⁠Environmental, Social, and Governance (ESG) Regulation and Sustainable Corporate Conduct: Emerging Legal Challenges and Policy Responses

Abstract

The increasing global emphasis on Environmental, Social, and Governance (ESG) principles has significantly influenced the development of corporate governance frameworks and sustainability regulations across jurisdictions, including Indonesia. ESG regulations are increasingly recognized as important legal instruments for promoting sustainable corporate behavior, enhancing corporate accountability, and supporting long-term sustainable development objectives. However, the implementation of ESG principles also generates various legal challenges related to regulatory fragmentation, legal uncertainty, enforcement limitations, and corporate accountability. This study aims to analyze the development of ESG regulations in Indonesia, examine the emerging legal challenges associated with ESG implementation, and evaluate policy responses that may strengthen sustainable corporate governance. Employing a normative legal research method, the study utilizes statutory, conceptual, and comparative approaches to analyze relevant legislation, regulatory frameworks, legal doctrines, and international ESG standards. The findings indicate that Indonesia has progressively incorporated ESG-related principles into environmental regulations, corporate governance standards, sustainable finance policies, and sustainability reporting requirements. Nevertheless, the existing regulatory framework remains fragmented across multiple legal sectors, creating challenges regarding regulatory coherence, compliance obligations, and enforcement effectiveness. The study further identifies greenwashing risks and the absence of comprehensive ESG legislation as significant obstacles to achieving effective corporate sustainability governance. To address these challenges, the study proposes regulatory harmonization, strengthened disclosure requirements, enhanced enforcement mechanisms, and institutional capacity building as key policy responses. The study concludes that a more integrated and coherent ESG governance framework is necessary to promote sustainable corporate behavior, improve legal certainty, strengthen stakeholder protection, and support Indonesia’s transition toward sustainable economic development.