic gains from the violation. b. Confiscation Offending companies may face the seizure of the products in question or the profits earned from their sale. c. Exclusion from Public Procurement and Funding Violators could experience temporary exclusion from participating in public procurement processes and receiving public funding, impacting their access to lucrative opportunities. d. Product Trading Restrictions In severe or recurrent violations, the EU may impose temporary bans on trading these products within its jurisdiction or revoke the option to employ simplified due diligence procedures. Ad Hoc JTF Importance in EUDR The EUDR has strained relations between Europe and palm oil-producing countries like Indonesia. However, Indonesia and Malaysia recently formed a special task force with the EU to solve this anti-deforestation law, called Ad Hoc JTF. The task force’s creation followed Indonesia and Malaysia’s visit to Brussels in May. During this visit, Coordinating Minister for Economic Affairs Airlangga and Malaysian Plantation Minister Fadillah Yusof traveled to the EU headquarters to address concerns about the EUDR. Palm oil is among the products affected by the EUDR, which requires proof of its origin to ensure it doesn’t come from deforested areas before entering the European market. Indonesia worries that this requirement will complicate matters for small-scale palm oil producers. Indonesia sees the establishment of Ad Hoc JTF on EUDR as a sign of the EU becoming more flexible, which could lead to progress in the Comprehensive Economic Partnership Agreement (CEPA) negotiations. These negotiations between Indonesia and the EU started in July 2016 and have continued through 15 rounds of talks. Indonesia aims to conclude these negotiations by the end of this year. The Progress of The Joint Task Force Astrid Schomaker, the Director for Green Diplomacy and Multilateralism at the European Commission, acknowledged that Indonesia and Malaysia have made strides in reducing deforestation. The Director also appreciated the exchange of information and clarifications regarding the regulation. The three parties have agreed on the terms of reference for the Ad Hoc JTF, which covers several important topics. These include involving farmers in supply chains, considering national certification systems related to land legality and deforestation timelines, ensuring traceability from producers to consumers, using scientific data on deforestation and forest degradation, and addressing data protection. The Ad Hoc JTF is expected to complete its work by the end of 2024 and may be extended if all parties agree. Guide to Doing Business in Jakarta Mailchimp Free eBook Indonesia Business Insight Full NameEmail I have read InCorp's Privacy Policy and agree to InCorp using my information provided to contact me about related content, and services.*Subscribe Ensure Compliance with InCorp Indonesia With the growing concern about environmental impacts, businesses can consider maximizing the environmental, social, and governance (ESG) framework to minimize the environmental harm caused by company operations. Contact our experts, who provide ESG advisory and business license services to help your business meet the ever-increasing market demand for environmentally friendly products. Let’s embark on a journey toward a sustainable and prosperous future by filling out the form below. Read Full Bio Pandu Biasramadhan Senior Consulting Manager at InCorp Indonesia An expert for more than 10 years, Pandu Biasramadhan, has an extensive background in providing top-quality and comprehensive business solutions for enterprises in Indonesia and managing regional partnership channels across Southeast Asia.
Home Blog Indonesia’s Path Towards Sustainable Development Goals Business Setup | ESG Advisory | Indonesia Indonesia’s Path Towards Sustainable Development Goals InCorp Editorial Team 11 July 2024 8 minute reading time Table of Contents What is Sustainable Development? What are the 17 Sustainable Development Goals? Why is Sustainability Important? Benefits of Sustainability How to Achieve Sustainable Development Goals How do SDGs Help Businesses? SDGs Implementation in Indonesia Government Efforts to Achieve the SDGs in Indonesia Challenges and Opportunities for Achieving the SDGs in Indonesia Conclusion National Development Planning Agency (Bappenas) is raising awareness about the Sustainable Development Goals (SDGs) and mobilizing support to achieve the 2030 vision. These efforts aim to facilitate the realization of the 17 Sustainable Development Goals and 169 targets by 2030. The realization includes plans to break free from the middle-income trap, alleviate poverty, and become a more sustainable developed country by 2036. Despite the economic impact resulting from the COVID-19 pandemic, the government has implemented recovery measures. Social aid, incentives, and fiscal policies lead to a post-pandemic economic growth trajectory. For your better understanding of SDGs, we will explore the extensive mapping of the Sustainable Development Goals in Indonesia. This article will thoroughly examine the strides made, the focal areas of attention, and the innovative approaches deployed to address the urgent challenges. What is Sustainable Development? Sustainable development is meeting society’s current needs while safeguarding future generations’ ability to meet them without compromise. It balances economic growth, environmental protection, and social inclusion. Understanding the Sustainable Development Goals meaning is crucial for grasping the importance of this concept. What are the 17 Sustainable Development Goals? These 17 Sustainable Development Goals provide a comprehensive framework for a better and more sustainable future. Here’s the list: No Poverty Zero Hunger Good Health and Well-being Quality Education Gender Equality Clean Water and Sanitation Affordable and Clean Energy Decent Work and Economic Growth Industry, Innovation, and Infrastructure Reduced Inequality Sustainable Cities and Communities Responsible Consumption and Production Climate Action Life Below Water Life on Land Peace, Justice, and Strong Institutions Partnerships for the Goals Why is Sustainability Important? Sustainability is critical for ensuring a healthy planet and a thriving society. Environmental degradation, social inequality, and economic instability threaten our collective future. By prioritizing sustainability, we align with the Sustainable Development Goals 2030 agenda, ensuring a better future, such as: Combat climate change and protect our environment. Build a fair and equitable society where everyone has the chance to succeed. Drive economic growth that benefits all. Benefits of Sustainability Beyond its ethical importance, sustainability offers numerous benefits for businesses: Environmental Protection: Reduces carbon footprint and conserves natural resources. Economic Growth: Promotes efficient use of resources, leading to cost savings and innovation. Social Equity: Ensures fair distribution of resources and opportunities, enhancing quality of life. Adopting sustainability practices brings significant benefits, contributing to the broader sustainable development list. How to Achieve Sustainable Development Goals Efforts to achieve these goals are particularly relevant for regions like Indonesia’s sustainability, where environmental and social challenges are pressing. Here are the steps businesses can take: Conduct A Sustainability Audit: Identify areas for improvement. Set Achievable Goals: Focus on specific SDGs that align with your business strategy. Develop A Sustainability Plan: Outline actions and resources needed to achieve your goals. Collaborate with Stakeholders: Engage employees, suppliers, and customers in your sustainability journey. Measure and Report on Progress: Track your impact and adjust your strategy. How do SDGs Help Businesses? The SDGs offer a framework for businesses to align their strategies with global priorities. By integrating SDGs into their operations, companies can: Enhance brand reputation and customer loyalty. Access new markets and unlock investment opportunities. Improve operational efficiency and reduce costs. Foster innovation through sustainable practices. Attract and retain top talent committed to sustainability. Read more: Understanding The Environmental Sustainability in Business SDGs Implementation in Indonesia Through strategic investments, Indonesia is dedicated to enhancing the well-being of its populace. will address various sectors, including health, education, infrastructure, and technology. The ultimate goal is to bring Indonesia into a golden age and serve as an exemplary model for neighboring nations. The overarching ambition is for Indonesia to attain developed country status with a solid competitive edge by 2045. Through collaboration and partnerships, the government envisions a prosperous, secure, sovereign, independent, and competitive nation. Therefore, the emphasis is on advancing human resources and public welfare. Government Efforts to Achieve the SDGs in Indonesia At the 10th Asia-Pacific Forum on Sustainable Development (APFSD), Ivanovich, representing Indonesia, revealed that the country has surpassed 50% of its SDGs indicators. This announcement occurred during the UN conference organized by the Economic and Social Commission for Asia and the Pacific (ESCAP) in Bangkok, Thailand. Ivanovich also highlighted notable advancements in various areas. Sanitation, public transport safety, water resources, energy efficiency, sustainable industry, carbon emissions reduction, high-tech industrial product exports, and data availability are among others to show progress. The Indonesian government relies heavily on data to ensure the achievement of targets. The government emphasized the need to enhance data quality and disaggregation, particularly for marginalized groups. The National SDGs Secretariat of Indonesia collaborated closely with local governments, stakeholders, universities, academic communities, and international development partners by proposing an inclusive approach. Indonesia aims to realize all Sustainable Development Goals by 2030. Strategy to Accelerate the Sustainable Development Goals In his opening speech at the APFSD, Abdul Halim Iskandar, the Minister of Villages, Disadvantaged Regions, and Transmigration, Stressed the importance of inclusivity in SDG achievement and expressed optimism about the SDG Village initiative. He also emphasized the importance of a local perspective in prioritizing Indonesia’s vision and grounding the SDGs at the village level through the SDGs Desa initiative. Village administrations in Indonesia cover 91 percent of the lowest level of government and have a significant population of 214 million rural residents. The SDGs Desa program aims to reformulate village development, empower local communities in decision-making, and utilize local potential to improve living standards. Thus, it aims to make them independently embody the philosophy that building a nation “takes a village.” The aim is to accelerate village development by implementing the 17 SDGs under the SDGs Desa initiative, which now includes an additional 18th goal. The program utilizes data on population, households, and developmental needs, which is accessible online. Challenges and Opportunities for Achieving the SDGs in Indonesia The Sustainable Development Goals are indeed ambitious. Numerous countries collectively pursue it. However, each country faces unique constraints in its pursuit of these goals. In Indonesia’s case, the following issues challenge its SDG achievement. Inadequate Human Resources Collecting and analyzing SDG data is challenging because sufficient personnel with the necessary skills and expertise are needed. Many regions, especially developing countries, need more trained professionals to implement and manage sustainability projects. This gap hinders the effective execution of sustainable practices and policies. Efforts to build capacity through education, training programs, and international collaboration are essential to overcome this challenge. Investing in human capital improves the workforce’s ability to contribute to sustainable development and enhances overall economic growth. Budget Constraints More financial resources allocated to ministries, agencies, and regions help provide SDG data. Conversely, limited funding can impact data collection, analysis, and dissemination efforts. Addressing this issue requires innovative financing solutions, such as public-private partnerships, green bonds, and international aid. Governments and businesses must prioritize sustainability in their budgeting processes to ensure continuous investment in sustainable development. Lack of Optimal Collaboration Effective collaboration among stakeholders is essential for robust SDG data provision. To ensure the availability and accuracy of SDG data, optimal collaboration between different parties involved in data collection and reporting is needed. Disaggregation of Statistics Providing SDG data requires disaggregating statistics to describe specific trends and patterns within subpopulations. Detailed data on different demographic groups requires additional resources and methodologies. The challenges above can be overcome by primary statistical innovation, which can help overcome resource limitations and improve the quality of SDG data. Furthermore, fostering stronger collaboration among diverse stakeholders can promote better coordination and communication. Lastly, establishing a national statistical governance framework in Indonesia can provide opportunities for advancing the achievement of SDGs by streamlining data processes. Guide to Doing Business in Jakarta Mailchimp Free eBook Indonesia Business Insight Full NameEmail I have read InCorp's Privacy Policy and agree to InCorp using my information provided to contact me about related content, and services.*Subscribe Conclusion Enhancing SDG data provision can have a profound and far-reaching impact on various aspects of the economy. By improving the availability and accuracy of SDG data, businesses and entrepreneurs can make more informed decisions, align with sustainability goals, and create positive social and environmental outcomes. At InCorp Indonesia, we acknowledge the significance of ESG matters and provide extensive services to assist companies in their ESG journey. Here’s how we can empower your company: Expert Guidance: Our consultant will help you assess current practices, identify improvements, and develop a tailored ESG strategy. Actionable Resources: Access best practice guides, industry benchmarks, and data-driven insights to support your sustainability efforts. Seamless Implementation: We assist with stakeholder engagement, risk management, and reporting to ensure smooth ESG strategy execution. Measurable Impact: We’ll help you set clear metrics and KPIs to track progress and show your commitment to sustainability. Fill out the form below to schedule a consultation and discuss how our ESG services can help your business achieve its sustainability goals. Read Full Bio Pandu Biasramadhan Senior Consulting Manager at InCorp Indonesia An expert for more than 10 years, Pandu Biasramadhan, has an extensive background in providing top-quality and comprehensive business solutions for enterprises in Indonesia and managing regional partnership channels across Southeast Asia.