Home Blog Is The ESG Implementation Strategy Beneficial for Business? Business Setup | Company Registration | Human Resource | Recruitment Is The ESG Implementation Strategy Beneficial for Business? InCorp Editorial Team 4 June 2025 4 minutes reading time Table of Contents Why ESG Matters for Your Business Environmental, Social, and Governance for Business ESG Implementation in Indonesia In its very essence, Environmental, Social, and Governance, or ESG, is a competitive advantage for businesses. It is because it indicates that your business is doing its part in creating a better world. The invention of ESG is to raise awareness of certain things that need addressing. Failure to do so would lead to fatal consequences. Businesses are significant contributors to climate change through means of deforestation and also industrial pollution. Why ESG Matters for Your Business By handling ESG matters, your businesses can welcome innovation and unlock the business team’s creative ability by developing models that tackle prominent issues. Aside from this, ESG is also related to the growth of the business. It is especially true since the Millennials, and Generation Z is getting increasingly more conscious about preserving the environment and matters of social justice. Therefore implementing ESG strategies would attract and retain those customers who put these values on a pedestal. Implementing a proper ESG strategy would allow for sustainable economic development. Aside from development, investment opportunities would also significantly improve. Venture capital and private equity funds are looking at the ESG performance of companies. Poor ESG management would lead to fallouts and reduce stock prices for investors. Environmental, Social, and Governance for Business ESG has gained significant importance among inventors, policymakers, and business actors. It is an essential safeguard for businesses from future risk. The ‘E’ in ESG refers to the environmental aspect as it assesses the impact of resource consumption on a particular industry. The ‘S’ refers to the social criteria for how businesses interact and communicate with the communities, whereas the ‘G” refers to the governance aspect, which involves the assessment of internal practices and policies that lead to effective decisions and legal compliance. ESG standards are not limited to a particular size of business. Large businesses undoubtedly have the advantage of more resources to look into ESG matters. However, small businesses are expecting to consider focusing on the green economy. Not only would it make them more attractive to potential investors, and small businesses could benefit from implementing ESG themselves. Benefits of Implementing ESG Several benefits could be reaped by a company implementing ESG. The first benefit is tapping into new markets and expanding the reach in current markets. Aside from that, implementing ESG would also allow businesses to benefit from cost reductions and combat rising operating expenses. The third benefit is the increase in greater strategic freedom. A robust ESG implementation can help companies attract and retain quality employees. It directly affects ESG as it helps reduce the risk of adverse government action. It can even allow for more outstanding government support. It would instill a sense of purpose and generate greater productivity within the workforce. Lastly, investment returns are enhanced as capital is now placed on more promising and sustainable opportunities. ESG Implementation in Indonesia For Indonesia, ESG implementation is a top priority. The main reason for this is the applied pressure from foreign investors to create a smooth transition toward implementing ESGs. Indonesia is attempting to utilize technology as a critical tool to drive inclusive growth. Adopting technology is expected to widen access to health care, education, and employment. Indonesia has dedicated a financing key to developing ESG potential. In that, there are thematic bonds and also a Sustainable Finance Roadmap issued for this reason. Those initiatives ensure that investors no need to worry about establishing their business in Indonesia while implementing ESG in the system. Indonesia has increasingly engaged with the agenda of developing climate sustainability within the coming decade. The country has utilized its position as the G20 President in 2022 and ASEAN Chair for 2023 to develop and showcase its steps regarding ESGs. Read more: Indonesia’s Rapid Development for the Green Energy Transition The Challenges and Potentials The main challenge from a business standpoint to implement ESG practices is hiring employees with sustainability expatriates. The issues faced in Indonesia differ from those encountered in the United Kingdom or the United States. The transition plans must be curated and tailored to address and overcome their concerns. However, Indonesia has excellent potential in renewables, agriculture, forestry, and green manufacturing sectors. Implementing ESG can be tricky but has a multitude of benefits. Companies looking to do so should consider hiring InCorp Indonesia (an Ascentium Company) to tackle other administrative matters, such as business licensing and company registration. It would give companies a more hands-on approach to the more important and strategic development parts. Read Full Bio Verified by Ales Cina Consulting Manager at InCorp Indonesia Aleš manages solution delivery at InCorp Indonesia, optimizing incorporation processes and client relationships. His experience in internal auditing, retail, and sales offers valuable global insights. Aleš, with a degree in Economics and Finance from the Czech Republic, helps clients navigate cross-border business challenges, focusing on cultural and legal insights. Frequently Asked Questions Are there investment facilities provided for foreign investors in Indonesia? A newly established PMA company in Indonesia is typically provided with import facilities, tax holidays, tax allowances, or investment allowances. Import facilities Investors in Indonesia, particularly in manufacturing, may benefit from import tax exemptions for capital goods and raw materials through the Master List Facility. The imported goods must meet specific criteria, such as not being produced locally or not meeting industry demand despite local production. Tax holiday The government offers CIT reductions of 50% or 100% for 5–20 years for listed pioneer industries, based on investment value. After this period, a CIT reduction of 25% or 50% applies for two fiscal years. Non-listed sectors can also apply by meeting criteria demonstrating pioneer industry status. Pioneer industries are industries that have a wide range of connections, provide additional value and high externalities, introduce new technologies, and have strategic value for the national economy. Tax allowance For companies in certain designated areas or regions, the government may provide the following tax concessions: Net income reduction up to 30% of the amount invested, prorated at 5% annually for six years, on condition that the assets invested are retained for the same duration. Accelerated depreciation and/or amortisation deductions An extension of tax losses carried forward for a maximum of ten years A 10% (or lower if treaty relief is available) withholding tax rate on dividends paid to non-residents The applicant eligible has to meet high-level-criteria for the above tax facilities: High investment value or for export purposes High manpower absorption High level of local content Investment allowance The government offers a reduction in net income of up to 60% of the investment, distributed at 5% annually over six years of commercial production, contingent upon the retention of invested assets for the same duration. To qualify, applicants must meet business line eligibility criteria and employ a minimum of 300 Indonesian workers in the project. Super deduction This facility could be granted to certain businesses, such as: 60% reduction in net income of the amount of tangible fixed assets invested for labor-intensive industries, distributed throughout a certain time frame. Up to 200% reduction in the gross income of the amount spent for human resources development in certain competency activities. Up to 300% reduction in gross income of the amount spent for certain R&D activities in Indonesia. What is a CV? CV (Commanditaire Vennootschap) is a proprietary business entity that houses several individuals to run a business. Can investors own shares with preferential rights? Under Indonesian Company Law, shareholders can hold shares with various preferential rights, such as voting rights, nomination rights for board members, priority dividend or liquidation proceeds, and options for conversion or withdrawal after a set period. Can a foreigner become a director or commissioner of a company in Indonesia? Yes, in a foreign-owned (PT PMA) company, a foreigner can be a director or a commissioner Get in touch with us. 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