a. Is there any statutory duty to implement net zero business strategies;

Yes. As Indonesia has ratified the Paris Agreement under Law No.16 of 2016, there are several implementing regulations and other regulations related to sustainable business, among others: (i) Law No. 7 of 2021 on Harmonization of Tax Regulations (“HPP Law”), (ii) President Regulation No. 98 of 2021 on the Implementation of Economic Carbon Value to Achieve National Contribution Target and Glasshouse Gas Emission Control in the National Development (“PR 98/2021“), (iii) The Financial Authority Services Regulation No. 51/POJK. 03/2017 on the Implementation of Sustainable Finance for Financial Services Institutions, Issuers, and Public Companies, (iv) President Regulation No. 14 of 2024 on the Implementation of Carbon Capture and Storage Activities (“PR 14/2024“), and so on.

b. Is the use of carbon offsets to meet net zero or carbon neutral commitments regulated;

Yes. The concept was first introduced under the HPP Law. Following HPP Law, there are several implementing regulations issued governing this matter, such as (i) PR 98/2021, (ii) the Minister of Environment and Forestry (“MoEF“) Regulation No. 21 of 2022 on the Implementation of Carbon Economic Value, and (iii) MoEF Regulation No. 7 of 2023 on the Procedures for Carbon Trading in the Forestry Sector. In short, carbon offset trading may be carried out bilateral between the parties and/or under the carbon exchange. In carrying out carbon offset trading, businessperson shall prepare the Climate Change Mitigation Actions Plan Document (DRAM) to be verified by the certified verificator. The DRAM and the verification result shall be recorded in the National Registry System for Climate Change Control (Sistem Registri Nasional Pengendalian Perubahan Iklim or “SRN PPI“) maintained by MoEF to evidence the carbon ownership and its offset.

In addition, as mentioned above, to achieve net zero emission by 2060 or sooner, the Indonesian Government enacts PR 14/2024, which outlines two distinct carbon capture and storage schemes: one within the framework of oil and gas production sharing contracts and another for non-PSC operators under a newly defined Carbon Storage License Area. Implementing PT 14/2024, the Minister of Energy and Mineral Resources (“MEMR“) issued MEMR Regulation No. 16 of 2024, which sets out key licensing and operational requirements. With this framework in place, Indonesia aims to provide greater certainty for investors and businesses looking to engage in CCS.

c. Have there been any test cases brought against companies for undeliverable net zero strategies;

As the regulations are relatively newly issued and Indonesia targets the net zero in 2060, we have not heard any test cases for undeliverable net-zero strategies.

d. Have there been any test cases brought against companies for their proportionate contribution to global levels of greenhouse gases (GHGs)?

So far as we are aware, there is no such test cases yet.

Unfortunately, the Indonesian government does not have a universal requirement for all new projects to demonstrate biodiversity net gain. However, it has implemented various regulations and initiatives that push projects towards achieving positive biodiversity outcomes. Projects with significant environmental impacts are particularly required to conduct thorough assessments and propose mitigation measures as part of their development consent process (AMDAL/UKL/UPL – please see below).

Indeed. If companies utilize surface water or groundwater, they are required to obtain licenses, as stipulated in Government Regulation No. 30 of 2024.

Although so far, we are not aware of any test cases brought against companies for product liability or pollution of the environment related to forever chemicals such as Perfluoroalkyl and Polyfluoroalkyl Substances (PFAS), there are cases in relation to PFAS found in food packaging and clothing in Indonesia. Unfortunately, neither the Indonesian Food and Drugs Supervisory Agency nor other government instances have issued any regulations specifically addressing PFAS.

a. The law governing the waste hierarchy is addressed by the Environment international guide, in respect of ESG are any duties placed on producers, distributors or retailers of products to ensure levels of recycling and / or incorporate a proportionate amount of recycled materials in product construction?

While there isn’t a comprehensive law that expressly addresses all aspects of the waste hierarchy in ESG criteria, several key regulations mandate producers and businessperson to ensure recycling and the use of recycled materials, among others: Law No. 18 of 2008 on Waste Management and Government Regulation No. 81/2012 on Management of Household Waste and Similar Waste.

b. Are any duties placed on producers, distributors or retailers of products to handle the end-of-life of the products placed on the market?

In addition to the aforementioned laws and regulations above, there are several other provisions, such as regional government regulations on the obligation imposed on businessperson to use eco-friendly shopping bags in supermarkets, department stores, and markets, thus significantly reducing single-use plastic. Further, the Indonesian Food and Drugs Supervisory Body also regulates certain plastics for food packaging by promulgating Regulation No. 20 of 2019 on Food Packaging, which prohibits certain materials from being incorporated in food packaging.

Although there is no specific regulation governing plastic pollution in Indonesia, there are several regulations concerning waste management that are also related to plastic pollution. Please see our response in point 5 above for the reference to such regulations. In such laws and regulations, there are several sanctions that might be imposed by the government, ranging from administrative sanctions up to criminal sanctions in the form of confinement.

Law No. 13/2003 on Manpower, as amended (“Manpower Law“), incorporates provisions related to equality and non-discrimination in the workplace. Several notable aspects in Manpower Law, among others: (i) non-discrimination: employers are prohibited from discriminating against employees based on race, religion, gender, disability, age, or other protected characteristics, (ii) equal pay for equal work: employers must ensure that employees receive equal pay for equal work, regardless of their background, (iii) anti-harassment and anti-bullying: employers are required to prevent and address any form of harassment or bullying in the workplace.

Please see our response above. Fail to meet such principles, Manpower Law contains sanctions from administrative sanctions until criminal sanctions (up to imprisonment).

Government Regulation No. 78/2015 on Wages mandates provincial and district governments to calculate the minimum wages in each area, with adjustments made to reflect regional economic conditions and the cost of living. The government considers factors such as food, housing, healthcare, and education when setting these wages.

a. Are there any statutory duties to perform due diligence;

No.

b. Have there been any test cases brought against companies?

Several test cases have been recorded, especially in labour-intensive sectors, such as palm oil plantations, garment industries, ice cream manufacturers, etc.

a. Are there any statutory duties to perform due diligence?;

No.

b. Have there been any test cases brought against companies?

Yes, the cases are similar to the above.

To the best of our knowledge, no specific requirement has been issued by the Indonesian Advertising authorities (Komisi Penyiaran Indonesia) regarding such matters. However, Indonesian consumer protection regulations encompass general provisions prohibiting false or misleading advertising claims. Consequently, business actors are not permitted to engage in misleading or false advertising practices when promoting their products.

To the best of our knowledge, the Competition and Markets authorities have not taken any action, imposed any fines, or prosecuted any businesses for making unsubstantiated sustainability claims regarding their products or services.

To the best of our knowledge, no legal case yet. However, several petitions and complaints from several society elements have been heard.

Generally, the Indonesian Company Law requires every limited liability company to carry out corporate social and environmental responsibility actions for surrounding society, ensuring sustainable economic growth. The actions are reflected in an annual general meeting of shareholders. Specifically for State-Owned Companies, there is also a BUMN regulation that mandates the implementation of a corporate social responsibility program by the directors of State-Owned Companies.

We have not heard any from the private company sector. However, there is some news regarding misleading information about CSR fund misuse involving the Indonesian Central Bank.

Specifically for the financial sector, the Indonesian Financial Services Authority (OJK) mandates the report on sustainability based on OJK Regulation Number 51/POJK.03/2017 on the Implementation of Sustainable Finance for Financial Services Companies, Issuers, and Public Companies. To implement Sustainable Finance, the companies must prepare (i) an action plan for sustainable finance and (ii) a sustainable report that must be submitted annually to the OJK. Several principles that must be adhered to, among others (i) responsible investment, (ii) sustainable business strategies and practices, (iii) social and environmental risk management, (iv) governance, informative communications, (v) inclusiveness, (vi) development of priority sectors, and (vii) coordination and collaboration.

Specifically for banks, OJK obliges Banks to prepare stress test on climate change risk towards their business to be submitted to OJK. This mapping is used for identifying, measuring, monitoring, and controlling climate-related risks. However, for not-so-heavily-regulated companies, there is no mandatory report on managing climate related financial risks.

Generally, save for AMDAL/UKL-UPL/SPPL, no statutory regulation for all companies to report on energy consumption. However, specifically for certain sectors of companies, Government Regulation No 79 of 2014 on National Energy Policies mandates producers to conserve energy and manage energy usage. Further, it also mandates central and regional governments to establish guidelines on energy conservation, management, and mandatory energy audits for energy users.

Generally, no specific regulations that mandate businesses to report on gender pay gaps. However, the Indonesian government obliges companies to report mandatory report on manpower periodically. In such report, there are several aspects, among others, the salary of the workers.

Indonesia does not have a specific statutory requirement for companies to report on modern-day slavery in their supply chains. However, in addition to several of the abovementioned laws and regulations, workers may report modern-day slavery through several applications built by the governments, such as JAKI or other applications.

During the last few years, the Indonesian government seems to be inclined to impose carbon tax as they need more funding for internal projects and are bound to the Paris Agreement. However, recently, a statement from the Minister of Energy and Mineral Resources implied that the Indonesian government is in a dilemma about continuing the Paris Agreement as the United States (the initiator of the Paris Agreement) exits from the Paris Agreement. The main concern was whether the green financing programs would slow down, as the transition to green energy would be costly due to the novelty of the technology.

Nonetheless, since ESG has become a hot issue recently, some foreign investors or foreign lenders tend to include ESG criteria in choosing their prospective investees or debtors. In this regard, implementing ESG may be beneficial for companies to bring more opportunities & benefits for the companies themselves. This may bring more ESG attention and compliance to more Indonesian companies.

Further, as mentioned above, the Indonesian government so far supports the ESG trends by enacting sets of regulations to provide a framework for implementing ESG. Specifically for banking sectors, the OJK may also impose stricter regulations and guidelines for ESG disclosures since they have been actively updating regulations to ensure more comprehensive and transparent reporting.

Assuming Indonesia is still bound to the Paris Agreement, ESG-related court disputes and enforcement actions are expected to increase in the next 12 months.