Get to know more about us

Product walkthrough, trial, POCs, enterprise offering, support and more. Speak with one of our specialists.

Share your details
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
By contacting us, you agree to our Terms of service and Privacy Policy

Green Taxonomy: A Guide for Sustainable Business

Sustainable living

What is Green Taxonomy?

Understanding Green Taxonomy

Green Taxonomy is a classification system used to determine whether an economic activity can be considered as contributing to sustainable environmental objectives. This concept emerged in response to the global need to address climate change and accelerate the transition to a low-carbon economy.

This taxonomy differs from other environmental initiatives by providing a measurable, consistent, and scientific framework for classifying economic activities. It applies not only to large corporations but is also relevant for small and medium-sized enterprises (SMEs) seeking to adopt sustainability principles.

Objectives and Benefits

Green Taxonomy has various strategic goals, one of which is to create market transparency and prevent greenwashing practices. For companies, the presence of this taxonomy aids in responsible investment decision-making and enables businesses to assess and report the environmental impacts of their operations.

Investors gain clarity on whether their investments truly support a green economy. Regulators and the public also obtain a basis to objectively evaluate and monitor corporate environmental commitments. This taxonomy is an essential tool for achieving net-zero emissions targets and building a sustainable economy.

Core Principles

For an activity to be classified as green, it must meet several criteria, including:

  1. Contributing substantially to at least one environmental objective (e.g., climate change mitigation, climate adaptation, sustainable resource use).
  2. Not causing significant harm to other environmental goals (Do No Significant Harm or DNSH principle).
  3. Complying with good governance practices, including ESG (Environmental, Social, and Governance) principles.

Regulations and Policies in Indonesia

In Indonesia, the Financial Services Authority (OJK) released the Indonesian Green Taxonomy in 2022. This document serves as a guideline for classifying sectors and economic activities that support environmental protection and sustainable development.

The Indonesian Taxonomy is aligned with international standards such as the EU Green Taxonomy but is tailored to national contexts. The government also plays an active role in providing policy support, fiscal incentives, and strengthening regulations.

Sectors Covered in the Green Taxonomy

Several priority sectors included in the Green Taxonomy are:

Initial Steps for Companies to Implement Green Taxonomy

Companies aiming to adopt the Green Taxonomy should begin by:

  1. Assessing their current sustainability position.
  2. Identifying business activities that match the green classification.
  3. Developing transparent and credible reporting systems, including disclosures on environmental risks and green performance.

Strategies to Integrate Green Taxonomy into Business Operations

Integrating taxonomy into business strategy requires adjusting business models and developing internal policies aligned with sustainability. Employee training and human resource capacity building are crucial so that the entire organization understands and supports the transformation process.

Challenges and Barriers to Implementation

Some challenges faced by companies include:

Case Studies of Companies Adopting Green Taxonomy

Local Company - PT Pertamina Geothermal Energy

PT Pertamina Geothermal Energy developed renewable geothermal energy projects classified as green by OJK's Taxonomy. The company is a pioneer in supporting Indonesia's energy mix through low-carbon technology.[Ref]

Global Company - Enel (Italy)

Enel, a multinational energy company based in Italy, adopted the EU Taxonomy to report green activities and increase transparency for investors. Enel is a leader in issuing green bonds and developing large-scale renewable energy.[Ref]

Results and Key Takeaways

Companies that successfully implement the taxonomy demonstrate competitive advantages in the market, easier access to green financing, and a more positive brand image.

Role of Financial Institutions and Investors

Financial institutions play a crucial role in promoting the adoption of the Green Taxonomy by:

Supporting Technologies for Green Taxonomy Implementation

Technology plays an important role in supporting reporting and monitoring processes, including:

The Future of Green Taxonomy in Indonesia

Green Taxonomy in Indonesia will continue to evolve alongside regulatory strengthening and the growth of the green product market. Innovation in renewable energy, sustainable finance, and cross-sector collaboration will be key to accelerating adoption.

Recommendations for Companies

Conclusion

Green Taxonomy is not merely a classification tool, but a strategic framework to help companies transform toward sustainable business. The sooner a company takes action, the greater its opportunity to grow inclusively and remain competitive in the green economy era.

FAQ (Frequently Asked Questions)

  1. What is Green Taxonomy? Green Taxonomy is a classification system for economic activities that support environmental sustainability.
  2. Do small businesses need to adopt it? Yes, even on a smaller scale, businesses can adapt the taxonomy principles to their capacity.
  3. How do you report green activities? By adopting sustainability reporting frameworks such as GRI and including classifications from the Green Taxonomy.
  4. What is OJK’s role in the Green Taxonomy? OJK developed the Indonesian Green Taxonomy and oversees its implementation in the financial sector.
  5. Are there incentives for compliant companies? Yes, incentives such as affordable financing, investment facilitation, and market recognition are becoming available from regulators and investors.

More Insights

Driving Positive Impact Across Key Global Goals

Jejakin’s green programs combine high-tech monitoring, biodiversity restoration, and community-led initiatives to deliver powerful, sustainable change across ecosystems.