Citing the 2019 National ESG Survey conducted by the Indonesian Center of Risk Management and Sustainability (CRMS), the majority of respondents have not considered ESG in decision-making processes and other business processes in the organization. This survey was conducted through 171 companies in Indonesia from 16 industrial sectors, where the majority came from the financial and insurance sector (33 percent) and the mining and quarrying sector (9 percent).

The majority of respondents perceived that ESG is important because it can support the company's sustainability, but, in fact, ESG practices have not been consistently implemented. More than a quarter of respondents implemented ESG due to stakeholders’ requests, and only a small proportion implemented it because they realized that there is a positive relationship between ESG implementation and profitability. In relation to risk management, almost two thirds of respondents have not integrated ESG practices in their risk management, mainly because they do not know or are not sure whether it is necessary to integrate the ESG concepts into company risk management.

The CRMS survey accurately describes the fundamental problems experienced by many companies in implementing ESG. It can be said that, in general, ESG is still perceived as a theory or concept that is well accepted but actually not urgent enough or necessary to implement. As quoted from Harvard Business Review, many CEOs feel as if they're doing everything that's asked of them in terms of improving ESG practices. Yet their firms aren't being rewarded by capital. However, as suggested, following the crowd on ESG activities is not the answer. To gain a competitive advantage, firms should instead focus on the ESG issues that are financially material for them and pursue those in distinctive ways.

There are at least two reasons for this. First, an ESG focus can help management reduce capital costs and improve the firm's valuation. That is because as more investors look to put money into companies with stronger ESG performance, larger pools of capital will be available to those companies. Second, positive action and transparency on ESG matters can help companies protect their valuations as more global regulators and governments mandate ESG disclosures.

To make this happen, there are several strategies that can be used, e.g. identify a corporate purpose and build a culture around it, make operational changes to ensure that the ESG strategy is successfully executed, and commit to transparency and relationship building with investors. In practice, there are some challenges in assessing the extent to which ESGs are being carried out.

The biggest challenge is related to measurement and data availability. Take the example of carbon emissions. Ideally, a fund manager with a portfolio, or a bank with a loan book, could gauge its total net carbon footprint, including the supply chains companies use and the emissions their products release. If all the data is available properly, investors could objectively track both its carbon and financial performance and compare one portfolio with another.

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