Businesses are asking the government to provide incentives to manufacturers who use sustainable materials for production as a way to reduce costs and increase their products’ competitiveness against the regular ones in the market
usinesses are asking the government to provide incentives to manufacturers who use sustainable materials for production as a way to reduce costs and increase their products’ competitiveness against the regular ones in the market.
The incentives could be in the form of a tax holiday, a tax cut, or a subsidy on environmentally friendly raw materials, said Budi Santosa, executive director of the Indonesia Business Council for Sustainable Development (IBCSD).
He argued that a high cost of production was the main problem for manufacturers that use sustainable materials. The situation created a wide price gap between environmentally friendly products and those produced using regular materials, he said.
“On average, the prices of products that use sustainable materials can be 60 percent higher than those that don’t,” Budi told The Jakarta Post after a recent high-level IBCSD meeting on sustainable consumption and production in Jakarta.
Sustainable materials were expensive because they needed to be certified in several ways to guarantee they were environmentally friendly, he said.
For example, palm oil products that received certification from the Roundtable on Sustainable Palm Oil (RSPO) were usually considered to be of premium quality, making them more expensive than those that had not been certified.
Palm oil producers, Budi said, had to spend more to be RSPO-certified as they needed to verify and prove that their products were sourced from sustainable materials.
Although a World Wide Fund for Nature study in 2006 revealed that a majority of consumers prefer brands that are environmentally and socially responsible, Budi said in reality, those brands lost in competition with cheaper products that were not certified as sustainable.
“In the end, many customers still prefer to buy the cheapest products available instead of the most sustainable ones,” he said.
Rofyanto Kurniawan, head of the center for state revenue policy at the Finance Ministry’s Fiscal Policy Office, told the Post that there was already a plan for giving fiscal and non-fiscal incentives to support sustainable products, but his center had to conduct thorough analyses and discussions first.
“The incentives need to be aligned with the current regulations, so we need to analyze and measure the impact first before giving them out to the businesses,” he said.
Budi of the IBCSD suggested another incentive in the form of official recognition, so that the products would have a good reputation for being environmentally friendly among government institutions and consumers.
Arifin Rudiyanto, the deputy head of maritime and natural resources at the National Development Planning Agency (Bappenas), said Bappenas was working with the National Standardization Agency (BSN) to devise an “ecolabel” framework that would certify products as environmentally friendly based on standards created by the two institutions. The BSN would issue the label.
Should the products receive the ecolabel from BSN, he said, those products would be able to enter the government’s e-catalog system, which contains lists of goods and services that could be procured by ministries, government institutions and working units online.
“Products that have ecolabels will also be prioritized in the catalog because of their commitment to producing environmentally responsible products,” Arifin said, adding that Bappenas and BSN hoped to implement the framework in about two years.
Budi said he was optimistic that the plan could be beneficial since the government, the private sector and civil society organizations were open to discussion to make Indonesian products more sustainable.
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