Summary of “Institutional Dynamics and Environmental Disclosures: Insights from Indonesia’s Energy Sector” (Putri et al., 2025, Pacific Accounting Review)
This paper investigates how institutional pressures—coercive, mimetic, and normative—shape environmental disclosures in Indonesia’s energy sector. It focuses on the tension between symbolic compliance (formal adherence without real change) and substantive practices (genuine integration of sustainability into operations).
The study seeks to answer:
How do institutional pressures shape environmental disclosures in Indonesia’s energy sector, and how do symbolic compliance and substantive performance coexist within these pressures?
Using institutional theory (DiMaggio & Powell, 1983) as the analytical framework, the paper explores how external pressures from regulators, professional norms, and global standards influence companies’ disclosure practices—often leading to partial or performative compliance.
The energy sector is one of Indonesia’s most environmentally impactful industries and is central to the country’s sustainability agenda. Regulations such as OJK Regulation No. 51/2017 have made sustainability reporting mandatory, while global frameworks like the Global Reporting Initiative (GRI) have become standard practice for legitimacy.
However, weak enforcement, limited awareness, and fragmented governance have created institutional voids that encourage symbolic compliance. Companies often issue sustainability reports to appear legitimate rather than to reflect substantive environmental improvements.
This study builds on prior research (e.g., Ardiana et al., 2025; Widhiyani et al., 2025) by examining the interaction between multiple institutional pressures rather than viewing them in isolation. It also addresses a key gap in the literature—the coexistence of symbolic and substantive practices within the same regulatory framework.
Under institutional theory, organisations conform to three main types of pressures:
These forces shape corporate behaviour and disclosure practices. However, in weak institutional contexts, conformity may result in decoupling—a divergence between external reporting and actual performance. Companies may report environmental achievements symbolically to satisfy regulators and investors, while internal practices remain unchanged.
The study used a qualitative design involving semi-structured interviews with 22 sustainability reporting managers from energy companies listed on the Indonesia Stock Exchange.
This approach enabled the authors to interpret not just how companies comply but why they adopt certain practices and how symbolic and substantive elements coexist in disclosures.
(a) Coercive Pressures: Compliance over Substance
The implementation of POJK No. 51/2017 successfully institutionalised sustainability reporting but led mostly to symbolic compliance.
Managers admitted that reporting was treated as a “checklist” or audit exercise rather than a tool for improving environmental performance.
“We spend more time ensuring the report looks right for auditors than actually reducing our impact.” – COMP5
While the regulation improved reporting consistency, it lacked incentives for substantive innovation. Many firms complied to avoid sanctions, not to advance sustainability. Without stronger enforcement or performance-based incentives, coercive pressures risk reinforcing superficial compliance.
(b) Mimetic Pressures: Global Templates, Local Disconnect
Companies heavily relied on global frameworks (e.g., GRI, ISO standards) to gain legitimacy and appeal to foreign investors. This “copy-paste” approach enhanced international credibility but often ignored local environmental challenges.
“We follow global models, but they don’t always fit Indonesia’s real problems like peatland fires or mangrove loss.” – COMP14
For example, energy firms highlighted carbon offset projects aligned with global trends but neglected mangrove restoration or deforestation impacts, which are far more relevant to Indonesia.
Nevertheless, some managers saw mimicry as a learning phase, arguing that adopting global frameworks provided a foundation for eventual substantive integration.
(c) Normative Pressures: Performative Stakeholder Engagement
Normative pressures encouraged companies to engage stakeholders, but engagement often remained performative. Consultations were used to demonstrate legitimacy rather than to integrate stakeholder feedback into corporate decisions.
“We meet communities, but their inputs rarely change what goes into the report.” – COMP13
Companies prioritised investor expectations over local community needs, reflecting a hierarchy of stakeholder influence.
While investors demanded emissions data, local stakeholders were more concerned with air and water quality—issues often underrepresented in reports.
Despite this, a few companies began incorporating community feedback into materiality assessments, showing early signs of progress from symbolic to substantive engagement.
The findings demonstrate that the three types of institutional pressures interact dynamically rather than operate independently:
This interaction produces a dual reality: companies maintain legitimacy through symbolic compliance while selectively integrating substantive practices when strategically beneficial.
The study extends institutional theory by showing that symbolic and substantive reporting can coexist—not as opposites, but as complementary strategies within evolving institutional environments.
The paper proposes several policy and managerial recommendations:
These measures would shift environmental disclosures from symbolic to substantive accountability, aligning corporate actions with genuine sustainability outcomes.
The study focuses only on Indonesia’s energy sector and relies on manager-level perspectives, which may not represent other industries or stakeholder views.
It is also cross-sectional, capturing institutional dynamics at one point in time.
Future research could: