Kimin Tanoto
It's hard and it's meant to be hard
Kimin Tanoto is boldly reinventing his family’s steel production company by embracing sustainability and focusing on lower-carbon steel processes
“My advice to people with assets is to take a look at what you have and, if it’s winding down and at risk of being stranded, make a transformation for the greater good,” says Kimin Tanoto, Chairman of Executive Committee of Indonesian steel producer Gunung Raja Paksi (GRP). “But don’t stand still.”
In Tanoto’s case, the assets he found himself overseeing, as part of his family’s steel production business, included an iron ore-powered blast furnace and an electric arc furnace, which he says cost close to $300mn to build. To demonstrate the company’s commitment to achieving its net zero goals, he plans to demolish the blast furnace and focus solely on the electric arc furnace to produce low-carbon emission steel – while his competitors continue predominantly to produce high-carbon steel using the blast furnace method.
Driven by his strong convictions about the green economy – industrial decarbonisation, widespread electrification via renewables and the fundamental transformation of businesses towards sustainability – Tanoto is intent on making an impact beyond the steel sector. Drawing on the experience of steering his family's steel enterprise towards low-carbon operations, he co-founded Gunung Capital in 2019 together with Kelvin Fu, Chief Transformation Officer at GRP.
As CEO, Tanoto intends Gunung Capital to be more than simply an investment firm: he wants it to act as a catalyst for innovative ideas and to be a hub for engaging with external partners and stakeholders. This collaborative approach is central to his ambition of expanding the family footprint beyond steel and the Indonesian market. As well as planning to close down the carbon-intensive blast furnace, Tanoto has made quieter yet still impactful changes, including introducing credible new ESG (environmental, social and governance) standards to operations. The World Bank’s International Finance Corporation has supported the venture with its first loan to a steel producer in more than a decade.
Moving away from fossil fuels
Based 40km east of Jakarta, Gunung Raja Paksi currently produces 2.7mn tons of liquid metal per year from its blast furnace (for the time being) and its electric arc furnace; the latter, as the name suggests, runs on electricity, rather than iron ore or coal, and its primary source material for producing steel is recycled scrap metal.
It's a much less carbon intensive way of making steel
“It's a much less carbon intensive way of making steel,” says Tanoto. “The majority of steelmakers in the world use the blast furnace. Steel produced from a blast furnace produces 2.4 metric tonnes of CO2 per tonne of steel; the electric arc furnace produces only up to 0.4 metric tonnes of CO2 per tonne of steel. It’s game-changing.”
Taking electrical power from a grid that relies largely on fossil fuels didn’t sit well with Tanoto’s wider mission, so he has made changes on that front, too. “We’re taking that one step further and not using the coal-powered electric grid,” he says. “We want to take ourselves away from anything that is using fossil fuels, so we will be tapping on renewable energy to power our operations.”
Changing times
When Tanoto joined the family company in 2019 as a second-generation leader, he quickly introduced a net-zero road map. “It was very difficult, because it was among family members,” he says. “In the end, everyone agreed that change was necessary. We could see it. We’re facing an onslaught of overcapacity production out of China; it’s pervasive across all building materials.” One of the biggest challenges for Tanoto and Fu was to convince shareholders to buy into their vision – but they were expecting that. “It’s hard – and it’s meant to be hard,” says Tanoto, pragmatically.
Our dream is that we could be the catalyst for change like that in the steel industry
The move towards low-carbon-emission steel was influenced, in part, by the rise of the electric car, as consumers look to alternatives to fossil-fuel-heavy tech. “I love going to Singapore and China now, where there are so many EV cars on the road: it’s so quiet, and you don't feel the heat. Our dream is that we could be the catalyst for change like that in the steel industry.”
In the US, California Governor Gavin Newsom’s carbon tax was also something of a lightbulb moment for Tanoto. “When I read that he was trying to implement a carbon tax, I thought this could be a moment for us to retool and face the competition from another angle. It was a realisation that maybe there is another way to sell a product. We choose between an internal combustion engine vehicle and an EV. In the future, couldn’t you choose between steel and green steel?”
For all his business acumen, Tanoto says it was a conversation with his then nine-year-old daughter, who learnt about fossil fuel pollution and the climate crisis at school, that ultimately influenced his move into new production methods for steel. “Maybe it’s corny, but it's true. One day my daughter said to me, ‘My teacher told me you are one of the biggest polluters of the earth. Papa, you’ve got to do something’. Well, I'm going to try to do something. I want to be able to go home and tell my daughter that we did something great.”
