ESG: Capitalism Forces Indonesian Corporations to 'Go Green'

In recent years, the global corporate world has undergone a dramatic shift in language. Where companies once spoke only of profits, efficiency, expansion, and growth, nearly all major firms now discuss sustainability, carbon emissions, green energy, governance, and social responsibility. The term environmental, social, and governance (ESG) has become a new standard in international business.

In Indonesia, this phenomenon is increasingly evident. Almost all major listed companies on the Indonesian Stock Exchange now publish sustainability reports. Coal companies talk about energy transition, palm oil firms discuss forest conservation, and national banks are restricting financing for environmentally damaging projects. Even technology and property firms are competing to build eco-friendly reputations.

Many view this change as capitalism becoming more humane. Yet the fundamental question remains: are companies genuinely embracing environmental and social justice, or is ESG merely a new strategy by global capitalism to protect long-term profits?

Historically, ESG did not emerge from leftist movements, socialism, or anti-capitalist activism. Instead, it originated from the heart of global financial capitalism. In the early 2000s, major financial institutions began recognising that climate change, social conflicts, and poor corporate governance could destroy investment value.

For global investors, forest fires are no longer just environmental tragedies but threats to supply chains and corporate reputation. Labour disputes are not merely workers’ rights issues but risks to productivity and production stability. Poor corporate governance is not just an ethical concern but a risk leading to corruption, financial fraud, and stock price crashes.

In other words, capitalism has come to understand that environmental and social damage ultimately undermines profits.

Thus, ESG emerged as a risk management tool. Environmental, social, and governance factors are now integrated into modern business calculations. Companies must no longer merely generate large profits; they must also appear responsible to global investors.

This trend is particularly pronounced in Indonesia, especially in sectors long under international scrutiny, such as coal, palm oil, forestry, and mining.

Take the national coal industry. For years, it enjoyed commodity price booms and became a major profit source for domestic conglomerates. However, as the world discusses decarbonisation and energy transition, coal companies face serious threats: losing international financing access.

Many global banks and investors are now reluctant to fund new coal projects. Consequently, Indonesian mining firms have shifted their communication strategies. They no longer focus solely on production and exports but highlight renewable energy projects, mine reclamation, green downstreaming, and carbon trading.

Companies like PT Bukit Asam Tbk are building coal gasification and solar energy projects. PT Bumi Resources Tbk and other major mining groups actively discuss ESG commitments in annual reports. Even companies long associated with coal are competing to present an “energy transition” image.

A similar pattern occurs in the palm oil sector. For years, the industry faced global pressure over deforestation and forest fires. The European Union has tightened regulations on products linked to deforestation. As a result, Indonesian palm oil firms are strengthening sustainability certifications, supply chain traceability, and conservation programmes.

Companies such as Sinar Mas Agribusiness and Food and Wilmar International are actively developing no-deforestation policies and sustainability reporting. However, these steps are not solely driven by environmental idealism; without ESG certifications and standards, access to global markets could be jeopardised.

In the banking sector, changes are equally clear. National banks are implementing sustainable finance principles. Bank Mandiri, Bank Rakyat Indonesia, and Bank Central Asia are increasing green financing and introducing green bonds and sustainability-linked loans.

Why are banks pushing ESG? Because environmental risks are now seen as credit risks. If financed companies face environmental lawsuits or lose export markets due to sustainability issues, their ability to repay debts is compromised. For banks, ESG is not just about morality but safeguarding asset quality and business stability.

This is where modern capitalism’s major shift lies. Previously, companies could pursue maximum profits without considering social and environmental impacts. Now, global capital markets are punishing firms deemed unsustainable.

However, criticism of ESG is growing. Many argue it is merely a new form of capitalist cosmetic surgery. Companies enhance sustainability reports, run green advertisements, and launch social campaigns while maintaining exploitative core business practices.

Greenwashing is a serious issue. Numerous firms speak of net-zero emissions while still expanding fossil fuel-based operations. Others plant thousands of trees for campaign pu