TELEGRAF – In the era of globalization and rapid economic development, companies are required not only to focus on financial profits but also on sustainability and their impact on the environment, society, and corporate governance.
This is known as Environmental, Social, and Governance (ESG).
The implementation of ESG principles is not only necessary for maintaining business sustainability but also plays a crucial role in enhancing a company’s reputation and attracting investors who are increasingly concerned with sustainability issues.
What is ESG?
ESG is a framework that encompasses three main aspects of sustainability:
Environmental: This factor includes the company’s measures in managing its environmental impact, such as:
- Reducing carbon emissions.
- Energy efficiency.
- Waste management.
- Conservation of natural resources.
Social: Focuses on the company’s social impact, including:
- Relationships with employees.
- Protection of human rights.
- Social inclusion.
- Empowerment of surrounding communities.
Governance: Assesses the company’s governance structure, including:
- Transparency in decision-making.
- Integrity and accountability.
- Oversight of internal policies and management.
ESG is a modern benchmark for companies to demonstrate their responsibility towards society, the environment, and other stakeholders.
OJK Regulations and Implementation of Sustainable Financial Reporting
In Indonesia, the implementation of ESG is increasingly regulated through policies by the Financial Services Authority (OJK). One of the main regulations is POJK No. 51/POJK.03/2017 on sustainable finance. This regulation requires public companies to report sustainability principles in their annual reports.
Main Contents of POJK 51/2017:
- Information on environmental management efforts (energy, emissions, resource use).
- Social welfare (community relations, human resources, social rights).
- Transparency and accountability in governance.
Additionally, POJK No. 16/POJK.04/2021 reinforces the obligation for public companies to integrate ESG aspects into their annual reports. This step not only complies with government regulations but also enhances information access for investors and the public.
Benefits of ESG Implementation for Companies
Implementing ESG provides broad strategic benefits, covering aspects of reputation, investor appeal, and business sustainability. Here are some of the main benefits:
- Enhancing Company Reputation
Companies that seriously implement ESG principles are more appreciated by the public, consumers, and investors. This builds a positive image and increases customer loyalty.
- Attracting Investors and Financing
Modern investors are not only looking for financial returns. Many prioritize companies with good sustainability values. This opens opportunities for:
- Easier access to funding.
- Lower capital costs.
- Supporting Long-Term Sustainability
By considering ESG, companies can be more responsive to:
- Changes in environmental regulations.
- Social dynamics and governance challenges.
- External risks that may affect the business.
- Complying with Government Regulations
Compliance with ESG regulations not only prevents legal sanctions but also ensures business continuity. Companies that comply with rules like POJK 51/2017 can enhance their credibility in the eyes of stakeholders.
- Providing Positive Impact on Society and the Environment
Companies that implement ESG usually invest in social responsibility programs, such as:
- Education and training for the community.
- Improving healthcare services.
- Environmental conservation.
This creates a more harmonious relationship between the company and the surrounding community.
ESG as a Moral Obligation and Business Strategy
According to the author, implementing ESG is a moral obligation that goes beyond mere regulatory compliance. The modern business world demands active roles from companies in creating sustainable added value.
From a strategic perspective, ESG is a long-term investment that can enhance a company’s competitiveness. In daily operations, ESG helps companies:
- Identify potential risks.
- Manage resources more efficiently.
- Build good relationships with all stakeholders.
Companies that integrate ESG into their strategies will be better prepared to face global challenges, such as climate change, social dynamics, and evolving market expectations.
Case Study: Impact of ESG Implementation
As an illustration, multinational companies like Unilever have shown that sustainability can align with profitability.
Their strategies, including reducing carbon emissions and responsible resource use, have increased consumer trust and customer loyalty.
In Indonesia, the implementation of ESG by several large companies has set a good example, such as environmentally friendly waste management by manufacturing companies or community empowerment programs by mining companies.
Implementing ESG is not just about complying with regulations but also a way to create sustainable value for the company, society, and the environment.
With increasingly stringent regulations, such as those from OJK, companies in Indonesia are required to be more proactive in integrating ESG into their strategies.
In the author’s view, ESG is a long-term investment that provides strategic, reputational, and sustainability benefits.
Companies that consistently implement ESG will be in a better position to face future challenges while contributing positively to the world.
With strong ESG implementation, we can build a more ethical, responsible, and sustainable business world.
By: Ni Komang Fenny Erawati, Master of Accounting 2024 Undiksha
