*Sheren Omega, Head of Sustainability, GRP

Could the steel manufacturing industry be a major proponent for sustainability?

The steel manufacturing industry is critical to global economic development and, according to S&P Global, the demand for steel is forecasted to edge up to 2.2% in 2023. Despite ongoing trade wars, geo-political conflict and supply chain bottlenecks, steel has yet to let up, owing to the rise in consumption, increased infrastructure construction and thriving automobile sectors.

However, the steel industry is also one of the most energy intensive industries, accounting for around 8% of global carbon dioxide emissions. In today’s climate, regulators and consumers alike are more discerning of the toll this industry takes on the environment and societies. Collectively, there has been increased pressure for steel manufacturers to transition into more sustainable practices.

The Paris Agreement calls for emissions to be reduced by 45% by 2030 and hopes to reach net zero by 2050. The European Union and its member states have further pledged to cut their carbon emission by at least 55% by 2030 and debated on making the pledge legally binding. With such ambitious goals for reducing carbon emissions, countries need all industries to innovate and transform into a more sustainable mode of production.

Steel manufacturing and sustainable operations almost seem mutually exclusive. Nevertheless, as markets are on a rapid rise towards sustainability, there is no doubt that opportunities are vast and wide for the construction and manufacturing industries.

To thrive and fulfil their corporate social responsibility, steel manufacturers must have the determination to not only invest their resources into acquiring new technology, but to completely transform their vertical integration to ensure green production. Within the steel industry, energy efficiency has become an increasingly vital strategy to address climate change challenges.

According to EY, advancements in technology for over the last 50 years have witnessed the steel industry move from traditional blast furnaces (BFs) toward the electric arc furnace (EAF) and have reduced energy use in steel production by 60%.

Gunung Raja Paksi (GRP), being EAF operated, has been on an industry leading mission to decarbonise the steel industry and recently, adopted several initiatives to reduce emissions, such as investing in a modern Light Section Mill to increase steel production efficiency by 500,000 metric tons a year, resulting in reduced gas and power consumption by 50%.

The adoption of green technology is a sure-fire method to bolster sustainable production of steel. However, more can be done. Across the globe, initiatives such as the purchase of carbon credits have added to the goal of reducing emissions.

The purchase of carbon credits was established as a mechanism to reduce greenhouse gas emissions, where companies get a set number of credits that reduce over time, and they could sell excess credits to other companies. The system creates a monetary incentive for companies to reduce their carbon emissions. In practice, the purchase of carbon credit fund projects elsewhere can help reduce greenhouse gas emissions as it supports biodiversity development in local communities.

Recognising the opportunity to give back, GRP led the charge as the first steel company in Indonesia to have purchased carbon credits, even before the implementation of any carbon offset regulations within Indonesia. As of 2022, GRP has purchased 10,000 carbon credits from eight recognised Natural Climate Solution (NCS) projects under Climate Impact X.

Aside from empowering local communities, sustainable steel products are also key to the governments’ plans for urban development. With urbanisation unfolding at a global scale, it is estimated that 68% of the world’s population will live in urban areas by 2050. Therefore, the market for infrastructure is expected to increase. Additionally, ensuring accountability is a key factor in building the roadmap to sustainable steel manufacturing, which is why GRP has established a first-year baseline to measure the ESG performance in the company.

At the same time, governments will continue to look for sustainable solutions for infrastructure due to their considerations for future generations. Currently, almost 9,400 cities have committed to over 20,000 actions to address and mitigate climate change. If these pledges are fulfilled, it is estimated that cities in emerging markets worldwide will attract over $29.4 trillion.

For the steel manufacturing industry to effectively capitalise on the global urban development scene, it must transit to a sustainable line of production that uses a sustainable energy source. In that regard, the usage of solar power rather than relying on the national power grid, is one of the ways that GRP is pursuing sustainable production. 

With countries all taking action to tackle cities’ emissions problems and combined with the increasing urbanisation, sustainable construction materials will only continue to gain prominence. Steel manufacturers should strive to incorporate sustainability into various aspects of their production pipeline through concrete actions, including obtaining certificates for a company’s sustainable efforts (such as the Environmental Product Declarations), implementing carbon capture systems in one’s factories and investing resources in R&D for more sustainable solutions.

The decision to innovate green steel will only reap great benefits in Asia Pacific as it aligns with the regional, and even global, trend to ensure the longevity of our world.

*Sheren is the Head of Sustainability at PT Gunung Raja Paksi, Tbk. Her responsibilities include preparing the long-term business and strategy plan as well as Sustainability Roadmap and Initiatives.

With eight years of experience in a professional firm, Sheren has strong knowledge expertise in business process review and risk management; varying in several types of industries from manufacturing, telecommunication and nonprofit organization. She also has been part of the transformation of GRP business goals, processes and technologies. This has resulted in a significant turnaround at the businesses from a loss-making to record profits in 2021.

Sheren leads the Sustainability department to ensure the implementation of roadmap and improve ESG implementation in the company. She is also a member of IISIA Department of Energy, Environment & Sustainability Committee for the period of 2021 – 2025.