Sustainability, specifically environmental sustainability, is the topmost priority for both consumers and businesses around the world. Governments are setting stricter compliance standards, consumers are making more informed purchasing decisions and the economy is shifting towards sustainability and decarbonisation.
Climate change is on the top list of priorities for business leaders. Leading up to COP26, the INSEAD Corporate Governance Centre and Heidrick & Struggles conducted a global survey of board directors. 75% state that climate change is very or entirely important to the strategic success of their companies.
1. Consumers putting environmental sustainability first
The detrimental effects of climate change, such as extreme weather, droughts, and floods is a clear wake call up for all of humanity. There is an “eco-awakening” amongst consumers occurring across the world – both in developed and developing countries – with an increase of 24% in Indonesia. Public concern for nature has also risen globally by 16% and has grown during the pandemic.
Consumers are increasingly starting to support businesses that engage in sustainability efforts. 66% of those surveyed (in McKinsey US cohort survey) consider sustainability when making a purchase.
Businesses are being held accountable by customers and so there’s a growing demand by businesses for their suppliers to supply environmentally-friendly products, including carbon-friendly steel productions.
2. Carbon emissions are more heavily regulated
It’s getting more expensive for organisations to continue operating whilst retaining a high carbon output.
Carbon price, known as carbon tax, is the price companies have to pay based on the carbon they emit in the process of production of goods and services.
Globally there are 64 carbon pricing initiatives implemented (or are scheduled to be implemented), according to World Bank statistics. In Indonesia, President Joko Widodo signed the “Economic Value of Carbon”, introducing a carbon cap-and-trade system that will kick off in April this year. This is where a cap is set and companies that exceed this limit will have to pay 30,000 rupiah ($2.09) per tonne of CO2e for coal-fired power plants.
In order to stay competitive, and not incur excessive carbon taxes, it’s paramount that companies transition to using cleaner energy and partnering with raw material suppliers that can offer such solutions.
3. Business leaders and investors prioritise ESG principles
There is also a shift of business priorities of top management, towards more environmentally and socially sustainable development. The Davos Manifesto states that “the purpose of a company is to engage all its stakeholders in shared and sustained value creation,” and a significant majority (91%) of directors surveyed agreed with this statement.
Since COVID-19, directors of companies are spending more time considering ESG issues, Diligent Institute global research found. As a result, many industries are evaluating their entire supply chain to ensure they’re ruthlessly cutting carbon emissions in order to quickly achieve carbon-zero targets. For example, in the automotive industry, Toyota aims to ensure suppliers of critical components cut carbon emissions by 3%, and Volkswagen is looking to ensure all their European plants are powered only by renewable energy by 2023.
4. Green hydrogen prices are expected to halve over the next 10 years
Generating electricity through the burning of fossil fuels used to be cheaper than the cost of producing renewable energy. But, by 2030, prices for hydrogen will decline due to the lowered cost of solar and wind energy. Also, energy created from fossil fuels might become more expensive due to heavy penalties imposed for the release of excessive carbon emissions.
Steel, a vital metal widely used, requires a significant amount of energy to be produced. Green steel, however, is steel that is made using hydrogen instead of coal and hence, produced with the lowest carbon footprint possible. This makes it gentler on the environment. As hydrogen is becoming a more cost-effective way of generating energy, also producing steel with hydrogen, would make green steel the cheaper option. Making the switch, from conventional steel to green steel, will not just help companies reduce their emissions, it will also help their bottom lines.
Partner with Gunung Prisma for sustainable steel solutions
To stay competitive and win the favour of consumers in today’s world, brands need to be on the right side of these trends. Gunung Prisma, a leading steel distribution company based in Indonesia and led by Liwa Supriyanti, champions the use of eco-solutions and distributes green steel. Partner with us to offer sustainable solutions to your target market.