When Dharsono Hartono was appointed by Indonesia’s powerful chamber of commerce and industry (KADIN) to spearhead its corporate decarbonisation ambitions last year, he took charge of two functions – KADIN’s Net Zero Hub, which advises Indonesian companies how to decarbonise, and the Carbon Centre of Excellence, a carbon market knowledge lab that connects buyers and sellers of carbon credits.
“We’ve been hearing a lot from industry players that it’s very hard to decarbonise without carbon offsets,” said Hartono, who is also chief executive of PT Rimba Makmur Utama, a company that manages the Katingan Mentaya Project, a forest conservation project in Kalimantan that produces more than 7 million tonnes of carbon credits a year.
There are a few trailblazers leading Indonesia’s decarbonisation conversation, such as steel giant Gunung Raja Paksi and garment manufacturer Pan Brothers. However, many are struggling because they lack an understanding of how to reduce emissions or which sustainability frameworks to use, says Hartono, adding that recent criticism of the carbon offsetting industry has been “unfair”.
Other corporates in Indonesia complain that procuring renewable energy is too difficult, while regulations have struggled to keep up with the pace of change in new technologies that would help slash emissions.
Hartono is keen to chart a new course for the KADIN Net Zero Hub, which was set up after the COP26 climate talks in Glasgow, in 2022 to support Indonesian businesses in their transition to net zero. It has around 80 mainly large corporate members, and recently joined the global Race to Zero campaign, which aims to rally non-state actors to halve their emissions by the end of the decade.
Hartono succeeded erstwhile hub director Muhammad Yusrizki, who was jailed on corruption charges related to communications infrastructure project a year ago.
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Net zero is not a gimmick anymore. Companies need to decarbonise, otherwise they will lose their competitiveness.
Dharsono Hartono, chairman, KADIN Net Zero Hub and Carbon Centre of Excellence
While the KADIN Net Zero Hub under Yusrizki focused on working with Indonesian corporates on their decarbonisation plans, the hub’s latest incarnation will also focus on helping the government achieve its ambition to be a renewable energy powerhouse – by developing industries such as nickel mining and sustainable aviation fuel, says Hartono.
Hartono is also looking for funding to support KADIN Net Zero Hub in its aim to decarbonise corporate Indonesia over the next five years. As KADIN membership is free, the organisation is looking to raise funds for capacity building and training programmes.
In this interview, Hartono talks about KADIN Net Zero Hub 2.0, decarbonisation ambitions under a new government, and why trying to decarbonise without carbon credits is like trying to fly to the moon in the 19th century.
Tell us about how the progress made since KADIN launched the Net Zero Hub.
We started out with the idea that we wanted to help Indonesian companies decarbonise. We weren’t just talking about large companies in the hard-to-abate sectors, but companies of all sizes.
We know that it’s not going to be an easy journey. Small and medium enterprises are very sensitive about decarbonisation, because they are part of global supply chains and must respond to the decarbonisation agenda of international brands. For example, there are 13 Indonesian firms that supply to Adidas.
Through our corporate assistance programme, we help these firms go through the process of calculating their greenhouse gas emissions. We want them to work towards aligning with SBTi [the Science Based Targets initiative, which assesses corporate net zero targets according to their compatibility with the Paris Agreement’s 1.5°C goal].
We are currently looking for funding to support smaller businesses as they work towards SBTi alignment, which will require capacity building and training, as we roll out a new five-year strategy for the KADIN Net Zero Hub.
What can we expect of KADIN Net Zero Hub 2.0?
Besides the corporate assistance programme, we’re also looking at how we can work with the government to create ecosystems and policy frameworks in three key areas; renewable energy manufacturing – Indonesia has a lot of the raw materials needed for clean energy; nickel, silica, and so on; electric vehicles, from-nickel-to-battery; and sustainable aviation fuel – Indonesia is a big producer of palm oil.
The path for Indonesia to achieve net zero by 2060 can actually be a lot faster [policymakers have said that Indonesia could decarbonise by 2055 or earlier if given international aid], and we can help that process by being a bridge between the private sector and government.
How will KADIN be pushing Indonesian companies to decarbonise?
We have attracted a lot of donors interested in supporting KADIN Net Zero Hub. But we have to deliver. We have to make sure that the companies we help are really clear about how they plan to reduce emissions. They have to be able see the ‘win-win’ in decarbonisation, and understand that cutting emissions creates brand value.
Most importantly, companies need to believe that it is the right thing to do. It’s about changing the mindset. Too many companies, particularly SMEs, believe that decarbonisation is hard, painful and has no benefit. Others want to achieve net zero, but there is a lot of confusion over which framework or standard to use. Part of the role of KADIN Net Zero Hub is to synchronise policies to make achieving net zero easier.
One of the conditions of KADIN Net Zero Hub membership has been that companies get their decarbonisation targets approved by SBTi? Is that no longer a condition for membership?
We don’t enforce that [SBTi target approval] – it’s an aspiration.
I chair both the KADIN Net Zero Hub and KADIN Carbon Centre of Excellence. We’ve been hearing a lot from industry players that it’s very hard for them to decarbonise without carbon offsets.
The metaphor I use to explain the problem is that it’s the 19th century, and somebody has told us that we have to go to the moon, because it’s a good place to be. But at that time, we were not equipped to go to the moon.
There has to be a bridge to help the transition – and offsets is one way of achieving that.
The reason we merged the Net Zero Hub and Carbon Centre of Excellence is because of the view in the market that Indonesian companies cannot decarbonise without carbon offsets – that is, high quality, high integrity carbon offsets.
I am also chair of ASEAN Alliance on Carbon Market [or AACM, an initiative that promotes the growth of cross-border voluntary carbon markets that was formed during Indonesia’s presidency of the Association of Southeast Asian Nations last year].
Southeast Asia is a highly strategic region for carbon markets, and we can connect our members with buyers in key international markets such as the UK, US, Canada, China, Korea and Japan.
The idea of the alliance is knowledge sharing – to develop a common understanding of what a high quality carbon credit project should look like.
The voluntary carbon markets have taken a lot of criticism over the last 18 months. What do you make of the backlash?
There’s been a lot of noise in the market, which has created a negative view of carbon credits – but everybody knows that we need carbon credits to decarbonise, particularly in this region.
We’ve seen a lot of greenhushing as a result of negative publicity, which is quite sad. The market was really picking up in 2021 and there was a lot of excitement about its potential.
Every market has good and bad products. But all of a sudden, the worst product represented the whole voluntary carbon markets industry – which is not fair.
One issue is additionality [a carbon project is additional if it would not have taken place without revenue from selling carbon credits].
Do we have to reach a point where something has to be under threat to have value? That ignores the benefit that a nature-based project provides. A standing tree provides a benefit. Should a national park in Canada not be valued because there’s no threat to it? There’s conflict around this point, which creates fear among companies looking to buy credits.
What are the biggest challenges that companies in Indonesia are facing as they decarbonise?
Some companies just don’t know how. Others are in hard-to-abate sectors. Some worry they will lose their competitiveness, for instance if they don’t respond to regulations such as the European Union’s carbon border adjustment mechanism [which puts a tax on carbon intensive imports into the EU, starting in 2026].
Rather than worry, we want companies to be proactive - play offence, not defence. Net zero is not a gimmick anymore. Companies need to decarbonise, otherwise they will lose their competitiveness.
We want to be inclusive and leave nobody behind. That includes coal mining companies. Why not? The only reason is that SBTi does not have a framework for coal companies yet. The Net Zero Hub should be involved in every sector.
How worried are Indonesian companies about greenwashing backlash?
Most companies won’t make statements that they can’t deliver on. In recent years, we’ve seen companies hold back on making sustainability claims, because they know they have to be accountable. A lot of our members have not made net zero claims, which is the right thing to do. How can you make a net zero claim when you have not calculated your carbon footprint?
Eventually, companies will have to work towards net zero targets, but the last thing we want to see is companies pressured into making claims before they even know how to decarbonise.
What are your thoughts on the new leadership under Prabowo Subianto and what it could mean for Indonesia’s decarbonisation ambitions?
I’m optimistic – because it’s a continuation of our existing government. I’m particularly excited to see how Prabowo is looking to downstream the nickel industry to position Indonesia as a leader in critical minerals. Of course coal is still a big issue and will still be a big part of the energy mix, but will be phased out over time.
Prabowo has said that he’s aiming for 8 per cent economic growth. Won’t decarbonisation be difficult given such economic growth ambitions with a fossil fuels-based grid?
If your mindset is that something is too hard to do, it will never happen. All problems can be solved. People said it was too hard to build a subway system in Jakarta. It took some time, but we did it eventually.
This interview has been edited for clarity and brevity
