How to Build a Sustainable Business as a Foreigner in Indonesia?

Registering a company in Indonesia is only the beginning. For many foreign investors, the real challenge begins after the paperwork is complete. While forming a foreign-owned company (PT PMA) allows entry into the market, it does not guarantee long-term success. To build a sustainable business in Indonesia, foreign entrepreneurs must go beyond compliance and licensing, and focus on the country’s local nuances, operational complexities, and long-term relationship-building.

Apart from being a beautiful travel destination, Indonesia is also an attractive place to set up a business. With its abundant resources and a growing middle class, the country represents opportunity and momentum. Sustainable business practices have garnered strong interest as Indonesia has risen to prominence in this space. Sustainability is a top priority for businesses operating in Indonesia. It has set a goal to achieve net-zero emissions by 2060.

In this article, we will learn about sustainable business practices, their advantages, challenges and strategies for implementing sustainable business practices in Indonesia and how we can help.

What do Sustainable Business Practices in Indonesia mean?

Sustainable business practices in Indonesia mean the adoption of plans that support economic growth while minimising environmental impact and supporting social well being. These methods include improving energy use, minimising waste, and utilising renewable materials, promoting sustainability for both companies and the environment.

Understanding sustainable business practices here means looking beyond corporate pledges. It means observing how a logistics company in Bali reroutes its fleet to cut carbon emissions. And it means asking what responsibility a cement producer bears for the rivers it draws from and the air it alters.

Indonesia’s economy, which is fueled by mining, palm oil, textiles, and tourism, has long walked a tightrope between growth and degradation. Now, as climate risk intensifies and global markets demand cleaner practices, that balance is shifting. Sustainability, in this context, refers to business strategies that protect the environment, strengthen local communities, and remain economically viable across generations.

“Profit isn’t enough,” said Rini Kartikasari, an environmental economist based in Yogyakarta. “Sustainable businesses are asking who is paying the hidden cost of our growth, and how do we change that?”

 

What are the Advantages of Adopting Sustainable Business Practices?

Sustainable business practices in Indonesia yield many environmental and social benefits, including:

 

1. Reputation and Consumer Trust

As global awareness around climate and ethics grows, businesses that adopt sustainable practices often earn stronger reputations. In markets like Indonesia, where transparency is uneven, this can be a powerful differentiator.

 

2. Long-Term Cost Savings

Reducing energy use, cutting waste, and improving supply chain efficiency can lower operating costs over time, benefits often overlooked in short-term profit calculations.

 

3. Access to Capital and Markets

Investors are increasingly aligning portfolios with ESG standards. Companies that meet sustainability benchmarks may gain access to funding and favourable trade terms, especially with partners in Europe and North America.

 

4. Regulatory Readiness

Governments across Asia, including Indonesia, are tightening environmental and labour laws. Sustainable businesses are better positioned to adapt early and avoid penalties.

 

5.Talent Attraction and Retention

Employees, particularly younger generations, are drawn to companies whose values align with their own. Sustainable practices can help attract skilled talent and reduce turnover.

What are the Challenges Faced When Adopting Sustainable Business Practices?

Despite the advantages, businesses face many snags when adopting sustainable practices. These are the main impediments:

 

1. High Initial Costs

Switching to sustainable materials, clean energy, or ethical supply chains often requires significant upfront investment, something many small and mid-sized businesses struggle to justify.

 

2. Lack of Clear Regulation

In countries like Indonesia, inconsistent enforcement and shifting policy frameworks make it difficult for companies to plan long-term sustainability strategies with confidence.

 

3. Limited Supplier Options

Sourcing eco-friendly inputs or working with ethical partners can be challenging, especially in regions where the infrastructure for sustainability is still developing.

 

4. Resistance to Change

Within companies, there is often hesitation, either from leadership or staff, to depart from familiar practices, particularly when short-term profits are at stake.

 

5. Measuring Impact

Tracking environmental and social impact requires systems many businesses do not yet have. Without clear metrics, sustainability efforts risk being more symbolic than substantial.

 

What are the Top Strategies for Implementing Sustainable Business Practices?

Sustainability has moved beyond rhetoric. For companies seeking to embed it in daily operations, the challenge lies in execution. Some approaches, tested across industries and geographies, offer a clearer way forward. These are the top strategies for implementing sustainable business practices in Indonesia:

 

1. Understand the Local Business Culture

Doing business in Indonesia as a foreigner requires more than capital. Indonesia is a relationship-driven market. Trust and personal connections hold significant value, especially in negotiations and partnerships. Politeness, patience, and understanding hierarchical business structures go a long way in building credibility.

Engaging with local stakeholders, attending industry events, and respecting cultural norms are essential. It’s not uncommon for deals to take time, as mutual understanding often comes before formal agreements.

 

2. Focus on Regulatory Compliance and Changes

The legal landscape in Indonesia is evolving. While company registration through the Online Single Submission (OSS) system has become simpler, staying compliant requires continuous effort. Licences, permits, tax obligations, and manpower regulations may differ across industries and regions.

 

3. Build a Reliable Local Team

Foreign investors often underestimate the importance of local human capital. A sustainable business requires a team that understands both the local market and the company’s global vision. Investing in local talent not only reduces operational risks but also builds loyalty and cultural alignment.

Offer clear career progression paths and respect local labour laws, and create an inclusive work culture. In many cases, hiring a capable local manager can bridge communication gaps and speed up decision-making.

 

4. Adapt Your Products and Services

A business model that works in Singapore, Europe, or the US may not suit Indonesian consumer behaviour. Preferences, purchasing power, and digital adoption levels vary across the archipelago. To thrive, foreign businesses must localise their offerings.

Conduct market research and gather customer feedback early. Tailor your pricing strategy, distribution channels, and marketing campaigns to suit regional differences, from Jakarta to Surabaya and beyond.

 

5. Build Partnerships with Purpose

Foreign-owned companies in Indonesia benefit from working with local distributors, suppliers, and institutions. Partnerships help navigate regulatory red tape, access local networks, and boost brand visibility.

When entering a joint venture, ensure that expectations and profit-sharing mechanisms are clearly documented. Transparency is key. Whether you’re in manufacturing, tech, or F&B, partnerships rooted in mutual benefit tend to last longer.

 

6. Commit to Long-Term Investment

Indonesian markets favour stability. Businesses that stay committed during economic ups and downs are more likely to earn customer trust and government support. Short-term profit chasing rarely works.

Reinvesting in local communities, offering employment, and engaging in sustainable practices enhance a company’s reputation. Whether through CSR or climate-conscious production, such efforts make a lasting impact.

 

7. Secure Scalable Systems and Infrastructure

A good business idea will struggle without scalable systems. Many foreign companies fail due to poor inventory tracking, unclear SOPs, or untrained staff. As operations grow, inefficiencies compound.

From accounting to customer service, invest early in technology and standard processes. Ensure your infrastructure is compliant with Indonesian laws and well-suited for expansion.

 

Conclusion

Beyond licenses and logos, doing business in Indonesia means learning to listen both to the land and to its people. As sustainability becomes central to the country’s future, the most successful foreign ventures will be those that think generationally, not just quarterly.

For investors who are ready to do more than just enter the market, we at 3E Accounting Indonesia can help you in guiding and building the groundwork needed to thrive sustainably in one of Southeast Asia’s most promising economies.

 

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