Author
By Julia Poliscanova, Senior Director for Emobility and Supply Chains at T&E, and Tommy Pratama, Executive Director for Traction Energy Asia
Indonesia is big when it comes to the new race to secure minerals and cleantech. With some of the world’s largest reserves of metals like nickel and cobalt, the country is fuelling the global shift to cleaner energy and electric cars. But as nickel demand takes off, so does its environmental and social harm as forests are logged and workers injured.
The solutions to avoid all that exist and Indonesia does not have to reinvent the wheel. These include the new global supply chain traceability rules in Europe and a promising partnership between Indonesia’s government and the global Initiative for Responsible Mining Assurance (IRMA). How will they help exactly?
The EU is known to be a regulatory giant. Some of these laws, like the new supply chain rules, can have a positive global impact. Key among these is the new sustainable battery law that codifies the United Nations “due diligence guidelines” into law. This means that car and battery makers have to map and address any human rights or environmental risk in their supply chains, including nickel.
Unless measures are in place to halt deforestation or ensure health & safety measures for workers, batteries containing that nickel simply can’t be sold on the EU market, one of the world’s largest.
Another new law, under the lengthy title of the Corporate Sustainability Due Diligence Directive, covers all major supply chains more horizontally than just nickel. It similarly requires all large companies (e.g. carmakers) to map and deal with human rights and other abuses from their suppliers.
Many in Indonesia have so far questioned the unfair burden these laws pose. But if implemented as intended, these will oblige large foreign firms to clean up their act and apply the latest clean technology and safety practices.
The Indonesian government should work with the EU to make sure the new rules help its nature and people. The success means attracting EU investment, possibly joining one of the new Trade and Investment Partnerships announced by European Commission President Von der Leyen and building expertise in sustainable practices across the board.
Where EU regulations provide the framework, IRMA offers a practical path forward. Known for its rigorous standards on environmental protection and respect for local and indigenous populations, IRMA is the best supply chain standard that exists globally.
IRMA representatives have been working closely with the Indonesian government to adapt the standard to the country’s reality.
Indonesia’s landscape and communities are diverse, with specific needs that can be overlooked by one-size-fits-all standards. IRMA works in equal measure with local authorities, indigenous communities and mining companies. It provides guidance not only on environmental performance, but how to navigate complex governance structures and varying levels of community involvement.
This partnership could make all the difference. By aligning international standards with local realities, IRMA’s involvement can help Indonesia put its sustainability goals into reality. This can result in improved working conditions, better safety measures, and a bigger voice for local communities.
None of this is likely to be smooth sailing. Indonesia’s regulatory environment is complex, and not all companies have the resources to meet these new standards quickly. Smaller companies may need technical support and training to navigate compliance.
That’s where the European institutions can support both the government and smaller metal suppliers with guidance and technology. As IRMA has many mining and purchaser companies involved, it can help local businesses build the skills they need to meet supply chain requirements.
But success would be more likely if the Indonesian government supported these efforts with incentives— tax breaks or grants—for companies that adopt higher standards, comply with the EU laws ahead of schedule or achieve IRMA certification.
Indonesia is on the brink of becoming a global leader in the EV battery ecosystem. While there is still work to do, the combined efforts of the EU, IRMA, and Indonesian government could create a lasting, positive impact. If Indonesia succeeds, it won’t just raise the bar for its own mining practices. It could become a model for sustainable growth in other resource rich Global South countries.
