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Corporate sustainability in Indonesia: A complex picture

Right now I’m in Jakarta, heading out tonight to Singapore for the Singapore Compact conference tomorrow.

I’ve spent the last few days being briefed on what’s happening – or not – in the field of business and issues around sustainability here in Indonesia.

Indonesia is a fascinating, friendly and deeply opaque country, that much is clear.

Also without doubt are the huge opportunities for business here.

240 odd million people represents a major market.

Here’s a few random bullets on what I have picked up here, having spoken at length with businesses, NGOs and government representatives since Monday:

  •  Indonesia is clearly a huge potential market for many Western brands. Lots are here. More are moving in. There’s serious money to be made as growth is stable, at high levels and wealth is rising.
  • The sustainability debate is still in its infancy: BP’s work here a decade ago still seems to be the best example of well-thought through sustainability project. Although the long term picture of the Tangguh project is unclear.
  • There are some pilot projects here in factories, where companies are making a real difference to improving workers lives (A BSR project, for example)
  • Economic nationalism is on the rise: This is making life increasingly difficult for business.
  • Central government power is weak. The regions are almost like different countries.
  • Indonesian companies, such as APP and APRIL in forestry, are expanding their work despite international NGO opposition.
  • The law is deeply unclear and changes often. Working legally is difficult: Laws change without warning and are often open to interpretation.
  • Enforcement of the law, as often elsewhere is often shaky at best. Although some progress is being made.
  • Some policies seem designed simply to create more jobs for civil servants. (Plus ca change)
  • Energy subsidies are about 20% of the national budget. There are concerns over how sustainable this is, what changes to that could mean for growth, and also for serious social unrest.
  • Environmental awareness is low: For most people, progress means gadgets and cars after the basics are taken care of. Jakarta traffic is legendarily dense. 
  • However, deforestation seems to have stablised (not getting worse, however one defines that!) and there is serious political, regional interest in saving what’s left of the forests here (West Papua, for example)
  • Industries are subject to “CSR laws” and targets around issues such as local content (extractives) without any real clarity as to what that means or how it will be achieved.
  •  UK and retailers from other countries are piling in, using agents and franchises.
  • Unilever is the most respected company here on sustainability: For their work back in 2004 with Oxfam and their commitment to investing in traceable palm oil production.
  •  NGOs are unclear as to what corporate sustainability actually means in practice beyond the basics of philanthropy and safety.
  • Campaigning NGOs are seen as inconsistent (Greenpeace) but slowly improving in terms of credible claims based on science.
  • Overall, there’s a rise in aggressive nationalism (elections due in mid-2014) and increasing opposition to being “told what to do” on the environment and social issues by the “West”. 
  • Undoubtedly, progression on sustainability by Indonesian companies will be firmly done their own way and in their interest, however that can be defined and put into practice.
  • To drive progress, foreign companies and their governments and chambers of commerce are going to need to be much clearer about what benefits better practices have, and show the way using evidence and proven models, if Indonesian firms are to follow.

    It looks like I’ll be back here in January for the 2013 Crossroads Forum

I’m sure all interested readers would value comments on the above from genuine experts on the country.

2 Comments

  1. For someone working on sustainability issues in Indonesia, I found your list to be quite useful and mostly spot on. I agree less with this point: "NGOs are unclear as to what corporate sustainability actually means in practice beyond the basics of philanthropy and safety." This blanket statement actually hides quite a lot of variation between NGOs level of awareness. To some extent, many NGOs (and companies of course) do still believe that CSR is about planting trees and handing out cash to the needy, however some others are already cognizant that CSR is also an opportunity for changing corporate practices (WWF and Kehati come to mind).

  2. Thanks Mark. Well pointed out.

    My NGO comment was based on the 12 or so I spent a few hours with.

    I of course should have acknowledged the fine work that both Greenpeace and WWF have done in Indonesia on forestry campaigning and other issues. Thanks for the comment.

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