From biodiversity to ESG: evaluating disclosure approaches of companies operating in Indonesia

Biodiversity and Environmental, Social, and Governance (ESG) are becoming critical national interest in Indonesia. This study explores biodiversity and ESG disclosure practices of Indonesian and Korean companies operating in Indonesia, providing a comparative analysis of their performance and disclosure patterns. The sample comprises 70 companies including top 30 Indonesian companies with lowest ESG risk according to Sustainalytics in 2023 and Korean financial firms with highest revenue operating in Indonesia. Two quantitative assessments were conducted: a 5-year biodiversity disclosure analysis (2019–2023) and an ESG performance evaluation for 2023. Findings showed that in biodiversity disclosure, overall awareness of companies was increasing; less significance had been given to biodiversity by most of the companies. The proportion of Indonesian firms publishing sustainability reports increased from 56.7% in 2019 to 96.7% in 2023, but only 7% treated biodiversity as a material topic and 27% aligned with GRI 304 standards on biodiversity. Indonesian companies show a structured approach to ESG, with defined frameworks and long-term planning, yet lack measurable outcomes and extensive third-party validation. Korean companies showed strong ESG standards but faced challenges in establishing clear frameworks and roadmaps. While both sets of companies were engaged in sustainability, Korean firms exhibited relatively lower biodiversity prioritization and ESG integration compared to Indonesian companies. These insights highlighted the importance of integrating biodiversity within ESG strategies to bridge the gap between corporate sustainability commitments and tangible environmental outcomes. This research also showed the need for policy support, including biodiversity-specific guidelines and financial incentives in Indonesia to encourage companies to integrate biodiversity strategically within their ESG goals.

Graphical Abstract

Graphical Abstract

1 Introduction

1.1 Importance of disclosing biodiversity impact of corporates

Biodiversity refers to the variety of living organisms found in all environments, including land, oceans, and freshwater ecosystems (CBD, 1992). Many industries, such as agriculture, pharmaceuticals, and tourism, rely directly on biodiversity for their products and services. This has led to the emergence of “biodiversity business,” where companies develop models focused on conservation (Barna, 2008). According to the United Nations, biodiversity refers to variety and differences in nature. It includes three main levels: genetic diversity, which is the range of differences within a species; species diversity, which is the number of different species; and ecosystem diversity, which covers the variety of habitats and ecological processes (IUCN, 2024). United Nations Biodiversity Conference, COP15, concluded with a major global agreement. This agreement aims to stop the ongoing damage to our natural world and was formalized through the adoption of the Kunming-Montreal Global Biodiversity Framework (UNEP, 2022). Despite its importance, challenges remain in implementing effective strategies. Many leading global companies are not adequately addressing biodiversity loss in their sustainability reports (Yahaya, 2024). With climate change and global warming being major concerns, it's vital to push for better reporting on biodiversity. Looking at how companies currently report on this can help encourage them to share more detailed information in the future.

1.2 ESG and its importance in the corporate world

ESG, which stands for Environmental, Social and Governance is a key aspect that has major focus by almost all the stakeholders including governments and other public institutions. According to the United Nations Development Program (UNDP), ESG can be identified as a key framework for assessing and managing related issues (UNDP, 2024). With the global initiatives supporting the disclosure of ESG aspects of the organizations, many large corporations tend to disclose their ESG-related impacts and risk. Hence, sustainability reporting has consistently increased from 1993 to 2022 (Shulman, 2022). An analysis that covers the Fortune Global 250 (the world's top 250 companies by revenue) and the N100 (top 100 companies by revenue), both of which show a clear upward trend in sustainability reporting over the years (KPMG, 2022). In addition to that, ESG investing has grown significantly, increasing over eightfold since 2015 to $18.4 trillion. While public markets have driven this growth, private markets have also expanded, with ESG investments nearly doubling in the same period (PwC, 2022). The ESG principle has been actively implemented in Europe, the United States, and other developed nations since it was first formally proposed in 2004. Emerging economies have also focused more on ESG recently, in addition to developed nations. Therefore, research focus on ESG is growing continuously. According to an analysis by Chytis, Eriotis (Chytis et al., 2024), the annual number of publications on ESG has risen significantly from 2006 to 2022.

ESG measurements are increasingly vital for assessing corporate sustainability and ethical practices. Materiality analysis is crucial by helping firms prioritize relevant issues (Jørgensen et al., 2022; Calabrese et al., 2019). The implementation of ESG principles emphasize quantifiable indicators and standardized reporting frameworks (Saraswati et al., 2024). Research shows that ESG commitment enhances stakeholder engagement, brand reputation, and financial performance (Tong, 2023). Liu, Lau (Liu et al., 2024) found that such commitment can drive green transitions through technological innovation. However, research indicates that many companies misuse sustainability reports for greenwashing practices, leading even those with high CSR scores to mislead environmental claims (Aggarwal and Kadyan, 2014; Krafft and Saito, 2015; Yu et al., 2020). Furthermore, shareholders' pressures, opportunities, and rationalizations can influence contractor greenwashing behaviors in projects (He et al., 2022). To combat this issue, third-party verification and independent audits have become essential in assessing company's ESG performance (Bachelet et al., 2019; Lyon and Maxwell, 2011). The integration of these elements is essential for the foundational strategy of comprehensive ESG performance assessment (Eccles et al., 2012), resulting in more holistic and material ESG disclosures (Bashir et al., 2023).

Hence, this study focuses on companies operating in Indonesia, with particular attention to both leading domestic firms and Korean financial companies active in the country. The choice of Indonesia is due to its dual significance: first, as a mega-biodiverse nation with urgent sustainability challenges, and second, as a fast-growing economy where ESG integration is gaining prominence in national policy and investment discourse. Indonesia's regulatory momentum toward sustainable finance such as Otoritas Jasa Keuangan (OJK) Regulation No. 51/2017 requiring sustainability reporting makes it a timely and policy-relevant setting for ESG analysis.

The inclusion of Korean companies operating in Indonesia is informed by both practical and analytical considerations. First, the authors of this study have an academic collaboration between researchers from Indonesia and Korea, enabling deep contextual understanding of both institutional environments. Second, Korean companies play a vital role in Indonesia's economy, particularly in capital-intensive sectors such as finance, energy, and manufacturing. As of 2023, over 2,000 Korean companies are registered as operating in Indonesia, and Korea is among Indonesia's top five foreign investors, with over USD 7.5 billion in FDI in 2022 alone (IICB, 2023). Major financial institutions and conglomerates such as KB Financial Group, Shinhan Bank, and LG Group are highly active in the Indonesian market.

Further, Korean firms are widely recognized for high ESG performance domestically. For instance, in the Dow Jones Sustainability Indices (DJSI) Asia-Pacific, Korea has consistently had strong corporate representation across sectors. However, studies have highlighted that ESG practices of multinationals may not translate consistently across host countries due to differences in institutional pressure, stakeholder expectations, or regulatory environments (Jamali et al., 2015; Ioannou and Serafeim, 2012). Thus, a key question motivating this research is whether the ESG standards demonstrated by Korean firms in their home country are similarly evident in their Indonesian subsidiaries or local operations.

By comparing Indonesian ESG leaders with Korean financial firms operating in the same national context, this study contributes to understanding how institutional origin and host-country conditions interact to shape ESG performance. It also provides valuable insights into the transnational transferability of ESG practices, an increasingly important issue as multinational enterprises expand across jurisdictions with varying sustainability norms.

While previous studies have examined ESG reporting trends or biodiversity disclosures separately, few have analyzed how biodiversity is embedded within ESG performance frameworks, particularly in emerging economies. This research is the first comparative assessment that jointly evaluates biodiversity and ESG performance of both domestic Indonesian firms and foreign (Korean) companies operating within the same institutional context, enabling cross-national insight under shared regulatory conditions.

2 Literature review

2.1 ESG and biodiversity performance in companies in Indonesia

Indonesia, the largest economy in Southeast Asia, is an archipelago (a group of islands) with over 300 distinct ethnic groups. According to the Fortune 500 list of Southeast Asian countries, out of 500, 110 companies belong to Indonesia (Fortune, 2024). Indonesia's economic development has been driven primarily by natural resource exploitation, including agriculture, mining, and energy sectors (Gellert, 2010). However, this development has also brought environmental degradation, social inequality, and governance challenges to the country (Burke and Resosudarmo, 2012; McCarthy and Zen, 2010; Zahroh, 2022). In response to these issues, Indonesia is increasingly integrating ESG considerations into its business practices. The OJK or the Financial Services Authority, has introduced POJK 51/2017, requiring sustainability reporting for financial institutions and public companies to enhance accountability and transparency in environmental management (Prihandono and Yuniarti, 2023; Qudriyah et al., 2021). On average, Indonesian companies disclosed 53.81% of Integrated Reporting components in their annual reports (Pratama, 2017). This gap highlights the need for better alignment with industry-specific ESG standards (Ermakova and Finogenova, 2023; Ermakova et al., 2023) and emphasizes the necessity of a materiality matrix for evaluating ESG performance tailored to each industry (Wan et al., 2023). According to Meyer and Rowan (1977), organizations often adopt formal practices such as ESG disclosure to appear legitimate and socially responsible, even when actual implementation remains limited. This explains why some firms report ESG activities more for symbolic compliance than for substantive change (Meyer and Rowan, 1977).

2.2 Environmental dimension

Indonesia, the world's largest archipelagic nation, comprises over 17,500 islands spanning approximately 790 million hectares, with a coastline exceeding 95,000 km. As one of 17 mega-diverse countries, it harbors 17% of the world's wildlife, including over 515 mammal species, 1,519 bird species, and extensive plant and reptile diversity (BIOFIN, 2024). Indonesia is a biodiversity hotspot, with 566 national parks covering 36 million hectares. This includes 490 terrestrial protected areas (22.5 million hectares) and 76 marine protected areas (13.5 million hectares). Its forests span 88.5 million hectares, particularly rich in biodiversity within lowland regions (CBD, 2024). These important setting makes it crucial for Indonesia to focus on biodiversity. By embedding ESG considerations into their strategies, businesses can ensure they are operating in a manner that is both economically viable and environmentally responsible. However, as Visser (2008) notes, in developing countries ESG and CSR adoption is often externally driven by global standards, investors, or multinational supply chains, rather than being internally motivated by environmental ethics (Visser, 2008).

2.3 Social dimensions

Indonesia's diverse social and economic disparities necessitate the integration of ESG factors in investment decisions, particularly in the mining and plantation sectors (Cakranegara, 2021). The mining and oil sectors significantly impact local communities, requiring careful management of social responsibilities in various sectors (McPhail and Davy, 1998), such as community development, employee welfare, human rights, diversity, and inclusion (do Amaral et al., 2024). In response, businesses are increasingly adopting Corporate Social Responsibility (CSR) initiatives that align with the United Nations Sustainable Development Goals (SDGs) (Nasrullah et al., 2014; Turker and Turker, 2018), particularly in areas like poverty reduction, education, and healthcare (Jenkins, 2005). Jamali and Karam (2016) highlight that CSR and ESG practices in developing countries are shaped by complex institutional and macro-level antecedents, where weak formal institutions, cultural norms, and informal governance systems lead to hybrid and context-specific CSR expressions. This explains the selective and uneven adoption of social ESG practices in Indonesia (Jamali and Karam, 2016).

2.4 Governance dimensions

Governance in Indonesia is evolving with greater emphasis on transparency and anti-corruption. The government's initiatives to strengthen regulatory bodies and implement anti-corruption laws are crucial for enhancing corporate governance standards (Juwono, 2016; Tjiptoherijanto and Rowen, 2010). However, the success of these initiatives often hinges on their integration into core business strategies rather than being treated as ancillary activities.

In general, the ESG landscape in Indonesia is further shaped by global standards such as the Global Reporting Initiative (GRI), Sustainability Accounting Standards Board (SASB), and the International Council on Mining and Metals (ICMM) principles (Prihandono and Yuniarti, 2023; Kamela and Alam, 2021). The government is also promoting ESG initiatives in micro, small, and medium enterprises (Putri et al., 2022) and infrastructure development through public-private partnerships (PPP) (Haryani and Anjani, 2023; Steelyana and Wahyuni, 2024; Wardhana, 2024). These frameworks guide businesses in reporting their ESG performance, enhancing accountability and investor confidence. Still, consistent with Meyer and Rowan's (1977) institutional view, ESG governance in Indonesia often reflects an effort to gain legitimacy within global markets rather than to transform internal governance culture (Meyer and Rowan, 1977).

2.5 Emerging trends and future directions

Indonesia's business environment is increasingly prioritizing sustainability and ESG factors in corporate strategies. Companies are responding to regulatory pressures while recognizing the competitive benefits of sustainable practices, such as better risk management and enhanced reputations (Oyewole et al., 2024; Chakravarty, 2014; Hockerts, 2015; Lusmeida and Arsjah, 2023; Saldi et al., 2023). The growth of green bonds and sustainable finance instruments highlights the rising significance of ESG in Indonesia's financial markets (Nursahla et al., 2023; Prabowo, 2018). The integration of sustainability and ESG principles into the Indonesian business environment is both a challenge and an opportunity (Putri and Bangun, 2023). As the country continues to navigate the complexities of economic development, environmental stewardship, and social equity, the role of ESG in shaping a more sustainable and resilient future cannot be overstated (Sun et al., 2024). Matten and Moon (2008) distinguished between explicit and implicit CSR systems—explicit approaches rely on formal reporting and policies (typical in Indonesia), whereas implicit approaches are embedded in cultural or institutional norms (as in Korea). This framework helps explain cross-country differences in ESG adaptation (Matten and Moon, 2004).

2.6 Overview of Korean companies in the Indonesian market

Korean companies have a significant impact in the economy of Indonesia. Companies like Samsung have made substantial contributions through investments, job creation, and tax revenues, enhancing Indonesia's economic growth (Husna et al., 2024). Korean enterprises predominantly invest in the manufacturing sector, often preferring joint ventures and small-scale investments, which align with local market needs (Kim, 2022). Korean companies provide an interesting contrast to Indonesian firms, particularly in the context of sustainability and ESG practices. In contrast, Korea, while not classified as a biodiversity hotspot, possesses unique ecosystems such as temperate forests and wetlands. The country has made significant strides in biodiversity conservation, particularly in urban and industrial settings, through proactive policies and the establishment of programs like the National Aquatic Ecological Monitoring Program (Andersen and Jang, 2021; Jun et al., 2016). Korea's technology-driven economy allows it to address biodiversity impacts through innovation and sustainable urban development practices (Young and Don, 2017). This proactive stance positions Korea as a model for green growth in East Asia, showcasing effective strategies for integrating biodiversity considerations into economic planning (Andersen and Jang, 2021; Young and Don, 2017). The “Korean 200 Biodiversity & Nature-Positive Commitments 2023” report by IESGA highlights a significant doubling in the number of companies disclosing biodiversity and nature-positive initiatives, increasing from 16 in 2019 to 37 in 2021 (Global ESG Forum, 2023; Cho et al., 2024).

However, the performance of Korean companies operating in other countries may not necessarily align with their performance within their home country, due to challenges of adapting to unique social, environmental, and regulatory landscapes. This presents an opportunity for further research, as variations in performance across different contexts remain an area that is not yet fully understood. To address this, we designed our study to analyze both Indonesian companies and Korean companies operating within Indonesia. The objective was to comparatively analyze the ESG and Biodiversity performance of Indonesian companies and the Korean companies in Indonesia. This comparative approach aims to highlight any differences or consistencies in their practices across these two distinct settings.

2.7 Theoretical framework: institutional duality and organizational isomorphism

This study applies the concepts of institutional duality and organizational isomorphism to explain how firms adapt their ESG and biodiversity disclosure practices across different settings. Institutional duality refers to the situation in which multinational subsidiaries face pressures from both home and host country institutions (Kostova and Roth, 2002; Kostova et al., 2008). These firms must align with corporate policies developed in the home country while also responding to local regulations and cultural expectations. In this study, Korean firms in Indonesia operate between Korea's well-established ESG systems and Indonesia's developing sustainability frameworks, leading to varied patterns of disclosure and compliance (Table 1).

Table 1

Table 1. Theories related to the study.

The idea of organizational isomorphism further clarifies how firms become similar in response to institutional pressures (DiMaggio and Powell, 1983). Coercive, normative and mimetic forces encourage companies to follow accepted norms and peer practices to gain legitimacy. Indonesian firms may imitate global ESG reporting models, while Korean firms may adapt to host country expectations to secure local acceptance. Together, these perspectives provide a useful foundation for understanding how institutional context shapes transnational ESG adaptation and biodiversity disclosure. In emerging economies such as Indonesia, ESG and biodiversity disclosures are often motivated by regulatory compliance and external expectations rather than internalized environmental values. Korean companies operating in Indonesia, on the other hand, tend to transfer their home-country governance and reporting systems but face challenges adapting them to local institutional contexts. Comparative CSR theory (Matten and Moon, 2008) also explains these differences through explicit, regulation-driven practices and implicit, value-based approaches to sustainability.

Institutional theory and the concepts of duality and isomorphism together explain why and how companies differ in ESG and biodiversity performance across contexts. Institutional duality creates conflicting pressures: subsidiaries must satisfy both home-country institutional norms and host-country regulations. This tension shapes ESG disclosure depth and content. Coercive pressures (laws such as OJK 51/2017) drive formal compliance and reporting visibility; normative pressures (professional and stakeholder expectations) influence disclosure quality and assurance; and mimetic pressures (peer imitation and global benchmarking) encourage firms to align with international frameworks such as GRI 304 and TNFD. As a result, institutional alignment (through coercive and normative forces) enhances structural ESG attributes, frameworks and roadmaps, while institutional adaptation (through duality management and mimetic learning) affects substantive outcomes, performance and biodiversity integration. Therefore, causal pathways run from institutional pressures→organizational conformity→ESG structure→ESG and biodiversity outcomes, explaining observable cross-country differences between Indonesian and Korean firms.

Based on these theoretical perspectives, the following hypotheses are proposed:

H1: ESG and biodiversity disclosures differ significantly between Indonesian and Korean companies operating in Indonesia due to variations in institutional environments.

H2: Indonesian companies are expected to have more structured ESG frameworks and disclosure roadmaps as a result of domestic reporting regulations, while Korean companies are likely to show stronger operational ESG performance aligned with international standards.

H3: Biodiversity disclosure is expected to remain limited across both groups, reflecting its relatively weak institutional integration within the ESG agenda.

3 Methodology

3.1 Sample selection criteria

This study employs a quantitative–comparative and longitudinal approach using content analysis as its primary analytical method. The research design integrates both cross-sectional (ESG assessment in 2023) and time-series (biodiversity disclosure from 2019–2023) dimensions. The mixed design enables identification of trends in biodiversity-related reporting and comparative evaluation of ESG performance between Indonesian and Korean companies operating under the same institutional setting. This approach allows both descriptive assessment and statistical comparison, ensuring theoretical alignment with institutional and legitimacy frameworks.

3.2 Location and the subjects

This study is designed with three key objectives. First, it aims to evaluate the biodiversity performance of Indonesian companies, Korean companies, and other foreign firms operating in Indonesia over the period 2019 to 2023. This longitudinal assessment enables an understanding of how corporate attention to biodiversity has evolved over time, particularly in response to global and national environmental expectations. The assessment is grounded in a biodiversity performance evaluation framework that draws on key indicators, including GRI 304 standards, to reflect companies' recognition and management of biodiversity-related impacts.

Second, a subset of these companies, selected based on data completeness and relevance, was analyzed in greater detail to assess their ESG performance for the year 2023. This ESG assessment employed a comprehensive, multi-dimensional framework encompassing four major components: ESG Framework Measurement, ESG Performance Benchmarking, ESG Roadmap Analysis, and ESG Assurance Practices. Focusing the ESG evaluation on 2023 ensures a snapshot of current corporate sustainability practices in alignment with the latest regulatory and reporting trends.

Third, the study conducts a comparative analysis of Indonesian and Korean companies operating in Indonesia to identify key differences in their biodiversity and ESG disclosure patterns. This comparative lens is particularly relevant given the differing institutional, regulatory, and cultural contexts between domestic and foreign firms.

These objectives are both theoretically and practically significant. Theoretically, the research fills an important gap in ESG literature by linking biodiversity-specific disclosures to broader ESG integration, an area still underexplored in sustainability research. Practically, it provides empirical insights for a range of stakeholders including investors, regulators, and policymakers seeking to assess corporate accountability and environmental stewardship. The analysis offers valuable guidance on how companies operating in emerging economies like Indonesia are aligning with global sustainability expectations, particularly in terms of biodiversity protection and ESG transparency.

In this study, disclosure is viewed not only as communication of information but also as a legitimacy-seeking practice. According to institutional and legitimacy theory, organizations disclose ESG and biodiversity information to align with societal expectations and secure legitimacy among stakeholders (Meyer and Rowan, 1977; Suchman, 1995; Deegan, 2002). Consequently, sustainability reporting is interpreted as both an informational output and a symbolic signal of corporate accountability.

3.3 Biodiversity disclosure analysis

3.3.1 Data collection techniques

The biodiversity disclosure component of this study is based on a 5-year dataset (2019–2023), selected to capture trends and variations in biodiversity-related reporting among companies operating in Indonesia. Given the relatively underdeveloped and inconsistent nature of biodiversity disclosures compared to ESG reporting, the use of a multi-year period allows for a more comprehensive examination of disclosure frequency, content, and alignment with established reporting standards.

Two distinct datasets were constructed for this purpose:

1. Set A – Indonesian ESG Leaders (n = 30):

This dataset consists of 30 Indonesian companies selected based on their strong ESG performance in 2023, as identified by low ESG risk scores in the Sustainalytics ESG-Leader Index. These companies were included to examine the extent to which leading ESG performers disclose biodiversity-related information. The sample provides insights into whether broader ESG leadership is associated with meaningful biodiversity transparency (Figure 1).

Figure 1

Figure 1. Sample selection criteria.

2. Set B – Financial Institutions (n = 40):

A separate dataset was developed to assess biodiversity disclosure among financial institutions, based on their strategic influence in directing capital flows and shaping environmental outcomes. Financial institutions, including banks, insurers, and investment firms—play a critical role in advancing biodiversity-related accountability due to their ability to integrate nature-related risks and dependencies into lending and investment decisions. As emphasized by the Taskforce on Nature-related Financial Disclosures (TNFD) and the EU Sustainable Finance framework, the financial sector is central to embedding biodiversity considerations into corporate decision-making and risk governance (CDSB, 2021; EU, 2024).

The dataset includes:

• 13 Indonesian financial institutions (based on market presence and data availability),

• 11 Korean financial institutions (also included in the ESG performance analysis),

• 16 other foreign financial institutions operating in Indonesia (selected based on market share and completeness of reporting).

The asymmetric sample sizes (Saraswati et al., 2024; Jørgensen et al., 2022; Aggarwal and Kadyan, 2014) are a direct result of limitations in the availability of complete and verifiable sustainability or integrated reports during the study period. Rather than imposing artificial balance across groups, the sampling strategy prioritized data quality and inclusion of only those firms with publicly accessible, relevant biodiversity disclosures (Figure 1).

Based on the methodology by Zu Ermgassen et al. (2022) to assess Fortune 100 companies, in the process data collection was carried out involving the acquisition and analysis of sustainability reports from selected companies.

The sustainability reports from each selected company for the years 2019–2023 were obtained for the analysis. In this step, we checked whether the companies have published their sustainability reports.

3.3.2 Data analysis techniques

A threefold analysis was conducted on each sustainability report to assess the companies' biodiversity-related disclosures:

1. Frequency of biodiversity mentions: the frequency with which the term “biodiversity” was mentioned in the sustainability reports was recorded. This provided a quantitative measure of the companies' focus on biodiversity (Hassan et al., 2020).

2. Inclusion as a material topic: we examined whether biodiversity was listed as a materiality topic in the sustainability report, indicating the company's recognition of its strategic importance.

3. Adherence to GRI 304 standards: the reports were reviewed for compliance with GRI 304 standards, which specifically addresses biodiversity issues. This standard remains one of the most widely accepted frameworks for reporting on biodiversity and environmental impact.

The data enabled both qualitative and quantitative assessments of biodiversity integration into corporate sustainability strategies.

Data used in this study are using the publicly available in sustainability reports and nor any human participants are involved in this study for procuring the data. The frequency and contextual integration of biodiversity information were analyzed descriptively over 5 years using Microsoft Excel.

3.4 ESG disclosure analysis

3.4.1 Data collection techniques

Following the biodiversity disclosure analysis, a focused assessment of ESG performance was conducted for a subset of 41 companies during the year 2023. This subset includes the 30 Indonesian companies and 11 Korean financial institutions previously examined for biodiversity disclosure. ESG evaluation was not extended to the remaining foreign financial institutions, as the primary comparative objective of the study was to assess ESG implementation by Korean firms relative to leading Indonesian companies operating under the same regulatory conditions in Indonesia.

The decision to restrict ESG analysis to a single year is based on both methodological and practical considerations. Multi-year panel analysis of ESG performance is highly complex due to the evolving nature of reporting standards, variation in metrics, and inconsistency in third-party assurance practices across time. In contrast, a single-year cross-sectional assessment offers temporal consistency and captures the most recent corporate ESG strategies and disclosure frameworks under the current reporting environment. The year 2023 was selected as it represents a period of maturity in ESG reporting, marked by the increasing adoption of internationally recognized standards and third-party assurance mechanisms.

3.4.2 Data analysis techniques

The ESG performance of the 41 selected companies was assessed using a structured framework composed of five dimensions: presence of a formal ESG framework, benchmarking of ESG performance metrics, articulation of ESG roadmaps with clear targets, inclusion of third-party ESG assurance, and a weighted composite score aggregating all four dimensions. This framework was designed to evaluate both structural and outcome-based components of ESG disclosure and to enable systematic comparison between domestic and foreign companies operating within Indonesia.

This two-stage analytical design allows for an in-depth understanding of how companies disclose and implement sustainability practices, beginning with biodiversity as a specific environmental domain and extending to broader ESG integration. It also facilitates a focused comparison between Indonesian and Korean firms under consistent institutional conditions.

3.4.3 ESG framework

The first component discusses the existence of an ESG framework, or similar terms such as the materiality matrix, as a reference for companies in developing and implementing sustainability strategies. Materials analysis often uses the Global Reporting Initiative (GRI) materiality matrix as a guide. Other ESG reporting standards such as SASB and TCF as well as rating methodologies (Sustainalytics, MSCI) focus on industry information to highlight related issues for stakeholders. This component shows how companies develop and manage their sustainability strategies.

To measure this component, we compiled recommended material topics from various ESG reporting standards and rating methodologies by harmonizing ESG-related terms for specific industries. This compilation is cross-referenced with the ESG frameworks adopted by companies, and we assess the alignment of each company's ESG framework with the recommended material topics. Details of this evaluation are provided in the following Table 2:

Table 2

Table 2. ESG framework measurement approach.

3.4.4 ESG performance metric benchmarking

The second component focuses on quantitative metrics developed by various ESG standards and rating agencies. Just like financial performance is measured with clear metrics, ESG performance requires comparisons with measurable indicators. Supported by research by Risso and Longarini (2023) which emphasizes the importance of standard benchmarks as a benchmark for ESG performance in various industry sectors and proposes the use of performance indicators to assess corporate governance through factor analysis.

To measure this component, we classify indicators for each ESG topic as quantitative or qualitative, prioritizing ratio-based metrics (e.g., emission intensity) over absolute figures. These metrics are then compared with data from the previous 3 years and with national industry peers that have similar ESG ratings or risk profiles. Detailed results of our ESG performance metrics are presented in the following Table 3.

Table 3

Table 3. ESG performance metric benchmarking measurement approach.

3.4.5 ESG Roadmaps

The third element emphasizes management's commitment to effectively addressing ESG issues, which is crucial for aligning company objectives in both the short and long term (Agbakwuru et al., 2024). This commitment also aligns with stakeholder interests.

To assess this component, we will examine each material ESG topic for every company to determine if there is a clear SMART target (Specific, Measurable, Achievable, Realistic and Time bound) associated with it. The focus will be on the presence of these targets rather than their magnitude, as companies may have different resources.

3.4.6 ESG Assurance

The fourth element emphasizes the validation of ESG achievements by an independent third party. Just as financial statements are audited to ensure their accuracy and reliability, achieving credible ESG requires independent validation. The study conducted highlights the importance of a reliable ESG research system to overcome data quality and data validation constraints (Liu et al., 2023). Independent validation helps prevent companies from controlling the issue of greenwashing, i.e., claims that exaggerate or misrepresent the company's environmental credentials (De Silva Lokuwaduge and de Silva, 2022). This component assessment is carried out by reviewing the sustainability report (or similar document) for the ESG assurance statement to ascertain whether or not the ESG disclosures provided have been independently verified by a third party.

3.4.7 Combined ESG performance components

An ESG assessment consists of several key components that are measured separately to produce a final score that reflects the company's overall ESG performance. There are main component emotes that are evaluated, including ESG framework and/or ESG materiality matrix, Sustainability performance metrics benchmarking, Presence and coverage of ESG roadmaps, Existence of ESG assurance. Each of the four components has a different weight that reflects the importance of the role of these components for sustainability and governance.

The final score of the ESG framework is 10% which includes the structure of the company's policies in managing the company's ESG issues as the basis for effective ESG management. Its low weight reflects the general condition among companies in Indonesia. In contrast, ESG performance carries a higher weight of 30%, measuring measurable achievements related to ESG indicators and trends in addressing sustainability issues over time. The ESG roadmap also receives a weight of 30%, assessing how clearly the company outlines its roadmap and concrete targets for future ESG issues. The fourth component, ESG assurance with a weight of 30%, where this component ensures the credibility of the company's ESG reports and achievements through independent recognition. This weighting is determined through ongoing discussions with experts to prioritize important elements in effective ESG management.

The weighting scheme reflects the relative maturity and influence of each ESG component toward driving meaningful sustainability outcomes. The ESG Framework was assigned the lowest proportion because disclosure frameworks and materiality mapping have been well-established for years through international standards such as the GRI Materiality principle, widely adopted in Indonesia and evidenced through the increasing use of materiality matrices in listed companies' sustainability reports (Calabrese et al., 2019). Frameworks primarily guide the structure and scope of disclosure, rather than directly indicating performance impact, therefore a lower weight is appropriate. In contrast, the remaining three dimensions (Performance, Transition Roadmap, and Assurance) were weighted equally due to their critical and emerging role in shaping credible, outcome-oriented ESG reporting. Performance metrics and outcomes align with the ISSB/IFRS S1–S2 requirement for decision-useful sustainability metrics and targets, emphasizing measurable results (Nielsen, 2023). Transition plans and science-aligned targets are increasingly mandated by regulations such as the EU CSRD and reinforced through global commitments, highlighting their role in ensuring forward-looking accountability. Independent external assurance is gaining prominence through standards such as ISSA 5000 and ISAE 3000 (Revised), enhancing data credibility and stakeholder trust (Simnett et al., 2009). Because these three pillars collectively drive material, verifiable, and future-oriented impact, assigning them equal and higher weight is conceptually justified. The ESG score is calculated using the following formula: Bottom of Form

$\begin{array}{l}=\left(10\%x\frac{ScoreforESGframework}{MaxscoreforESGframework}\right)\\ +\left(30\%x\frac{ScoreforESGperformance}{MaxscoreforESGperformance}\right)\\ +\left(30\%x\frac{ScoreforESGroadmap}{MaxscoreforESGroadmap}\right)\\ +\left(30\%x\frac{ScoreforESGassurance}{MaxscoreforESGãssurance}\right)\\ =\left(10\%x\frac{ScoreforESGframework}{4}\right)\\ +\left(30\%x\frac{ScoreforESGperformance}{3}\right)\\ +\left(30\%x\frac{ScoreforESGroadmap}{2}\right)\\ +\left(30\%x\frac{ScoreforESGãssurance}{1}\right)\end{array}$

Information:

1. The ESG Framework Score is based on an evaluation of the ESG framework disclosure and the company's materiality matrix with a minimum score of 1 and a maximum score of 4 (see Table 2 for full details).

2. The ESG Performance score is based on the company's main sustainability performance indicators, with a maximum score of 3 (see Table 3 for full details).

3. The ESG Roadmap Score assesses a company's commitment to achieving their sustainability targets and strategic plan, with a maximum score of 2 for this component (see Table 4 for full details).

4. The ESG Assurance Score is based on the measurement of the external validation rate of a company's ESG disclosures. The maximum score is 1 (see Table 5 for full details)

Table 4

Table 4. ESG roadmaps measurement approach.

Table 5

Table 5. ESG assurance measurement approach.

3.5 Data validity

Data validity was ensured through the use of verifiable, publicly released reports obtained directly from company websites and official sustainability repositories. Only reports covering the full period (2019–2023) and meeting completeness and accessibility criteria were included. The use of standardized frameworks such as GRI 304, TNFD, and OJK 51/2017 provided consistency and comparability across firms. Because all data were publicly available, the study ensures transparency, replicability, and objectivity without the need for external validation.

In relation to the coding process, it is important to note that the biodiversity disclosure analysis and ESG disclosure scoring were conducted by a single trained coder (the first author) using a detailed scoring rubric and codebook developed in alignment with GRI 304, SASB, TCFD, IFRS S1 and S2, and ESG assessment criteria. As a result, inter-coder reliability testing was not applicable for this study. To minimize subjectivity and enhance consistency, a systematic coding protocol was used, and ambiguous classifications were cross-checked with a senior researcher for clarification. This approach ensures sufficient reliability for exploratory research of this nature, although future studies may incorporate multiple coders to enable statistical inter-coder reliability testing and enhance robustness.

4 Results and discussion

4.1 Biodiversity disclosure analysis

4.1.1 Analysis on top 30 Indonesian companies that demonstrated lowest ESG risk according to sustainalytics report in 2023

Among the top 30 Indonesian companies identified by sustainalytics in 2023 with the lowest ESG risk, our analysis shows a substantial increase in sustainability reporting between 2019 and 2023. In 2019, only 17 companies (56.7%) published sustainability reports, rising to 29 companies (96.7%) by 2023 (Figure 2). This shift aligns with Indonesia's regulatory evolution under the Financial Services Authority (OJK), which introduced mandatory sustainability reporting through Regulation No. 51/2017 and further detailed content and format requirements via OJK Circular Letter No. 16/SEOJK.04/2021(SSEK, 2024).

Figure 2

Figure 2. Biodiversity performance of top 30 Indonesian companies.

However, while general ESG reporting gained traction, biodiversity-specific metrics remained underdeveloped. References to “biodiversity” increased from 12 companies in 2019 to 26 in 2023. Despite this increase, only a marginal number included biodiversity as a material topic, one in 2019, peaking at four in 2022, then declining to two in 2023. Similarly, GRI 304 alignment grew from two companies in 2019 to eight in 2023. These results, partially confirm H1 and H3, indicating that while disclosure frequency improved, the limited materiality and weak GRI 304 alignments show biodiversity remains only superficially integrated within ESG frameworks. These findings suggest that while regulatory pressure, such as OJK's mandatory reporting requirements, succeeded in broadening disclosure practices, it did not compel companies to meaningfully incorporate biodiversity into their strategic risk frameworks. This pattern is consistent with recent evidence that mandatory sustainability rules expand disclosure volume without guaranteeing depth or decision-useful quality, particularly for nature-related topics (Latella and Veltri, 2024).

Several factors contribute to this limited integration. OJK Regulation 51/2017 mandates the preparation of sustainability reports by public and financial institutions but does not explicitly require biodiversity metrics; the 2021 Circular Letter focuses on report structure and minimum contents rather than prescribing GRI 304 metrics (OJK Regulation 51., 2017). During our study window (2019–2023) the relevant global standards were still evolving; GRI's update to biodiversity reporting (GRI 101: Biodiversity 2024) will only replace GRI 304 from 2026 onward, meaning firms were not yet required to adopt the revised biodiversity content. Similarly, the Circular Letter 16/2021 provides technical guidance on reporting form and content without imposing biodiversity-specific provisions (Meutia, 2023). Indonesia's 2020–2030 National Biodiversity Strategy and Action Plan (NBSAP) set voluntary disclosure targets but lacked enforcement mechanisms. Meanwhile, global frameworks such as the Kunming–Montreal Global Biodiversity Framework (adopted COP15, 2022), Taskforce on Nature-related Financial Disclosures (TNFD, finalized 2023), and revised GRI 304 standard (2024) provided external pressure to increase biodiversity visibility. However, firms, particularly those under domestic regulatory regimes, appear to have responded primarily by increasing narrative references rather than substantive strategic integration. Furthermore, recent peer-reviewed studies on biodiversity disclosure corroborate our interpretation: cross-country analyses find that biodiversity reporting is uneven, shaped by emerging global frameworks (GRI/TNFD/ESRS), and often lags climate disclosure in both coverage and quality—exactly the pattern we observe in Indonesian leaders (Bassen et al., 2025; Lammerant, 2024).

4.1.2 Analysis on financial companies in Indonesia with highest revenue in 2023

The second sample included 40 high-revenue financial institutions operating in Indonesia, divided into Group A (Korean, 11 firms), Group B (Indonesian, 13), and Group C (Foreign non-Korean, 16). All groups exhibited increased sustainability reporting activity, with Group C outperforming the others in frequency and depth of disclosures, followed by Group B and then Group A. According to Figure 3, there was no clear trend in the use of the keyword “biodiversity” across the groups during the selected period. However, Group B mentioned it more frequently than Groups A and C, indicating greater emphasis on biodiversity.

Figure 3

Figure 3. Biodiversity performance of Korean companies in Indonesia (A), Indonesian companies (B) and other foreign companies (C).

Foreign financial institutions in Group C demonstrated the most robust engagement with biodiversity issues. Nearly every firm that mentioned biodiversity classified it as a material topic and showed progressive alignment with GRI 304 requirements from 2020 to 2023. This cross-group variation supports H1, as institutional environments and regulatory maturity clearly influence disclosure depth, and further reinforces H3 by confirming that biodiversity continues to hold a peripheral position across corporate sustainability reporting. This likely stems from their exposure to international regulatory regimes, including the EU CSRD (effective 2023), as well as early adoption of TNFD principles. The TNFD, finalized in September 2023, has gained over 500 organizational commitments including 129 financial firms with USD 17.7 trillion in assets to implement nature-related disclosures (Asuene Inc., 2025). Similar patterns have been documented in Europe and Japan, where banks subject to CSRD and TNFD frameworks show earlier integration of biodiversity risk management compared with those in emerging markets

Indonesian financial institutions (Group B) showed moderate progress. A gradually increasing number mentioned biodiversity, though fewer than half designated it as material. Some have begun referencing Bank Indonesia's 2022 Green Taxonomy, yet GRI 304 alignment remained inconsistent. This aligns with Uyar et al. (2022), who found that in emerging economies like Turkey, sustainability reporting grows under regulatory pressure but tends to remain descriptive rather than strategic (Kuzey and Uyar, 2017). Korean financial institutions operating in Indonesia (Group A) demonstrated the lowest levels of biodiversity disclosure between 2019 and 2023. None identified biodiversity as a material topic or aligned with GRI 304 standards. References to biodiversity, when present, were typically limited to CSR-related activities rather than integrated risk frameworks. This trend reflects the broader ESG focus of their parent institutions in South Korea, where regulatory emphasis during this period prioritized climate change and corporate governance over biodiversity (Financial Services Commission, Republic of Korea, 2024; ICLG, 2025). South Korea's ESG disclosure roadmap, including guidelines from the Financial Services Commission and the Korea Sustainability Standards Board, positioned biodiversity as a voluntary rather than mandatory theme (Kim, 2023a). Comparable findings were reported by Bassen et al. (2025), who observed that biodiversity-related disclosure remains limited in jurisdictions where ESG guidance is voluntary rather than enforceable (Bassen et al., 2025). Furthermore, Indonesian policy instruments such as OJK Regulation No. 51/POJK.03/2017 and the 2022 Green Taxonomy, while encouraging ESG reporting, did not yet impose biodiversity-specific requirements, offering limited regulatory incentive for deeper integration at the branch level (Indonesia Financial Services Authority, 2025). As biodiversity increasingly becomes addressed in international frameworks like COP15's Kunming-Montreal GBF (2022), TNFD (2023), and EU CSRD (2023), future disclosures from these institutions may become more robust. However, between 2019 and 2023, biodiversity remained a secondary consideration due to prevailing regulatory and institutional priorities.

4.1.3 Institutional drivers and financial policy context

The differential performance among both corporate and financial samples echoes the influence of regulatory environments and market governance. Indonesia's NBSAP and OJK's sustainability regulation strengthened domestic ESG governance but lacked biodiversity specificity, leading firms to boost disclosure volume without strategic substance. This outcome parallels results from Latin American and ASEAN markets, where regulation expanded ESG visibility, but substantive biodiversity management remained limited (Ali et al., 2024). International frameworks such as GBF, TNFD, CSRD, and SBTN, gaining momentum during 2020–2023, have created tangible incentives for foreign firms to deepen biodiversity reporting (Goldberg and Yonge, 2024).

Financially, global institutions with multinational mandates have internalized biodiversity risks in their capital allocation under the TNFD and GRI 304 frameworks. Indonesian banks, responding to national taxonomies and emerging domestic sustainability discourse, have followed suit. Korean banks, however, have remained largely insulated from these pressures, continuing to prioritize climate and corporate governance over biodiversity.

The observed differences reflect how global sustainability standards are interpreted through transnational governance processes. Rather than being adopted wholesale, frameworks such as GRI 304 and TNFD are translated into Indonesia's institutional setting through OJK regulations and the 2022 Green Taxonomy, creating a hybrid ESG model suited to local priorities (Czarniawska and Joerges, 1996). ESG disclosure also functions as a legitimacy mechanism, allowing firms to demonstrate conformity with societal and investor expectations (Suchman, 1995; Deegan, 2002). In emerging markets, disclosure often expands faster than substantive change, reflecting institutional decoupling where reporting secures legitimacy even amid limited implementation (Meyer and Rowan, 1977; Azizul Islam, 2016).

4.2 ESG performance analysis

In the ESG Performance assessment analysis section, various ESG components are evaluated in companies in Indonesia, Korean companies in Indonesia, and the two regions. The ESG component in question includes key performance metrics in four score categories: ESG framework score, ESG performance score, ESG Roadmaps score, and ESG assurance score. The metrics are then visualized using graphs to show a comparison of sustainability and governance efforts in each region. From the graphics, you can get insights into how well companies have integrated ESG principles into their strategies and operations. Overall, the findings show that global ESG norms are localized through Indonesia's state-led sustainability framework. International principles such as GRI 304 and TNFD are adapted to domestic governance and cultural priorities, producing an Indonesian ESG model that merges global accountability with national development objectives (Jiang et al., 2024; Rahmaniati and Ekawati, 2024).

4.2.1 ESG framework

In Figure 4, Indonesian companies achieve a relatively high ESG Framework score of 0.81, indicating effective development and implementation of corporate ESG strategies. This demonstrates their capability in formulating ESG materiality matrices and structured sustainability plans addressing climate change and resource management, potentially enhancing their transparency, reputation, and global competitiveness. Comparable results were reported by Lagasio and Cucari (2019), who found that strong governance mechanisms and board structures enhance ESG framework quality in emerging markets (Lagasio and Cucari, 2019).

Figure 4

Figure 4. ESG performance of Korean and Indonesian companies for the year 2023.

In contrast, Korean companies operating in Indonesia score lower (0.68), suggesting challenges in fully implementing their ESG frameworks locally. Although Korean firms typically adhere to global ESG standards, they appear to face adaptation issues in Indonesia, highlighting a need for better alignment and structured approaches to local sustainability management. Korean multinationals often experience difficulty contextualizing ESG frameworks to host-country regulatory expectations (Kim, 2023b).

A statistical t-test (Table 6) confirms this difference (t-value = 2.028, coef. 0.127^**), statistically validating that Indonesian companies currently have more advanced ESG frameworks compared to Korean companies facing adaptation hurdles.

Table 6

Table 6. T-test analysis result.

The combined ESG framework score for Indonesian and Korean companies is 0.78, reflecting how these firms collectively design and implement their sustainability strategies. This aggregate figure is calculated by averaging each country's ESG Materiality Matrix Score, thereby offering a regional benchmark that complements our primary cross-country comparisons.

Notably, biodiversity risk management has emerged as a critical environmental dimension within these matrices. Prior research (Ali et al., 2024; Adler et al., 2018) shows that substantive voluntary biodiversity disclosure both signals genuine environmental stewardship and reduces information asymmetry precisely the qualities our “two or more environmental topics” criterion rewards. Consequently, firms that explicitly integrate biodiversity into their materiality matrices not only achieve higher framework scores but also tend to exhibit stronger environmental performance and greater stakeholder trust.

While our main hypothesis examines differences between Indonesian and Korean companies, presenting the combined score provides valuable context about overall sustainability practices in the region. It underscores shared commitments to ESG principles and collective strengths despite variation in industry specific and regional priorities and illustrates how integration of ESG considerations into core business strategies has become a regional norm.

4.2.2 ESG performance metric benchmarking

ESG performance must be measured through verifiable indicators and benchmarking to validate sustainability claims and enable comparisons over time and against peers. Based on Figure 4, Indonesian companies record an ESG Performance Score of 0.59, indicating solid ESG management, though still trailing Korean firms, which achieve a score of 0.75.

A two-sample t-test confirms that this performance gap is statistically significant (t = −2.020, coef. = −0.160^*, p < 0.1), suggesting that while Indonesian firms excel in ESG planning, they need to strengthen operational execution and monitoring. In contrast, Korean companies demonstrate robust implementation particularly in carbon emissions control, waste management, renewable energy deployment, employee welfare, and community engagement underpinned by higher transparency and governance accountability (Lee and Ahn, 2025). This pattern aligns with Friede et al. (2015), who aggregated over 2,000 empirical studies and found that firms with mature ESG systems exhibit stronger operational and financial performance (Friede et al., 2015).

Beyond operational factors, recent regulatory initiatives have further shaped ESG outcomes in Indonesia. The Financial Services Authority's Sustainable Finance Roadmap Phase II (POJK 5/2021) mandates that listed firms integrate emissions reductions, resource efficiency, and social impact targets into their strategic planning through 2025. Complementing this, the Indonesia Green Taxonomy Edition 1.0 (2022) offers a standardized classification of eligible “green” activities, guiding firms toward measurable investment targets and enhancing comparability across sectors (Farihah et al., 2024). By translating high level ESG commitments into concrete reporting requirements and incentive structures, these regulations reduce ambiguity around performance metrics and encourage firms to adopt science-based targets, external assurance, and sector-specific benchmarks thereby accelerating the transition from policy compliance to demonstrable sustainability outcomes.

4.2.3 ESG roadmaps

Indonesian companies achieve an average ESG Roadmap Score of 0.83, indicating that most firms clearly articulate both short- and long-term sustainability targets across material ESG topics. In contrast, Korean companies operating in Indonesia record a much lower score of 0.32, suggesting that fewer than half of their material issues are paired with explicit targets. This disparity highlights significant differences in strategic commitment to ESG planning between the two groups.

A statistical t-test (Table 6; t-value = 5.722, coef. = 0.532) confirms a significant difference between Indonesian and Korean companies' ESG roadmap scores. These findings underline a clear gap in the effectiveness of both groups in defining and pursuing sustainability strategies. Indonesian companies are thus validated as more advanced in developing ESG roadmaps, while Korean companies experience adaptation challenges. The combined ESG Roadmap Score for both Indonesian and Korean companies is 0.70, calculated as the average ESG roadmap scores from companies in each country. Management commitment to robust ESG roadmaps is critical for translating high-level sustainability ambitions into actionable plans. By setting SMART targets Specific, Measurable, Achievable, Relevant, and Time-bound for each material issue, companies ensure accountability and enable stakeholders to track progress against clear milestones. Well-defined roadmaps also align corporate strategies with global frameworks, such as the Sustainable Development Goals (SDGs) and Nationally Determined Contributions (NDCs), while signaling to investors and regulators that the firm is prepared to manage environmental, social, and governance risks over both the short and long term.

4.2.4 ESG assurance

Figure 4 presents the ESG Assurance Score, measuring the extent to which companies obtain independent third-party validation of their sustainability reports a critical element for enhancing the credibility of ESG disclosures, akin to financial auditing. Indonesian companies achieve an average ESG Assurance Score of 0.63, indicating a relatively strong commitment to verifying ESG performance through external assurance. This reflects an increasing recognition of the value of third-party validation in enhancing transparency, bolstering stakeholder trust, and ensuring compliance with sustainability standards. In contrast, Korean companies operating in Indonesia show a lower ESG Assurance Score of 0.44, suggesting that while some third-party validation is present, it is often limited in scope or application. This moderate level of assurance may not be sufficient to meet rising expectations from global investors and regulators who demand more rigorous and comprehensive sustainability validation. The combined ESG Assurance Score for Indonesian and Korean companies is 0.58, representing a reasonable commitment to third-party ESG validation. A statistical t-test (Table 6; t-value = 3.182, coef. = 0.190^*) confirms a significant difference in ESG assurance between Indonesian and Korean firms. This result is not coincidental but reflects genuine disparities in their sustainability evaluation approaches. Indonesian companies demonstrate leadership with more comprehensive ESG validation across environmental, social, and governance dimensions. Conversely, Korean companies must enhance their ESG assessment processes, developing robust systems to clearly identify ESG strengths and areas needing improvement. This analysis underscores Indonesian firms' effectiveness in implementing thorough ESG assessments aligned with their long-term sustainability objectives.

External assurance is increasingly recognized in academic and regulatory discussions as a key mechanism to improve the credibility, reliability, and comparability of sustainability disclosures. While still voluntary in many jurisdictions, companies that opt for independent assurance signal stronger ESG governance and transparency. Prior studies (Simnett et al., 2009; Dando and Swift, 2003; Cheng et al., 2015) emphasize that assurance reduces reporting bias, deters opportunistic misreporting, and enhances stakeholder confidence. In the context of ESG reporting, assurance not only reduces the likelihood of greenwashing (Fuhrmann et al., 2017), but also addresses the growing disagreement between ESG ratings by enhancing the consistency and auditability of reported data (Gipper et al., 2024; Kimbrough et al., 2024). However, the extent and quality of assurance vary widely many firms still opt for limited rather than reasonable assurance, and often verify only selective aspects such as GHG emissions rather than the full ESG scope (Ballou et al., 2018; Michelon et al., 2015). Simnett et al. (2009) show that the uptake of sustainability report assurance varies widely across countries and is shaped by institutional and legal factors; this helps explain the uneven adoption we observe (Simnett et al., 2009).

4.2.5 Combined ESG performance components

The ESG assessment measures several key components evaluated separately and combined to produce a final score reflecting a company's overall ESG performance. The four components are the ESG framework, ESG performance, ESG roadmap, and third-party ESG validation, each assigned different weights based on their importance to sustainable practices and corporate governance. This assessment evaluates how well companies formulate ESG policies, report measurable achievements, set future sustainability targets, and verify claims through independent validation. The calculation formula is as follows:

$\begin{array}{r}\left(10\%x\frac{0,81}{4}\right)+\left(30\%x\frac{0,59}{3}\right)+\left(30\%x\frac{0,83}{2}\right)\\ +\left(30\%x\frac{0,63}{1}\right)=0.02025+0.059\\ +0.124+0.189=0.393\end{array}$

The ESG score of 0.393 for Indonesian companies indicates a strong commitment to sustainability, especially in future planning through a defined ESG strategy. However, improvements are needed in practical ESG performance and third-party validation to enhance the credibility of their sustainability achievements.

The ESG score is calculated by combining the weighted values of each component using the following formula:

$\begin{array}{r}\left(10\%x\frac{0,68}{4}\right)+\left(30\%x\frac{0,75}{3}\right)+\left(30\%x\frac{0,32}{2}\right)\\ +\left(30\%x\frac{0,44}{1}\right)=0.017+0.075\\ +0.048+0.132=0.272\end{array}$

With a total score of 0.272, Korean companies operating in Indonesia have a solid ESG framework and demonstrate good performance in some sustainability components. However, low scores in the ESG roadmap and third-party validation highlight the need for improvement in long-term sustainability planning and enhancing the credibility of their ESG claims through independent validation.

This assessment measures how effectively a company formulates and implements sustainability strategies while ensuring the credibility of its ESG claims. The ESG score serves as a benchmark for assessing a company's overall commitment to sustainability practices and is calculated by combining the weighted values of each component using the following formula:

$\begin{array}{r}\left(10\%x\frac{0,78}{4}\right)+\left(30\%x\frac{0,63}{3}\right)+\left(30\%x\frac{0,70}{2}\right)\\ +\left(30\%x\frac{0,58}{1}\right)=0.0195+0.063\\ +0.105+0.174=0.361\end{array}$

With an ESG score of 0.361, the combined Indonesian and Korean companies demonstrate a commitment to managing ESG issues, particularly in sustainability policies and roadmaps. However, improvements are needed in measurable performance and third-party validation to enhance credibility.

Overall, Indonesian companies scored higher in ESG framework development (0.81 vs. 0.68), while Korean firms performed better in operational metrics (0.75 vs. 0.59), resulting in a moderate combined score of 0.63 that indicates progress but continued scope for improvement. Meanwhile, the ESG roadmap scores reflect a strong commitment from Indonesian companies (0.84) to long-term sustainability planning, while Korean companies score lower at 0.32, suggesting a need for better strategic planning. Third-party ESG validation also requires development, with a combined score of 0.58, indicating moderate transparency but a need for more comprehensive assurance processes. Overall, while there is a solid foundation, particularly in Indonesia, there is potential for improvement in measurable performance and external validation to meet global sustainability standards. The ESG results support both H1 and H2. The clear differences between Indonesian and Korean companies show that each country's rules and systems strongly affect ESG performance (H1). Indonesian firms achieved higher scores in frameworks, roadmaps, and assurance because of national reporting regulations, while Korean firms performed better in actual operations due to their stronger home-country ESG systems (H2). Overall, the findings show that government rules help shape ESG structure, but company experience and maturity determine how well those plans are carried out.

5 Limitations of the study

While this study provides valuable insights, several aspects define its scope. The analysis uses GRI 304 standards to maintain consistency in assessing biodiversity performance, although variations in other frameworks such as the SDGs or SASB may influence how companies disclose related information. The focus on leading Indonesian and Korean firms allows for meaningful comparison but may not represent the full range of corporate practices across different sectors. As the study relies on publicly available sustainability reports, the results reflect reporting behavior rather than independently verified performance, yet this approach ensures transparency and replicability. The findings also correspond to the period from 2019 to 2023, when ESG regulations and biodiversity standards were still developing. Future studies could extend this research by examining more industries, longer time frames, or additional factors such as investor or market influence to broaden the understanding of ESG and biodiversity reporting.

6 Conclusion

The results show that Indonesia's regulatory efforts, such as OJK 51/2017 and the 2022 Green Taxonomy, have successfully expanded sustainability reporting but have not yet ensured deep integration of biodiversity within corporate ESG frameworks. Biodiversity disclosure increased in frequency but remains mostly narrative and rarely treated as a material issue. In contrast, Indonesian firms performed better in ESG frameworks, planning, and assurance, while Korean firms showed stronger operational outcomes, highlighting how different institutional contexts shape sustainability practices. These findings confirm that regulation can broaden disclosure, but organizational capability determines its quality and impact.

To strengthen implementation, policymakers should specify biodiversity indicators within national ESG guidelines and ensure consistent enforcement. Companies need to move beyond compliance by setting measurable biodiversity targets, linking them to ESG roadmaps, and securing third-party assurance to improve credibility. Financial institutions should embed TNFD-aligned risk assessments into lending and investment decisions, while regulators can provide incentives for firms that demonstrate measurable biodiversity outcomes. Finally, collaboration between Indonesian and Korean businesses could facilitate knowledge transfer and support the development of integrated ESG–biodiversity reporting models suitable for emerging economies.

In summary, while awareness of ESG and biodiversity is growing, companies need stronger regulatory support and clearer integration strategies to deepen their commitment, especially in ecologically sensitive regions like Indonesia.

Data availability statement

The original contributions presented in the study are included in the article/Supplementary material, further inquiries can be directed to the corresponding authors.

Author contributions

MS: Writing – original draft, Formal analysis, Visualization, Methodology, Writing – review & editing, Conceptualization. FP: Formal analysis, Writing – review & editing, Methodology, Writing – original draft, Conceptualization, Visualization. RG: Conceptualization, Writing – review & editing, Visualization. IH: Supervision, Writing – review & editing, Methodology, Visualization, Conceptualization. JR: Methodology, Conceptualization, Writing – review & editing, Visualization. YO: Funding acquisition, Visualization, Conceptualization, Writing – review & editing, Project administration, Methodology, Supervision.

Funding

The author(s) declared that financial support was received for this work and/or its publication. This work was supported by the National Research Foundation of Korea (NRF) grant funded by the Korea government (MSIT) (RS-2025-00555967). This study received funding support from the Korea University Eco-Innovation Convergence University Project under the Advanced Field Innovation Convergence University Project. This research was supported by Basic Science Research Program through the National Research Foundation of Korea (NRF) funded by the Ministry of Education (RS-2021-NR060142). This work was supported by OJEong Resilience Institute, Korea University. This work was also supported by Korea University Business School Research Grant.

Conflict of interest

The author(s) declared that this work was conducted in the absence of any commercial or financial relationships that could be construed as a potential conflict of interest.

Generative AI statement

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Supplementary material

The Supplementary Material for this article can be found online at: https://www.frontiersin.org/articles/10.3389/frsus.2025.1668560/full#supplementary-material

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