The ESG Pivot: Indonesia’s 2026 Outlook for Mining, Energy, and Agriculture

For foreign investors and exporters looking to do business in Southeast Asia’s largest economy, understanding ESG compliance in Indonesia is no longer optional. It has become a defining factor in whether a company can attract capital, secure licenses, and operate without regulatory disruption. 

In 2026, this reality is especially sharp for three industries that sit at the very heart of Indonesia’s economy: mining, energy, and agriculture.

This article breaks down the key regulations, sector-specific challenges, and practical steps that companies operating in these high-impact industries need to understand right now.

Why ESG Is Reshaping Business in Indonesia

Indonesia holds some of the world’s most significant natural resources. It is the top global producer of nickel, a leading exporter of palm oil, and one of the largest coal suppliers in the world. These sectors drive enormous economic value, but they also face growing scrutiny from global investors, trading partners, and regulators who are demanding higher sustainability standards.

The push for responsible business practices is no longer driven solely by ethics. The European Union’s Corporate Sustainability Due Diligence Directive and supply chain legislation from major importing markets are forcing companies operating in Indonesia to meet international ESG benchmarks, or risk losing access to key export markets altogether.

At home, Indonesia’s regulatory agencies have been building a robust framework for sustainable finance and environmental accountability. For companies seeking to establish or expand operations in the country, understanding this framework is essential.

Indonesia’s Evolving ESG Regulatory Framework

The primary regulator overseeing sustainable finance in Indonesia is the Financial Services Authority, known as OJK (Otoritas Jasa Keuangan). Its flagship regulation, OJK Regulation No. 51 of 2017, mandates sustainability reporting for publicly listed companies and financial institutions. Supplemented by OJK Circular Letter No. 16/2021, it requires annual reports to include a sustainability section covering environmental, social, and governance performance.

A pivotal development arrived in February 2025 when OJK released Indonesia Taxonomy for Sustainable Finance Version 2.0 (TKBI 2.0). This updated framework expanded the previous energy-focused taxonomy to include construction, real estate, transportation, and parts of agriculture, forestry, and palm oil. OJK has announced that TKBI 3.0, expected in 2026, will extend coverage further to include the agriculture sector more broadly, industrial processes, and approximately 537 additional business classification codes (KBLI).

On the capital markets side, the Indonesia Stock Exchange (IDX) launched a formal ESG disclosure mechanism in January 2025 through Form E020, standardizing how listed companies report sustainability metrics in line with ASEAN Exchanges’ ESG Common Core Metrics.

For carbon governance, Presidential Regulation No. 110 of 2025 replaced the earlier carbon trading framework and introduced more detailed mechanisms for cross-border carbon trading, opening Indonesia’s market to internationally recognized carbon credits for the first time.

The Mining Sector: Nickel, Coal, and the Compliance Pressure

Indonesia’s mining sector faces some of the most acute ESG compliance in Indonesia pressures. Nickel mining, in particular, is under the global spotlight because of its critical role in electric vehicle batteries. While the government’s downstream processing policy (known as “downstreaming”) has boosted domestic smelter investment, it has also introduced significant environmental concerns around carbon emissions, water contamination, and community impacts.

Key regulations that mining companies must navigate include:

Government Regulation No. 22 of 2021 governs AMDAL (Analisis Mengenai Dampak Lingkungan), Indonesia’s environmental impact assessment system. Any mining or processing operation with significant environmental impact is required to complete an AMDAL study before commencing operations. This is one of the most important environmental permits in the country, and failure to secure it correctly can halt projects entirely.

Presidential Regulation No. 60 of 2023 on the National Strategy for Business and Human Rights (known as PR 60/2023) creates obligations for companies to respect human rights across their supply chains, a requirement that directly affects mining operations working near indigenous and local communities.

The Raja Ampat controversy in mid-2025, where public outcry over nickel mining on protected small islands forced a rapid government response, serves as a stark reminder that social and environmental risks in mining are not theoretical. Companies that fail to account for community and ecological impacts face reputational damage, operational shutdowns, and investor withdrawal.

For mining companies seeking to enter the Indonesian market or expand operations, an environmental permit (AMDAL or UKL-UPL for smaller operations) and a B3 hazardous waste management permit are non-negotiable starting points.

The Energy Sector: Transition Obligations and Carbon Markets

The energy sector remains Indonesia’s most regulated ESG environment. Coal-fired power plants have been at the centre of the country’s carbon pricing debate since Law No. 7 of 2021 on the Harmonization of Tax Regulations introduced a carbon tax framework targeting high-emission industries. Although full implementation has faced delays, the policy direction is clear: high-emission energy companies will face increasing financial costs for their carbon output.

Indonesia’s Second Nationally Determined Contribution (SNDC), submitted to the UNFCCC in October 2025, reinforces the country’s commitment to emissions reduction across energy, industrial processes, waste, agriculture, and forestry. President Prabowo’s “Asta Cita” programme specifically emphasizes self-sufficiency in the green and blue economy, adding political momentum to energy transition Indonesia priorities.

For foreign energy companies entering Indonesia, the practical implications include:

• The need to align with the Ministry of Energy and Mineral Resources (MEMR) decarbonization roadmap
• Compliance with the carbon market framework under Presidential Regulation No. 110/2025
• Engagement with OJK ESG regulations for any energy company listed or seeking financing from Indonesian financial institutions
• Consideration of Carbon Capture and Storage (CCS) frameworks under MEMR Regulation No. 2 of 2023 and Presidential Regulation No. 14 of 2024 for upstream oil and gas operators

The Ministry of Industry is also planning a Ministerial Regulation on Industrial Decarbonisation in 2026, which will affect energy-intensive industrial operators across the country.

The Agriculture Sector: Palm Oil, AFOLU, and New Disclosure Requirements

Agriculture is the sector experiencing the fastest change in its ESG compliance Indonesia landscape. The inclusion of Agriculture, Forestry and Other Land Use (AFOLU) in TKBI 2.0 and the forthcoming TKBI 3.0 means that companies in palm oil, rubber, timber, and other agribusiness sectors are now formally within the sustainable finance taxonomy’s scope.

Palm oil sustainability has been a pressure point for Indonesian exporters for years, driven by the EU’s Deforestation Regulation and demands from global consumer goods companies for verified sustainable sourcing. In 2026, those demands are backed by increasingly specific disclosure requirements under Indonesian law itself.

For agriculture companies, this means:

• Sustainability reporting obligations if listed on the IDX or seeking financing from OJK-supervised institutions
• Potential environmental permit (AMDAL) requirements for land clearing or plantation expansion
• Compliance with free, prior, and informed consent (FPIC) protocols for operations near indigenous communities under PR 60/2023
• Alignment with Indonesia Sustainability Standards (SPK), which were finalized and issued in July 2025 and are based on IFRS S1 and S2 frameworks

Foreign exporters sourcing Indonesian agricultural products are also affected. Supply chain due diligence requirements from importing markets mean that verifiable ESG compliance along the Indonesian supply chain is increasingly a condition of market access, not just a preference.

What Foreign Companies Must Do: A Practical Starting Point

Regardless of the sector, foreign companies entering Indonesia face a common set of ESG-related compliance requirements that sit alongside their core business licensing obligations:

1. Secure the Right Business Entity Foreign companies must operate through a PT PMA (Perseroan Terbatas Penanaman Modal Asing), Indonesia’s foreign investment company structure. The choice of PT PMA environmental compliance obligations will depend on the sector, the scale of operations, and the applicable KBLI classification.

2. Obtain the Correct Environmental Permits Any business in mining, energy, or agriculture that impacts the environment requires an environmental permit, which may include a full AMDAL study or a simplified environmental management document (UKL-UPL). The B3 hazardous waste permit is mandatory for companies involved in waste transport, storage, or disposal from industrial processes.

3. Understand Your Reporting Obligations Listed companies and financial institutions supervised by OJK must produce sustainability reports. Private companies in natural resources are required to prepare a Corporate Social and Environmental Responsibility (CSER) plan. In 2026 and beyond, these obligations are only expanding.

4. Monitor Carbon Market Developments Companies in high-emission sectors should actively track the evolving carbon market Indonesia framework, particularly the cross-border carbon trading mechanisms introduced in late 2025, which could affect both cost structures and investment flows.

Getting It Right in 2026 and Beyond

Indonesia’s ESG landscape in 2026 is more sophisticated, more comprehensive, and more enforceable than it was just a few years ago. The combination of TKBI taxonomy expansions, carbon trading frameworks, sustainability disclosure standards aligned with global benchmarks, and sector-specific regulations means that companies who approach Indonesia without a clear compliance strategy are taking a significant and unnecessary risk.

The good news is that Indonesia remains one of Southeast Asia’s most attractive investment destinations, with a 284-million-strong population, abundant natural resources, and a government actively incentivizing responsible investment. Companies that build ESG compliance in Indonesia into their operational DNA from day one are far better positioned to attract investors, secure licenses, and build lasting commercial relationships in one of the world’s most dynamic markets.

The challenge lies in the complexity. Indonesia’s regulatory framework spans multiple ministries, overlapping taxonomies, and rapidly evolving standards. That is where working with experienced local partners makes all the difference.

Let Business Hub Asia Help You Navigate ESG Requirements

Whether a company is registering a PT PMA, applying for an environmental permit, or trying to understand how TKBI 3.0 affects its financing options, Business Hub Asia provides end-to-end business setup, licensing, and compliance support in Indonesia.

From AMDAL permit assistance and B3 waste licensing to PT PMA registration and sector-specific regulatory guidance, the team at Business Hub Asia helps foreign companies move from complexity to clarity, faster.