Greenwashing in Indonesia: Branding Strategy or Legal Risk?

Sustainability issues are gaining increasing public attention in Indonesia. Consumers, investors, and regulators now expect companies to take greater responsibility for the environmental and social impacts of their business activities. This expectation has become more concrete following the issuance of the Sustainability Reporting Standards (PSPK 1 and PSPK 2) by the Indonesian Institute of Accountants (IAI). However, alongside this growing focus on sustainability, a practice known as greenwashing has also emerged. This practice refers to marketing strategies that exaggerate environmentally friendly claims without being supported by substantive and verifiable actions.

What is Greenwashing?

Greenwashing refers to communication or marketing practices used by companies to portray their products or operations as environmentally friendly and sustainable, without valid supporting data. In practice, companies often use greenwashing as a facade that allows them to continue business-as-usual activities without making meaningful environmental improvements.

According to the Green Business Benchmark, greenwashing commonly appears in seven forms, as follows:

The Sin of Hidden Trade-off
This occurs when a company presents an environmental issue as resolved, while the proposed solution creates other significant environmental impacts.
The Sin of No Proof
This involves making environmental or sustainability claims without credible supporting evidence. These claims lack verifiable data or independent third-party certification.
The Sin of Vagueness
This practice uses broad and poorly defined environmental terms. Examples include words such as “green,” “eco-friendly,” or “sustainable,” which can mislead stakeholders.
The Sin of Worshipping False Labels
This occurs when companies create the impression of official recognition or certification by using false or unauthorized environmental labels.
The Sin of Irrelevance
This involves highlighting environmental claims that are irrelevant or insignificant and do not reflect a substantive sustainability commitment.
The Sin of Lesser of Two Evils
This practice emphasizes relative environmental benefits while ignoring the fact that the product or service still causes substantial overall harm.
The Sin of Fibbing
This refers to environmental claims that are outright false or deliberately misleading.

The Greenwashing Phenomenon in Indonesia

In Indonesia, greenwashing has become more visible alongside rising awareness of Environmental, Social, and Governance (ESG) issues. Most companies listed on the Indonesia Stock Exchange currently publish sustainability reports as separate disclosures. In addition, the Financial Services Authority (OJK) actively promotes sustainable finance through Financial Services Authority Regulation Number 15 of 2017.

Market pressure also plays a significant role, particularly from younger consumers. According to PwC’s 2025 research, 71% of Indonesian consumers are willing to pay a premium for products that support sustainability initiatives. As a result, some companies attempt to appear “green” faster than their internal systems can realistically support.

One notable example of greenwashing in Indonesia relates to captive coal-fired power plants (PLTU captive). These facilities are privately owned power plants used to meet internal industrial electricity needs. Typically, they operate in closed industrial areas, which limits public scrutiny and regulatory oversight.

In 2023, Financial Services Authority (OJK) proposed including captive coal-fired power plants within the green taxonomy framework. The stated rationale was to support industries classified as environmentally friendly. However, many stakeholders viewed this proposal as a form of greenwashing. Captive coal plants still rely on coal and generate high carbon emissions. Labeling them as “green” fails to reflect their actual environmental impact and risks undermining the broader energy transition agenda.

Also Read: Green Commitment: 5 Key Channels of Sustainability Communication

Legal and Reputational Risks

Greenwashing is not merely an ethical business issue. It also creates serious legal and reputational risks. These risks typically arise when greenwashing involves the following elements:

Misleading advertising
Violations of disclosure and transparency principles
Inconsistencies between public reporting and actual conditions

Under the Consumer Protection Law (UUPK) Article 8 paragraph (1) points (a) and (f), as well as Article 9 paragraph (1) point (k), businesses are prohibited from making false or misleading claims or promises. These provisions apply to products, advertisements, and marketing activities. Violations may result in criminal sanctions. Article 62 of the UUPK stipulates penalties of up to five years’ imprisonment or fines of up to IDR 2 billion.

Beyond legal exposure, the most significant impact of greenwashing is the loss of investor and consumer trust. In today’s digital ecosystem, a single finding of misconduct can spread rapidly. Over time, this erosion of trust can materially affect corporate reputation and valuation.

The Role of Consultants in Preventing Greenwashing

To mitigate greenwashing risks, companies must ensure that all sustainability claims are supported by measurable and well-documented data. These claims must also rest on robust internal control systems. In this context, consultants play a critical role in helping companies develop structured ESG reporting frameworks. Consultants also help align public disclosures with operational practices and ensure compliance with relevant standards and regulations, including GRI, ISSB, and applicable Financial Services Authority (OJK) regulations on sustainable finance.

As a consulting firm, PT Synergy Ultima Nobilus supports companies in strengthening the credibility of their sustainability disclosures. This support includes facilitating independent verification processes for sustainability reports. Through this approach, companies can ensure that published information remains accurate, consistent, and accountable to all stakeholders.

Through an integrated advisory approach, PT Synergy Ultima Nobilus assists companies in identifying ESG risks, strengthening the quality of sustainability claims, and preparing credible documentation. These efforts support informed investment decision-making and help protect long-term corporate value.

Sustainability is not merely a narrative exercise. Instead, it requires real transformation within the business model. Companies with genuine commitment embed ESG into their core strategy, set measurable targets, and report performance transparently. As markets become more sophisticated, the distinction between appearing “green” and being truly sustainable can no longer be obscured.