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Integrating sustainability in South East Asia's steel manufacturing

Source:International Metalworking News for Asia     Date:2023-03-04
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By: Kathryn Gerardino-Elagio

 

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People have used steel since the olden days; and today it is existing in nearly every aspect of society’s lives. Steel is among the world’s most recycled materials, with circular economy practices merged into various stages of the production cycle. However, the high-temperature heat necessary to its production process still requires large amount of energy. Hence, Steel production is one of the world’s most polluting and energy consuming activities making it a major contributor to global emissions.

 

Asia's steel industry alone accounts for more than 70% of the carbon emissions in global steel production, according to the World Economic Forum. With the growing concerns over climate change, regulators, investors, and industrial customers are increasingly pushing steelmakers to increase their sustainability by pursuing decarbonisation.  PT Gunung Raja Paksi Tbk (GRP), one of the largest private steelmakers in Indonesia, released their recent Environmental, Social and Governance (ESG) Strategy Handbook. In relation to this, Sheren Omega, Head of Sustainability, disclosed how steel companies can incorporate sustainability into their business management.

 

2.jpgIMNA: How will steel companies consistently grow its bottom line, while innovating ways to incorporate sustainability into all possible aspects of their company?

 

Sheren: Many steel companies often view sustainability as a form of compliance which requires prominent level of investments to be achieved, thus making it seem like another burden to worry about. However, what goes beyond the surface of perceptions is that incorporating sustainability into your company’s fundamental business model can help propel your organisation to greater heights.

 

While the steel industry is one of the biggest perpetrators of pollution, the increasing conversations surrounding climate change has led to investors and customers now looking at alternatives that are sustainable for the long term. Hence, finding ways to innovate and incorporate sustainability is exactly how steel companies can consistently grow its bottom line. For example, our sustainability efforts at Gunung Raja Paksi (GRP) such as obtaining certifications like an Environmental Product Declarations (EPD) allowed us to expand into more markets with discerning views on green building and strict environmental laws like New Zealand. Currently, we are looking to further transform our methods of producing sustainable steel materials to contend with the likes of steel players in Europe and United States of America.  

 

IMNA: Is sustainability sustainable? How can steel companies make it work?

 

Sheren: Overall, investing in sustainability strategies and initiatives could prolong the longevity of an organisation. While it may seem daunting to take the leap, taking small but reasonable steps to reduce your carbon emissions is still action taken, and the critical first step towards greater sustainability for companies to take is to conduct careful evaluation on roadblocks to achieving sustainability. At GRP, we have identified challenges that steel companies face in the move towards sustainability through our Environmental, Social and Governance (ESG) Strategy Handbook – first challenge is the availability of technology to produce zero carbon products hence required research & development including resources to develop a new technology/ The other challenge would be the lack of awareness amongst stakeholders, where holding in-depth discussions to educate them could be a solution.  

  

Another challenge is that employees and stakeholders might not see the importance in this investment – the duty is then on leadership to cultivate and champion the use cases of sustainability to ensure this culture is embedded among employees. Our strategy has evolved to focus on nurturing the right talent to take our business to greater heights, equipping them with the knowledge and skills to align with our sustainability goals.  

  

Being a steelmaker for over 52 years, we have witnessed the difficulties the steel industry has faced and with our deep knowledge and understanding, we hope to drive our sustainability agenda through our ESG Strategy Handbook as a roadmap towards decarbonisation for other steel players in the region. 

 

IMNA: If a company will emphasise sustainability, sometimes it has an impact on prices. How do you address this issue?

 

Sheren: Kickstarting green practices like investing in decarbonisation takes time, as it disrupts the status quo. Sustainable alternatives are also often more expensive upfront. However, pushing through with these green initiatives is important as it translates into the greater good in the future. It is critical for companies to realise that taking climate action now ensures the long-term sustainability of your organisation.  

 

What people usually do not realise is that these costs usually manifest itself into higher prices for customers, which can have a negative impact on sales as a result. However, the wider adoption of sustainable alternatives would help to lower prices and costing in general. For now, it is most important to be transparent with your sustainability initiatives to ensure that customers and investors are aware of the reasoning behind costings – educating and increasing awareness is a crucial step in every and all steps of your sustainability journey.  

 

IMNA: How do you think steel companies are reacting to commitment to sustainability?

 

Sheren: Across South East Asia, we have been seeing a greater commitment and emphasis placed on sustainable practices – especially with global conferences like COP27 seeing countries like Malaysia, Indonesia and Singapore reaffirming their commitment towards taking concrete action to tackle climate change.  

 

As mentioned previously, the steel industry is one of the largest contributors to air pollution and carbon emissions, and there has been growing pressure placed on steel companies to shift towards greener practices. While we are seeing more steel companies take sustainability seriously, there are many still hesitant to commit.  

 

While more polluting methods like the usage of fossil fuels are cheaper and more convenient now, it is not a long-lasting approach towards manufacturing steel. It is important for companies to seek out alternative sources of energy, especially renewable ones. These often turn out to be more cost-efficient, contrary to beliefs – according to the International Renewable Energy Agency (IRENA)1, where almost two-thirds of renewable power capacity added last year had lower costs than the cheapest coal-fired power plants in G20 countries.  

 

IMNA: What advice would you give to other companies who also want to start this journey?

 

Sheren: Taking the necessary steps to lay the groundwork and form a concrete plan is the first step towards starting your sustainability journey. It may seem that such an investment of time and resources towards creating a blueprint is inefficient, but it allows your company to hold itself accountable.

 

Additionally, even though initial start-up costs are higher, the benefits brought to your company, investors and customers eventually are significant. It is important to remember to think in the long term and remain optimistic about the development of renewable sources of energy – with the advancements in technology, we are hopeful that prices for alternative sources of energy will eventually level out.

 

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1https://www.reuters.com/article/renewables-costs-idUSL1N2YU0P3


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