ESG, or “Environment, Social Governance,” represents principles, perspectives, and governance for companies to achieve sustainability. These principles are endorsed by the United Nations Global Compact, an international UN agency. ESG principles stem from the Principles of Responsible Investment, which guide capital market participants in their investment decisions. Although primarily applied within companies, ESG practices can be implemented across various organizations, including governments and non-governmental entities.
In Indonesian parlance, ESG principles are often referred to as “Lingkungan, Social, dan Tata Kelola”, although the term ESG is more commonly used. The implementation of ESG within corporate internals, particularly banks, is regulated by the Financial Services Authority of the Republic of Indonesia through Regulation No. 17 of 2023 concerning Governance Implementation for Commercial Banks. This regulation is significant because financial sector regulations typically serve as benchmarks for other operating sectors. This is because regulations regarding ESG, particularly in Indonesia, are not specifically outlined and remain diverse across sectors.
ESG principles and regulations have been widely applied across various companies worldwide. From digital companies to mining companies, sustainability orientation has become a crucial element for them. According to JPMorgan’s analysis, the implementation of ESG is important because 9 out of 10 asset managers believe that integrating ESG into company activities can enhance future returns (JPMorgan, 2023). Some global companies that implement ESG include Microsoft, Meta, and Alphabet. For digital companies in Indonesia, pioneers in ESG implementation include Bukalapak, DANA, and GoTo, while in the mining sector, companies like Freeport McMoran Indonesia and others across various sectors and business models also adopt ESG practices.
The implementation of ESG can be explained in three main aspects: Environmental, Social, and Governance. Firstly, environmental aspects involve the use of renewable energy, greenhouse gas reduction, climate risk mitigation, recycling processes, and disaster mitigation. Secondly, social aspects focus on the impact of company activities on employee well-being, covering health and safety, working conditions, employee benefits, diversity and inclusivity, human rights recognition, and the company’s impact on local communities. Lastly, governance aspects include ethical company standards, board diversity and governance, stakeholder engagement, shareholder rights, and performance compensation (WeForum, 2023).
According to Quantitative (2023), a consulting company, there are at least six steps before a company reports its ESG activities to accrediting bodies. These steps include identifying important ESG issues for the company, establishing long-term strategies and objectives for the company’s ESG, selecting a framework for ESG reporting, planning for ESG organization/company implementation, collecting relevant ESG data for elaboration, and presenting comprehensive company ESG reports. Substantive ESG accountability can be delegated to stakeholders, ranging from investors, directors and commissioners, to accreditation bodies evaluating such reports.
So far, ESG reporting remains internal and is reported to international accreditation bodies. One of these accreditation bodies is the Global Reporting Initiative (GRI), an independent international nonprofit organization established to provide reporting standards for companies implementing ESG. Simply put, the matrix used to assess ESG implementation for companies is the matrix described by the World Economic Forum in the previous paragraph. The implementation of ESG in startup companies is crucial because the comprehensive “GRI Report” guidelines are only available in the Mining, Agriculture, Forestry, Coal, and Oil Gas sectors.
Although the guidelines are not yet complete, ESG implementation is still very feasible for startup companies. In Indonesia, PT. GoTo Gojek Tokopedia, Tbk (hereinafter referred to as GoTo) is one of the pioneers in implementing ESG. GoTo’s ESG report has been recognized and accredited by the SASB “Sustainability Accounting Standards Board” and GRI itself. GoTo developed a roadmap for reporting under the theme: “Three Zeroes,” which is structured into sustainable steps, namely “Zero Emissions, Zero Waste, and Zero Barriers.” These three aspects represent GoTo’s commitment to sustainability transition and inclusive society. GoTo held meetings with various community groups, one of which introduced the “Three Zeroes” commitment in Jakarta to the Center for Digital Society (CFdS) at Gadjah Mada University’s Faculty of Social and Political Sciences.
At least, GoTo has taken several steps in achieving these ESG principles in their activities. For instance, in the Environmental matrix, GoTo is committed to reducing carbon emissions by transitioning their service fleet to fully electric. In 2021, GoTo conducted a trial launch of 500 electric fleets in South Jakarta. From a social matrix perspective, GoTo is committed to supporting inclusivity and accessibility for all. The company has launched features such as GoRide for PWD (People with Disabilities) and Gojek Autism for people with disabilities. Additionally, the company provides financial literacy access and sustainable livelihood programs for driver partners.
From a governance perspective, GoTo is committed to integrating the ESG framework as a guide for the Board of Commissioners and the Chief Executive Officer. This integration is necessary for the Board of Commissioners and the Chief Executive Officer to address and manage environmental and social issues more relevantly. Furthermore, GoTo also applies the risk management framework with ISO 31000. In implementing ESG, GoTo invites collaboration with relevant stakeholders to work together in this sustainability transition. GoTo also commits to adhering to the International Labour Organization (ILO) standards on Child Labor in all countries where GoTo operates.
Addressing why ESG is important to be implemented in startup companies is because ESG implementation drives businesses to be more sustainable. This is done not only to comply with established matrices but also to build trust. The trust built can increase customer loyalty to a business, especially for new business models. Where the implementation of sustainable principles is expected to minimize business risks, ultimately increasing opportunities for new markets and access to capital needed for the startup’s growth (ESG Indonesia, 2024).
The more startup companies implement ESG in their company operations, the more it is hoped to create a bandwagon effect for other startup companies. This is quite important given the tech winter that occurred in the previous quarter. Besides efficiency, the successive layoffs that occurred were due to a wait-and-see approach among digital practitioners. The same is expected to happen with the implementation of ESG in many startup companies. Apart from enhancing the image, the implementation of ESG is expected to trigger a sustainability transition to achieve Sustainable Development Goals. Although there is no complete and comprehensive GRI guideline yet, the implementation of ESG in digital companies can be appreciated as a positive step towards sustainable development goals.
