Until a few years ago, environmental approval processes were often seen as mere formalities. The AMDAL or UKL-UPL documents were completed so that business permits could be issued, then stored away in a drawer. However, the business landscape in Indonesia is shifting rapidly. Now, environmental compliance is not just about passing audits. It is about whether your company is eligible for funding, can participate in large tenders, or even continue to operate.
This shift is not just rhetoric. Recent data and regulations indicate that environmental compliance has become a very concrete part of business calculations.
Large Tenders Now Use ESG Filters
The most obvious example is in the Waste-to-Energy (WtE) projects managed by Danantara. The tender for waste power plants in four cities: Bekasi, Denpasar, Yogyakarta, and Bogor, requires participants to meet environmental governance aspects as a primary evaluation criterion. Not just an addition, but a determinant.
The assessment includes the design of environmental impact management, the reliability of environmentally friendly technology, and socio-economic risk analysis. Twenty-four international companies from China, France, Japan, Singapore, and Hong Kong participated in the initial selection. All must partner with local companies. As a result, the winners are not merely the lowest bidders, but those who can most effectively demonstrate measurable ESG commitment.
This pattern is likely to spread to other infrastructure projects. If state-owned enterprise tenders are already using ESG filters, it is only a matter of time before private tenders follow suit.
OJK Encourages Sustainable Finance Through Regulations
From a financial perspective, OJK has long been promoting this agenda. POJK No. 51/2017 requires financial institutions, issuers, and public companies to develop Sustainable Finance Action Plans. In February 2025, OJK will release the Indonesian Sustainable Finance Taxonomy (TKBI) Version 2.0, which expands coverage to various sectors, not just energy.
On a more technical note: in January 2025, the Indonesia Stock Exchange will launch Form E020 for ESG reporting standardization. This means that ESG disclosure is no longer a "nice to have" for companies that are listed or planning to enter the capital market. It is mandatory.
For companies needing bank credit, the situation is similar. Major banks are beginning to include ESG scores in credit feasibility assessments. Companies with a history of environmental violations or without adequate compliance documentation may face higher risk premiums or outright rejections.
Law Enforcement is Becoming More Serious
While funding doors are becoming more selective, on the other hand, environmental law enforcement is also tightening. Throughout 2025, the Ministry of Environment monitored 921 companies and found various environmental management violations. The PROPER 2025 program monitors 5,476 companies on a regular basis.
In January 2026, KLH/BPLH revoked environmental approvals for 28 companies in Aceh, North Sumatra, and West Sumatra, mostly in the forestry and mining sectors. PermenLHK No. 14/2024 introduced stricter administrative fines as an additional instrument beyond warnings and permit suspensions.
The "multi-door enforcement" approach implemented by KLHK allows for layered sanctions: administrative, civil based on the polluter pays principle, and criminal if there are victims involved. For business actors, this is not a risk that can be managed later.
Compliance as a Business Strategy
Companies that view environmental compliance as an operational burden may need to reevaluate their perspective. At this point, environmental compliance is more akin to a strategic investment: opening access to green funding, meeting tender requirements, and avoiding sanctions that could halt operations.
PP 28/2025, which reorganizes risk-based business licensing, clarifies the process. Business actors who understand risk classification, choose the appropriate environmental documents, and master the OSS-Amdalnet digital flow will have a significant administrative advantage over competitors who are still guessing.
In an era where investors, regulators, and business partners alike are reviewing ESG scores before signing contracts, ignoring compliance does not save costs. It wastes opportunities.
References:
- Republika – ESG Compliance Becomes a Requirement for WtE Danantara Tender Winners → esgnow.republika.co.id
- Ministry of Environment – Monitoring 921 Companies, Imposing Strict Sanctions for Environmental Management Violations → kemenlh.go.id
- Ministry of Environment – Revoking Environmental Approvals for 28 Companies in Sumatra → kemenlh.go.id
- OJK – Implementation of Sustainable Finance for Financial Institutions, Issuers, and Public Companies → ojk.go.id
- Ministry of Environment – 5,476 Companies Monitored Through PROPER 2025 → kemenlh.go.id