From a linear to a circular economy

Till today, Indonesia must be considered rather a linear economy in regards to waste management. In a linear economy, products are produced, used, and then disposed of without any further processing. As a consequence, very large amounts of virgin raw materials are used, which need to be mined and refined to be disposed of after use. The resulting impact on the environment can be well-observed worldwide, especially in developing and emerging countries like Indonesia.

As the largest economy in South East Asia Indonesia produced 63 million tons of waste in 2021 (table 1). With an estimated plastic recycling rate of currently 10 percent, less than 1 million tons of plastic will be recycled every year. A report from 2020 (NPAP) states that 70 percent of the plastic residues is mismanaged, e.g., openly burned (48%), dumped on land, or in poorly managed official dumpsites (13%) or leaking into waterways and the ocean (9%). This report uses data from 2017 and estimates that Indonesia generated 6.8 million tons of plastic waste in that year. More recent data from the Indonesian Ministry of the Environment and Forestry (KLHK) indicates that plastic waste in the amount of 9.8 million tons were generated in 2021. Table 1 shows the composition of the waste that was generated.

Table 1: Waste composition data 2021 
Type Amount in tons per day Per year (365 days)  Share in % of the total
Food waste 48,162 17,579,130 27.84%
Plastic 26,934 9,830,910 15.57%
Wood, twigs, leaves 21,228 7,748,220 12.27%
paper, cardboard 21,153 7,720,845 12.23%
Others 13,706 5,002,690 7.92%
Metal 12,329 4,500,085 7.13%
Textile 11,717 4,276,705 6.77%
Glass 11,599 4,233,635 6.71%
Rubber, leather 6,160 2,248,400 3.56%
Total in tons 172,988 63,140,620  

On the demand side we can refer to data from the Indonesian Ministry of Industry. Accordingly, in 2019 national demand stood at 5.63 million tons, which is significantly lower compared to the waste generated. One reason why the generated amount of plastic is rather high compared to the output of local factories are the imported packaged goods. Even though domestically more plastic is generated than needed, Indonesia still relies on imported plastic residues to utilize the existing recycling capacities in its factories.  Table 2 shows the detailed number of the explanation above.

Table 2: Plastic consumption and production in Indonesia (PP, PE, PS, PET, PVC) 
Item Amount  Source

Production Capacity

2,660,000 tonnes/year INAPLAS/MOI
Production 2,310,000 tonnes/year INAPLAS
Import 1,670,000 tonnes/year BPS
Recycle 1,655,000 tonnes/year ADUPI &APDUPI

Total National Demand

5,635,000 tonnes/year  
Source: Ministry of the Environment & Forestry (2020), pg. 14/24 link

The existing waste management system is inadequate and underfunded. There is no proper formal collection system in place. In Indonesia the informal sector, consisting of scavengers (pemulung) and collectors (pengempul), represents the primary collection infrastructure of recyclable resources. Due to the lack of waste separation at the household level, recyclable materials are already polluted when they are sorted out from the mixed waste. Cleaning and processing for later use is cost-intensive. What makes it worse is that for food packaging Indonesia relies almost exclusively on virgin plastics. There are almost no local food-grade recycling facilities available. The first PET food-grade recycling facility was established by Danone and Veolia in 2021. The plant has been designed for an annual capacity of 25,000 t. However, changes are on the rise, Indonesia has started to embrace the circular economy approach. 

In a circular economy a sustainable production and consumption system is in place where the product life cycle is extended by reusing and recycling the material. With the enactment and enforcement of necessary laws and regulations, waste can be reduced to a minimum. Environmental friendliness and a well-functioning circular economy are meritorious goods. Society agrees that such goods are needed and desirable, but the free market will not provide such goods by itself. In such a situation the government has to step in and set the necessary rules and regulations to ensure that the market will provide such goods to increase the welfare of society. 

Key to the establishment of a circular economy is an Extended Producer Responsibility (EPR) based on a strong legal foundation. A properly established EPR system holds the manufacturer or the importer of the goods (both referred to as “producer” in the remainder of the text) accountable for the entire life cycle of the product and its packaging material. The responsibility of the producer includes the collection, sorting, and recycling of the left-over packaging material and the goods itself. Further, the producer bears financial responsibility as well as the responsibility for any environmental impact of the product and its packaging. At present, the most common goods covered by EPR schemes worldwide include electrical and electronic equipment (WEEE), consumer goods packaging, tires, and car batteries. Ideally, all reusable materials should be covered by EPR systems to maximize the collection of those resources and to make them available for reuse. Nevertheless, it should be noted that in reality there are limitations. As shown in figure 1, not all materials can be recycled or the recycled material is not sufficient to meet the demand for new/recycled packaging material. Consequently, some virgin material needs to be added. 

Figure 1. Resource use and reuse in a circular economy

Source: PREVENT Waste Alliance. 2020. EPR Toolbox. Fachsheet 00:Preface, introduction, glossary, overview of factsheet and key readings, More information:

The adoption of an EPR system provides environmental, economic and social benefits. Table 3 summarizes the most obvious ones. 

Table 3: key potentials benefits of EPR
Area of benefit Key potential benefits
  • Supporting effective end-of-life collection and environmentally-sound treatment of collected waste products
  • Helping to boost waste reuse and recycling rates 
  • incentivising producers towards green design or eco-design; creating more resource efficient products with lower environmental impacts e.g. using less or less harmful materials
  • contribution to the transition towards a circular economy
  • Fees paid by producers to EPR schemes can be finance waste collection and processing, reducing waste management cost to governments (for waste collection) and citizens (for waste-related charges) 
  • Reduced cost of using recycled material relative to virgin materials, by ensuring more effective collection of sorted waste materials and thereby providing higher quality secondary raw material 
  • Job creation, e.g. in Germany, around 290.000 people work in the waste management and secondary raw materials sector
  • Places greater social responsibility on producers by applying the polluter pays principle 
  • Reduces potential health risks from mismanaged waste, including hazardous waste such as WEEE and batteries (e.g. pollution of water sources, health risks from pests attracted to dumped waste

Limitations of voluntary schemes 

Due to its various advantages, the worldwide number of EPR systems has increased progressively in recent years. A large number of countries have implemented EPR schemes, either following a mandatory or voluntary approach. Based on the current scope of the regulatory framework Indonesia is somewhere between a voluntary and mandatory EPR. While reduction and recycling have become mandatory, the overall framework of the Indonesian waste management system makes the implementation rather challenging. The Indonesia Packaging Recovery Organization (IPRO) promotes a collective approach, but as an industry-led organization membership is voluntarily. 

Generally, the downside of voluntary EPR schemes is their limited scope because companies have the option to not take part in the scheme. Such systems have no legal framework to ensure compliance and the funding depends on the voluntary contributions from members. In comparison, a mandatory system is able to ensure compliance of obliged companies and can be financed sustainably due to mandatory financial contributions to the system. Moreover, it creates the possibility to install a collection system for all packaging materials, not only the economically most interesting resources. However, we are not there yet in Indonesia. The legal framework for EPR is still evolving, but the progress is visible. 

Financing an EPR system  

Important to a well-functioning system is financing. An EPR system cannot function without financial contributions from the producers. In Germany for instance, producers pay a fee according to the nature and weight of the packaging that they will make available in the market by selling their products. With the application of the “Polluter pays”-principle the burden of financing the waste management system will be transferred from the municipalities and taxpayers to the producers, i.e., the polluters. To ensure the internalization of the environmental (external) cost of the product and its packaging, an appropriate legal framework is needed to ensure same level playing field for all players involved. 

The majority of the mandatory EPR systems oblige companies to ensure that their packaging materials will be collected, reused and/or recycled properly at the end of the product-life cycle. In some countries certain economic instruments are employed. Examples are deposit refund systems (DRS) or advance disposal fees (ADF). In a DRS the consumer pays a deposit when buying a product. After returning the packaging, the deposit is reimbursed to the consumer. An additional mechanism is an advance disposal fee, which is paid by the customer at the purchasing point in order to cover the estimated costs for collection and recycling. Furthermore, legal requirements, such as a minimum share of recycled material in new products, can be implemented to enhance EPR. Informing consumers and producers about EPR can increase the willingness to participate in the EPR system.  

In Indonesia, the municipal waste management is financed with the budgets of the central as well as municipal governments.  However, the national budget is mostly used to support municipal governments with the procurement of equipment or the construction of facilities (capex). Municipal budgets on the other hand are used to finance the operation of the municipal waste management (opex). Households and businesses contribute through the payment of retribution fees. Additionally, there are non-retribution subsidies, paid from taxes and other revenues, covering the remaining. Ideally, the government strives to have the waste handling spending by 2025 to be IDR 22,000 per person per year for capital expenditures and IDR 43,000 per person per year for operational spending. Currently, the year for capital expenditure is IDR 5,000 and IDR 19,000 for operational spending.  

For producers the current situation is challenging. To comply with the regulation, businesses have to develop a roadmap with measures that shall be implemented after approval from the Ministry of Environment and Forestry (KLHK). Since the regulation is not very specific, proposed activities and required funding will vary widely between producers. Further, companies will be reluctant to spend much at this stage since no regulatory level-playing field exists. We have to assume that most private sector programs will be financed with mandatory CSR funds. 

Further reading 

The Extended Producer Responsibility is a rather complex topic. Our elaborations in this section of the website are meant to be an introduction. For those who want to dive deeper into the subject may find the following resources useful: 

1. EPR Toolbox 

The EPR Toolbox developed by the PREVENT Waste Alliance is a collection of internationally relevant knowledge on the topic of EPR for packaging. Its aim is to promote knowledge exchange and enhance development of EPR systems worldwide. Indonesian organizations have been involved in the development as well. The comprehensive resources comprising of videos and text-based material can be accessed via this direct link to the EPR Toolbox 

2. Going circular: The EPR Guide 

Developed by the WWF Academy in cooperation with PREVENT Waste Alliance, this free-of-charge online course utilizes the above-mentioned EPR Toolbox and provides a comprehensive introductory training to the topic of EPR. The online course can be accessed via the WWF Academy website.