A recent study by the Foundation for International Human Rights Reporting Standards (FIHRRST), supported by Moores Rowland Indonesia (MRI) and the Belgian Embassy, highlights a decline in foreign investor interest in Indonesian companies, which is attributed to negative perceptions of ethical standards in local businesses.
Ali Rahmadi, FIHRRST’s Director of Operations, noted that international corporations are becoming increasingly cautious about investing in Indonesia.
Many global investors prioritize businesses that integrate human rights into their operations as part of their long-term strategies.
“While Indonesia offers a large market potential, global trends indicate that investors are not solely focused on financial returns but are also evaluating how ethically and transparently businesses operate,” Rahmadi said while quoting the report on Sunday, December 15, 2024.
The study revealed that sustainability reporting, a key indicator of corporate responsibility, is often lacking in local businesses, further eroding investor confidence.
This misalignment between investor expectations and corporate practices is viewed as a significant barrier to foreign investment.
Human rights due diligence
Marzuki Darusman, founder of FIHRRST, emphasized the importance of implementing human rights due diligence (HRDD) as a concrete step to address these challenges.
HRDD ensures that business activities respect human rights while adhering to international standards.
“HRDD is not just a tool for protecting human rights, it is essential for improving Indonesia’s business reputation on the global stage,” Marzuki said.
Risa E. Rustam, Director of Finance and Human Resources at the Indonesia Stock Exchange, highlighted sustainability reports as crucial for balancing economic growth with environmental protection and human rights. She stressed the importance of corporate transparency in building trust.
“Global investors are not only interested in outcomes but also the processes behind them,” Risa said.
She believed that this challenge presents an opportunity for Indonesian companies to transform their practices by consistently adopting sustainability measures and fostering strong community relations.
Path to competitiveness
By embracing ethical practices and sustainability, Indonesian companies can rebuild investor confidence, attract foreign capital, and strengthen their competitiveness on the global stage.
“Commitment to ethics and sustainability is not only a pathway to increasing foreign investment but also a foundation for resilient and globally competitive businesses,” Risa concluded.
