PROPER INDONESIAN PUBLIC DISCLOSURE PROGRAM Strengthening the role of Stakeholders in promoting compliance RASIO RIDHO SANI, DRS, M.COM, MPM Secretary of PROPER Technical Team Assistant Deputy Minister for Hazardous Materials and Wastes Management Ministry of the Environment Republic of Indonesia International Workshop on Environmental Performance Disclosure for Developing Countries, Beijing, 6-7 April 2006 ASIAN ENVIRONMENTAL COMPLIANCE AND ENFORCEMENT NETWORK

Rationality of PROPER (Program for Pollution Control, Evaluation Rating) Ineffective Conventional Environmental Law Enforcement Increasing demand for transparency and public participation Low companies compliance rate Incentive scheme for beyond compliance Alternative Compliance Tools ASIAN ENVIRONMENTAL COMPLIANCE AND ENFORCEMENT NETWORK

Information disclosure will cause reaction and interaction among interested and related parties Disclosure facilities compliance performance will create incentive and disincentive reputation to company Stakeholder will give pressure to bad performer and appreciation to good performer A national public disclosure is more effective than local public disclosure PROPER is a national alternative instrument in pollution control through environmental performance public disclosure. Why & What’s PROPER (Environmental Performance Public Disclosure Program)

Elements of PROPER and Its legal basis Compliance Surveillance Public Right to Know Public Participation in Environmental Management Companies’ Obligation for Self Reporting Deployment of preemtive, preventif & pr o-active approach Implementation of Good Environmental Governance ASIAN ENVIRONMENTAL COMPLIANCE AND ENFORCEMENT NETWORK Environmental Act No. 23/1997

PROPER “Clean River Program” (1995) “Clean River Program” PROKASIH (1990) BLUE SKY “Clean Air Program” (1995) KENDALI “Hazardous Wastes Management Program” (1995) Environmental Impact Assessment (RKL/RPL) Monitoring Program (1990) PROPER (Postpone) PROPER Multimedia (Water, Air, EIA, & Hazardous Wastes) 2002 Single media approach Economic and Political Crisis Multimedia approach From single media into multi media Environmental compliance public disclosure ASIAN ENVIRONMENTAL COMPLIANCE AND ENFORCEMENT NETWORK AusAid and CIDA Support for technical matter (1994) World Bank Support for data processing (1995)

Single media Not describing overall or true picture of performance Simple and required less integrated skill of inspector Shorter time and cheaper budged for inspection Multimedia Describe overall performance Complicated and integrated skilled of inspector required Longer time and more expensive resources needed for inspection From single media into multi media Environmental compliance public disclosure ASIAN ENVIRONMENTAL COMPLIANCE AND ENFORCEMENT NETWORK

PROPER: 5 color rating Compliance Performance Alternative Rating Above Comply GoldA GreenB Comply BlueC Failure to Comply RedD BlackE Compliance Performance Assessment Type of Compliance AreaMethod Environmental Management System Processes (Efforts) Voluntary Waste Utilization and Resources Conservation CSR: Community Development Water Pollution ResultsMandatory Sea Water Pollution Air Pollution Hazardous wastes Implementation of E.I.A

Sources of Data for Rating Analysis Self Monitoring Obligatory Self Reporting Local Government Monitoring PROPER inspection team Other sources: NGO’s, University Data from all of sources as long as accountable are considered to be used in analysis ASIAN ENVIRONMENTAL COMPLIANCE AND ENFORCEMENT NETWORK

Example data used for Rating Analysis in PROPER Data Base System ASIAN ENVIRONMENTAL COMPLIANCE AND ENFORCEMENT NETWORK

The Latest Rating Result (August 2005) Overall compliance rating Based on media compliance rating Based on Industry Category ASIAN ENVIRONMENTAL COMPLIANCE AND ENFORCEMENT NETWORK

NoOwnership Compliance Performance Non ComplyComply 1National16659% 7941% 2State Owned Enterprises 4944% 6256% 3Foreign5736% 10364% Best performance rating on the basis of origin country investor Performance rating based on Capital Investment ASIAN ENVIRONMENTAL COMPLIANCE AND ENFORCEMENT NETWORK

Effectiveness PROPER as a compliance tool No Disclosure Period Percentage of compliance change (black-red to blue- green) 1 85 facilities April 2003 – Dec % facilities Des 2004 – Jul % PROPER has increased level of compliance for 13.15% in less than one year. ASIAN ENVIRONMENTAL COMPLIANCE AND ENFORCEMENT NETWORK

Strategic Map of PROPER in comparison to Conventional Environment Law Enforcement LOW HIGH TimeBudgetPublic Involvement Other Stakeholders involvement Added value for stakeholder Stakeholders relations PROPER Law Enforcement ASIAN ENVIRONMENTAL COMPLIANCE AND ENFORCEMENT NETWORK

Further action: strengthening disclosure impacts 1.5 (five) facilities with two times black rating directed to priority target for law enforcement 2.10 (ten) “black” companies under special attention from the banks 23 CEO’s received Green Companies Award from Minister of Environment in front of Vice President Republic of Indonesia Special 1 hour TV event “Environmental Night Award (MAL)” Bad PerformerGood Performer ASIAN ENVIRONMENTAL COMPLIANCE AND ENFORCEMENT NETWORK

8.000 Central Regional Office Province, District/City Agency Potential Target Estimated Number of inspectors Required ASIAN ENVIRONMENTAL COMPLIANCE AND ENFORCEMENT NETWORK Further action: increasing number of targeted facilities

III. Key Success Factor and Role of Stakeholders Effective Communication Strategy Synergistic approach with other program Credibility of Executing Agency Active Role of Stakeholders Key Success Factor ASIAN ENVIRONMENTAL COMPLIANCE AND ENFORCEMENT NETWORK

Key Success Factor and Role of Stakeholders Media Customers Communities Banking Stock Market Industry Association Local Government NGO’s Consultant Independent Advisory Board ASIAN ENVIRONMENTAL COMPLIANCE AND ENFORCEMENT NETWORK

Role of Independent Advisory Board 1.Independent advisory board has played important role in maintaining credibility of the program, in addition to multi tier internal peer review system of assessment 2.Independent advisory board consists of representatives from University, Environmental NGO’s, Customer NGO’s, Mass Media, International Institution. 3.Task and functions: To verify the result of PROPER Team evaluation. To report the verification result to Minister of Environment. To conduct other tasks under direction of Minister of Environment. ASIAN ENVIRONMENTAL COMPLIANCE AND ENFORCEMENT NETWORK

Flow Chart of PROPER implementation System Development Participant Selection Inspection & Data Collection Report Development Preparation of Initial Rating Review Stage I (Tech. Team) Review Stage II (Senior Official) Review Stage III (Advisory Board) Ministry of Environment report to President Final Rating Review by Advisory Board Response to company and local govt. input Announcement of Initial Rating to Company Preparation of Temporary Rating Ministerial Decree for Final Rating Dissemination of Ministerial Decree to Companies Development Disclosure Materials Public Disclosure Program Evaluation Socialization (Marketing) Dissemination of Ministerial Decree to Local Government Announcement of Initial Rating to Local Govt.

Example of Media Reporting on PROPER ASIAN ENVIRONMENTAL COMPLIANCE AND ENFORCEMENT NETWORK

Tools of Banking Industry in promoting Environmental Good Practice Pre-Construction & Construction Operation (1) Post Operation Feasibility Study Spatial Planning & Land Use Environmental Impact Assessment Operation (2) Environmental Management Licenses Compliance Monitoring (PROPER) Environmental Management Licenses Compliance Monitoring New LoanOn Going Loan On Going Loan New LoanOn Going Loan Better Clients’ Environmental Management means less risk ASIAN ENVIRONMENTAL COMPLIANCE AND ENFORCEMENT NETWORK

The role of Indonesia Banking Industry in promoting compliance via PROPER Companies Performance Rating State of Companies Credit Performance Gold, Green, and Blue Good Liquidity Red Special Attention Two times Red or more Black Two times Black or more Less Liquidity Doubted Default ASIAN ENVIRONMENTAL COMPLIANCE AND ENFORCEMENT NETWORK

The challenges: To merge PROPER and Bank Credit Rating Limited number of companies covered by PROPER. Annual period of rating disclosure. Focused on large scale industries. Provide incentive and disincentive reputation scheme. Number of Bank’s clients more than PROPER participants. Bank credit performance assessment at least quarterly. Covered small, medium, and large scale enterprises. Disincentive scheme only. PROPER Disclosure Program Bank Credit Rating Condition ASIAN ENVIRONMENTAL COMPLIANCE AND ENFORCEMENT NETWORK

The role of PROPER in promoting compliance performance of ISO certified facilities Among 298 certified ISO facilities, 57 facilities are assessed under PROPER in No of Facilities GoldGreenBlueRedBlack Rating of Certified ISO Facilities NoCompany NameType of Industry PROPER Rating Certified Agency Year of Certification PT.Pupuk SriwijayaFertilizer SGS28-Apr-97 2PT.Pertamina Unit Pengolahan IV Cilacap Oil & Gas MOODY2001 3PT.Pertamina Unit Pengolahan VI Balongan Oil & Gas KEMA2000 4PT.Riau Andalan Pulp & Paper, Forestry DivisionPulp & Paper SGS2 Nop PT.Indah Kiat Pulp & Paper Tangerang Pulp & Paper DNV1 Okt 1998 ASIAN ENVIRONMENTAL COMPLIANCE AND ENFORCEMENT NETWORK

PROPER Rating of Certified ISO Facilities Period ASIAN ENVIRONMENTAL COMPLIANCE AND ENFORCEMENT NETWORK

IV. The Next Stages Increasing number of PROPER participants by 2009 Deployment of Quality Audit System (e.g. ISO 9000) in order to increasing credibility and efficiency of the program Establishment of Integrated Data Base System and contracting out Entry Data Processing to third party Increasing Value Added of PROPER for Beyond Compliance Companies Using PROPER as an instrument to benchmark provincial and local government performance on environmental management Strengthening capacity of provincial and local government staffs and Delegating field technical work to local government staff step by step ASIAN ENVIRONMENTAL COMPLIANCE AND ENFORCEMENT NETWORK

Thank you Text message: Building C 1 st Floor Office Ministry of the Environment Republic of Indonesia Jl. DI Panjaitan Kav. 24 Jakarta Indonesia ASIAN ENVIRONMENTAL COMPLIANCE AND ENFORCEMENT NETWORK