Jakarta Globe | Insight

Sustainable Policies Help Indonesian Firms Cut Costs

Jakarta. Indonesian companies have started to consider environmental and social issues in their operations. Some of them are even willing to sacrifice technological advancement for the sake of environmentally safer ways of doing business.

“Nowadays, reputation and sustainability are of key importance to us,” Vale Indonesia corporate affairs director Basrie Kamba said at the “Beyond Profitability: Balancing Sustainability and Growth” seminar organized by GlobeAsia and Asia Pacific Resources International Holdings Limited (April) in Jakarta on Dec. 6.

As the business world is still about numbers, Basrie said, many companies are putting price tags on community programs to measure their success rate.

According to him, however, it is unnecessary, simply because addressing environmental and social issues translates directly into a real and positive financial impact and long-term prospects for a company.

Vale Indonesia, the local unit of Brazilian miner Vale, has recently won the Sustainable Business Awards Indonesia for its consistent anti-corruption policies. The award was presented by Singapore-based Global Strategic Events (Global Initiatives), PwC and the Indonesia Business Council for Sustainable Development.

Innovations for Better Output

The are various innovations behind Vale’s 17 percent increase in production to 90,000 tons in 2017. For example, its team managed to tweak the company’s ore dryers to require less coal fuel, and by 2019 will save 3,000 tons of it.

Vale is not the only company that has boosted production and reduced costs through sustainability-driven innovations.

Similar things have been done in different industries by companies such as the world’s largest palm oil holding Golden Agri Resources, Indonesia’s largest cement manufacturer Semen Indonesia, and the local arm of global food packaging company Tetra Pak.

Earlier this year, the Ministry of Agriculture approved the fully commercial use of seeds cloning by Golden Agri Resources, which allowed the company to increase production to 10.8 tons of crude palm oil per hectare, from 7.5 tons, without the need to expand its plantations.

“We use a lot of technology. We can monitor the performance of our estates across Indonesia … so we really see what is happening there. We have satellite images, a computerized system,” said Anita Neville, Golden Agri Resources vice president of corporate communications and sustainable relations.

“It’s a culture of constantly improving practices, being more efficient and more sustainable,” she said, adding that the company also applies a complete “zero waste” policy at its plantations.

Golden Agri Resources also relies on simple and natural methods to reduce the use of pesticides. For example, it has 2,000 owls to fight rats, which according to Neville makes its “negative environmental footprint” much smaller.

Similarly, Semen Indonesia uses technology to become more efficient in energy consumption. According to its corporate secretary, Agung Wiharto, for cement mix the company utilizes others waste, like copper slag and gypsum, and produces energy from the excess heat generated by its own machines.

Tetra Pak Indonesia president director Paolo Maggi told the Jakarta Globe that it is “heavily” investing in research and development to find a much faster means of production, which has a direct impact on its operational costs.

Although he did not share numbers, Maggi said Tetra Pak is the company “that invests the highest amounts in research and development.”

For instance, the company has recently created a machine that can produce 40,000 packages an hour, 16,000 more than it used to. It also replaces peroxide sterilizing with an electron beam system, which requires very little maintenance.

“It is safer, because you’re not managing or handling any chemicals, and more economical, because you don’t have to buy peroxide,” Maggi said, adding that as a company that produces fast-moving consumer goods, Tetra Pak is active in campaigning for better aftersales management, which includes recycling.

“We want to increase the collection of post-used goods. How do we do it? We invest lots of time and resources into educational programs for our customers and consumers,” he said.

Incentives 

The government is well aware of these improvements and innovations, but while listed companies are obliged to report their sustainability efforts, incentives for those that are unlisted to follow suit are still insufficient, said Teddy Caster Sianturi, the head of green industry and environment center at the Ministry of Industry.

According to Teddy, the government has an annual green industry award to encourage companies to increase their use of renewable energy, but that is not enough.

“[Recycling] companies are now paying a double value-added tax, on their input and output,” he said, adding that the ministry is currently studying ways to improve this situation.

He added that value-added tax exemptions should suffice.

JANUARY 2018
REVIEW & LOOKING AHEAD
DECEMBER 2017
BEYOND PROFITABILITY
NOVEMBER 2017
URBAN INNOVATION
OCTOBER 2017
REGULATORY REBOOT
AUGUST 2017
DEFENDING PANCASILA