Understanding ESG Scores: A Key Indicator for Sustainable Business Practices

Sustainability and ethical practices are crucial factors that influence investment decisions and corporate reputations. An ESG score is a numerical or letter-grade measure of a company’s Environmental, Social, and Governance performance, typically scored 0–100, with above 70 considered strong. This is used by investors, regulators, and supply chain partners to assess sustainability risk and long-term value.

In Indonesia, ESG performance is shaped by OJK’s POJK 51/2017 sustainability reporting mandate and the Indonesia Green Taxonomy (TKBI). Understanding your ESG score has moved from voluntary best practice to strategic business necessity.

Key Takeaways

• An ESG score measures performance across Environmental, Social, and Governance factors, usually on a 0–100 scale or letter grade.
• OJK’s POJK 51/2017 mandates sustainability reporting for financial institutions, issuers, and public companies operating in Indonesia.
• The Indonesia Green Taxonomy (TKBI) is expanding under TKBI 3.0 in 2026, and OJK plans to amend POJK 51/2017 to incorporate IFRS S1/S2 disclosure standards from January 2027.
• ESG score and ESG rating are related but distinct. A score measures performance and a rating measures risk.
• A stronger ESG score is increasingly tied to real financing outcomes in Indonesia, including green bonds, sustainability-linked loans, and OJK-directed sustainable finance incentives.

What is a Good ESG Score?

ESG scores are most commonly measured on a 0–100 scale, though some agencies use letter grades or a reversed risk scale. Here’s how scores are generally interpreted:

Score Range	Classification	What It Indicates
70–100	Strong	Actively manages ESG risks; follows best practices; attractive to ESG-focused investors.
50–69	Average	Meets baseline standards; measurable gaps remain in disclosure or risk management.
Below 50	Weak	Material ESG risk exposure; limited disclosure or governance controls.

ESG rating scales differ by provider. MSCI uses letter grades from AAA to CCC, Sustainalytics applies a reverse risk score where a lower number indicates lower risk, and S&P Global CSA uses a 0–100 score. Before comparing companies, always check which rating scale is being used.

What is an ESG Score? 

An ESG score is a numerical indicator of a company’s Environmental, Social, and Governance performance. A higher score reflects stronger sustainability practices and risk management. These scores help investors assess a company’s commitment to responsible and ethical operations, supporting more informed investment decisions.

Why ESG Scores Matter

ESG scores play a crucial role in helping companies enhance their governance and management. Here’s why they matter: 

• Validation: ESG scores provide a precise, public measure of a company’s sustainability efforts, helping validate its ESG initiatives. 
• Peer Comparison: Companies and investors can use ESG scores to compare performance across similar organizations. 
• Benchmarking: ESG scores enable industry-wide comparisons, indicating a company’s position within its sector. 
• Progress Tracking: These scores provide a measurable way for companies to track and manage their ESG improvements over time. 
• Investor Appeal: Investors rely on ESG scores to make responsible, sustainable investment choices. 
• Risk Identification: Scores help highlight potential risks related to environmental, social, or governance issues. 

Who Provides ESG Scores?

ESG scores are issued by third-party rating agencies such as MSCI, Sustainalytics, S&P Global CSA, Refinitiv, and ISS ESG. Each provider uses its own methodology, data sources, and weighting system, which means the same company may receive different ESG scores from different rating agencies.

For businesses in Indonesia, the challenge is not only understanding ESG scores, but knowing how to prepare for them.

InCorp Indonesia (an Ascentium Company) helps companies assess ESG readiness, identify gaps against global rating methodologies and local regulatory requirements, and build an improvement roadmap aligned with Indonesia’s ESG landscape, including POJK 51/2017 reporting, TKBI alignment, and PROPER environmental performance.

READ MORE:

• ESG Reporting: A Guide for Sustainable Business Practices
• 5 Ways to Integrate ESG Investing into Business Growth
• Is The ESG Implementation Strategy Beneficial for Business?

How ESG Scores Are Calculated 

ESG scores in Indonesia and globally are based on information from company reports, government data, and news articles. Each rating agency uses methods often aligned with international standards, such as the Global Reporting Initiative (GRI), the Sustainability Accounting Standards Board (SASB), the Carbon Disclosure Project (CDP), and the UN Sustainable Development Goals (UN SDGs). 

Companies are assessed on factors such as carbon emissions, board diversity, and worker safety, which are combined to produce a final ESG score. There are two primary methods for calculating this score. 

• Qualitative Method: This uses surveys and company-provided information. However, it can miss important data if the company doesn’t share everything. 
• Quantitative Method: This approach utilizes publicly available information, including official reports. It’s more consistent, but still depends on how much the company discloses.

Ready to improve your ESG score? InCorp Indonesia’s ESG Advisory team provides gap assessments, framework alignment, and investor-ready sustainability reporting tailored to Indonesia’s regulatory environment. Speak with an ESG Specialist →

READ MORE:

• Decarbonization Strategies for Businesses through ESG Solutions
• How ESG is Redefining Mining Operations in Indonesia
• Why Investing in ESG Matters for Your Business

ESG Score vs. ESG Rating: What’s the Difference? 

Though often used interchangeably, ESG scores and ESG ratings have distinct meanings. Understanding their differences helps stakeholders better assess a company’s sustainability profile. 

Aspect	ESG Score	ESG Rating
Definition	A numerical value (e.g., 0–100) representing ESG performance	A category or letter grade (e.g., AAA to D) summarizing ESG risk or quality
Format	Quantitative	Qualitative
Purpose	Measures how well a company performs on ESG metrics	Evaluates the level of ESG-related risks
Usage	Enables benchmarking and tracking progress	Indicates risk level to investors
Methodology	Based on specific ESG indicators and data	Often includes risk exposure and management
Users	Analysts, companies, ESG advisory services	Investors, rating agencies, regulators

In short, an ESG score measures performance, while an ESG rating assesses risk. Both are valuable tools, but serve different decision-making needs. Companies in Indonesia aiming to improve transparency and investor trust often strive to optimize both metrics. 

How to Improve Your Company’s ESG Score 

Enhancing your ESG (Environmental, Social, and Governance) score requires a strategic and comprehensive approach. Here are the steps companies can take to improve their ESG performance: 

Integrate ESG into Business Strategy 

Integrating ESG into the core business strategy ensures that sustainability goals align with corporate objectives. This integration enables more informed decision-making and demonstrates a commitment to long-term value creation. 

Conduct a Materiality Assessment 

Identify and prioritize ESG issues most relevant to your business and stakeholders. A materiality assessment helps focus efforts on areas with the most significant impact and significance. 

Align with Global and Regulatory Frameworks 

Adopt recognized standards such as GRI, SASB, and the UN SDGs, while ensuring alignment with Indonesia’s own framework: POJK 51/2017 and the Indonesia Green Taxonomy (TKBI), which OJK is expanding to TKBI 3.0 in 2026 to cover additional sectors and roughly 537 more KBLI codes.

Enhance ESG Data Collection and Reporting 

Implement robust systems for collecting, managing, and reporting ESG data. Accurate and timely disclosure of ESG metrics builds trust with stakeholders and can positively influence ESG ratings. 

Engage Stakeholders 

Involve employees, investors, customers, and communities in ESG initiatives. Stakeholder engagement fosters collaboration, accountability, and shared ownership of sustainability goals. 

READ MORE:

• Why Investing in ESG Matters for Your Business
• How ESG is Redefining Mining Operations in Indonesia
• Sustainability Report: A Guide to Compliance and Impact in Indonesia

Set Clear ESG Goals and Monitor Progress 

Establish specific, measurable ESG objectives and regularly track progress against these targets. Continuous monitoring enables timely adjustments and demonstrates a commitment to improvement. 

Seek ESG Advisory Services 

ESG advisory firms provide expert guidance on regulatory compliance and practical improvement strategies. In Indonesia, this includes preparing for OJK’s planned amendment of POJK 51/2017 to incorporate IFRS S1/S2 climate disclosure standards.

This is expected to take effect from January 2027 — a shift that will raise reporting expectations well ahead of the deadline.

 

Take the Next Step Toward Sustainable Growth with InCorp 

To elevate your ESG strategy and improve your score, consider partnering with ESG experts. InCorp Indonesia (an Ascentium Company) offers ESG advisory services to support your journey. Here’s how we can help: 

• Strategic ESG Integration: We help align your business operations with global ESG frameworks, including the GRI Standards, the SASB Standards, and the SDGs, ensuring compliance and strategic coherence. 
• Comprehensive ESG Assessment & Reporting: Receive tailored evaluations, accurate data collection, risk identification, and transparent ESG reporting aligned with POJK 51/2017 and TKBI.
• Stakeholder Engagement & Continuous Improvement: Build trust with investors and communities through clear engagement plans, while continuously refining your ESG practices for better long-term results. 

Fill out the form below to strengthen your ESG performance and drive long-term value. 

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