Toward a More Responsible Critical Minerals Supply Chain Supporting Indonesia’s Energy Transition

This policy brief examines the environmental, social, and governance (ESG) risks associated with Indonesia's nickel industry, which is critical to the global energy transition. While Indonesia has seen significant economic growth and export value increases through its downstreaming strategy and export bans, the sector faces challenges including high carbon intensity, workplace fatalities, and rising agrarian disputes. The document maps Indonesian regulations against international standards, identifies policy gaps in human rights and transparency, and provides recommendations to strengthen safeguards and governance.

• Indonesia is a global leader in the nickel industry, producing 54% of nickel pig iron (NPI) and hosting 74% of the world's NPI smelters. The country's nickel export value grew from USD 1.4 billion in 2020 to USD 6.8 billion in 2023, with non-tax state revenue from nickel increasing 15 times between 2016 and 2022, rising from USD 49 million to USD 487 million.
• The expansion of the nickel sector has resulted in significant ESG challenges. Carbon intensity for Indonesian nickel companies ranges from 29 to 70 tonnes of COʂ per tonne of nickel. Safety is a major concern, with 107 deaths resulting from 104 workplace accidents at nickel smelters between 2019 and 2025. Additionally, mining-related conflicts linked to nickel expansion increased by 114% in 2023 compared to 2022.
• Indonesia's downstreaming strategy has been driven by a series of export bans and fiscal incentives. A raw nickel ore export ban began on January 12, 2014, followed by a more selective ban on January 1, 2020, for ore with a grade below 1.7%. To attract investment, the government offers tax holidays for 10–20 years and income tax relief up to 100% for companies in special economic zones (SEZs).
• A mapping of Indonesian regulations against international ESG standards reveals several critical gaps. While labour rights and safety systems are mandated, there is no mandatory human rights due diligence. Sustainability reporting is limited, and anti-corruption policies are recommended but not mandatory. There is also a lack of traceability systems and due diligence requirements for supply chains.
• The document recommends several policy actions to improve the sustainability of the nickel supply chain, including the introduction of mandatory ecosystem service assessments, biodiversity monitoring, and the promotion of free, prior, and informed consent (FPIC) for projects affecting Indigenous communities. It also suggests mandating ESG disclosures and anti-corruption policies for all mining companies.

APA

Maulidia, M., & Bridle, R. (2025). Toward a More Responsible Critical Minerals Supply Chain Supporting Indonesia’s Energy Transition. International Institute for Sustainable Development. https://www.iisd.org/system/files/2025-12/critical-minerals-energy-transition-indonesia.pdf

Chicago

Maulidia, Martha, and Richard Bridle. Toward a More Responsible Critical Minerals Supply Chain Supporting Indonesia’s Energy Transition. International Institute for Sustainable Development, 2025. https://www.iisd.org/system/files/2025-12/critical-minerals-energy-transition-indonesia.pdf.

Wikipedia

{{cite report |last1=Maulidia |first1=Martha |last2=Bridle |first2=Richard |title=Toward a More Responsible Critical Minerals Supply Chain Supporting Indonesia’s Energy Transition |publisher=International Institute for Sustainable Development |date=December 2025 |url=https://www.iisd.org/system/files/2025-12/critical-minerals-energy-transition-indonesia.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{maulidia2025toward, author = {Maulidia, Martha and Bridle, Richard}, title = {{Toward a More Responsible Critical Minerals Supply Chain Supporting Indonesia’s Energy Transition}}, institution = {International Institute for Sustainable Development}, year = {2025}, month = dec, url = {https://www.iisd.org/system/files/2025-12/critical-minerals-energy-transition-indonesia.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }