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

The Executive Director of the Center of Economic and Law Studies (Celios), Bhima Yudhistira, has stated that accelerating the green industry transformation, particularly for small and medium industries (IKM), requires an incentive-based approach to speed up the transition for entrepreneurs. Bhima said the government needs to provide concrete support for IKM through various instruments, such as low-interest financing for energy-efficient machinery investment, support for high-cost green certification, and tax incentives for businesses that reduce emissions and waste. “Therefore, the approach cannot only be regulatory or campaign-based, but must be followed by targeted incentives,” he said in Jakarta on Sunday. Bhima noted that IKM play a strategic role in driving inclusive green industry, given their significant contribution to employment and potential to enter the global supply chain. “IKM are key to accelerating a labour-intensive green industry transformation. Their potential is large for export markets, especially in the low-carbon food and beverage supply chain and automotive components,” he said. Beyond financial support, he assessed that strengthening human resource capacity is also a crucial factor in accelerating the IKM green transformation. Many business actors still require assistance in calculating energy efficiency, managing waste, and implementing circular production principles. Bhima also sees the use of digital technology and artificial intelligence (AI) as a way to help IKM optimise energy and raw material usage more efficiently. On the other hand, Bhima encouraged the government to provide greater space for green IKM products in the government procurement supply chain. According to him, environmentally friendly products can be prioritised in the procurement of goods and services, while also encouraging large companies to involve green IKM in their industrial supply chains. He added that the increasingly stringent environmental standards in various export destination countries present both opportunities and challenges for Indonesian IKM. Products that fail to meet sustainability aspects risk losing market access, while IKM that can meet green standards have the potential to gain premium buyers and increase product added value. “IKM that are able to meet the standards have a greater opportunity to enter the global supply chain, obtain premium buyers, and increase their product added value,” he said. Data from the Central Statistics Agency (BPS) in 2025 shows that the number of IKM in Indonesia reached 4.43 million business units, accounting for approximately 99.79 percent of the total national industry. In the first quarter of 2026, IKM contributed 21.71 percent to the national industrial output and absorbed more than 13 million workers. The Ministry of Industry, through the Directorate General of Small, Medium, and Miscellaneous Industries, has introduced a Green IKM Empowerment Programme as a strategic effort to encourage IKM actors to implement more competitive, sustainable, and environmentally sound industrial activities. The programme is expected to produce IKM that apply green practices in their business activities, while creating role models that can inspire and drive transformation for other IKM across various regions. The Ministry has also launched a Green IKM Transformation Activity Guidebook as a practical guide for implementing green activities, along with a Green IKM Empowerment Programme Book containing the background, indicators, and implementation stages of the programme.