Part of business strategy, not merely reporting

STARTING January 1, 2027, the Financial Services Authority (Otoritas Jasa Keuangan, OJK) will require listed companies (emiten) to implement the Sustainability Disclosure Standards. While corporate readiness ahead of the deadline varies, significant positive progress has been recorded compared to previous years.

Indonesian Listed Companies Association (AEI) executive director Gilman P. Nugraha noted that compliance is driven by growing awareness that sustainability is integral to business strategy, rather than a mere reporting obligation.

The number of listed companies publishing sustainability reports has grown consistently. AEI observations of the Indonesia Stock Exchange (IDX) show that most large-capitalisation firms routinely publish annual reports. Overall, over 90% of listed companies regularly submit sustainability disclosures, though depth and quality vary.

According to Gilman, sustainability reporting is increasingly viewed as an integral component of corporate business strategy.

AEI views the introduction of Statement of Sustainability Disclosure Standards (PSPK) 1 General Requirements for Disclosure of Sustainability-related Financial Information and PSPK 2 Climate-related Disclosures as a clear commitment to aligning national practices with international standards. Indonesia must remain agile in response to rapid global changes.

This alignment is vital as global institutional investors increasingly demand consistent, accountable, comparable and high-quality sustainability data.

“Going forward, with the enforcement of standard reporting obligations that are more uniform, we hope that not only will the compliance level increase, but also the quality of the information submitted. Consequently, it will be increasingly beneficial for investors and stakeholders,” said Gilman.

A gradual, dialogue-driven transition is essential to maintain market stability. Achieving full readiness requires capacity building, particularly in data management and human resources.

The 2027 mandate serves as a key momentum to improve reporting quality incrementally while granting companies adequate time to adapt.

Challenges in implementation

Successful implementation depends on both internal corporate readiness and a supportive market ecosystem. The market requires practical guidelines, sector-specific application examples, HR capacity building and regulatory harmonisation.

AEI highlights four key internal challenges listed companies face:

> Availability and quality of ESG data: The single largest obstacle, especially for quantitative metrics. Listed companies struggle to gather accurate, reliable and verified data across their entire operational supply chain. Intensive cross-functional coordination among the corporate secretary, investor relations, finance, risk management, human capital, operations and internal audit is crucial.

> Compliance implementation costs: Data collection and high-quality report generation require financial investment, including expenses for consultants or new information systems.

> Regulatory complexity: The existence of multiple frameworks and differing standards can be confusing, especially for companies taking their first steps.

> Risk of greenwashing: Varying report quality and the lack of independent verification heighten greenwashing risks, which can ultimately damage corporate credibility.

Furthermore, Gilman added that human resources are one of the most decisive factors in determining implementation success. Applying PSPK 1 and 2 – which are integrated with financial statements – requires higher capabilities than simply drafting narrative reports.

A lack of detailed regulatory standards remains the primary barrier to uniform and effective sustainability disclosures across Indonesian listed firms, says Rio.

Sustainability reporting today is no longer just about Corporate Social Responsibility (CSR) activities; it has evolved into a practice that links sustainability aspects with business strategy, corporate governance, risk management and financial performance.

Meanwhile, legal and sustainability expert Rio Christiawan assesses that Indonesian listed companies still lack specialised knowledge or clear standards regarding sustainability report disclosures.

Existing regulatory standards for sustainability reports lack sufficient detail, causing reports submitted under Financial Services Authority Regulation Number 51/POJK.03/2017 concerning the Application of Sustainable Finance for Financial Services Institutions to remain non-uniform.

Consequently, he believes the single greatest challenge today is the absence of standardised reporting. Moving forward, the OJK must establish comprehensive rules regarding disclosures and sustainability report standards to avoid future complications.

“Therefore, OJK needs to create a legal umbrella that substantially outlines detailed compliance metrics, specifies the exact contents of disclosure reports, identifies supervisory bodies and defines sanctions for non-compliance,” Rio stated.