(1) Ensuring accountability in the rush of energy transition
At the Group of 20 (G20) major economies leaders summit in Brazil on Nov 19, Prabowo said that Indonesia is planning to phase out the use of coal energy within 15 years by building over 75 gigawatts of renewable energy capacity. He refers to the country’s huge potential of geothermal resources, biofuel and biodiesel.
Prabowo’s aspiration in pursuing green and sustainable energy is translated into some alternatives. The three of them: (1) producing green fuels in form of biomass, bioethanol; (2) increasing the installation of geothermal, and (3) building nuclear power facing challenges and risks for fuelling conflict.
Currently, number of geothermal projects are opposed by local communities, like we are seeing in Padaringcang, Banten, Cianjur, West Java and East Nusa Tenggara. Geothermal consumes large amount of water and may resulted in the shortage of water near the location which is essential for farmers.
(2) Ensuring accountability in the food self-sufficiency
Prabowo has set a target for the country to achieve food self-sufficiency within three to four years by expanding harvestable land to four million hectares by the end of 2029. Meanwhile, agriculture minister Andi Amran Sulaiman pledged to achieve the goal in three years, a year ahead of Prabowo’s target.
To achieve the target, prabowo relies on food estate programmes. He is accelerating the food estate projects in some provinces such as in Merauke- Papua, Toba- North Sumatera, Gunung Mas-Central Kalimantan.
Food Estate Projects have to deal with the complexities involving land procurement, including issues of customary lands and indigenous rights. Demarcation of land often triggered agrarian conflicts. Meanwhile, poor infrastructure led to soaring production and post-harvest costs. Production was low because not all of the region was suitable for rice, sugarcane or corn. Furthermore, acidic soil led to increased costs for land management because of the need for copious quantities of fertilizer. Additionally, the clearing of 600 hectares of natural forest in Gunung Mas, Central Kalimantan for cassava plantations in 2020 triggered the release of 250,000 tons of carbon emissions. And during the rainy season, the deforestation led to flooding.
(3) Ensuring integrity in the hype industry of ESG
Currently, ESG has developed into one of the increasingly widespread compliance regimes and even become a kind of new ‘industry’ in encouraging sustainable development and business. Currently there are various complex and fragmented voluntary frameworks and standards in use. It is estimated that currently there are at least 7 institutions that create ESG standards, 11 ESG frameworks, and approximately 19 ESG rating agencies. Most of them are dominated by international institutions. This number is very likely to increase again. In addition, ESG is also developing with the emergence of education, certification, including codes of ethics from professionals who work to build and implement ESG frameworks.
‘Industrialisation’ of ESG may lead to the practice of greenwashing. The criticism of ESG is generally directed at the integrity of rating agencies and the sustainable report. Highlighted, for example, is the significant gap between what ESG ratings and data products assess and what they assume they assess: ESG ratings and data products increasingly focus on risks that are relevant to investors. This means that a company’s environmental, social and governance impacts (e.g., its actual impact on climate, the environment, people and society) are not a primary consideration. In addition, the rating system also creates dependency over time (and efforts to make such disclosures consistent, without strong regulation and verification risk leading to an ESG data system that can be easily manipulated by the rated company. The risk of biased, misleading, and incomplete company information must be fully considered in any recommendation or regulatory action on ESG data disclosure by companies.
The poor picture of the ESG industry is evidenced by the low quality of ESG implementation by companies. The Transparency in Corporate Reporting (TRAC) score for anti-corruption aspects of 121 mining companies in Indonesia is only 0.31 out of a maximum score of 10. This score indicates that the average score obtained by 121 mining companies in Indonesia is in the Very Low score category in carrying out business practices with integrity and environmentally friendly to avoid corporate criminal liability. (TII, 2024). The same thing if we refer to the RepRisk Report, 2023 which shows an increase in the number of cases of greenwashing practices by banks and financial services institutions worldwide. According to RepRisk’s records, there has been an increase in cases reaching 70% in the last 12 months from the previous 12 months. The increase in cases was mostly contributed by European financial institutions, and most of the greenwashing also involved claims around fossil fuels. In RepRisk’s records, as many as 148 cases came from the banking and financial services industry globally in the 1 year to the end of September 2023. This figure is up from 86 cases during the previous year.
Andriyani + Hidayat | Counsellors at Law 