{"id":1977,"date":"2023-04-05T10:55:21","date_gmt":"2023-04-05T03:55:21","guid":{"rendered":"https:\/\/gunungcapital.com\/?p=1977"},"modified":"2023-04-26T10:09:18","modified_gmt":"2023-04-26T03:09:18","slug":"a-matter-of-survival-why-indonesian-steel-giant-gunung-raja-paksi-is-going-net-zero","status":"publish","type":"post","link":"https:\/\/gunungcapital.com\/zh\/a-matter-of-survival-why-indonesian-steel-giant-gunung-raja-paksi-is-going-net-zero\/","title":{"rendered":"&#8216;A matter of survival&#8217;: Why Indonesian steel giant Gunung Raja Paksi is going net-zero"},"content":{"rendered":"<div data-elementor-type=\"wp-post\" data-elementor-id=\"1977\" class=\"elementor elementor-1977\" data-elementor-post-type=\"post\">\n\t\t\t\t\t\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-4530430 elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"4530430\" data-element_type=\"section\" data-settings=\"{&quot;jet_parallax_layout_list&quot;:[]}\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-b107301\" data-id=\"b107301\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t\t\t<div class=\"elementor-element elementor-element-21f7c9e elementor-widget-tablet__width-initial elementor-widget elementor-widget-text-editor\" data-id=\"21f7c9e\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t<style>\/*! elementor - v3.16.0 - 14-09-2023 *\/\n.elementor-widget-text-editor.elementor-drop-cap-view-stacked .elementor-drop-cap{background-color:#69727d;color:#fff}.elementor-widget-text-editor.elementor-drop-cap-view-framed .elementor-drop-cap{color:#69727d;border:3px solid;background-color:transparent}.elementor-widget-text-editor:not(.elementor-drop-cap-view-default) .elementor-drop-cap{margin-top:8px}.elementor-widget-text-editor:not(.elementor-drop-cap-view-default) .elementor-drop-cap-letter{width:1em;height:1em}.elementor-widget-text-editor .elementor-drop-cap{float:left;text-align:center;line-height:1;font-size:50px}.elementor-widget-text-editor .elementor-drop-cap-letter{display:inline-block}<\/style>\t\t\t\t<p><span style=\"font-weight: 400;\">With carbon border taxes making life harder for carbon-intensive industries, Gunung Raja Paksi feared it could not export its products to the West if it did not slash emissions. The firm&#8217;s top executives Kimin Tanoto and Kelvin Fu tell Eco-Business about how a firm in the hardest-to-abate sector is reducing its carbon footprint.&nbsp;<\/span><\/p>\n<p><span style=\"font-weight: 400;\">For PT Gunung Raja Paksi (GRP), one of Indonesia\u2019s largest steel companies, the motivation to cut emissions is business survival, says Kimin Tanoto, a member of the company\u2019s executive committee.&nbsp;<\/span><\/p>\n<p><span style=\"font-weight: 400;\">With the introduction of carbon border taxes by the European Union and the United States, the cold, hard reality for the steel maker is that it could miss out on huge markets if it does not reduce its carbon footprint.&nbsp;<\/span><\/p>\n<p><span style=\"font-weight: 400;\">This is not easy for a steel business. Steel making accounts for 6 per cent of global energy consumption and 6 to 9 per cent of carbon emissions, a footprint that is projected to grow by 15 to 20 per cent between 2030 and 2050 as the world urbanises. Decarbonising the steel trade is also expensive. It will require <\/span><span style=\"font-weight: 400;\">US$1.4 trillion in investment by 2050.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Despite the odds, in February this year, GRP unveiled its net- zero roadmap, aiming to be carbon neutral by 2050 and achieve net-zero emissions.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">\u201cWe don\u2019t want to end up with stranded assets,\u201d said Tanoto, who is also founder and chief executive of Gunung Capital, an investment management company affiliated to GRP.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">\u201cIf the world\u2019s top economies are pivoting towards carbon neutrality, exporting nations in Southeast Asia will have to comply. If your goods are not deemed green, you will face a huge tax burden.\u201d<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Working towards net zero will mean removing 135,937 tonnes of carbon dioxide equivalent (CO2e) from the company\u2019s Scope 1 emissions, which includes the firm\u2019s facilities and vehicles. GRP\u2019s Scope 2 emissions, which include purchased electricity, steam, heating and cooling, are bigger \u2013 394,860 tonnes CO2e, roughly three- quarters of its overall footprint.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">GRP\u2019s greenhouse gas inventory doesn\u2019t include the company\u2019s Scope 3 emissions yet, which include capital goods, transportation and distribution, waste and business travel. The steel industry\u2019s Scope 3 accounts for about 29 per cent of the sector\u2019s overall emissions.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">As difficult as planning to decarbonise a steel company is, getting buy-in from management was a major first hurdle. \u201cWe first had to explain to senior management and shareholders what carbon neutrality is, even what sustainability is,\u201d explained Kelvin Fu, Gunung Capital\u2019s co-founder and managing partner.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">\u201cWe had to convince them what going green is about, and what it means for steel \u2013 and even if it\u2019s possible for a steel business to go green,\u201d he recalled. Explaining the merits of decarbonisation to top management was a six-month process and it took another year of data gathering during the Covid-19 pandemic to set the wheels in motion for the net-zero roadmap.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">In the end, the selling point was that decarbonisation is a business opportunity as well as a necessary survival strategy.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">\u201cI believe the green movement is the business opportunity of our lifetime,\u201d said Tanoto. \u201cIf we pivot properly and invest properly, there\u2019s a lot of wealth creation to be had. A reset is going to happen across industries, in energy, building materials and property, and we want to be on the right side of the transition.\u201d<\/span><\/p>\n<p><span style=\"font-weight: 400;\">In this interview, Tanoto and Fu talk about the challenges of cutting carbon from one of the hardest industry\u2019s to decarbonise and why the future of the company isn\u2019t just rooted in green steel.<\/span><\/p>\n<p><b>GRP is no longer reliant on carbon offsets to reduce its climate footprint. What\u2019s the company\u2019s plan to curb emissions?<\/b><\/p>\n<p><span style=\"font-weight: 400;\">Kimin Tanoto: Instead of spending money on carbon offsets, we wanted to actually decarbonise ourselves. Previously, we had looked at just buying offsets, but we realised that relying on offsets is bordering on greenwashing.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Decarbonising GRP will be done in three main ways; investing in renewables \u2013 80 per cent of our carbon footprint can be reduced by switching to green power \u2013 improving operational efficiency, which will account for 15 per cent of reductions, and the last 5 per cent from a combination of insetting [financing climate protection projects along the company\u2019s own value chain] and, potentially, carbon capture, although that is a bit premature for us now.<\/span><\/p>\n<p><b>Give us a sense of some of the challenges you faced in preparing the company to decarbonise?<\/b><\/p>\n<p><span style=\"font-weight: 400;\">Kelvin Fu: The consultancy [GRP hired sustainability consultancy ERM to draw up its GHG inventory and help with its reduction strategy] had thousands of questions: what are your energy inputs, where are your business lines, and so on. If you look at our footprint, it\u2019s hard to appreciate how massive a task this was. All individual business units have varying technology systems. How do you get the energy output from individual business units? How do you get engineers to explain what it takes to produce a batch of steel and what the carbon footprint is for that batch?<\/span><\/p>\n<p><span style=\"font-weight: 400;\">We did a lifecycle assessment, and ERM then challenged our findings before we came up with a final number [for the carbon footprint]. We are now going to recalculate our footprint every year, and we must show step-by-step how we\u2019re reducing the footprint. We had to realign some of our business processes and re<\/span><span style=\"font-weight: 400;\">wire the ways our people think. Hiring sustainability people was almost impossible at the time, the talent pool was just too small. We had to train people in-house.<\/span><\/p>\n<p><b>How big is your sustainability team and how is it structured?<\/b><\/p>\n<p><span style=\"font-weight: 400;\">We have four people, two full time. They report directly to the CEO and have the authority to pull resources and data from across the company. Our head of sustainability was previously our head of corporate planning, Sheren Omega, who took about a year and a half to train up to do the role. The heavy-lifting [for setting <\/span><span style=\"font-weight: 400;\">the net-zero roadmap] was done by the consultants, but now the sustainability department is accountable for the targets we\u2019ve set.<\/span><\/p>\n<p><b>How have you approached change management within the organisation?<\/b><\/p>\n<p><span style=\"font-weight: 400;\">Kelvin Fu: There are two ways to influence people: with a stick and with money. One way to do them both is with key performance indicators (KPIs). We introduced sustainability KPIs for the management team this year. So now director-level sustainability KPIs for the management team this year. So now director-level bonuses are linked to the environmental performance of the company.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Kimin Tanoto: It affects our bottom line if management doesn\u2019t meet those KPIs. Our green vision has allowed us to get cheaper corporate loans from the bank.<\/span><\/p>\n<p><b>Has the company aligned with the Science-Based Targets Initiative (SBTi) , which aligns decarbonising companies with the Paris agreement on climate change?<\/b><\/p>\n<p><span style=\"font-weight: 400;\">Kelvin Fu: We\u2019re not signatories to that yet. In terms of our footprint, we are aligned with Responsible Steel, a global standards and certification body for the steel trade, which has informed our [net-zero] framework.<\/span><\/p>\n<p><b>Until recently, many steel companies would have viewed the indirect emissions along their value chain \u2013 Scope 3 emissions \u2013 as less of a priority\u2009 than Scope 1 and 2 emissions. But Scope 3 is now coming under the spotlight for steelmakers. What\u2019s your take on the need to tackle Scope 3 emissions?<\/b><\/p>\n<p><span style=\"font-weight: 400;\">Kimin Tanoto: In my opinion, Scope 1 and Scope 2 are more critical. But we still need to tackle Scope 3, and it\u2019s something that we\u2019re going to work with a consultant to figure it out. A lot of Scope 3 emissions come from energy and raw materials. We are running an electric arc furnace, which uses scrap recycled metal as stock. That feeds into the circular economy narrative<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Kelvin Fu: There aren\u2019t many scrap metal providers that are tech savvy and track their footprint, which is an issue. But we now have a responsible procurement policy in place as part of our roadmap, and we\u2019re going to push checklists on our suppliers to say, look, we\u2019re giving you some grace period, but soon you\u2019re going to have to report your Scope 1 and Scope 2 \u2013 because that\u2019s our Scope 3. But it will take some time. It will take a lot of education to drag them along.<\/span><\/p>\n<p><b>GRP has plans to grow. So how do you balance growth with sustainability<\/b><\/p>\n<p><span style=\"font-weight: 400;\">Kelvin Fu: My view is that it\u2019s not one or the other. Our current export growth is five per cent. We want to double or even triple that within two to three years. We don\u2019t want to just be an Indonesian company, we want to export to the rest of the world. Our exports are regional [Asia Pacific], where carbon taxes are starting to come into play, for instance in Singapore, and to Europe and the United States, where carbon taxes are already in play. The only way for us to access those markets is for us to be a low-carbon business.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">We already have some [certification], like the [International Organisation for Standardisation\u2019s] Environmental Product Declaration, which has opened up Standardisation\u2019s] Environmental Product Declaration, which has opened up markets that were previously closed to us. We\u2019ve already got a head start having an electric arc furnace (EAF) \u2013 which expends about a third of the emissions of a traditional blast furnace \u2013 and we have a strong circularity story. We have to stay ahead of our competitors. For them, switching to EAF is not so easy because it involves heavy capex.<\/span><\/p>\n<p><b>To what extent will you be relying on carbon capture, use and storage technology (CCUS) to meet your net-zero target?<\/b><\/p>\n<p><span style=\"font-weight: 400;\">Kimin Tanoto: We will not \u2013 for now. We will focus on renewable energy and energy efficiency first. Carbon Capture will be our last resort, before we then look at carbon offsets. If we were located in Central Java, it would be easier to deploy CCUS as there are a lot of gas fields there. CCUS would be very difficult for us, because of our location in a built-up town [GRP\u2019s plant is located in Cikarang Barat, West Java].<\/span><\/p>\n<p><b>It is not always easy for companies in Indonesia to source renewable energy and the grid is heavily dependent on coal. How are you approaching renewable energy procurement?<\/b><\/p>\n<p><span style=\"font-weight: 400;\">Kimin Tanoto: We wanted to put solar panels on all of our roofting, so we could source renewable electricity directly for our power transmission. We were in talks with Total Energies and were working through the details. But PLN [PT Perusahaan Listrik Negara, Indonesia\u2019s state electricity firm] blocked it. They said we couldn\u2019t consider the deal, because they had excess power [PLN has excess power capacity from its coal-based Java-Bali grid, so has put a cap on solar power installations] and we need you to take this excess power.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">A lot of industries in Indonesia are running into the same problem. They want to go green and install solar panels and wind turbines, but their plans are being blocked. We have to keep lobbying to use more renewable energy. We have to keep pushing.<\/span><\/p>\n<p><b>What sort of reskilling and upskilling of GRP\u2019s workforce will need to happen for your company to transition to net-zero?<\/b><\/p>\n<p><span style=\"font-weight: 400;\">Kelvin Fu: We have more than 4,000 employees. We still need to constantly reinforce the message that going green is the future. We will require them to track the electricity output to an individual batch of steel, so we can hold employees individually accountable for our carbon emissions. They will have to be cognisant of their footprint, so we can run our operations as efficiently as possible. That will affect our finance team, since our sustainability-linked loan is tied to our carbon reduction achievements. Our net-zero target is interconnected throughout the company, so a lot falls on our head of sustainability to raise awareness of the need to decarbonise in every department. Once sustainability is embedded in everyone\u2019s KPIs, the company can move as a whole.<\/span><\/p>\n<p><b>What\u2019s the response been like to the net-zero plan that has been put into place?<\/b><\/p>\n<p><span style=\"font-weight: 400;\">Kelvin Fu: There was resistance initially, but we have a new, young, ambitious team in place. If we\u2019d put in place a KPI that was not achieveable \u2013 let\u2019s say GRP by 2030 \u2013 it wouldn\u2019t have worked. It has to done gradually. We cannot expect scrap yards in Indonesia to reduce their emissions overnight. We cannot enforce everything in one shot.<\/span><\/p>\n<p><b>Are there companies in the steel sector you\u2019ve looked to for inspiration to help you meet you decarbonisation target?<\/b><\/p>\n<p><span style=\"font-weight: 400;\">Kimin Tanoto: ArcelorMittal [a Luxembourgish-Spanish-French steel firm, the largest in the world] and Nucor [the largest steel firm in North America]. Nucor\u2019s strategy has always been rooted in recycling, so they\u2019re in a very good position to take advantage of the green movement. Their carbon footprint is one of the lowest and they take a lot of care to keep reducing it. In Asia, Posco [a South Korean steel maker] is one of the leaders.&nbsp;<\/span><\/p>\n<p><span style=\"font-weight: 400;\">H2 Steel [a Swedish firm which is to launch the first renewable hydrogen-based integrated steel mill] is also impressive, although that is a greenfield project with new technology and a five-year offtake agreement with government support, which is unheard of.<\/span><\/p>\n<p><b>What has been the biggest challenge in decarbonising GRP?<\/b><\/p>\n<p><span style=\"font-weight: 400;\">Kelvin Fu: I think green steel is going to fundamentally change the way we think about steel production. And one of the most difficult things to do is to work out where to locate your plants. Previously, you needed to locate your plant near a coal mine or an iron ore mine or a port to ship your product to market. But now you need to think about where you\u2019re to source green power from. We\u2019ve been thinking about our expansion plan, and we\u2019re conflicted about where to put certain facilities.<\/span><\/p>\n<p><b>There\u2019s talk about green hydrogen, but where is that going to come from? What are your plans for the future?<\/b><\/p>\n<p><span style=\"font-weight: 400;\">Kimin Tanoto: We\u2019re in the business of finding partnerships and opportunities. So we\u2019ll looking to make investments in other climate technologies that can assist our manufacturing plant. We do not just want to be seen as a steelmaker. We want to replicate what we have learned decarbonising GRP and apply the playbook to other complementary industries. Now when we go into a new business venture, we can look at it through a low-carbon lens. That\u2019s the next step for us.<\/span><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-f204dde elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"f204dde\" data-element_type=\"section\" data-settings=\"{&quot;jet_parallax_layout_list&quot;:[]}\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-dfc0933\" data-id=\"dfc0933\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t\t\t<div class=\"elementor-element elementor-element-5f36bd0 elementor-widget elementor-widget-text-editor\" data-id=\"5f36bd0\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t<p>This article has been published with the title:<br \/><em>\u201c &#8216;A matter of survival&#8217;: Why Indonesian steel giant Gunung Raja Paksi is going net-zero\u201d<\/em><br \/><a href=\"https:\/\/www.eco-business.com\/id\/news\/a-matter-of-survival-why-indonesian-steel-giant-gunung-raja-paksi-is-going-net-zero\/\" rel=\"nofollow noopener\" target=\"_blank\">https:\/\/www.eco-business.com\/id\/news\/a-matter-of-survival-why-indonesian-steel-giant-gunung-raja-paksi-is-going-net-zero\/\u00a0<\/a><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t\t\t\t<\/div>","protected":false},"excerpt":{"rendered":"<p>With carbon border taxes making life harder for carbon-intensive industries, Gunung Raja Paksi feared it could not export its products to the West if it did not slash emissions. The firm&#8217;s top executives Kimin Tanoto and Kelvin Fu tell Eco-Business about how a firm in the hardest-to-abate sector is reducing its carbon footprint.&nbsp; For PT [&hellip;]<\/p>","protected":false},"author":1,"featured_media":1984,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[16],"tags":[27,31,28,29],"_links":{"self":[{"href":"https:\/\/gunungcapital.com\/zh\/wp-json\/wp\/v2\/posts\/1977"}],"collection":[{"href":"https:\/\/gunungcapital.com\/zh\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/gunungcapital.com\/zh\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/gunungcapital.com\/zh\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/gunungcapital.com\/zh\/wp-json\/wp\/v2\/comments?post=1977"}],"version-history":[{"count":0,"href":"https:\/\/gunungcapital.com\/zh\/wp-json\/wp\/v2\/posts\/1977\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/gunungcapital.com\/zh\/wp-json\/wp\/v2\/media\/1984"}],"wp:attachment":[{"href":"https:\/\/gunungcapital.com\/zh\/wp-json\/wp\/v2\/media?parent=1977"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/gunungcapital.com\/zh\/wp-json\/wp\/v2\/categories?post=1977"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/gunungcapital.com\/zh\/wp-json\/wp\/v2\/tags?post=1977"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}