Mapping Indonesian's transition towards a circular economy

MEMORIAS DE

CONGRESO NACIONAL

AMICA 2019

ISSN

516

ID 616 MAPPING INDONESIAN’S TRANSITION TOWARDS A

CIRCULAR ECONOMY

Juli Nurdiana, Michiel Heldeweg and María-Laura Franco-García

University of Twente, Faculty of Behavioural, Management and Social sciences, Department of Governance and Technology for Sustainability, Drienerlolaan 5, 7522 NB Enschede, The Netherlands

Abstract

While the Indonesian government has proclaimed their support to embrace a circular economy (CE), it appears that implementation is still in the early stage. The transition itself is an on-going process that requires systemic changes in a wide array of different functions, types of organisations and levels of implementation. However, it has not been discussed in advance by how much and to what extent the Indonesian government, businesses, and civil organisations should engage in CE. This paper aims to support the deployment of a CE in Indonesia by analysing the transition movement from linearity to circularity. We argue that, in recent years, the CE concepts, policies, and initiatives that have emerged do respond to the environmental sustainability efforts. In this context, this study provides a systematic mapping tool for policy makers to understand better how Indonesia is actually addressing environmental sustainability, while transitioning towards a CE and by going through different phases. Our descriptive and exploratory analysis is based on a systematic literature analysis and stakeholder interviews to understand the past and recent approaches to the CE transition. We show that different types of policies and instruments - in particular for waste management - have been enforced in this transition process and what kind of challenges may hinder the implementation.

Keywords: circular economy, policy, Indonesia, developing country, transition

Introduction

Ellen Mac Arthur foundation (2013) mentioned that the root of circular economy has been defined in many theories which question the limitation of linear economic system which assume that the resources are unlimited. The notion of a circular approach to the economy has been put forward as a way to move away from the ‘take-make-consume-dispose’ linear process , to more a close loop process. More practically, it is related to reduce resource use and the load of our environment. At this stage, circular economy can be considered as a transformational change across the value chain to retain both material types and preserve their value for as long as possible (Bicket et al, 2014).

In 1996, Germany has started to stipulate Closed Substance and Waste Management Act, which ensured that the disposal of waste meeting the environmental compatibility. Japan also developed a comprehensive legal framework to move towards a recycling-based society through The Basic Law for Establishing a Recycling-Based Society (Morioka et al., 2005). It is interesting to note that China shows their CE highest record on CE publications, in particular after CE was enforced as regulation in 2009 (Jiao and Boons, 2014;

Yu et al., 2014; Geissoerfer et al., 2017). It can be seen that one common feature of countries’ CE policy is to prevent further environment deterioration and to conserve scarce resources through effective waste management, especially integrated solid waste management. However, the main focus of the CE, as embedded in the original concept, it has gradually been shifted from narrow waste recycling to broad efficiency-oriented control during the closed-loop flows of materials at all stages of production, distribution, and consumption. These concepts have tangibly helped to reduce pressure on the environment and create value and this contribution is likely to increase considerably (Bastein et al., 2013).

Notwithstanding, a transformation into a more circular path is not without any complications. Homrich et al. (2018) mentioned that there are visible gaps towards circular economy tenets. Further, besides attitude and knowledge, function’s integration, finance, and technology become the dominant challenges for CE (Ritzen and Sandstrom, 2017). Further the legislative, institutional and cultural issues, are also mentioned as one of the main barriers towards circular economy (Homrich et al., 2018). The findings emphasized Geng et al. (2009) that, in particular at city level, incentives, financial and public awareness are needed to enable government supporting CE implementation.

In particular for Indonesia, it is interesting to know how companies transforms the paradigm following global movement. It started from end of pipe solutions, 3R (reduce, reuse, recycle), EPR (Extended Producers Responsibility), and now to a circular economy. Rahman et al. (2009) identified that in the implementation of cleaner production for SMEs (Small Medium Enterprises), from 54 companies surveyed, 51.85% of them already applied CP. Conversely, 11.11% were familiar with 3R, and another 20.37% went for reducing and reuse (2R), whereas the rest of 16.67% practiced only one R (reduce). This finding was impressive because it showed that the Indonesia, i.e., companies have already acknowledged their environmental issues to some extent. Align with another fact that in 2025, Indonesia is expected to generate 70.8 mil tons per year, the waste issue seems to bring significant influence for Indonesia. Therefore, it is understandable that the Indonesian government recently has set the solid waste management into Indonesian national policy and strategy. Therefore, the transition into CE is more discussed from waste management perspective. This information highlights a need for a descriptive-exploratory study on how Indonesia has started to develop CE strategies.

Objectives

Taking this aspect into account, this study built the discussion based on the research question “What elements of institutional reforms and policy instruments could bring Indonesia towards circular economy? and what might become the proxies and challenges to practice CE ?”

Methodology

This study used a mixed methods and compiled the data from different types of sources (Schoonenboom & Johnson, 2017). The information was collected was both qualitatively and quantitatively from desk study and the interviews, and started from August 2018 to December 2018. The first research question will be discussed qualitatively based on selected publications either in Bahasa or English. They may vary from government reports, documents, peer-reviewed journals, companies’s reports, and other relevant literature

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and quantitatively based on the participatory process of interviews involved different type of stakeholders in two cities as a sample of study (Bulungan and Cimahi), ranging from NGO, communities, academia, companies, and government officials. The information of the respondents were compiled and disassembling based on a semantic theme to recognize the participants viewpoints within their experiences.

Discussion and analysis

This part is intended to discuss what kind of institutional supports and instruments have been available (from past and existing initiatives) and what kind of barriers hinder the transition to circular economy.

Based on the past initiatives, particularly in the perspective of the environment, a lot of literature seemed to put heavy concerns on pollution prevention and cleaner production. For example, Bapedal of Indonesia developed program for Pollution Control, Evaluation and Rating (PROPER PROKASIH) in the late of 1993, which classified environmental performance ratings into 5 different schemes. The objective of this program was to increase compliance with environmental regulations, adopt clean technologies, strengthen polluters to develop in-house environmental management capabilities and prepare companies in Indonesia for ISO-14000 certification. Also, based on the survey conducted by Afsah and Wheeler (1996), in 187 factories, it was revealed that 5 out of them, were considered safe, while nearly 64% were found to violate the limit of effluent discharge. In addition, Syahrir et al (2002), also mentioned, that the ambient air quality suggested that NOx, CO and THC are a serious problem in almost all areas of Jakarta in 1998. In the same year, it was exposed that motor vehicles were major contributor of NOx, PM10, CO and THC load emission. Later in the following year, the pollution prevention initiative was likely to shift to a form of cleaner production, though actually cleaner production has been introduced in Indonesia since 1993 (Marshal, 2009). As a response to the lack of cleaner production service providers, Indonesian Cleaner Production Centre (ICPC) was built in 2004, which focused on establishing networking in promoting cleaner production, developing and standardizing cleaner production modules and guidelines as well as empowering and developing cleaner production services.

In 2007, profit oriented Environmental Management (MeLOK) was established, to encourage the cost savings by reducing the consumption. Rahman et al (2009) also presented the result of the implementation of cleaner production in Indonesian SMEs (Small Medium Enterprises). From 54 companies surveyed, in terms of resource efficiency, 51.85% of them were applying CP, another 11.11% were familiar with 3R (reduce, reuse, recycle), another 20.37% went for reduce and reuse (2R) only while the rest 16.67% practiced one R (reduce) only. It was also revealed that 38.89% of the companies have not implemented the ISO 14000. It indicated that, ISO 14000 as the voluntary management system has not been accommodated fully. With regards to SMEs, particularly in food sectors, Japan Chemical Industry Association (JCIA) sent its experts in 1995 and 1996 to help develop the industrial park in the suburb of Jakarta, which aimed to provide technical expertise in waste-water-treatment (OECD, 1998). Also, the development of eco-office guidelines in 2003 was also a part to promote resource efficiency. The aim in this project was separating the waste and treating into composting. Another discussion is related to eco

labeling. Regarding eco labeling as one of the means to promote the sustainable development, the Indonesian Institute of Eco-labeling (LEI) Indonesia was the first organization to employ the constituency based system. This organization developed an eco-labeling certification system for Indonesia’s forest products, chain of custody (timber tracking), marine products, industrial products and mining products6_.

According to Helmy (n.d), the implementation of pilot project of eco-label accreditation and certification for textile, printing paper and powder detergent products had been started during October 2004 – December 2005. At present, it is found that the eco-labeling is becoming more familiar to Indonesian industries with the foundation of Yayasan Ekolabel Indonesia. Apart from that, though Sadikin (2008) mentioned despite many weaknesses to adopt public procurement, there is upcoming movement towards the implementation of green procurement. This information provided a general picture on how Indonesian industries (in general), considered sustainability at the first place before shifting to circular economy.

In specific to the barriers during the circular economy implementation, specifically addressing the cases for Indonesia, this study classified those main challenges as: institutional barriers, social barriers, and business culture (Figure 1).

Figure 1. Barrier in implementation (Indonesian cases – author’s contribution)

6 _{www.lei.or.id}

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regulation. For instance, despite the raising concerns of the central government to waste management by issuing government regulation No. 81/2012, Law 32/2009, and regional regulation of Bulungan No 8/2015, they have not yet laid down rigorously into the implementation. There are indications of lacking support and adequate facilities to maintain those policies. Further, despite the informal recycling becomes the noticeable norm in the cities, the waste policies and regulation have not largely governed this area. Lack of vision and trade-off amongst the most cities’ priorities, leads the waste becoming not at first issue in recent development. In this regard, the finding is accordance with Bourguignon (2016) and Predenville et al. (2018) who pinpointed the potential challenges of multi-level governance and future vision. These situations are capable of inflicting and undermining the recent attempts for waste reduction over the past year. Further, the city governments within an experiencing rapid pattern of production and consumption growth, are still practicing landfilling as an integral part of the waste management system. However, non-hazardous waste is still mixed with the non-hazardous one- in particular, for the municipality waste, even open dumping exists as part of local practices. This situation was accused of deliberate infliction of keeping the amount of waste percentage as tiny as possible that ends up in a landfill. Consequently, it may have hinder the chance to pursuit CE practices within waste management.

In terms of social barriers, the main challenges are the low level of people awareness and their participation in CE practices. Based on the information obtained from respondents, people and business seem to lose the connection to various CE initiatives as many of them have not heard the term of CE. However, in particular for industries, some of them (big industries), have already been familiar with the technologies and initiatives of CE, without asserting those as part of CE practices. Further, from the community side, there is an urgent call to shift their mindsets to favor the groundwork of CE. Many people have been practicing still throw-away behavior (e.g., using single-use plastics, throwing leftover food), which has hindered to pursue waste reduction from consumer’s side. This information justified the findings of Ritzen and Sandstrom (2017) and Bourguignon (2016) which raised the importance of consumer behavior and attitude and knowledge for CE transitioning.

Shifting to business culture, the main impending hindrances are related to the ability of business to initiate the start-up project on CE and allow the collaboration. Though, there are few cases that businesses carried out the research at the request in the sense of cost saving, it is likely that in the two cities, it has not become as foregoing agenda yet. Financial constraint and the fitness of available collaboration model become one of preeminent factors. From this, CE is not a magic strategy that works solely. Expressing willingness would not be enough, it has to be owned and equipped with enlightened instruments, policies and civil society participation. There should be plans also for the business sector to include CE within their plans for future. Furthermore, as Suherman et al. (2019) mentioned developing CE platform in certain scales and contexts will help to promote the innovations and also bring unique opportunities for collaboration.

Conclusions

In general, this study has provided an initial descriptive-explanatory analysis in the form of institutional and instruments policy as a basis to identify circular economy status for Indonesia. In this regard, this study grouped the main challenges for Indonesian cases into institutional barriers, social barriers, and business culture. The challenge for CE implementation is translated to enabling the conditions for deploying trust among stakeholders. The collaborative activities could create circular solutions.

Acknowledgements

This research was supported by 4in1 IDB Project. We thank our colleagues who provided us with their insight and suggestions that greatly assisted our research.

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