There is a harsh paradox in today’s sustainability debate. The tools for understanding environmental risk are becoming more sophisticated: financed emissions, climate-risk models, taxonomies, transition plans and carbon pricing are increasingly part of the language of business and finance.
This is all important progress. But as the conversation becomes more technical, one question is still too often asked late: what happens to people inside the transition?
For Indonesia, this is not a secondary concern. The country is not only trying to decarbonize a large emerging economy.
It is also undertaking a development transformation: creating better jobs, raising productivity, expanding social protection, building skills and widening the opportunities through which people can improve their lives. The social dimension is not an extension of sustainability. It is where sustainability becomes development.
Indonesia’s labor market structure makes this especially clear. In May 2026, Statistics Indonesia recorded 148.19 million people in employment, of whom 87.88 million — 59.3% — worked in informal activities. For millions of households, therefore, the quality of a transition will not first be experienced through an ESG score or sustainability report.
Rather, it will be experienced through work: whether income is adequate, jobs are safe, skills remain valuable, social protection is available and families can see a credible path to a better future. This changes how sustainability should be judged.
A coal phase-down may reduce emissions while imposing concentrated adjustment costs on regions whose jobs and local economies depend on mining. A new electric-vehicle or mineral-processing value chain may generate investment and export value while raising questions about contractor conditions, occupational safety, community impacts and who captures the gains from industrial upgrading.
These are not arguments against environmental ambition. They are arguments for taking that ambition seriously enough to examine its distributional consequences.
Environmental sustainability asks whether development can remain within ecological limits. Social sustainability asks how the benefits, opportunities, risks and costs of development within those limits are distributed. In that sense, the “S” in ESG is not competing with the “E.” It is where the social consequences of environmental decisions become visible.
That distinction matters inside companies and financial institutions. A company may reduce energy intensity and increase renewable-energy use, yet still rely on poorly protected contractors or tolerate unsafe conditions in its supply chain.
A bank may finance low-carbon capital expenditure without asking whether a client has a credible plan for workers, suppliers and communities affected by the transition. The problem thus is not simply one of disclosure. It is a problem of decision architecture.
Social consequences have to enter the same places where environmental consequences increasingly enter: investment appraisal, procurement, credit assessment, capital allocation, transition planning and oversight.
A transition plan should not only state how emissions will fall. It should identify who is materially affected, what capabilities they will need, what resources are allocated to adjustment and what evidence will show whether promised benefits actually reached them.
There is an understandable objection. Sustainability standards need common principles. Investors need comparability. Climate change requires collective action. Human rights do not become relative simply because countries have different income levels.
All of that is true. But common standards do not require identical priorities or trajectories. Indonesia does not begin from the same labor market structure, institutional capacity or development conditions as a high-income economy. Nor does a bank face the same material social risks as a mine, plantation or manufacturer.
A more credible principle is therefore: shared principles, differentiated trajectories and a common burden of proof.
The trajectory may differ, but the evidence cannot disappear. A company or financial institution claiming a sustainable or just transition should still be able to show its starting point, who is materially affected, what decisions have changed, what resources have been committed and what results have followed. Context can explain why a pathway differs. It should not become an excuse for weaker accountability.
This is also the next challenge for sustainable finance. Financial systems have become increasingly capable of making environmental consequences legible. Carbon can be counted, climate risks can enter models and economic activities can be classified. Imperfect as these tools are, they allow environmental information to influence credit, investment and capital allocation.
The task now is to make social consequences sufficiently decision-useful without pretending that human dignity can be reduced to a spreadsheet. Job quality, safety, reskilling, labor rights, supply-chain conditions and community impacts cannot be compressed as easily into a single metric as tons of carbon dioxide. That makes them harder to integrate, not less material.
What becomes visible is more likely to be considered. What is considered is more likely to shape decisions. And decisions determine where capital, technology and institutional attention ultimately move.
Indonesia’s challenge is shared by many emerging Asian economies: to decarbonize while still transforming their productive structures and widening economic opportunity. If social sustainability remains an afterthought, countries may produce transitions that look credible in carbon terms while weakening the development foundations that make those transitions durable.
Success, then, cannot be measured only by whether growth becomes greener. It must also be judged by whether new industries create better work, whether affected communities share in the benefits, whether people facing disruption have the capacity to adapt and whether the transition expands rather than narrows the routes to a dignified life.
The most important question is not only: How green is our growth? It is: Whose lives are actually becoming better because of it?
Setyo Budiantoro is senior advisor at The PRAKARSA and Fair Finance Asia Advisorty Committee and SDGs ESG expert at the Indonesian ESG Professional Association (IEPA)
