Sustainability reporting in Indonesia has entered a critical phase amid the strengthening of sustainability disclosure and assurance regulations and standards. Although POJK 51/2017 requires sustainability reporting, challenges remain, particularly limited disclosure of Scope 3 emissions and the absence of a comprehensive mandate for sustainability assurance. These conditions may increase the risk of greenwashing and undermine the credibility of sustainability information. The introduction of PSPK 1 and PSPK 2, which adopt IFRS S1 and IFRS S2, respectively, and DE SAKb 5000, which adopts ISSA 5000, marks a shift from predominantly narrative reporting toward more integrated disclosure connected with financial information and supported by reliable assurance mechanisms. This article examines the urgency of sustainability assurance, existing regulatory gaps, and the role of these standards in improving the quality and credibility of sustainability reporting in Indonesia. It also proposes a phased approach that considers corporate readiness, professional capacity, and compliance costs.
Almost a decade after the enactment of Financial Services Authority Regulation No. 51/POJK.03/2017 (“POJK 51/2017”) concerning the Implementation of Sustainable Finance for Financial Services Institutions, Issuers, and Public Companies, the sustainability reporting landscape in Indonesia remains in a grey area.
Sustainability Reports are often treated as an extension of the Corporate Communication Division, resulting in documents that are highly polished and rich in philanthropic narratives, yet poorly integrated with the company’s underlying financial realities. Some major companies in Indonesia that are genuinely committed to sustainability have already prepared sustainability reports and obtained independent assurance to ensure the accuracy, credibility, and reliability of the data presented, based on global reporting and assurance frameworks. However, for many of them, the primary motivation has been to meet requirements enabling their products to access export markets in various destination countries.
This situation has allowed greenwashing practices to flourish amid regulatory gaps and flexibility, ranging from manipulation of emissions baseline years to reluctance to report third-party emissions (Scope 3). However, the era of cosmetic reporting is likely coming to an end as the Regulator moves to establish a more robust sustainability reporting and assurance architecture in Indonesia.
Under the current regulatory framework, namely POJK 51/2017 and its implementing regulations, emissions disclosure by financial services entities and issuers listed on the Indonesia Stock Exchange remains heavily focused on direct operations. The regulation requires companies to report energy efficiency, which is methodologically aligned with Scope 1 (direct emissions from facilities owned or controlled by the company) and Scope 2 (purchased electricity). At present, POJK 51/2017 is under revision by the Financial Services Authority (OJK) to further strengthen these requirements.
Indonesia’s current regulatory framework does not yet establish a rigid and comprehensive mandate from the Regulator for assurance over sustainability information. As a result, the reporting of Scope 3 emissions, which account for a significant portion of an organization’s carbon footprint, remains in a regulatory grey area. The majority of companies choose the safer route: either not reporting Scope 3 emissions at all or publishing only a small portion of metrics that are relatively easy to measure, while the majority of their impacts remain undisclosed.
To close these gaps, two key pillars are being established: Sustainability Reporting Standards (Pernyataan Standar Pelaporan Keberlanjutan or PSPK) 1 and PSPK 2 as disclosure standards, and the issuance of the Exposure Draft of Sustainability Assurance Standard (Draft Eksposur Standar Asurans Keberlanjutan or DE SAKb) 5000 as an independent sustainability assurance standard.
PSPK 1 establishes the General Requirements for Disclosure of Sustainability-related Financial Information, while PSPK 2 addresses Climate-related Disclosures. Meanwhile, SAKb 5000 establishes the general requirements for sustainability assurance engagements.
This combination of standards is not merely an administrative revision; it represents a paradigm shift that redefines the meaning of corporate accountability in the eyes of the public, investors, and other stakeholders.
The Sustainability Standards Board of the Indonesian Institute of Accountants (Dewan Standar Keberlanjutan Ikatan Akuntan Indonesia or DSK IAI) has adopted the global IFRS S1 and IFRS S2 standards as PSPK 1 and PSPK 2, which will become effective on January 1, 2027. These standards compel companies to stop treating environmental issues as separate from financial performance.
- The Connectivity of Information: PSPK 1 requires sustainability-related risks to be directly reflected in financial reporting. If a bank provides financing for the development or management of a large-scale commercial property, the bank must assess the potential for the property to become a stranded asset if it fails to comply with future green-building regulations. This climate transition risk must be logically connected to adjustments in the calculation of Expected Credit Loss (ECL) recognized in the bank’s books. Companies must also be transparent when ESG (Environmental, Social, and Governance) risks or the closure of a plant or facility affect the useful life of an asset.
- Extreme Supply Chain Transparency: Through PSPK 2, the disclosure of Scope 3 greenhouse gas emissions is set to become mandatory, although implementation will be phased. Companies will no longer be able to engage in cherry-picking by concealing emissions “upstream” in their supply chains or within their credit portfolios through Financed Emissions.
Strict reporting requirements under PSPK will not be effective without a mechanism to establish the reliability and credibility of the underlying data. The Indonesian Institute of Public Accountants (Institut Akuntan Publik Indonesia or IAPI) has responded by preparing the Exposure Draft of Sustainability Assurance Standard 5000 (DE SAKb 5000), an adoption of the international ISSA 5000 standard. IAPI conducted a public hearing on DE SAKb 5000 on August 18, 2026, and the standard is expected to become effective on December 31, 2026. Assurance itself is intended to enhance stakeholders’ confidence in sustainability reporting. Under SAKb 5000:
- Framework Agnostic: DE SAKb 5000 is designed to be highly flexible while remaining rigorous. Assurance practitioners may apply it to provide assurance over reports prepared using PSPK/IFRS, GRI, SASB, POJK 51 metrics, or subsequent revisions to those requirements.
- Bridging Limited and Reasonable Assurance: The standard provides a clear methodology for assurance practitioners to perform both Limited Assurance during the early stages of adoption and, as corporate internal systems mature, transition toward Reasonable Assurance.
- Professional Skepticism over Double Materiality: The standard equips assurance practitioners with procedures to examine management’s assertions in greater detail. Practitioners will no longer merely verify the completeness of documentation; they will actively assess management’s process for determining material topics. If management deliberately omits an environmental dispute that could affect the company’s value, DE SAKb 5000 requires the assurance practitioner to modify the assurance conclusion, potentially resulting in a Qualified or Adverse conclusion.
- Multidisciplinary Collaboration: DE SAKb 5000 recognizes that traditional accounting assurance practitioners do not possess expertise in every aspect of climate science. The standard therefore establishes procedures for involving specialists, such as environmental engineers or hydrologists, in assurance teams, ensuring that carbon-footprint verification is performed using scientifically valid methodologies.
The greatest challenge in making sustainability assurance mandatory is the risk of compliance fatigue—where medium-sized companies merely fulfill administrative requirements without achieving meaningful substance due to the significant cost burden. Regulators therefore need to design a Phased Approach:
- Priority Phase: Mandatory full assurance should initially focus on Public Companies/Major Issuers, large State-Owned Enterprises (SOEs), and high-risk extractive sectors, including Banking, Mining, Energy, and Palm Oil.
- Facilitating Medium-sized Entities: Medium-sized companies should be given regulatory relief through a Limited Assurance requirement covering only core material metrics, or alternatively, a comply or explain approach during the first three to five years of the transition period.
- Professional Capacity: Universities and professional associations should accelerate sustainability assurance certification programs to address the shortage of ESG assurance practitioners in Indonesia.
The issuance of PSPK on July 1, 2025, and the expected effectiveness of DE SAKb 5000 on December 31, 2026, mark the final chapter of the era of cosmetic green reporting. Going forward, emissions data and sustainability metrics will be subject to assurance and treated with the same level of rigor as financial position and profit-and-loss data. In an increasingly green economy, credibility is no longer merely a complement to corporate reputation; it is an absolute prerequisite for survival in the global business ecosystem.
The ideal roadmap is not about how quickly we can force every company to obtain assurance over its sustainability reporting. Rather, it is about how prepared our ecosystem is to support the integrity of that reporting. Medium-sized companies do not need to operate under the constant fear of sanctions; they need guidance, reasonable standards, and a sustainability assurance services ecosystem that is competitive in terms of cost.
