Embracing Low Carbon Steel for Long-Term Survival

Gunung Raja Paksi (GRP), a member of the Gunung Steel Group, is embarking on a transformative journey towards low carbon steel production, recognizing the imperative of shifting the steel industry towards sustainability as a survival strategy. This endeavor encompasses reskilling, renewable energy adoption, and equipment modernization.

The key question arises: What is green steel, and why is it crucial? The steel industry’s substantial energy consumption, contributing 8-10% of global emissions, underscores the significance of addressing its environmental impact. Green steel is becoming a familiar solution as it is produced with sustainable energy sources. It involves two production methods—blast furnace and electrical furnace—with the latter offering a path towards decarbonization. The steel industry is essential to Indonesia’s goals for reducing emissions. The focus includes securing renewable energy, green hydrogen production, circular economy advancement, and governmental support.

Kelvin Fu, Managing Partner of Gunung Capital, emphasizes that innovation and uniqueness in steel production will drive customer added value. The most tangible way to deliver that value is to produce lower carbon steel .

Fu further highlights the GRP Net Zero roadmap, focusing on a 75% carbon intensity reduction through green power sourcing and fuel switching through a partnership with Fortescue Future Industries (FFI) to convert natural gas facilities to green hydrogen.

Abednedju Giovano Warani Sangkaeng (known as Argo), the President Director of GRP, reflects on the company response during the pandemic while prioritizing transformation and change management for safety and product delivery.

The successful transition to a low-carbon future hinges on transparency, especially throughout the entire value chain. This journey is firmly supported by a versatile strategy that encompasses different levels. At the corporate level, GRP’s sustainability endeavors are meticulously tracked through scorecards by Sustainalytics and a comprehensive carbon footprint analysis conducted by ERM.

Meanwhile the pivotal technical layer involves active engagement with suppliers, where adherence to ESG standards is imperative for effectively tackling Scope 3 emissions. The collaborative approach extends equally to customers, with the intention of imparting awareness about eco-conscious practices.

The founding family’s perspective sheds light on the GRP distinctiveness.  Key figures in GRP, the Executive Committee members Kimin Tanoto and Tony Taniwan, underscore the company’s history and transition towards low-carbon steel. The shift is driven by a blend of strategic and survival instincts, underpinned by a long-term perspective.

Tanoto further explains that the pivotal aspect underpinning the topics on the steel industry’s transition towards sustainability is perspective. What might initially appear as a risk and cost expense can transform into an exceptional opportunity, provided the right strategic approach and environmentally conscious mindset. GRP has studied the issue extensively to assess its impact on business operations and discovered that producing green steel could be a significant growth area.

GRP emphasizes the necessity for constant innovation and resilience in the steel sector because it understands that business is akin to warfare. This outlook prompted GRP’s transition from family management to professional leadership, aligning with the goal of survival and profitability. While some shareholders had initial reservations, the visible results and the unfolding ESG initiatives have garnered broader support. The commitment to a sustainable future is unwavering, with the belief that short-term trends pale in comparison to long-term industry shifts.

Underlining the commitment to the path of low-carbon steel, GRP takes substantial steps towards sustainability by embracing hydrogen and ammonia technologies. Through a partnership with Fortescue Future Industries (FFI), specializing in green hydrogen production, the steel manufacturer conducts detailed technical studies to convert key business units from natural gas to green hydrogen. Despite the potential price challenges associated with green hydrogen, technological advancements might lead green steel to be more competitive than traditional carbon steel, particularly in Asia.

Instead of focusing on sheer scale, GRP prioritizes profitability and smart investments, ensuring flexibility in deploying new technologies and adopting green practices. The synergy between green steel and hydrogen emerges as a growth area, reflecting the company’s commitment to the energy transition and local solutions pillar of its ESG strategy.

The collaboration with FFI stems from a shared vision for sustainability and alternative energy sourcing. The commitment to nurturing talent forms a crucial aspect of GRP strategy, as upskilling and reskilling the workforce is vital for their sustainability journey. The transformation will not only bring new job opportunities but also addresses the need for broader knowledge and awareness of low-carbon products and green protocols.

In the pursuit of a green future, GRP’s strategic approach and collaborations emphasize the importance of synergizing efforts across sectors and industries, driven by a shared vision for sustainability.

This article is adapted from an interview with the CNBC International series “Sustainable Future”. Check out the interview highlights here:

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