Industry Report: Indonesia's Waste Management Sector

How is Plastic Waste Management evolving in Indonesia?

Despite being relatively smaller in size and less dense in population, Indonesia produces more plastic than any other country in Asia, even beating the likes of larger countries such as India. This trend can be attributed to recycling rates as low as 10%, with 41% of the total waste being dumped into water bodies, 26% being burnt and 23% sent to landfills. 

The Root of the Problem

Despite efforts by government organizations, recycling companies, and NGOs to increase recycling rates, the rapid growth in population, urbanization, changing consumer habits, lack of education amongst households, and low engagement from the broader community is hampering the desired progress. Moreover, the traditional waste management value chain has been resource-intensive with large numbers of waste pickers scavenging waste heaps in the hopes of finding high-value products. The lack of accountability, aggressive competition amongst waste pickers and the lack of sorting facilities have led to unsteady incomes for the waste pickers while leaving the recycling companies at the behest of plastic importing companies.

What is changing in Indonesia's Plastic Waste Management landscape?

As the global momentum towards reducing plastic waste gains traction, the Indonesian government has vowed to reduce plastic waste by 70% in the next 5 years, leading to a catalytic change within the start-up landscape of the Indonesian waste management sector. Since 2020, there has been a tremendous increase in the number of tech-enabled start-ups, specifically with an emphasis on ensuring a circular economy, and in educating and engaging the communities.

Some start-ups are now providing recycled merchandise or store credit as incentives through easy-to-use mobile applications to align with the preferences of the current generation and encourage them to recycle. Start-ups are also enabling companies and households to track plastic waste across the entire value chain. This ensures accountability and traceability in the system leading to higher recycling rates of high-value products and better rates for waste collected.

Moreover, these businesses have taken extensive steps to improve the overall status of waste pickers within the community, by encouraging the public to move away from the negative image around them. A good example of this is the initiative led by Octopus who rebranded the term pemulungus (scavengers) to pelestari (preservers of the environment) and provided uniforms to eliminate the negative association with being a waste picker.

The start-ups are also protecting and improving the livelihoods of underserved communities. Getting connected directly to the environmentally-conscious consumer allows waste pickers to collect more materials in less time, eliminate the middlemen in the value chain, and thus increase their income potential. Some start-ups are also working with women-led or women-run artisanal SMEs to make recycled merchandise such as bags, wallets, and laptop sleeves, to increase their access to better income opportunities and larger markets.

Catalyzing Plastic Recycling Through Stakeholder Engagement

PlasticPay is one such tech-enabled innovative waste management enterprise to drive plastic recycling while at the same time providing a better livelihood to waste pickers in Indonesia.  

Looking ahead

The global pressure to reduce waste and the radical shift in how the sector operates has paved the way for increased investments. International organizations such as the Clean Oceans Initiative and Sea the Future have invested over USD 6 billion to transform the waste management infrastructure, and have begun to partner with these start-ups through various initiatives to increase recycling in the country. A space that was traditionally dominated by social impact investors is now witnessing investments from institutional investors, VCs, and other private equity firms.

This article is an excerpt of "The Changing Dynamics of Indonesia’s Waste Management Sector", an industry market report from IIX Impact Partner available on the IIX Impact Partners platform.

Download the report here.

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