CONTRACTOR EMPOWERMENT TO ENHANCE ENVIRONMENTAL, SOCIAL, AND GOVERNANCE (ESG) PERFORMANCE IN PT PERTAMINA

• Main Author: Cuandy, Alexander
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/68548
• Institution: Institut Teknologi Bandung

In global financial industry, the sustainable investment is representing growth in recent years. Sustainable investing is a major driving force that shapes global capital markets and moreover, influences financial institution and firms seeking to raise capital in global market. According to the report published by Global Sustainable Investment Alliance (GSIA), global sustainable investment reached USD 35.3 trillion at the beginning of 2020 and represents the total of 35.9% of the total global assets under management (AUM). This figure increases from 2018 which was USD 30.6 trillion or 33.4% of the total global AUM. In Company Long Term Plan (RJPP) year 2022-2026, Pertamina plans capital expenditure of USD 92 billion. This capital requirement is needed to fund the company’s projects which consist of 14 National Strategic Projects (PSN), such as Refinery Development Master Plan (RDMP), Grass Root Refinery (GRR), and more than 300 projects including upstream, downstream, and new and renewable energy projects. Thus, Pertamina needs to devise the source of funding to achieve its long-term target. Indeed, the company cannot provide all of the capital expenditure on its own. In order to suffice the capital requirement, the company shall seek external funding opportunities, such as through bond issuance. To understand business situation that affects Pertamina, external environment analysis is carried out using PESTEL framework to determine external factors that disrupted oil and gas industry. Then, strategic group mapping is carried out to understand competitors' strategies related to oil and gas exploration and production (E&P) and energy transition. In addition, the internal condition of Pertamina is carried out based on company’s resources and capabilities. Then, using VRIO analysis to identify resources/capabilities that can be reinforced to establish sustainable competitive advantage. One of Pertamina’s strategies to sustain competitive advantage is ESG integration. However, several Pertamina’s ESG indicators are not relatively good, such as work accidents and fatalities, oil spills, and cases of corporate ethics, which impacted to company's ESG rating. With the current ESG performance, investors will not be attracted to invest because of the high business risk. Thus, it will be difficult for the company to obtain access to capital. To improve its ESG performance, the company can involve and encourage the contractors to actively participate in the ESG implementation.