Summary of “Institutional Work in Making Sustainability Reporting Mandatory in Indonesia through Sustainable Finance” (Ardiana et al., 2025, Journal of Accounting in Emerging Economies)
This study explores how sustainability reporting, once a voluntary corporate initiative, became a mandatory requirement in Indonesia through the Financial Services Authority’s regulation POJK 51/2017. The regulation forms part of Indonesia’s sustainable finance framework and requires financial institutions and listed companies to disclose their sustainability performance.
The paper focuses on how this transformation happened—not as a sudden government decision, but as a result of institutional work carried out by multiple actors over more than a decade. It pays particular attention to ALPHA, a pioneering organisation that introduced the Global Reporting Initiative (GRI) standards in Indonesia and worked to localise them for the national context.
The key research question is:
How did institutional work by ALPHA and other actors contribute to making sustainability reporting mandatory in Indonesia?
The study also aims to show how cultural values—particularly gotong royong (mutual cooperation) and Pancasila (the five guiding principles)—helped build social acceptance and legitimacy for sustainability reporting.
After the fall of the New Order regime in 1998, Indonesia entered the Reformasi (reform) era, marked by democracy, transparency, and stronger civil society engagement. This shift created a more open environment for public accountability and sustainability practices.
At the same time, Indonesia’s economic reliance on natural resources increased pressure to balance growth with environmental responsibility. Local values such as gotong royong and Pancasila became important foundations for corporate responsibility—emphasising social harmony, ethics, and community welfare.
These values made sustainability reporting culturally meaningful, as it was seen not only as a business requirement but also as a contribution to society’s well-being.
Several earlier regulations already encouraged corporate responsibility, such as:
However, these laws lacked integration and clear reporting standards. The issuance of POJK 51/2017 marked the first coherent and enforceable framework, embedding sustainability reporting within Indonesia’s sustainable finance agenda.
The study uses Institutional Work Theory (Lawrence & Suddaby, 2006), which explains how actors create, maintain, or change institutions through purposeful action. Three key ideas guide the analysis:
By analysing these processes, the paper shows how voluntary sustainability reporting evolved into a legally required norm through the combined actions of companies, regulators, NGOs, consultants, and academics.
The authors used a qualitative approach with 35 semi-structured interviews conducted between June and October 2023. Participants included:
Interviews explored motivations, challenges, and actions that shaped the development of sustainability reporting. Data were analysed using thematic analysis, identifying recurring ideas and patterns about how reporting norms were created and institutionalised.
Phase 1 – Introduction of Sustainability Reporting (Early 2000s)
ALPHA, affiliated with the GRI in the Netherlands, introduced sustainability reporting to Indonesia. It began by training state-owned enterprises (SOEs) and listed companies to apply GRI standards, emphasising transparency and accountability.
Initially, many corporations viewed reporting as a bureaucratic burden. To overcome this, ALPHA reframed sustainability reporting as a strategic and ethical tool—useful for improving reputation, attracting investors, and building trust.
It collaborated with consultants (to adapt GRI guidelines for local use), academics (to provide legitimacy through research), and industry associations (to promote adoption).
Through these alliances, sustainability reporting started to gain recognition as a credible practice rather than an imported obligation.
Phase 2 – Voluntary Adoption and Cultural Framing (Mid-2000s–2017)
As awareness grew, ALPHA launched the Sustainability Reporting Awards, celebrating transparent companies and creating healthy competition. This move reframed sustainability reporting as a prestigious corporate achievement.
At the same time:
Together, these actors created a supportive ecosystem that turned sustainability reporting into a socially valued corporate norm.
Voluntary reporting thus became widely seen as an expression of gotong royong—a company’s contribution to shared welfare and national pride.
Phase 3 – Mandatory Regulation (After 2017)
The Financial Services Authority (OJK) issued POJK 51/2017, requiring banks, financial institutions, and public companies to publish sustainability reports as part of sustainable finance.
While the regulation was framed around financial accountability, it effectively made sustainability reporting a legal obligation.
This stage represented coercive institutional work—where regulations enforced what voluntary norms had already established.
Regulators and consultants helped companies interpret the new rules, while NGOs continued to monitor compliance and demand transparency as a public right.
Corporations responded by integrating sustainability into core strategies, recognising it as both a regulatory and ethical necessity.
The study finds that Indonesia’s transition from voluntary to mandatory sustainability reporting was incremental and collaborative, not abrupt.
ALPHA’s institutional entrepreneurship laid the groundwork through training, advocacy, and partnerships. Later, the involvement of regulators, NGOs, consultants, and academics consolidated these efforts into regulation.
Importantly, the success of this institutionalisation was strengthened by cultural alignment.
Framing sustainability reporting through gotong royong and Pancasila made it morally resonant with Indonesian society.
It was not seen as a foreign imposition but as part of the nation’s shared values of ethics, democracy, and social justice.
Thus, regulation (POJK 51/2017) was accepted more readily because it reflected rather than contradicted local norms.
Theoretical Contribution:
The paper extends institutional work theory by showing how embedded agency (actors operating within cultural contexts) and cultural legitimacy can drive institutional change in emerging economies. It highlights that regulation often follows, rather than precedes, normative and cultural acceptance.
Practical Implications:
Social Implications:
By linking sustainability reporting with gotong royong and Pancasila, Indonesia fosters a culture of transparency and shared accountability—strengthening public trust in corporate actions.
Future Research:
Further studies could compare Indonesia’s experience with other emerging markets, or explore how digital tools might enhance the accessibility and quality of sustainability reporting.