Govt introduces new environmental rating system

Debbie A. Lubis, Contributor, Jakarta

The idea of strolling along a riverbank to soothe your eyes or ease your mind has always been wishful thinking for Jakarta residents. Rotting trash, waste and sewage from factories, hotels, housing estates, and slums make Jakarta's water look and smell foul.

The government has issued numerous rules and regulations on waste management and environmental protection since the 1990s but legal enforcement has been weak. A recent study conducted by the Ministry of Environment has shown that only one quarter of industrial companies comply with those rules.

These conditions have forced the ministry to revive its Program for Pollution Control, Evaluation and Rating (PROPER) that was introduced in 1994 but stopped in 1998 due to unfavorable circumstances.

"We were afraid the people would react negatively to the audit report since circumstance could lead them to vandalize or loot the polluters' office or factory," said Rasio Ridho Sani, secretary of the PROPER technical team.

The ministry will soon release a report on the PROPER environmental audit that was conducted last year, which is slightly different than the 1994 project that emphasized water pollution.

The main objective of last year's audit was to increase compliance with environmental regulations (including hazardous waste, water, air and soil pollution, and to promote the adoption of clean technologies, create incentives for polluters to strengthen their environmental management capabilities, community development, and to support ISO 14000 certification (on Environmental Management System)).

"ISO 14000 is given to companies that have shown their commitment and efforts to comply with Environmental Law. But is possible that an ISO certificate holder is considered a polluter based on PROPER assessment because the audit relies on samples from the field," he said. He added that a company can be given a poor rating not simply because it has harmed the environment but also if it has the potential to harm the environment.

The 2002 audit was conducted on only 85 selected companies because of constraints on the government's financial and human resources.

The companies are chosen from selected industries that have the potential to harm the environment such as textiles, cement, pulp and paper, mineral and coal, oil and gas, and sugar and palm oil. The companies are located in provinces of West Java, Banten, East Java, Central Java, Lampung, Riau, Bangka Belitung, South Sumatra, Aceh, South Sulawesi, North Sulawesi, South Kalimantan, East Kalimantan, and West Nusa Tenggara.

Under PROPER, polluters are given environmental performance ratings that will be announced to the public through special reports on media and the Ministry of Environment's website.

The ratings use a simple color-coding format that grades the company's environmental performance from excellent to worst.

It is expected that by disclosing the ratings pressure from society and the private sector will coerce the polluters to comply with environmental regulations and reduce pollution levels to meet the emission standards.

The pressures range from boycotting the products of the polluters to imposing legal sanctions.

"This approach is more effective and cheaper than legal enforcement because companies are more afraid of tainting their reputation than the judiciary system. It takes years and costs a lot of money to settle one environmental case through law enforcement. With PROPER, it is the stakeholders -- the community, NGOs, policy makers, the business sector, and international funding agencies- who will judge the polluters," Rasio said.

Countries such as the Philippines, Mexico, and Colombia have used PROPER's principles to design pollution control measures. Public information and community participation in PROPER have been considered successful in combining voluntary compliance agreements, negotiated settlements, legal sanctions and market incentives to coerce companies to comply with Environmental Regulations.

The first-round PROPER ratings in 1995 showed that multinationals had the best performance, private domestic firms had the worst, and public enterprises were in between.

In a bid to avoid the risk of biased ratings, several steps were taken to ensure accurate assessments. The Ministry of Environment established a rigorous overall rating process involving several high-level reviews (peer review among technical team members and a review by senior officials) before the public disclosure of final ratings. This process is aided by reliable analysis from the Advisory Board over the companies' compliance rating status.

Currently, PROPER's Advisory Board consists of credible figures like environmentalist Prof. Dr. Otto Sumarwoto, academic Prof. Dr Muladi, environmentalist Sarwono Kusumaatmadja, Tom Walton of World Bank, Agus Purnomo of WWF, M. Achmad Santoso of ICEL, and Isa Karmisa Adiputra, Deputy for Environmental Impact Management from Institutional Sources at the Ministry of Environment.

Since the introduction of PROPER, polluters have been under great pressure to change their complacent attitude towards pollution control since good ratings enhance the reputation of their business.

Between 1995 and 1997 the program helped increase the level of compliance 10 percent from 213 industries that were involved in the environmental audit. Several polluters succeeded in improving their ratings several levels.

"The environmental performance reflects the overall performance of the company's management. If the company's rating is good, the banking system will not be reluctant to give them financial assistance while investors will be confident to invest their because the rating guarantees that the company is sustainable and a small risk".

However, public disclosure may have little impact on persistent polluters who do not care about their reputations. The State Minister of the Environment Nabiel Makarim, said during the hearing session with the House of Representatives' Commission VIII on Environment that the government can consider imposing sanctions on companies that cause environmental damage through special chambers in district courts. The first analysis will be conducted in Java, Sumatra and Kalimantan.