Indonesia and Nickel: Tracing the Path of Sustainability Through ESG Implementation

Nickel is an essential element in the global industry, used in the production of everything from stainless steel to electric car batteries. In line with the global shift towards green vehicles and the growing need for rechargeable batteries, the International Energy Agency (IEA) predicts that the demand for nickel will increase by at least 65% by 2030. As the world’s largest nickel producer, Indonesia is expected to meet two-thirds of the global nickel needs, with billion-dollar investment agreements already in place to develop both processing plants and mining operations.

However, this surge in the industry also brings significant challenges in environmental, social, and corporate governance (ESG) aspects. In the context of globalization where ESG issues are a primary focus for investors, Indonesia is strategically positioned to ensure that its nickel industry grows not only rapidly but also responsibly and transparently.

Environmental issues such as coral reef damage and water pollution affecting the livelihoods of fishermen highlight the importance of sustainable mining practices. The documented story of the Bajau community in Southeast Sulawesi by the BBC, threatened by nickel waste, affirms that industrial development must align with the preservation of nature and the livelihoods of local communities.

In addition, social issues such as the disparity in working standards and wages between local and foreign workers, as well as high occupational safety risks, indicate an urgent need for reform and more effective law enforcement. The increase in fatal workplace incidents underscores the need for significant improvements in safety and health standards.

Indonesia must respond swiftly, not only to meet global demand for sustainable batteries but also to ensure that its expansion does not negatively impact the environment and local communities. This is an opportunity for Indonesia to not only act as a major nickel producer but also as a pioneer in responsible mining practices. Balancing economic growth with adherence to ESG standards is key to ensuring that natural wealth is preserved and a fair and prosperous future is achieved for all involved parties.

Ignoring ESG issues can have broad and detrimental impacts. Environmentally, neglect can lead to ecosystem damage, health-threatening pollution, and contribute to global climate change. Socially, local communities may experience conflicts and livelihood losses, while unsafe and unfair working conditions can create social instability. In governance, investor confidence can collapse, legal risks can increase, and access to the global market can be impeded.

From an economic perspective, hesitation in responding to ESG can lower the stock value and reputation of companies, limit access to investment capital, and increase operational costs. In the future, companies that ignore ESG risk losing relevance for failing to follow consumer preferences and industry standards focused on sustainability.

Paying attention to ESG issues is no longer just an option, but a necessity that determines the long-term survival of a company. Concrete actions in managing environmental, social, and governance aspects enable companies not only to avoid financial and reputational risks but also to pave the way for innovation and sustainable growth. Moreover, proactivity in ESG issues reflects a company’s commitment to ethical investment—not only towards the environment but also in creating an inclusive economy. This strengthens the foundation of the company on the international stage, where sustainability is increasingly valued by consumers, investors, and regulators.

In this context, the utilization of technologies such as the Internet of Things (IoT), Artificial Intelligence (AI), and Blockchain offers smart solutions to navigate and optimize ESG issues.

Traceability with Blockchain

Traceability and authenticity of minerals are critical points that determine the sustainability of the mining industry. Blockchain technology, with its decentralized capability, has become a valuable instrument to ensure integrity and transparency throughout the mineral supply chain. For example, companies like De Beers, known for their diamond trade, have implemented the ‘Tracr’ blockchain platform, which allows them to trace the journey of diamonds from the mine to the consumer’s hands. Through this platform, each diamond is given a unique digital code that follows them throughout their supply journey, ensuring that the diamonds sold are conflict-free and meet the highest ethical standards.

Another example is the use of blockchain technology by the mining company BHP Billiton, which utilizes it to track and record data during the copper ore extraction process in Chile. With blockchain, BHP ensures that all parties involved, including vendors and partners, have access to consistent and unalterable data related to the origin of minerals.

Major mineral-producing countries such as Chile and Australia have also begun pilot projects to implement blockchain in managing mining data. These initiatives aim to increase efficiency and regulatory compliance while also providing assurance to consumers that the products they purchase are socially and environmentally responsible.

Through such real-world applications, blockchain not only revolutionizes how the mining industry manages its data but also how it demonstrates its commitment to sustainable and transparent practices to the world.

Environmental Monitoring and Management with IoT & AI

The utilization of the Internet of Things (IoT) in the mining industry has a significant positive impact, especially financially. With sensors installed throughout the mining area, companies can obtain accurate real-time data on operational conditions of the mines. Information on air quality, water levels, and seismic activity allows companies to intervene quickly before greater damage occurs, which in turn can reduce costs associated with repairs and environmental fines.

Furthermore, by monitoring working conditions in real-time, IoT helps in reducing the risk of workplace accidents. This not only decreases potential compensation costs and operation downtime but also enhances worker productivity. Companies that implement IoT in their operations demonstrate their responsibility towards worker safety, ultimately affecting the reputation and trust of investors and consumers.

From the perspective of equipment maintenance, IoT provides predictive capabilities that enable companies to carry out predictive maintenance rather than reactive maintenance. This means that equipment can be serviced before it breaks down, which could cause costly downtime and disrupt production. These cost savings directly affect the company’s bottom line, improving efficiency and reducing unforeseen expenses.

On a broader scale, minimizing environmental impact means that mining companies can avoid long-term costs associated with environmental rehabilitation and legal liabilities. This not only saves costs in the short term but also helps ensure the sustainability of long-term operations, crucial for the financial health of the company.

Overall, IoT presents an opportunity for mining companies to become more adaptive, responsive, and efficient—reducing operational costs, enhancing safety, and ultimately increasing profit margins. Investing in IoT technology is a strategic step that demonstrates a company’s commitment to innovation and sustainability, adding value that can become a competitive advantage in the global market.

Amid the global market dynamics that increasingly emphasize the importance of sustainability, Indonesia must take bold steps to ensure its nickel industry grows in alignment with ESG values. The adoption of Blockchain, IoT, and AI technologies is not just about technical innovation but a tangible manifestation of Indonesia’s commitment to responsible growth. This transformation promises long-term benefits not only economically but also in maintaining environmental and community harmony. This will also be highly relevant to Indonesia’s net-zero emission target by 2060.

The opportunity for stakeholders to contribute to the advancement of Indonesia’s nickel industry is immense. Regulators such as the Ministry of Environment and Forestry (KLHK), the Ministry of Energy and Mineral Resources (ESDM), and the Investment Coordinating Board (BKPM) play a key role in establishing frameworks that allow mining operations to run to high standards. Associations such as the Indonesian Mining Association (API), the Indonesian Nickel Mining Association (APNI), and other related organizations, are crucial in consolidating this industry towards sustainable and responsible practices.

Support from investors and the global community will not only accelerate the achievement of sustainability in the nickel industry but also help promote economic and social prosperity. Wise investment and trust given today are investments for the future—yielding financial benefits aligned with community welfare and environmental preservation. Let’s build the future of the nickel industry that is oriented not only towards profit but also towards integrity and sustainability.

Tuhu Nugraha
Tuhu Nugraha
Digital Business & Metaverse Expert Principal of Indonesia Applied Economy & Regulatory Network (IADERN)