The Iron and Steel Industry in Indonesia plays an important role in supporting national economic growth. Iron and steel products provide essential materials for construction, automotive manufacturing, infrastructure, machinery, energy projects, and many other industrial activities.
However, the Iron and Steel Industry is also associated with significant greenhouse gas emissions because many production processes require large amounts of energy and carbon-intensive raw materials.
As awareness of climate change and environmental sustainability continues to grow, companies in the Iron and Steel Industry are increasingly expected to understand their greenhouse gas emissions, establish measurable reduction targets, and implement long-term decarbonization strategies.
One important framework that can support this transition is the Science Based Targets initiative (SBTi). SBTi helps companies establish greenhouse gas reduction targets that are informed by climate science rather than relying only on internal assumptions or general sustainability commitments.
For companies operating in the Iron and Steel Industry, science-based targets can provide a structured pathway for reducing emissions, improving energy efficiency, supporting technological innovation, and monitoring long-term climate performance.
Science Based Targets Initiative (SBTi)
The Science Based Targets initiative was developed to help businesses establish greenhouse gas emission reduction targets that are consistent with climate science.
Many companies voluntarily establish carbon reduction targets. However, without a clear methodology or scientific framework, these targets may not necessarily reflect the level of emission reduction needed to address climate change.
SBTi provides methodologies, criteria, and guidance that help companies establish measurable greenhouse gas reduction targets.
The initiative was launched through collaboration involving CDP, the United Nations Global Compact (UNGC), World Resources Institute (WRI), and World Wide Fund for Nature (WWF).
For the Iron and Steel Industry, SBTi can provide a structured approach for translating climate commitments into measurable emission reduction targets.
Why SBTi Matters for the Iron and Steel Industry
The Iron and Steel Industry is particularly relevant to climate mitigation because conventional steel production can generate significant greenhouse gas emissions.
Emissions can arise from several activities, including:
- Iron ore reduction.
- Coke and coal consumption.
- Fuel combustion.
- Electricity consumption.
- Industrial processes.
- Raw material transportation.
- Finished product distribution.
Companies therefore need a clear roadmap showing how emissions can be reduced over time.
Science-based targets can help management identify how much emission reduction is required, establish measurable milestones, and monitor whether decarbonization programs are progressing as planned.
SBTi for the Iron and Steel Industry in Indonesia
Implementation of science-based emission reduction targets is becoming increasingly relevant for Indonesia’s Iron and Steel Industry.
Steel companies need to respond not only to environmental challenges but also to changing customer expectations, investor requirements, energy transition, technological developments, and international market conditions.
Establishing science-based targets can help companies create a structured approach to long-term greenhouse gas reduction.
The process generally begins by understanding existing emissions and identifying the major sources within company operations and value chains.
Companies can then establish appropriate reduction targets and develop programs to achieve them.
Objectives of SBTi for the Iron and Steel Industry
The main objective of applying the Science Based Targets initiative within the Iron and Steel Industry is to establish greenhouse gas reduction targets that are based on scientific methodologies.
More specifically, the objectives may include:
- Reducing greenhouse gas emissions from iron and steel production.
- Improving energy and resource efficiency.
- Reducing environmental impacts from industrial activities.
- Encouraging investment in lower-carbon technology.
- Improving transparency and accountability in greenhouse gas reporting.
- Establishing measurable short-term and long-term decarbonization targets.
- Monitoring progress toward corporate climate commitments.
Production Processes in the Iron and Steel Industry
The Iron and Steel Industry involves several complex production stages, starting from raw material extraction and continuing through steel manufacturing and final product processing.
1. Raw Material Extraction
Iron ore is extracted from mining areas and then processed to improve its quality before being used in ironmaking.
The material may undergo crushing, grinding, concentration, and other preparation processes.
Mining equipment, electricity consumption, material handling, and transportation can contribute to greenhouse gas emissions during this stage.
2. Iron Ore Reduction
In conventional integrated steelmaking, iron ore may be converted into pig iron using a blast furnace.
Coke is commonly used as both a fuel and reducing agent.
This stage can generate substantial carbon dioxide emissions because carbon is directly involved in the chemical reduction process.
3. Crude Steel Production
Molten pig iron can be combined with steel scrap and processed into crude steel.
Depending on the production route, companies may use technologies such as the Basic Oxygen Furnace (BOF) or Electric Arc Furnace (EAF).
The greenhouse gas intensity of these technologies can vary depending on energy sources, raw material composition, operational efficiency, and production conditions.
4. Refining
Crude steel may undergo additional refining to remove impurities and achieve the required chemical composition.
This stage can involve oxygen injection, alloy additions, electricity consumption, and other industrial processes.
5. Forming and Finishing
Steel is then shaped into various products through casting, forging, rolling, cutting, coating, and other finishing processes.
These processes require additional energy and therefore contribute to the overall environmental footprint of steel products.
Products of the Iron and Steel Industry
The Iron and Steel Industry produces a wide variety of materials used across major economic sectors.
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Reinforcing Steel Bar:
Commonly used in buildings, bridges, roads, and other infrastructure projects. -
Steel Plate:
Used in shipbuilding, bridges, heavy machinery, industrial equipment, and construction. -
Steel Pipe:
Used in oil and gas infrastructure, water systems, construction, and industrial applications. -
Hot Rolled Steel:
Used in automotive products, machinery, construction, appliances, and industrial components.
Main Greenhouse Gas Emission Sources in the Iron and Steel Industry
The Iron and Steel Industry can generate greenhouse gas emissions from several major sources.
Iron Ore Reduction
Conventional ironmaking using coke can produce substantial carbon dioxide emissions.
Because carbon is used directly as a reducing agent, reducing these emissions can require significant technological changes.
Fossil Fuel Combustion
Coal, natural gas, diesel, and other fossil fuels may be used for heating, furnaces, boilers, generators, material handling, and other operations.
Electricity Consumption
Electric Arc Furnaces, rolling mills, motors, pumps, compressors, and other equipment consume electricity.
The resulting Scope 2 emissions depend partly on the carbon intensity of the electricity supply.
Industrial Processes
Steel production involves chemical and physical processes that may generate direct greenhouse gas emissions.
Transportation
Transporting iron ore, coal, coke, scrap steel, additives, and finished products also contributes to the overall carbon footprint.
Scope 1, Scope 2, and Scope 3 in the Iron and Steel Industry
A greenhouse gas inventory provides an important foundation before a company establishes science-based targets.
Emissions are commonly organized into:
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Scope 1:
Direct emissions from company-owned or controlled sources, including fuel combustion and industrial processes. -
Scope 2:
Indirect emissions associated with purchased electricity, steam, heat, or cooling. -
Scope 3:
Other indirect emissions throughout upstream and downstream value chains, including raw materials, logistics, purchased goods, and other relevant activities.
Understanding these categories allows companies in the Iron and Steel Industry to determine which sources should receive the greatest attention.
Functions of SBTi for the Iron and Steel Industry
The Science Based Targets initiative can support companies in the Iron and Steel Industry in several ways.
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Establish Science-Based Emission Reduction Targets:
Companies can develop measurable greenhouse gas reduction targets using appropriate methodologies. -
Identify Emission Reduction Opportunities:
Emissions data can reveal areas where efficiency improvements or technological changes may provide the greatest reductions. -
Monitor Progress:
Companies can regularly compare actual greenhouse gas emissions with established targets. -
Build Internal Carbon Management Capacity:
SBTi implementation can encourage stronger greenhouse gas accounting and climate-management systems. -
Guide Technology Investment:
Long-term targets can help companies evaluate which technologies are needed to reduce emissions.
Benefits of SBTi for the Iron and Steel Industry
Companies in the Iron and Steel Industry may gain several benefits from establishing science-based emission reduction targets.
1. Stronger Climate Strategy
SBTi provides a more structured approach to climate commitments.
Instead of establishing general sustainability statements, companies can define measurable emission reduction objectives.
2. Improved Corporate Reputation
Transparent climate targets can demonstrate that the company is taking a systematic approach to greenhouse gas management.
However, environmental claims should always be supported by reliable data and actual progress.
3. Operational Efficiency
Many greenhouse gas reduction initiatives can also improve operational efficiency.
Reducing energy consumption, improving material efficiency, recovering waste heat, and optimizing production can lower both emissions and operating costs.
4. Better Preparedness for Market Changes
Customers and international supply chains may increasingly request information about product emissions, corporate carbon footprints, and decarbonization strategies.
Companies with structured greenhouse gas management systems can be better prepared to respond to these requests.
5. Improved Climate Resilience
Long-term climate planning encourages companies to understand risks associated with energy transition, carbon regulation, technology, and changing market expectations.
Energy Efficiency in the Iron and Steel Industry
Energy efficiency is one of the most important emission reduction strategies for the Iron and Steel Industry.
Companies can evaluate:
- Furnace efficiency.
- Boilers.
- Motors.
- Compressors.
- Pumps.
- Cooling systems.
- Rolling mills.
- Heat recovery.
Energy audits can help identify major energy losses and improvement opportunities.
Efficiency programs can then become part of the broader roadmap for achieving science-based emission reduction targets.
Renewable Energy for the Iron and Steel Industry
Renewable energy can help reduce indirect emissions associated with electricity consumption.
Companies may evaluate solar power, renewable electricity procurement, or other lower-carbon energy sources according to technical feasibility and operational requirements.
Renewable energy is particularly relevant for electricity-intensive production routes such as Electric Arc Furnace steelmaking.
Steel Recycling and SBTi
Steel is highly recyclable, which creates important opportunities for circular-economy strategies.
Increasing scrap utilization can reduce demand for virgin raw materials and, depending on the production route and electricity source, may help reduce greenhouse gas emissions.
Companies can therefore evaluate recycling and material circularity as part of their Iron and Steel Industry decarbonization roadmap.
Low-Carbon Technology in the Iron and Steel Industry
Achieving substantial greenhouse gas reductions may require more than incremental efficiency improvements.
Companies may need to evaluate new production technologies and process changes.
Potential strategies can include:
- More efficient Electric Arc Furnaces.
- Increased scrap utilization.
- Lower-carbon electricity.
- Alternative reducing agents.
- Improved process control.
- Waste heat recovery.
- Advanced material efficiency.
The appropriate technology depends on the company’s production route, raw materials, infrastructure, energy access, and investment capacity.
Iron and Steel Industry Companies in Indonesia
Several major companies operate within Indonesia’s Iron and Steel Industry, including:
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PT Krakatau Steel (Persero) Tbk
Produces steel products including hot-rolled and cold-rolled steel. -
PT Gunung Raja Paksi Tbk
Operates in steel manufacturing and processing. -
PT Steel Pipe Industry of Indonesia Tbk
Produces steel pipes for construction, infrastructure, and industrial applications. -
PT Jaya Pari Steel Tbk
Associated with steel plate manufacturing. -
PT Essar Indonesia
Produces cold-rolled and coated steel products.
Each company can have different production technologies, energy profiles, raw materials, and greenhouse gas emission sources.
For this reason, science-based target development needs to reflect the actual emissions profile of each company.
How to Reduce the Environmental Impact of the Iron and Steel Industry
Several strategies can help reduce the environmental impact of the Iron and Steel Industry.
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Adopt Lower-Emission Technologies:
Improve existing production systems and evaluate technologies that can reduce fossil fuel use and process emissions. -
Increase Renewable Energy Use:
Replace carbon-intensive electricity with lower-carbon energy sources where feasible. -
Increase Recycling:
Improve scrap recovery and recycling to support circular material flows. -
Improve Energy Efficiency:
Optimize industrial equipment, heat systems, motors, and production processes. -
Improve Waste Management:
Reduce waste generation and increase reuse, recycling, and material recovery. -
Optimize Transportation:
Improve logistics efficiency and reduce unnecessary fuel consumption. -
Engage Suppliers:
Work with raw material and logistics suppliers to understand and reduce relevant Scope 3 emissions.
GHG Inventory before Setting SBTi Targets
Before establishing science-based targets, companies in the Iron and Steel Industry need reliable greenhouse gas information.
A GHG inventory can help identify:
- Direct process emissions.
- Fuel combustion.
- Electricity emissions.
- Transportation emissions.
- Raw material emissions.
- Relevant supply-chain emissions.
The inventory establishes a baseline from which future emission reductions can be measured.
Setting an Emission Baseline for the Iron and Steel Industry
An emissions baseline represents the reference point used to measure future progress.
Companies need to establish reliable emissions data for the selected baseline year.
Future greenhouse gas performance can then be compared against this baseline.
Accurate baseline information is essential because unreliable starting data can affect the credibility of future reduction claims.
SBTi and Carbon Intensity in the Iron and Steel Industry
Absolute greenhouse gas emissions are important, but production intensity can also provide useful performance information.
For example, companies may monitor greenhouse gas emissions per tonne of steel produced.
Carbon intensity indicators can help management understand whether production efficiency is improving.
However, companies should evaluate absolute emissions as well because production growth can increase total emissions even when carbon intensity improves.
Monitoring SBTi Progress
Establishing a target is only the beginning.
Companies need to monitor greenhouse gas emissions regularly and compare actual performance with the target pathway.
Monitoring may include:
- Scope 1 emissions.
- Scope 2 emissions.
- Relevant Scope 3 emissions.
- Energy consumption.
- Carbon intensity.
- Renewable energy use.
- Scrap utilization.
- Emission reduction projects.
SBTi Reporting and Transparency
Transparent reporting allows stakeholders to understand whether emission reduction strategies are producing measurable results.
Companies should clearly explain baseline emissions, targets, methodologies, progress, and major changes affecting performance.
Companies should also avoid presenting planned initiatives as if reductions have already been achieved.
Clear reporting can strengthen the credibility of climate commitments.
How Actia Can Support the Iron and Steel Industry with SBTi
Actia can support companies in the Iron and Steel Industry that want to develop science-based greenhouse gas reduction targets and structured decarbonization strategies.
Support may include:
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Initial Assessment:
Identify major greenhouse gas emission sources and evaluate available emissions data. -
GHG Inventory Development:
Calculate Scope 1, Scope 2, and relevant Scope 3 greenhouse gas emissions. -
Target Development:
Support companies in developing emission reduction targets based on appropriate science-based methodologies. -
Decarbonization Roadmap:
Identify practical measures such as energy efficiency, renewable energy, recycling, process improvements, and lower-carbon technologies. -
Implementation Assistance:
Support the implementation of selected emission reduction initiatives. -
Training and Education:
Improve employee understanding of greenhouse gas emissions, carbon accounting, SBTi, and decarbonization. -
Monitoring and Reporting:
Help companies track performance and prepare appropriate progress documentation.
Benefits of SBTi Consulting for the Iron and Steel Industry
Developing science-based targets requires greenhouse gas data, technical analysis, internal coordination, and long-term planning.
Professional assistance can help companies organize these activities into a structured process.
It can also help different departments—including sustainability, engineering, operations, finance, procurement, and management—work toward common emission reduction objectives.
The Future of the Iron and Steel Industry
The Iron and Steel Industry will remain essential for infrastructure, transportation, manufacturing, buildings, energy projects, and economic development.
However, the industry’s future will increasingly depend on its ability to produce steel with lower greenhouse gas emissions and greater resource efficiency.
Companies need to understand their carbon footprint, improve energy performance, increase material efficiency, adopt lower-carbon technologies, and establish measurable climate targets.
The Science Based Targets initiative can provide a structured framework for translating climate science into corporate emission reduction objectives.
For companies in the Iron and Steel Industry, implementing science-based targets can support better greenhouse gas management, technological planning, operational efficiency, and long-term decarbonization.
Iron and Steel Industry and Long-Term Decarbonization
Decarbonizing the Iron and Steel Industry requires a long-term approach because significant reductions may depend on major technological, energy, and infrastructure changes.
Energy efficiency can provide immediate improvements, while renewable electricity, increased scrap utilization, process optimization, and new steelmaking technologies can support deeper reductions.
A reliable greenhouse gas inventory provides the starting point.
Science-based targets establish the direction.
A decarbonization roadmap identifies the actions required to achieve those targets.
Continuous monitoring then allows companies to determine whether actual emissions are moving in the intended direction.
With appropriate planning and implementation, companies in the Iron and Steel Industry can reduce greenhouse gas emissions while improving efficiency, strengthening sustainability performance, and preparing for the transition toward a lower-carbon economy.
Actia can support companies in developing greenhouse gas inventories, science-based targets, and emission reduction strategies. Click here to discuss SBTi and emission reduction planning with Actia.