Meeting Indonesia’s Future Energy Challenges

Have you ever thought about what your life would be like without access to energy? No light in the morning — nor coffee or toast. You couldn’t drive to work and there would be no way to connect with others around the world. Energy is the key enabler for all of our day-to-day activities, and for the economy.

Access to reliable and affordable energy supplies continues to improve our lives. The question is, how long will we be able to benefit from the energy supply that we need so much today?

Growing demand

Population growth has had a tremendous impact on energy demand. The world currently counts more than 7 billion people, and this number is projected to rise to more than 8 billion by 2025 — so global energy demand will continue to grow.

The challenge of meeting that growing demand is a problem that is particularly relevant for Indonesia, currently the fourth-largest country in terms of population and aspiring to continue its economic growth and development. Already Indonesia is one of the 20 biggest energy consumers in the world. If renewable energy sources are not developed immediately, depletion of energy resources becomes a real threat.

Renewable energy use in Indonesia is still very small. We mostly depend on fossil fuels. However, the government is aiming to increase the composition of renewable energy in the energy mix, to 17 percent by 2025. The composition the government is aiming to achieve would be 5 percent biofuel, 5 percent geothermal, 5 percent biomass, nuclear, water, solar and wind combined, and 2 percent from liquefied coal.

Renewable energy will also be critical to support electricity generation. Coal is still considered the most efficient and effective power plant fuel in Indonesia. Consumption is highest in the industrial, residential and commercial sectors. However, 27 percent of the Indonesian population is still off the grid.

Natural gas

In “The Outlook for Energy: A View to 2040,” ExxonMobil predicts that natural gas will be the fastest-growing major fuel through 2040. The company expects that demand for natural gas for power generation will rise by close to 80 percent by 2040. In the transportation sector, natural gas is expected to replace oil-derived fuel due to its relative affordability and low emissions; and be used mainly in commercial vehicles.

For Indonesia, this could be a major opportunity, since the country has large reserves of natural gas. The government has also been running a program to increase the number of people who use gas for cooking at home, instead of kerosene. Not only is this cheaper, it is also more environmentally friendly. In public transportation, the TransJakarta bus system is the only one that currently makes the most of this resource.

Besides renewables, investment in natural gas production would probably be a safe bet for Indonesia, considering both the expected growth in worldwide demand and the benefits of its use domestically. Surely our natural gas can be used for more than just cooking and transportation?

The print edition is available at Jakarta Globe newspaper, 3 April 2014 edition.
Digital version: http://www.thejakartaglobe.com/business/meeting-indonesias-future-energy-challenges/

Sustainability Results in Profit

Sustainability is often interpreted as corporate social responsibility, or  CSR. But in the presentation of “Sustainable Success: How Businesses are Profiting from Environmentally Sustainable Practices,” hosted by the Economic Section of the US Embassy at @america in Pacific Place, Jakarta, on Tuesday, 21 January 2014, several companies agreed that sustainability is not CSR.

Sustainability is about credibility and a long-term business process. A sustainable business always involves the community in its business activities; thus, the success of the company becomes the success of community as well.

Opened by Kristen F. Bauer, charge d’affaires, a.i. of the US Embassy, the presentation focused on how US businesses in Indonesia are working in innovative, and sustainable ways to have a positive impact on communities and the environment in this country.

Business decisions are not only about cutting costs and ensuring long-term profit, but also about helping the community in which business operates. Businesses do not have to choose between profit and sustainability. Taking care of environmental issues will ultimately add value and profit to businesses.

Steve Okun, director of public affairs for Asia-Pacific at Kohlberg Kravis Roberts (KKR), an investment company with deep roots in private equity, mentioned that to establish a business partnership, KKR assesses a company from a business, governance and a community perspective.
He said KKR makes investment decisions that can profitable as well as have a huge positive impact on the community.

One of the companies KKR invested in, is East Bali Cashews, based at Desa Ban in East Bali, founded by Aaron Fishman.

This is the first large-scale cashew processing facility on the island and one of the first village-based facilities in Southeast Asia. The East Bali region produces more than 3,000 tons, of cashews per year, with the company contributing 600 tons of Indonesia’s total output of 140,000 tons.

Almost all of Indonesia’s cashews are exported to India and Vietnam for processing before it is returned here for sale and consumption, resulting in the country losing precious value-added potential. While almost all packaged cashew snacks in Indonesia are imported from Singapore and Malaysia, the nuts originally come from here; so there is a high cost but lower quality cashews products.

Seeing this business opportunity, East Bali Cashews opened its own processing facility to create a value-added product, and save on shipping costs.

The results are much more favorable. Besides creating more profit, it also helps the local community. That is the concept of social enterprise, or impact investing.

East Bali Cashews now employs 180 people from the local community, with 90 percent of them women who have never had jobs before. The company is therefore making profit by empowering local women.

East Bali Cashews pays its workers daily after they finish working, with each woman earning a total of between Rp 1.000.000 and Rp 1.500.000 ($80-$120) per month.

The company also provides a day-care facility at work, so that the employees’ children can get an education while their mothers are working. East Bali Cashews believes that community development is best achieved and sustained through the empowerment of people, especially women. It also believes environmental and social sustainability in the business brings success for the company and its employees.

The waste and by-products generated by the production and processing of cashew nuts are managed optimally. The fruits can be turned into juice, or used as fertilizer. The cashew shells are processed and either utilized by the facility, or sold to brick producers as a source of energy. Fishman not only considers profitability but also the operation’s social, environmental, educational and financial impact. Those are aspects that prompted KKR to support and to be a part of East Bali Cashews.

Cargill Indonesia has adopted the same values of sustainability by developing its Sustainable Smallholder Development Program. As a global supplier of food and agricultural products, Cargill understands that building a close relationship with farmers is one of the keys to success. Having been operating in Indonesia for more than 40 years, and with more than 11,000 employees, Cargill is committed to conduct its business with integrity, to operate responsible supply chains, to uplift communities and to work to feed the world. The firm has assisted and developed smallholders in several sectors, including cocoa, coconut and palm oil.

One oil palm smallholder, who is in a partnership with Cargill, said the program has enabled them to successfully produce sustainable palm oil, which helps improve their standard of living. They have learnt how to care for their land and how to maintain its long-term productivity, ensuring that their children will have a future.

Chocolate producer Mars Indonesia is yet another example. The success of the cocoa industry has a strong relation with sustainability, the company’s president director Ruud Engbers said.

Mars, with more than 72,000 associates in 73 countries, is focusing on farmers’ prosperity, sustainable supply and responsible practices.

One of Mars’s core values is economic sustainability. This implies that when cocoa farmers are benefiting from the business, they would be happy to be cocoa farmers. Mars further aims to have zero landfill at all its factories by end of this year.

Meanwhile energy producer Chevron realizes that its oil and geothermal business has an impact to the environment. The company, operating in 180 countries and having been active in Indonesia for 88 years, adopted environmental protection as one of its key values. Chevron has made large investments to restore the environment as it aims for sustainable business practices. At the moment, the company is undertaking its Green Corridor Initiative, a program started in 2011, which involves the restoration of 500 hectares of forest between the Halimun and Salak mountains near Sukabumi, West Java.

The print edition is available at Jakarta Globe newspaper, 16 January 2014 edition.
Digital version: http://www.thejakartaglobe.com/in-focus/sustainability-and-profit/