Indonesia drafts ESG standard for mining as downstream investment surges

By Adianto P Simamora

Indonesia is developing a national environmental, social and governance (ESG) standard for the mineral sector as the government seeks to strengthen governance and sustainability requirements alongside its downstream processing drive.

Director General of Mineral and Coal Tri Winarno said the Energy and Mineral Resources Ministry is preparing the framework by referring to international standards while adapting them to domestic mining conditions.

Speaking at the ESG Forum in Jakarta on Tuesday, Tri said the proposed framework would be built around five pillars: green mining and decarbonization, responsible supply chains, community development, good mining governance, and digital reporting transparency.

"There are five pillars in the national ESG framework, namely green mining and decarbonization, responsible supply chains, community development, good mining governance, and digital reporting transparency," Tri said.

He said a preliminary gap analysis conducted by the World Resources Institute found Indonesia's current ESG regulations align between 30% and 50% with international standards.

The move comes as Indonesia seeks to attract investment into mineral processing industries while addressing growing scrutiny from investors and downstream consumers over environmental and social performance.

Deputy for Downstreaming and Strategic Investment at the Ministry of Investment and Downstreaming, Heldi Satria Putra, said ESG considerations are becoming increasingly important as Indonesia expands its role in global critical mineral supply chains.

Heldi said Indonesia accounts for more than 60% of global nickel supply, while downstream industries attracted US$9.2 billion of investment in the first quarter of 2026, equivalent to 29.6% of total investment realization nationwide.

Read also : Indonesian miners begin drafting green nickel mining standards

"Global leadership cannot be defined by natural resources alone. True leadership must also be built upon sustainability, responsibility, transparency, and long-term vision," Heldi said.

Separately, a policy paper by the Institute for Economic and Social Research, Faculty of Economics and Business, University of Indonesia (LPEM FEB UI) cautioned against applying a uniform downstreaming strategy across all minerals.

The study said Indonesia has identified 47 critical minerals, with nickel, copper and bauxite among the priority commodities targeted for downstream development. Investment in those sectors could reach US$254.7 billion and create more than 1.7 million jobs by 2040, according to the paper.

However, the study argued that each commodity faces different market dynamics and risks.

For nickel, researchers highlighted Indonesia's heavy reliance on China for investment and processing, as well as uncertainty surrounding future battery technology demand.

"The strategic importance of critical minerals in the twin transition does not automatically shield them from market risks," the paper said.

The study also noted that downstream strategies for copper and bauxite should focus on maximizing economic value rather than simply expanding domestic processing capacity.

Indonesia has aggressively pursued downstream mineral processing since imposing export restrictions on raw mineral ores, helping transform the country into the world's largest producer of refined nickel products and a growing hub for battery material investments.

Editing by Alexander Ginting