Celios: Green Industry Transformation Requires Incentive-Based Approach for SMEs

Jakarta (ANTARA) - Bhima Yudhistira, Executive Director of the Centre of Economic and Law Studies (Celios), believes that accelerating the green industry transformation, particularly in small and medium industries (IKM), requires an incentive-based approach to speed up the transition among IKM entrepreneurs.

Bhima said the government needs to provide concrete support for IKMs through various instruments, such as low-interest financing for investments in energy-efficient machinery, support for green certification, which remains costly, and tax incentives for businesses able to reduce emissions and waste.

“Therefore, the approach cannot rely solely on regulation or campaigns, but must be accompanied by well-targeted incentives,” he said when contacted in Jakarta on Sunday.

Bhima noted that IKMs play a strategic role in driving an inclusive green industry, given the sector’s substantial contribution to employment absorption and its potential to enter global supply chains.

“IKMs are the key to accelerating a labour-intensive green industry transformation. Their potential is significant for export markets, particularly in low-carbon supply chains ranging from food and beverages to automotive components,” he said.

Beyond financial support, he considers strengthening human resource capacity to be an important factor in accelerating the green transformation of IKMs.

Many business operators still require assistance in calculating energy efficiency, managing waste, and applying circular production principles.

Bhima also sees the use of digital technology and artificial intelligence (AI) as capable of helping IKMs optimise their use of energy and raw materials more efficiently.

On the other hand, Bhima urged the government to provide greater space for green IKM products within government procurement supply chains.

According to him, environmentally friendly products could be prioritised in the procurement of goods and services, whilst also encouraging large companies to involve green IKMs in industrial supply chains.

He added that increasingly stringent environmental standards in various export destination countries present both an opportunity and a challenge for Indonesian IKMs.

Products that do not yet meet sustainability requirements risk losing market access, whilst IKMs capable of meeting green standards stand to gain premium buyers and increase their products’ added value.

“IKMs that can meet the standards have a greater opportunity to enter global supply chains, secure premium buyers, and enhance their products’ added value,” he said.

Data from Statistics Indonesia (BPS) for 2025 shows that the number of IKMs in Indonesia has reached 4.43 million business units, or around 99.79 per cent of the national industrial total.

In the first quarter of 2026, IKMs contributed 21.71 per cent of national industrial output and absorbed more than 13 million workers.

The Ministry of Industry (Kemenperin), through its Directorate General of Small, Medium, and Various Industries (IKMA), has introduced the Green IKM Empowerment Programme as a strategic effort to encourage IKM operators to adopt more competitive, sustainable, and environmentally conscious industrial activities.

The programme is expected to produce IKMs that apply green practices in their business activities, whilst also creating role models that can serve as inspiration, examples of good practice, and drivers of transformation for other IKMs across the regions.

The Ministry of Industry has also launched the Green IKM Transformation Activity Guidebook as a practical manual for implementing green activities, as well as the Green IKM Empowerment Programme Book, which covers the background, indicators, and implementation stages of the programme.