Does Good Governance Correlate with the Transition within the Coal Sector in Indonesia?

As one of the world's primary coal producers, with a total production volume yang terus meningkat dalam tiga tahun terakhir dengan range 600-800 million ton per annum, Indonesia is one of the world's largest exporter and plays an active role in the transition towards cleaner energy ecosystems. The Indonesian government has set a target to push the share of new and renewable energy (EBT) to 34% within the national energy mix, a commitment formalised under the PLN’s Electricity Supply Business Plan (RUPTL 2025–2034). 

To date, coal continues to dominate approximately 60% of national electricity generation. It is this tension, between a reliance on conventional fossil fuels and the accelerating mandates of the energy transition, that forces industry players to adopt Environmental, Social, and Governance (ESG) frameworks. 

To navigate this transition, companies are expected not only to develop decarbonisation strategies, but also to establish effective governance structures to oversee implementation, manage risks, and ensure accountability. While climate targets often receive the greatest attention, governance plays an equally important role in turning sustainability commitments into measurable outcomes.

Utilising the Katadata ESG Index (KESGI) dashboard, this article examines corporate sustainability performance within a structured ESG rating framework. This analysis observes whether the top-tier companies within the KESGI dashboard that secure the highest ESG scores are accompanied by equally robust governance scores. The underlying premise is that effective corporate governance will be reflected in the sustainability efforts disclosed by the enterprise.

For the frontrunners within the KESGI index, the data suggests that internal governance mechanisms correlate directly with stronger cumulative sustainability outcomes. PT Alamtri Resources Indonesia Tbk, which currently leads the coal sector with an overall ESG score of 62.1, is anchored by a high Governance pillar score of 72.7. A similar operational architecture is observed at PT Indika Energy Tbk, which secures a total ESG score of 59.9, whilst PT Indo Tambangraya Megah Tbk (ITM) holds an overall ESG score of 58.7.

When examining the sub-components more closely, the nuances become clear:

• PT Alamtri Resources Indonesia Tbk: Its macro governance performance appears to be supported by both sustainability governance and regulatory compliance and transparency. This sustainability governance score broadly assesses indicators of corporate sustainability policies and commitments, the integration of ESG targets into management KPIs, alongside the composition and proportion of the management board. Meanwhile, the regulatory compliance and transparency aspect incorporates indicators tied to statutory regulations and international benchmarks, such as ISO standards.

  
  

• PT Indika Energy Tbk: Overall ESG Score: 59.9 The company's governance performance is primarily driven by its robust framework in business ethics and anti-corruption. Its other two key sub-indicators—sustainability governance, alongside regulatory compliance and transparency—maintain a nearly equal, balanced weight. This business ethics and anti-corruption/anti-bribery metric specifically evaluates the implementation of anti-corruption policies, the proportion of employees trained on these ethical practices, and the active whistleblowing channels addressed directly by the enterprise.

  
  

• PT Indo Tambangraya Megah Tbk (ITM): Overall ESG Score: 58.7 ITM's governance performance is heavily anchored by its strong metrics in regulatory compliance and sustainability governance. However, the company demonstrates a notable variation across governance sub-indicators  when it comes to business ethics and anti-corruption. On one hand, ITM demonstrates strong  environmental performance, clinching a perfect score of 100 in its Climate Transition Strategy. Yet, its aggregate ESG score is pulled down to 58.7 (ranking third overall) due to a notable internal asymmetry within its governance sub-components, where its Business Ethics & Anti-Corruption records a comparatively lower score of 25.

  To put this governance asymmetry into perspective, PT ABM Investama Tbk, which occupies the ninth rank on the index, holds a significantly higher corporate governance score of 63.8, even though its direct environmental score sits well below ITM's at 48.9.

Looking at these top two frontrunners, it seems that a high governance score correlates with a strong overall ESG performance. However, this data also reveals that corporate sustainability narratives may not move in a tidy, linear fashion across all indices. 

These figures reflect nuances in sustainable corporate governance within these enterprises. A company can excel in technical transition roadmaps whilst simultaneously facing distinct regulatory and oversight vulnerabilities elsewhere within its governance framework. While the analysis does not establish a causal relationship between governance and sustainability performance, it suggests that companies with stronger governance structures tend to achieve stronger overall ESG outcomes. As the coal sector continues to navigate energy transition challenges, governance may serve as an important foundation for ensuring that sustainability commitments are translated into consistent and measurable action.

As sustainability expectations continue to evolve, organisations are increasingly challenged to translate commitments into measurable outcomes. Life Cycle Indonesia supports businesses in strengthening sustainability performance through ESG assessments, sustainability reporting, and strategic advisory services that help integrate sustainability into corporate decision-making.

References 

1. Badan Pusat Statistik. (2026). Produksi barang tambang mineral. https://www.bps.go.id/id/statistics-table/2/NTA4IzI=/produksi-barang-tambang-mineral.html

2. Badan Riset dan Inovasi Nasional. (n.d.). Bauran energi di Indonesia menuju net zero emission melalui cofiring batu bara–biomassa. https://brin.go.id/ornm/posts/kabar/bauran-energi-di-indonesia-menuju-net-zero-emission-melalui-cofiring-batu-bara-biomassa

3. CEIC Data. (n.d.). Indonesia coal production. https://www.ceicdata.com/id/indicator/indonesia/coal-production

4. GoodStats. (2026). Batu bara masih dominasi bauran energi listrik Indonesia 2025–2034. https://goodstats.id/article/batu-bara-masih-dominasi-bauran-energi-listrik-indonesia-2025-2034-HlI7S

5. Katadata. (2026). RUPTL PLN targetkan bauran EBT capai 34,3% pada 2034. https://katadata.co.id/berita/energi/683d5c5dc2766/ruptl-pln-targetkan-bauran-ebt-capai-34-3-pada-2034

6. Kompas.com. (2026, January 30). 7 negara penghasil batu bara terbesar di dunia 2026, Indonesia peringkat 3. https://www.kompas.com/tren/read/2026/01/30/150000165/7-negara-penghasil-batu-bara-terbesar-di-dunia-2026-indonesia-peringkat-3