How Digitalization Can Drive Indonesia’s MSMEs Toward Net Zero
By Teguh Anantawikrama
Vice Chairman, Indonesian Chamber of Commerce (KADIN)
INVESTORTRUST - As Indonesia commits to achieving net-zero emissions by 2060, the journey ahead presents both a generational challenge and a transformative opportunity. At the heart of this national transition lies an often overlooked but indispensable engine of the economy: our micro, small, and medium enterprises (MSMEs). Representing over 99% of businesses and contributing more than 60% to the national gross domestic product (GDP), MSMEs are not just peripheral players—they are central to realizing Indonesia’s green ambitions.
Yet, the path to sustainability for MSMEs is fraught with barriers. From limited access to finance and technology to low awareness of environmental compliance and green market trends, the obstacles are significant.
Currently, fewer than 5% of Indonesian MSMEs practice sustainability or report on their environmental impacts. Only 16% have adopted digital tools. If we do not act decisively, millions of MSMEs risk exclusion from a global economy that is rapidly aligning with Environmental, Social, and Governance (ESG) standards and low-carbon practices.
Five Policy Priorities for Digital Green Transformation
But this is where technology and digitalization become game-changers. Digital tools can level the playing field for MSMEs, helping them become climate-resilient, competitive, and investment-ready.
With proper support, Indonesia can empower its MSMEs to turn today’s challenges into tomorrow’s green successes.
1. A National Digital Platform for MSME Sustainability Reporting
We must build a user-friendly online portal that helps MSMEs track greenhouse gas emissions, conduct ESG self-assessments, and align with global standards like ISO 14001 and the International Sustainability Standards Board (ISSB). This platform will be essential for complying with upcoming 2028–2030 disclosure requirements and accessing green financing.
2. Green Digital Finance Infrastructure
Fintech innovation is critical. By supporting startups that offer green credit scoring for informal and micro businesses—using AI and alternative data—we can unlock financing for enterprises previously excluded. Blockchain can also verify emission reductions in Results-Based Finance (RBF) schemes, enabling transparency and trust in green investments.
3. Regional Green Innovation Hubs
Public-private hubs across the country should be equipped with cleantech incubators, product certification labs, and co-investment opportunities. These hubs will connect MSMEs with export readiness programs and circular economy ecosystems, ensuring regional equity in green growth.
Bengok Craft founder Firman Setyaji at the 2025 BRI UMKM EXPO(RT) at the International Convention Exhibition (ICE) BSD City, Tangerang, Thursday (30/1/2025). Photo: Investortrust/Taufiq Al Hakim.
It’s time to embed sustainability in vocational training and entrepreneurship education. By launching online bootcamps and a national “Green Coach Network,” we can create a generation of MSME leaders who are climate-literate and business-savvy.
5. Regulatory Innovation and Incentives
Existing incentives under Minister of Finance Regulation (Peraturan Menteri Keuangan)No. 130 of 2020 and Government Regulation (Peraturan Pemerintah) No. 45 of 2019 must be expanded to reward digitally verified low-carbon investments. We also need faster implementation of regulatory sandboxes to test cleantech and green finance models in real-world conditions.
Strategic Synergy with National Goals
This transformation aligns with Indonesia’s broader development frameworks:
• Net-Zero Emission 2060: Supported by the LTS-LCCR and ESG mandates.
• Green Economy Vision 2045: Anchored in fiscal tools and circular strategies.
• Digital Transformation (Making Indonesia 4.0): Driving MSME digitalization.
• Financial Inclusion: Enabled by fintech and national literacy initiatives.
Indonesia cannot reach its climate goals without its MSMEs. The power of digitalization lies in its ability to democratize sustainability—making the green economy accessible not just to large corporations, but to small enterprises across the archipelago.
As Vice Chairman for Technology and Digital Transformation at KADIN, I urge policymakers, investors, startups, and civil society to rally behind a Digital Green Transformation Strategy for MSMEs. Together, we can ensure that MSMEs are not left behind—but instead lead Indonesia’s just, inclusive, and low-carbon future. ***
