Indonesia’s $100B Mineral Pivot to Advance Green Mineral Policy: Strengthening ESG Standards in Sustainable Green Mineral Supply Chain with Five ESG Reforms
Keywords:
Sustainable mineral governance, Indonesia nickel industry, ESG in mining supply chains, Green mineral policy, Energy transition minerals, Low-carbon mineral processingAbstract
Green minerals such as nickel, cobalt, and bauxite are central to the global energy transition, supporting the deployment of electric vehicles, renewable energy systems, and low-carbon technologies. However, rapid expansion of mineral extraction without robust environmental, social, and governance (ESG) safeguards risks undermining sustainability objectives and investor confidence. Indonesia, which contributes a substantial share of global nickel supply, occupies a strategic position in emerging battery value chains, yet its continued reliance on coal-based processing raises concerns regarding lifecycle emissions and long-term competitiveness in ESG-sensitive markets. This study examines Indonesia’s evolving green mineral strategy through qualitative policy analysis, stakeholder mapping, and benchmarking against international frameworks, including the Initiative for Responsible Mining Assurance (IRMA), the Extractive Industries Transparency Initiative (EITI), and OECD Due Diligence Guidance. The analysis identifies key structural challenges spanning environmental degradation, industrial complexity, shifting global market expectations, and governance gaps. In response, a five-pillar policy framework is proposed, focusing on: (1) strengthening ESG governance and transparency; (2) advancing downstream value addition through cleaner processing pathways; (3) enhancing stakeholder inclusion and community engagement; (4) aligning trade and investment policies with sustainability requirements; and (5) improving demand forecasting and market intelligence to support long-term planning. Drawing on indicative case evidence from major nickel-producing regions, the study highlights the environmental and social pressures associated with current mining practices and explores policy scenarios under different energy and regulatory pathways. The findings suggest that improved ESG alignment, combined with a gradual transition toward lower-carbon processing and more coherent governance, could enhance Indonesia’s ability to attract sustainable investment, reduce environmental risks, and strengthen its position in global mineral supply chains. Overall, the paper contributes an integrated policy framework that contextualizes global ESG standards within Indonesia’s mineral sector, offering insights for resource-rich economies seeking to balance industrial development with environmental stewardship and evolving market expectations.
Downloads
References
[1] Hans Nicholas Jong. "Indonesian Nickel Project Harms Environment and Human Rights, Report Says." Mongabay. https://news.mongabay.com/2024/02/indonesian-nickel-project-harms-environment-and-human-rights-report-says (accessed 22 April 2025).
[2] IUCN Netherlands (IUCN NL). "Nickel Rush in Indonesia: Deforestation Rates Double Around Nickel-Processing Plants." International Union for Conservation of Nature Netherlands (IUCN NL). https://www.iucn.nl/en/news/nickel-rush-in-indonesia-deforestation-rates-double-around-nickel-processing-plants (accessed 9 April 2025).
[3] Ellen Moore. "Multiple Dams Fail at Indonesian Nickel-Mining Facilities." Earthworks. https://earthworks.org/blog/multiple-dams-fail-at-indonesian-nickel-mining-facilities (accessed 12 April 2025).
[4] David L. Chandler. "3 Questions: Can We Secure a Sustainable Supply of Nickel?" MIT Technology and Policy Program (MIT News). https://tpp.mit.edu/news/3-questions-can-we-secure-a-sustainable-supply-of-nickel (accessed 4 April 2025).
[5] M. R. Awual et al., "Naked-eye lead(II) capturing from contaminated water using innovative large-pore facial composite materials," Microchemical Journal, vol. 154, p. 104585, 2020/05/01/ 2020, doi: https://doi.org/10.1016/j.microc.2019.104585.
[6] Krista Shennum and Adi Renaldi. "Nickel Unearthed: The Human and Climate Costs of Indonesia's Nickel Industry." Climate Rights International (CRI). https://cri.org/reports/nickel-unearthed (accessed 19 March 2025).
[7] EHN Curators. "Indonesia's Nickel Ambitions Clash With Environmental and Human Rights." Environmental Health News (EHN). https://www.ehn.org/indonesia-s-nickel-ambitions-clash-with-environmental-and-human-rights (accessed 8 April 2025).
[8] IESR, "Indonesia Energy Transition Outlook 2025," Institute for Essential Services Reform, 2024/12 2024. [Online]. Available: https://iesr.or.id/wp-content/uploads/2024/12/Indonesia-Energy-Transition-Outlook-2025-Digital-Version.pdf
[9] E. Institute for Energy and A. Financial, "Indonesia's Nickel Companies Need Renewable Energy," IEEFA, 2024/10 2024. [Online]. Available: https://ieefa.org/sites/default/files/2024-10/IEEFA%20Report%20-%20Indonesia%27s%20nickel%20companies%20need%20RE_Oct2024.pdf
[10] I. Sustainable Minerals. "Unpicking the Sustainability Risks in Indonesia’s Nickel Industry." University of Queensland. https://smi.uq.edu.au/article/2025/04/unpicking-sustainability-risks-indonesia%E2%80%99s-nickel-industry (accessed.
[11] Hans Nicholas Jong. "Indonesia Rushes Mining Law Amendments, Raising Environmental and Governance Alarms." Mongabay. https://news.mongabay.com/2025/01/indonesia-rushes-mining-law-amendments-raising-environmental-and-governance-alarms (accessed 18 April 2025).
[12] A. F. Rahmat S S Soemadipradja, Alya Meutia, Madeleine Jacobus, . "Indonesian Mining Regulations: Notable Changes and Developments in Recent Years." International Bar Association. https://www.ibanet.org/Indonesian-mining-regulations (accessed 15 April 2025).
[13] Rachmi Hertanti. "Between A Mineral And A Hard Place: Indonesia's Export Ban On Raw Minerals." Transnational Institute. https://www.tni.org/en/article/between-a-mineral-and-a-hard-place (accessed 4 April 2025).
[14] CRIF Asia. "Indonesia's Mining Industry Transformation: Opportunities, Challenges, And Downstream Prospects For 2025." CRIF Asia. https://www.id.crifasia.com/resources/industry-insights/indonesias-mining-industry-transformation-opportunities-challenges-and-downstream-prospects-for-2025 (accessed 14 May 2025).
[15] Rafi Adis Subarna. "Smelters Squeeze Indonesia’s Nickel Ore Supply." East Asia Forum. https://eastasiaforum.org/2024/09/14/smelters-squeeze-indonesias-nickel-ore-supply/ (accessed 11 April, 2025).
[16] Hans Nicholas Jong. "The Hidden Environmental Costs of Indonesia’s ‘Clean’ Battery Production." KrASIA (originally published by Mongabay). https://kr-asia.com/the-hidden-environmental-costs-of-indonesias-clean-battery-production (accessed 7 April 2025).
[17] T. OCallaghan, "Patience is a virtue: Problems of regulatory governance in the Indonesian mining sector," Resources Policy, vol. 35, no. 3, pp. 218-225, 2010.
[18] D. Shoesmith, N. Franklin, and R. Hidayat, "Decentralised Governance in Indonesia’s Disadvantaged Regions: A Critique of the Underperforming Model of Local Governance in Eastern Indonesia," Journal of Current Southeast Asian Affairs, vol. 39, no. 3, pp. 359-380, 2020, doi: 10.1177/1868103420963140.
[19] T. Wijaya and L. and Jones, "Indonesia, nickel, and the political economy of polyalignment in the Second Cold War," Third World Quarterly, pp. 1-20, doi: 10.1080/01436597.2025.2465514.
[20] I. R. Kurniyanto, D. R. L. Gultom, and M. B. Wusto, "Does the negotiation process on nickel export between Indonesia and the European Union provide benefits?," in BIO Web of Conferences, 2024, vol. 146: EDP Sciences, p. 01017.
[21] S. Kumar, "Is Indonesia’s ‘Nickel Nationalism’ A Smart Strategy? – Analysis," in Eurasia Review, ed, 2025.
[22] J. R. Owen, D. Kemp, A. M. Lechner, J. Harris, R. Zhang, and É. Lèbre, "Energy transition minerals and their intersection with land-connected peoples," Nature Sustainability, vol. 6, no. 2, pp. 203-211, 2023/02/01 2023, doi: 10.1038/s41893-022-00994-6.
[23] International Energy Agency, "The Role of Critical Minerals in Clean Energy Transitions," IEA, 2021. [Online]. Available: https://www.iea.org/reports/the-role-of-critical-minerals-in-clean-energy-transitions
[24] Y. Suzuki, "Managing mineral demand for the clean energy transition," Yale Environment Review, 2023. [Online]. Available: https://environment-review.yale.edu/managing-mineral-demand-clean-energy-transition.
[25] PWYP Indonesia. "Stakeholder Dialogue Towards A More Responsible Nickel Supply Chain." PWYP Indonesia. https://pwypindonesia.org/en/stakeholder-dialogue-towards-a-more-responsible-nickel-supply-chain (accessed 14 May 2025).
[26] EITI International Secretariat. "Indonesia." Extractive Industries Transparency Initiative (EITI). https://eiti.org/countries/indonesia (accessed 4 May 2025).
[27] F. K. Karim, D. S. Khafaga, M. M. Eid, S. K. Towfek, and H. K. Alkahtani, "A Novel Bio-Inspired Optimization Algorithm Design for Wind Power Engineering Applications Time-Series Forecasting," Biomimetics, vol. 8, no. 3, p. 321, 2023. [Online]. Available: https://www.mdpi.com/2313-7673/8/3/321.
[28] H. Myriam et al., "Advanced Meta-Heuristic Algorithm Based on Particle Swarm and Al-Biruni Earth Radius Optimization Methods for Oral Cancer Detection," IEEE Access, vol. 11, pp. 23681-23700, 2023, doi: 10.1109/ACCESS.2023.3253430.
[29] Septian Hario Seto. "Critical Minerals Value Added Policies: Indonesia’s Story." United Nations Conference on Trade and Development (UNCTAD). https://unctad.org/system/files/non-official-document/SSE_UNCTAD_Day2_final.pdf (accessed 3 May 2025).
[30] Thomas Kavanagh. "Indonesia Developing ETS Ahead of EU CBAM Introduction." Argus Media. https://www.argusmedia.com/en/news-and-insights/latest-market-news/2681354-indonesia-developing-ets-ahead-of-eu-cbam-introduction (accessed 10 May 2025).
[31] Michelle Gozum. "Decarbonizing the Nickel Industry in Indonesia." DNV. https://www.dnv.com/publications/decarbonizing-the-nickel-industry-in-indonesia (accessed 4 May 2025).
[32] A. Islam et al., "Next frontier in photocatalytic hydrogen production through CdS heterojunctions," International Journal of Hydrogen Energy, vol. 101, pp. 173-211, 2025/02/03/ 2025, doi: https://doi.org/10.1016/j.ijhydene.2024.12.300.
[33] Staff Writer. "Indonesia Accounts for Over 50% of Deforestation Caused by Large-Scale Mining." Mining.com. https://www.mining.com/indonesia-accounts-for-over-50-of-deforestation-caused-by-large-scale-mining/ (accessed 11 May 2025).
[34] A. Vera-Burau, L. S. Pera, and M. B. Massanes, "Integration of quantitative ESG factors in a mining project: Case studies of a quarry," Journal of Cleaner Production, vol. 501, p. 145304, 2025.
[35] W. I. Chawarura, M. Sibanda, and K. Mamvura, "An Assessment of the Roles of the Government, Regulators, and Investors in ESG Implementation in South Africa: A Scoping Review," Administrative Sciences, vol. 15, no. 6, p. 220, 2025.
[36] T. Zatonatska et al., "Sustainable Energy Investments: ESG-Centric Evaluation and Planning of Energy Projects," Energies, vol. 18, no. 8, p. 1942, 2025.
[37] N. Gunawan, K. Tukiainen, and B. Boulle. "Green Infrastructure Investment Opportunities: Indonesia – Green Recovery 2022 Report." Climate Bonds Initiative. https://www.climatebonds.net/files/reports/cbi_indonesia_giio_en.pdf (accessed 5 May 2025).
[38] A. Tritto. "How Indonesia Used Chinese Industrial Investments to Turn Nickel Into the New Gold, Carnegie Endowment for International Peace." https://carnegieendowment.org/research/2023/04/how-indonesia-used-chinese-industrial-investments-to-turn-nickel-into-the-new-gold (accessed 12 May 2025).
[39] A. a. K. Hawser, Michael, . "New ICMA ‘Green-Enabling’ Bond Guidance to Benefit Mining Sector." The Banker (Financial Times). https://www.thebanker.com/content/ac804f28-c80d-5537-85b2-d25147d88398 (accessed 10 May 2025).
[40] K. Kim. "Indonesia’s Uncertain Climb Up the Nickel Value Chain." Lowy Institute. https://www.lowyinstitute.org/the-interpreter/indonesia-s-uncertain-climb-nickel-value-chain (accessed 9 May 2025).
[41] I. Huber. "Indonesia’s Battery Industrial Strategy." Center for Strategic and International Studies (CSIS). https://www.csis.org/analysis/indonesias-battery-industrial-strategy (accessed 7 May 2025).
[42] H. N. Jong. "Mining Sites in Indonesia’s Disaster-Prone Areas a Ticking Time Bomb: Report." Mongabay. https://news.mongabay.com/2021/03/mining-sites-indonesia-disaster-prone-area-report/ (accessed 1 May 2025).
[43] International Energy Agency (IEA). "An Energy Sector Roadmap to Net Zero Emissions in Indonesia." International Energy Agency. https://www.iea.org/reports/an-energy-sector-roadmap-to-net-zero-emissions-in-indonesia/executive-summary (accessed 1 May 2025).
[44] AEER. "Aligning Nickel Production Levels With Renewable Energy Potential in Sulawesi." Action for Ecology and People’s Emancipation (AEER). https://www.aeer.or.id/en/aligning-nickel-production-levels-with-renewable-energy-potential-in-sulawesi/ (accessed 13 May 2025).
[45] A. Islam et al., "Harnessing visible light for sustainable biodiesel production with Ni/Si/MgO photocatalyst," Renewable and Sustainable Energy Reviews, vol. 208, p. 115033, 2025/02/01/ 2025, doi: https://doi.org/10.1016/j.rser.2024.115033.
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2026 Permana Andi Paristiawan, Alfian Ferdiansyah Madsuha, Haetham G. Mohammed, Didik Sugiyanto, Poppy Puspitasari, Ibham Veza
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
