The Role of Corporate Governance in Driving Energy Transition: A Qualitative Case Study of PT Pupuk Kaltim

ABSTRACT: This study investigates the role of corporate governance in driving the energy transition at PT Pupuk Kaltim, one of South-East Asia’s largest state-owned urea and ammonia producers. Employing a qualitative single case study design, data were collected through in-depth semi-structured interviews with seven key informants drawn from functionally diverse work units, supplemented by company document analysis and non-participant observation. Three research questions guided the inquiry: how corporate governance mechanisms are translated and implemented at the managerial level to support energy transition strategy; how functional managers utilise financial and non-financial accounting information when evaluating clean energy investment proposals; and what principal challenges managers face in balancing short-term financial targets with the long-term sustainability agenda. Findings identify four interdependent formal governance instruments: (1) formalisation of the Net Zero Emission (NZE) Roadmap into the Long-Term Corporate Plan (RJP) with shareholder approval through the Annual General Meeting of Shareholders (RUPS), thereby converting the decarbonisation agenda from a technical initiative into a binding strategic commitment; (2) a parity-principle Key Performance Indicator (KPI) system incorporating environmental indicators weighted at 3–10%, reinforced by a collegial impact mechanism that distributes accountability horizontally across the entire management tier; (3) a Three Lines of Defence oversight framework with the Internal Supervisory Unit (SPI) functioning as an independent third line; and (4) preparation for the adoption of the Sustainability Reporting Standards (PSPK S1/S2), which catalyses cross-departmental collaboration in building sustainability data infrastructure. Three categories of challenge are identified: a technological gap in Green Ammonia development that creates fundamental methodological limitations for risk assessment, capital budgeting, and investment audit; a structural tension between short-term profitability pressures and long-run green investment requirements; and an absence of a formal ESG audit guideline, pending direction from the Holding company. Theoretically, the study contributes by demonstrating how corporate governance mechanisms function as an institutional mediator reconciling the conflicting logics of Agency Theory and Stakeholder Theory in the context of a state-owned enterprise operating in an emerging economy.

KEYWORDS : corporate governance, energy transition, sustainability accounting, state-owned enterprise, Net Zero Emission, environmental management accounting