Many Companies Struggle to Implement ESG, These Are the Main Obstacles

Environmental, Social, and Governance (ESG) are business practice standards that consider environmental sustainability, social sustainability, and good corporate governance.

These standards are measured through various indices such as the S&P Dow Jones Sustainability World Index, the SGX ESG Transparency Index, and the IDX ESG Leaders.

According to the latest research report from Mandiri Institute, released on Thursday (3/11/2022), the trend of investment in companies implementing ESG continues to strengthen. Global ESG bond issuance reached US$930 billion in 2021, a nearly 14-fold increase compared to 2014.

However, despite the strengthening global trend, ESG adoption in Indonesia seems to be lagging.

Based on a Mandiri Institute survey of 190 domestic listed companies, only 52% measure carbon emissions from their business activities.

Furthermore, only 15% have set emission reduction targets. This is, however, one of the important standards in ESG.

The survey found that the main obstacle faced by Indonesian companies in implementing ESG is the difficulty in determining the criteria, matrices, or performance indicators.

Many companies also still lack understanding of ESG issues, and have difficulty finding relevant information and reference data with the detail shown in the graph.

In response to this, Mandiri Institute encourages stronger cooperation between companies and the government.

"Consultation between the government, regulators, and the business sector is crucial. The Financial Services Authority (OJK) has issued regulations on Sustainable Finance. However, further development of matrices is still needed to compare the performance of various industrial sectors," they said.