How P4G is Accelerating Partnerships in Indonesia

About

On September 15-16, 2022, P4G’s Indonesia National Platform accelerated its partnerships through workshops with relevant stakeholders in Jakarta. With representatives from government, private sector, and civil society organizations, the event focused on P4G’s key sectoral priorities in Indonesia: Zero Waste, Energy Transition, and Food and Agriculture. For each session, partnerships presented their business model, including results and progress so far. They highlighted their challenges and need for support, especially with specific policy or regulatory asks, while invited stakeholders provided feedback and potential contributions to accelerate the partnerships. By sharing how these partnerships could support the Indonesian government’s climate and development targets, participants identified tangible steps forward to advance these models.  

Zero Waste Green Industry 

P4G’s zero waste partnerships provide solutions across the plastics value chain, including reuse, collection, recycling, and upcycling, which are key to achieving the government’s target of reducing 70% of marine plastic waste by 2025.  

With a pioneering reuse solution, Siklus has experienced positive growth since it started in 2020, supported by its ability to deliver household goods without plastic packaging at a lower price. The business model also enables it to reach out to the low-middle income population by providing mobile solutions with bike deliveries. By offering a replicable business model that could be scaled up throughout Indonesia, Siklus contributes to national and local governments’ agenda which are actively working to develop programs to address plastic pollution. 

Yet the partnership faces two main challenges in developing the reuse market in Indonesia: (i) the lack of clarity on reuse business policy framework, which limits reuse providers in delivering products at competitive pricing; and (ii) the continued rise of large e-commerce in Indonesia, now offering online grocery shopping services and huge discounts that are more financially accessible for most customers. 

While reuse business models are still nascent in Indonesia, recycling has a more mature framework through Ministry of Environment regulations. One key policy, passed in 2019, assigns the responsibility of waste collection to local governments. This enables two partnerships, Project STOP Banyuwangi and Plastics in Circles: Smart Waste Collective to design the waste system and promote behavioral change for collection in Banyuwangi and Ambon respectively. Even with a clear mandate, these two partnerships struggle to find innovative financing models that would allow sustainable blended financing, since waste collection is currently not seen as a profitable or investable solution. That's why Project STOP Banyuwangi is currently experimenting on indirect collection fees that will also pair with electricity and water bills to support the retribution fee, making waste collection more formalized. 

Finally, the upcycling industry faces a different set of opportunities and challenges in Indonesia. Plastics in Circles: Recycle 2 Value aims to open its first factory in Surabaya to upcycle non-recyclable waste, such as foils and multi layers, and convert it to drainage and construction materials. The partnership noted how P4G funding enabled it to evaluate market readiness and feasibility of waste supply from Integrated Waste Management (TPST) and informal waste pickers. Yet, since this factory would be the first upcycling factory that processes mixed materials, the team faces a long lead time to build the machine. Similar to the recycling industry, Recycle 2 Value also seeks to develop a co-financing model to facilitate growth. 

Energy Transition 

As a country dominated by coal power, energy transition is a high priority in Indonesia. Potential pathways are outlined in the Indonesia Medium Term Plan 2020-2024 that targets a total of 14.5 GW of new and renewable energy power plants, yet the country needs tangible solutions that can help advance that goal.  

One Stop Service for Energy Efficiency offers financing models that focus on optimizing energy efficiency projects in Indonesia, as it tries to overcome perceived risk from the financial industry. The partnership performs energy audits on potential projects, analyzes their financial feasibility, and engages financial institutions to provide non-collateralized loans, while also backed by a risk mitigation instrument. So far, the project has secured two Memorandums of Understanding (MoUs) with potential energy service companies (ESCOs) and has already co-hosted events with Alliance of Energy Efficiency Indonesia and APKENINDO to scale its approach. 

The Getting to Zero Coalition looks at how Indonesia can be part of the global energy transition in shipping decarbonization. Using P4G funding, Getting to Zero Coalition published two reports to show the potential of electrifying boat vessels in Indonesia and how this method can be combined with the country’s existing plans for micro grids. The report also examined some of the developments for geothermal in Indonesia and how to competitively access this energy. This alternative source could help create a new opportunity for Indonesia to become a bunkering hub for green fuels for the shipping industry and subsequently reduce emissions. 

While the models are in line with the International Energy Agency’s Energy Sector Roadmap to Net Zero Emissions in Indonesia launched in September 2022, battling technological lock-in and providing proof of concept to support the state-owned utility companies remains the bottleneck for P4G’s energy transition partnerships. In addition, creating future incentives is a key consideration for these enterprises, since consumers in Indonesia do not pay the full cost of energy due to subsidies, limiting uptake of these solutions. 

Food and Agriculture 

P4G’s active food and agriculture partnerships aim to tackle food waste and provide agroforestry solutions. These are key priorities as emissions from food loss and waste account for 7% of Indonesia’s greenhouse gas emissions. Meanwhile, the country is trying to empower smallholder farmers with economic opportunities while conserving natural areas and combatting deforestation.  

Food Upcycling for the Future will transform beer spent grain into high a highly nutritious flour with similar characteristics to white flour. Used for products such as granola bars, noodles and pizza dough, the flour can sell at a competitive price while providing environmental savings. Currently, the start-up is working to build local upcycling factories near Multi Bintang breweries and aims to register their products with the National Agency of Drug and Food Control (BPOM). 

In agroforestry, Prosperous Forests aims to promote organic and nature-positive methods by offering coffee directly from smallholders to corporates in Europe. This partnership also aims to convert monoculture coffee plantation into agroforestry along conservation zones. Expanding their successful model in Laos, the partnership has faced challenges in the technical processing of coffee and thus achieving economies of scale. The social forestry mechanism in Indonesia has the potential to support development of Prosperous Forests’ model, but they need clarification on communities' access to social forestry programs as well as upskilling of the community to enable export potential. 

Lastly, PlusPlus, a crowdfunding platform, presented its business model that offers financing to small agricultural companies. Compared to other conventional crowdfunding models, impact performance is crucial for these investors, as the return on investment is directly linked to results, rather than financial growth. As it aims to focus on innovation and larger transactions, especially on commodities such as cocoa and promoting climate smart agriculture, PlusPlus hopes to expand and look for additional pipelines of SMEs that can participate. 

Common Needs Identified by Partnerships  

1. Creating proven business models and market readiness requires early-stage financing and a robust network. Across the sessions, partnerships shared how P4G funding is supporting high impact business models in the incubation stage and preparing them for market readiness. For example, Smart Waste Collective and Recycle 2 Value utilized the funding to conduct a feasibility study to gain insight on the market, while P4G’s catalytic funds crowded in additional sources of financing to the One Stop Service for Energy Efficiency partnership to expand its business model. Meanwhile, for partnerships like Food Upcycling for the Future, P4G provided a platform to connect Korean upcycling technology with Indonesian brewers through the 2021 P4G Seoul Summit.  

2. Blended financing models are key to support scalable impact. Learnings from recycling and agriculture partnerships reinforce the need for a comprehensive blended financing method from both government and private sector to scale and further commercialize new business models. 

3. Supporting high impact start-ups requires strong multi-stakeholder policy advocacy to introduce new standards. For partnerships providing refill solutions and upcycled food, they need coordination from the global and domestic level to establish universal standards so regulatory barriers do not impede the innovation needed to solve environmental challenges. Indonesia’s G20 presidency this year and future presidency in ASEAN opens the opportunity for the country to pioneer regulatory approaches for these new solutions.  

P4G looks forward to future opportunities to bring together our partnerships and National Platform with key stakeholders that can advance green business models through policy support and investment.

For more information about P4G's partnerships, subscribe to our newsletter.