How to Set Up Eco-Product Manufacturing Business in Indonesia: Balancing Goals with 2025 Regulations

Introduction

In recent years, Indonesia has emerged as one of Southeast Asia’s most promising destinations for sustainable investment. With its abundant natural resources, skilled labor, and strong government commitment to achieving net-zero emissions by 2060, the country is actively encouraging industries to adopt greener, more responsible production practices. This transformation has opened a new frontier for investors—especially those interested in building an Eco-Product Manufacturing Business in Indonesia.

Across sectors such as packaging, construction materials, textiles, and personal care, there is a growing demand for eco-friendly products that meet both local and international sustainability standards. The Indonesian government continues to strengthen its regulatory framework through initiatives like the Green Industry Standard and Extended Producer Responsibility (EPR) programs, rewarding companies that align their operations with environmental goals.

For foreign investors, understanding how to balance sustainability commitments with Indonesia’s evolving regulatory landscape is crucial. This guide provides a step-by-step overview of the legal requirements, certifications, and operational strategies needed to build and maintain a compliant, profitable, and environmentally responsible Eco-Product Manufacturing Business in Indonesia.

By the end of this article, readers will gain clarity on how to align business objectives with sustainability principles—turning green challenges into long-term growth opportunities.

Understanding Indonesia’s Green Regulatory Landscape

Building an Eco-Product Manufacturing Business in Indonesia requires more than just sustainable materials or innovative production methods—it begins with understanding the country’s evolving regulatory landscape. The Indonesian government has made sustainability a national priority, introducing a range of laws and initiatives to ensure that industrial growth aligns with environmental protection.

One of the key frameworks guiding this transition is Government Regulation (GR) No. 28 of 2021 on the Implementation of the Industrial Sector. This regulation introduced the Green Industry Standard (Standar Industri Hijau), which sets out clear criteria for companies to minimize waste, optimize energy efficiency, and utilize renewable materials. Businesses that meet these standards may qualify for the Green Industry Certification, a government recognition that enhances both credibility and access to incentives.

Equally important is the environmental permitting process regulated under Minister of Environment and Forestry Decree No. 22 of 2024. This decree streamlines the approval of environmental documents such as AMDAL (Environmental Impact Analysis) and UKL-UPL (Environmental Management and Monitoring Efforts), which are mandatory for manufacturing projects. The new system delegates much of the review process to provincial and regency governments, aiming to make approvals more efficient for investors.

However, compliance is strictly monitored. Under Minister of Environment Regulation No. 14 of 2024, companies that fail to adhere to environmental standards—such as improper waste disposal or exceeding emission limits—can face administrative sanctions or fines of up to IDR 3 billion. These policies signal the government’s serious stance on environmental accountability across industries.

For foreign investors, mastering these regulations is not merely a formality—it’s a cornerstone of operational success. A compliant, well-structured Eco-Product Manufacturing Business in Indonesia can not only avoid costly penalties but also position itself as a trusted partner in the nation’s sustainable industrial future.

Certifications and Standards You Must Secure

For any Eco-Product Manufacturing Business in Indonesia, obtaining the right certifications is more than a legal requirement—it’s a foundation for credibility, competitiveness, and international market access. These certifications prove that your operations meet both national sustainability standards and globally recognized benchmarks for environmental responsibility.

The first and most critical certification is the Green Industry Certification, issued by Indonesia’s Ministry of Industry under Government Regulation No. 28 of 2021. This program evaluates manufacturers based on energy efficiency, water conservation, waste reduction, and the use of renewable materials. Companies that achieve this certification gain access to tax incentives, positive brand recognition, and priority in government procurement projects—benefits that can significantly strengthen an Eco-Product Manufacturing Business in Indonesia.

Next is the SNI (Standar Nasional Indonesia) certification, which serves as the national quality standard across industries. For eco-friendly manufacturers, SNI ensures that product design, safety, and performance comply with Indonesia’s environmental policies. Complementing this is ISO 14001, an internationally recognized environmental management system certification that demonstrates a company’s structured approach to minimizing ecological impact.

For businesses that depend on renewable raw materials, especially in packaging, furniture, or paper industries, FSC (Forest Stewardship Council) and PEFC (Programme for the Endorsement of Forest Certification) are essential. These certifications verify that wood or paper-based inputs come from responsibly managed forests.

Achieving multiple certifications not only builds consumer trust but also enhances export opportunities. Many foreign buyers and international retailers now require suppliers to hold verifiable sustainability credentials before partnership approval. Therefore, securing these certifications ensures that an Eco-Product Manufacturing Business in Indonesia is fully equipped to compete in both domestic and global markets while aligning with environmental, social, and governance (ESG) principles.

In short, certifications are not just symbols—they are strategic assets that validate commitment to sustainability, efficiency, and compliance, the very pillars of a successful Eco-Product Manufacturing Business in Indonesia.

Waste Management and Extended Producer Responsibility (EPR)

Effective waste management is one of the most critical pillars of running an Eco-Product Manufacturing Business in Indonesia. As the country intensifies its environmental commitments, producers are now expected not only to minimize waste during production but also to take responsibility for their products even after they leave the factory. This concept, known as Extended Producer Responsibility (EPR), is central to Indonesia’s circular economy roadmap.

Under the latest EPR framework, manufacturers are required to design products that are recyclable, reduce packaging waste, and develop collection or reuse systems for post-consumer materials. According to a 2024 directive from the Ministry of Environment and Forestry, all producers of packaging and consumer goods must implement recycling and recovery programs by 2029. This means that an Eco-Product Manufacturing Business in Indonesia must have a structured plan to monitor, collect, and recycle the waste generated from its production and distribution processes.

Companies that fail to comply with EPR regulations risk facing administrative sanctions or heavy fines under Minister of Environment Regulation No. 14 of 2024. Beyond the legal aspect, ineffective waste management can also harm a brand’s reputation—particularly among environmentally conscious consumers and global importers who value transparency and sustainability credentials.

To stay compliant and competitive, manufacturers are encouraged to adopt renewable waste management methods, such as waste-to-energy conversion, biodegradable material usage, and closed-loop production systems. These innovations not only help reduce landfill impact but can also generate additional revenue streams through energy recovery or material resale.

In essence, successful waste management defines the true sustainability of an Eco-Product Manufacturing Business in Indonesia. By integrating EPR strategies from the start—rather than as an afterthought—companies can demonstrate real environmental accountability, reduce operational risks, and strengthen their position in both local and global green markets.

Renewable Material Sourcing and Supply Chain Strategy

In the pursuit of sustainable production, renewable material sourcing has become a cornerstone for every Eco-Product Manufacturing Business in Indonesia. The Indonesian government actively encourages manufacturers to integrate renewable, recyclable, and locally sourced materials in line with national sustainability policies. One of the key frameworks governing this is the Local Content Requirement (Tingkat Komponen Dalam Negeri or TKDN), which mandates a minimum percentage of materials, components, or labor to be sourced domestically.

For eco-product manufacturers, meeting TKDN standards not only ensures compliance but also unlocks incentives such as tax reductions, government procurement eligibility, and preferential treatment in public projects. Using renewable resources—like bamboo, coconut fiber, natural dyes, or biodegradable polymers—helps reduce dependence on imported raw materials and supports Indonesia’s green industrial ecosystem.

Beyond the sourcing itself, supply chain transparency has become a defining strength for companies operating in this sector. Global buyers and investors are increasingly demanding traceable supply chains, verified by certifications such as FSC (Forest Stewardship Council) for wood-based products or RSPO (Roundtable on Sustainable Palm Oil) for bio-based materials. Implementing blockchain-based or digital traceability systems is emerging as a strategic advantage for ensuring ethical and sustainable production.

Transparency also extends to labor practices, logistics efficiency, and carbon tracking. Investors and consumers alike want assurance that the brand’s sustainability claims are backed by verifiable actions. For an Eco-Product Manufacturing Business in Indonesia, this means building long-term partnerships with certified suppliers, maintaining audit-ready documentation, and regularly updating sustainability disclosures.

Ultimately, verified renewable sourcing and transparent supply chains build trust—not only with regulators but also with consumers and global partners. In a marketplace where credibility defines competitiveness, mastering these elements can position any Eco-Product Manufacturing Business in Indonesia as a leader in responsible innovation and environmental integrity.

Energy Efficiency and Decarbonization

Energy transition is no longer optional—it’s a strategic necessity for every Eco-Product Manufacturing Business in Indonesia. As the government accelerates its industrial decarbonization roadmap under the National Energy Policy (KEN) and the Low Carbon Development Initiative (LCDI), manufacturers are urged to reduce emissions through renewable energy integration, efficient machinery, and responsible energy management.

Many factories across Indonesia are now adopting solar rooftop systems, biomass boilers, and waste-to-energy technologies to meet sustainability targets while cutting operational costs. These technologies not only align with Indonesia’s Net Zero Emission 2060 goal but also strengthen brand reputation in international markets that prioritize green production.

The Ministry of Industry and Ministry of Energy and Mineral Resources (ESDM) have introduced several fiscal incentives for manufacturers that invest in renewable systems—such as tax holidays, import duty exemptions, and potential carbon credit trading benefits. These policies make it increasingly feasible for sustainable factories to thrive in the competitive market.

For investors, adopting energy-efficient solutions brings dual rewards: cost reduction and compliance credibility. When an Eco-Product Manufacturing Business in Indonesia aligns its production with renewable energy sources, it not only ensures environmental responsibility but also long-term profitability.

Ultimately, the decarbonization journey reflects a broader shift—where sustainability is not just about image but about measurable performance. Forward-thinking companies that prioritize energy efficiency today are setting the foundation for resilient, future-proof operations in Indonesia’s evolving green economy.

Navigating Licensing and Local Implementation

Setting up an Eco-Product Manufacturing Business in Indonesia requires careful navigation of multiple regulatory layers, from national approvals to regional implementation. For foreign investors, the process begins with establishing a PT PMA (Foreign-Owned Company) under the Online Single Submission (OSS) system, managed by the Indonesian Investment Coordinating Board (BKPM). This platform consolidates licensing procedures, ensuring faster and more transparent processing for business permits.

Key licenses include the Business Identification Number (NIB), which acts as both a company registration and import/export license, and specific Industrial Business Licenses (IUI) for manufacturing activities. Depending on the scale and environmental impact of operations, companies may also be required to secure Environmental Approvals (AMDAL, UKL-UPL)—documents assessing the project’s ecological footprint and outlining mitigation plans.

Zoning regulations are equally critical. Industrial activities must align with designated areas within local Spatial Planning (RTRW) and Zoning Detail Plans (RDTR). Conducting due diligence on land use compatibility prevents costly delays or compliance penalties later on.

In addition, coordination with local authorities—such as the Environmental Agency (DLH) and Public Works Department (Dinas PUPR)—ensures that site development, waste management systems, and infrastructure plans meet regional standards. Investors should also prepare for routine inspections and data submissions related to energy use, emissions, and waste output.

Securing these permits not only legitimizes operations but also builds credibility with partners, suppliers, and regulators. For an Eco-Product Manufacturing Business in Indonesia, thorough licensing compliance means more than legal clearance—it represents a commitment to transparency, sustainability, and long-term operational integrity.

By understanding and adhering to Indonesia’s evolving environmental and zoning laws, investors can confidently move from concept to production while contributing positively to the nation’s growing green economy.

Common Pitfalls and How to Avoid Them

While Indonesia offers strong incentives for sustainable ventures, many foreign investors still encounter obstacles when establishing an Eco-Product Manufacturing Business in Indonesia. These challenges often stem from misinterpreting local regulations, underestimating administrative timelines, and overlooking cultural and logistical nuances that affect daily operations.

One of the most frequent pitfalls is incomplete or incorrect licensing documentation. Many investors assume that obtaining a Business Identification Number (NIB) is sufficient to begin operations, when in reality, manufacturing activities also require environmental and zoning approvals such as AMDAL or UKL-UPL. Failure to secure these permits can lead to fines, operational suspension, or even revocation of business licenses.

Another common issue involves non-compliance with local labor and safety standards. Indonesia’s manpower laws emphasize fair wages, safe working conditions, and local employment quotas. Foreign companies that neglect these requirements risk reputational damage and potential sanctions. Aligning with local HR consultants or compliance specialists can help avoid these missteps.

Investors also underestimate the importance of local supplier verification and TKDN compliance (local content). Using uncertified or imported materials without proper declarations can delay customs clearance and disqualify a company from green incentives. Establishing transparent supplier networks early in the process ensures smoother logistics and stronger sustainability credentials.

Cultural misunderstandings can also slow progress. Business operations in Indonesia often rely on relationship-building and community engagement. Ignoring local customs, environmental expectations, or land-use traditions can lead to friction with authorities or communities surrounding the project site.

To prevent these pitfalls, foreign investors should partner with experienced local advisors who understand both regulatory procedures and regional dynamics. Conducting pre-investment due diligence, maintaining up-to-date compliance records, and engaging proactively with local agencies are essential habits for success.

Ultimately, avoiding these common mistakes allows an Eco-Product Manufacturing Business in Indonesia to operate confidently, ensuring environmental compliance, community alignment, and sustainable profitability in the long run.

Benefits, Incentives, and Market Opportunities

The Eco-Product Manufacturing Business in Indonesia is entering a golden era of opportunity. With growing global demand for sustainable goods, Indonesia has positioned itself as a strategic hub for eco-friendly production, backed by abundant natural resources and a strong commitment to green industrialization.

Foreign investors benefit from a range of government incentives, including tax holidays, import duty exemptions, and carbon credit opportunities for businesses adopting renewable energy and circular production methods. The Ministry of Industry also provides support programs through the Green Industry Certification scheme, which recognizes factories that meet efficiency and sustainability benchmarks.

Beyond domestic demand, Indonesia’s trade agreements with ASEAN, Australia, Japan, and the European Union open significant export pathways for eco-certified products. The global shift toward ESG (Environmental, Social, and Governance) standards further strengthens the long-term profitability of sustainable manufacturing ventures.

For visionary entrepreneurs, entering this sector means joining a rapidly expanding ecosystem where environmental stewardship meets economic growth. With strong policies, expanding infrastructure, and growing investor confidence, the Eco-Product Manufacturing Business in Indonesia promises not just profitability—but purpose-driven progress that supports a greener global future.

Building a Sustainable Future Through Green Innovation

Running a successful Eco-Product Manufacturing Business in Indonesia is more than just meeting compliance standards—it’s about creating meaningful impact through innovation, responsibility, and collaboration. The country’s evolving regulatory landscape, combined with its rich biodiversity and growing green economy, provides an ideal foundation for businesses that prioritize long-term sustainability over short-term gains.

Foreign investors who understand and embrace Indonesia’s environmental expectations gain more than operational licenses—they earn trust, credibility, and access to a market that increasingly values authenticity and transparency. From renewable sourcing to waste management, energy efficiency to ethical labor practices, every strategic decision contributes to both corporate resilience and environmental preservation.

Indonesia’s sustainable industrial transformation offers more than compliance opportunities—it invites participation in a movement that aligns business success with planetary well-being. Those who innovate responsibly and collaborate with local communities are shaping the next generation of green enterprises that define Southeast Asia’s future economy.

Now is the moment for forward-thinking entrepreneurs to take action. By investing in sustainable technologies, adopting renewable materials, and building partnerships grounded in transparency, your Eco-Product Manufacturing Business in Indonesia can become a catalyst for change—proving that profitability and environmental integrity can thrive together.

The path to green success starts here: where vision meets responsibility, and where every innovation builds toward a cleaner, more sustainable world.

‍