The Task Force on Climate-Related Financial Disclosures has played an important role in helping companies understand, manage, and communicate climate-related financial risks and opportunities. For Indonesia’s iron and steel industry, climate-related disclosure is particularly relevant because the sector is energy-intensive, exposed to global competition, and increasingly affected by the transition toward a lower-carbon economy.
The iron and steel industry is one of the strategic sectors supporting Indonesia’s national development. Steel products are widely used in infrastructure, construction, manufacturing, transportation, energy projects, and many other economic activities.
At the same time, increasing global awareness of climate change creates new challenges for the industry. Companies need to consider physical climate risks, changing environmental regulations, energy-transition risks, technology developments, market expectations, carbon costs, and growing demand for lower-carbon materials.
The recommendations developed by the Task Force on Climate-Related Financial Disclosures provide a structured framework for identifying and communicating these risks and opportunities.
Although the TCFD itself completed its work in 2023, its recommendations remain highly relevant because they have been incorporated into the international sustainability disclosure architecture, particularly IFRS S2 Climate-related Disclosures.
What Is the Task Force on Climate-Related Financial Disclosures?
The Task Force on Climate-Related Financial Disclosures, commonly known as TCFD, was established by the Financial Stability Board to improve the quality, consistency, and comparability of climate-related financial disclosures.
The framework was designed to help companies communicate how climate change may influence business operations, financial performance, corporate strategy, and long-term resilience.
Climate information is particularly important for investors, lenders, insurers, management teams, regulators, and other stakeholders because climate change can create both financial risks and business opportunities.
The Task Force on Climate-Related Financial Disclosures established four core areas that continue to influence modern climate disclosure frameworks:
-
Governance:
Explain how the organization oversees and manages climate-related risks and opportunities. -
Strategy:
Identify the actual and potential impacts of climate-related risks and opportunities on the company’s business, strategy, and financial planning. -
Risk Management:
Explain the processes used to identify, assess, prioritize, and manage climate-related risks. -
Metrics and Targets:
Disclose the metrics and targets used to assess and manage climate-related risks and opportunities.
Task Force on Climate-Related Financial Disclosures and IFRS S2
The climate disclosure landscape has continued to develop since the original TCFD recommendations were introduced.
The International Sustainability Standards Board developed IFRS S2 Climate-related Disclosures, which integrates and builds on the recommendations of the Task Force on Climate-Related Financial Disclosures.
This means companies familiar with the TCFD structure already have an important foundation for transitioning toward more comprehensive climate-related financial disclosures.
For iron and steel companies, this development is significant because climate disclosure is increasingly becoming connected with financial reporting, investor decision-making, transition planning, and long-term corporate strategy.
Development of the Iron and Steel Industry in Indonesia
Indonesia’s iron and steel industry plays a strategic role in supporting infrastructure and economic development.
Steel is required for buildings, bridges, transportation infrastructure, industrial facilities, machinery, automotive products, energy infrastructure, and many other applications.
As domestic development continues, demand for steel products can create substantial opportunities for manufacturers.
However, companies also face challenges related to raw material costs, international competition, energy consumption, technological transformation, environmental performance, and greenhouse gas emissions.
The Task Force on Climate-Related Financial Disclosures framework can help companies examine how these challenges may interact with climate change and the global transition toward a lower-carbon economy.
Climate Risks in the Iron and Steel Industry
Climate-related risks generally fall into two major categories: physical risks and transition risks.
Both categories are relevant to the iron and steel industry.
Physical Climate Risks
Physical climate risks arise from changes in climate and weather conditions.
Examples may include:
- Flooding affecting factories or warehouses.
- Extreme rainfall disrupting transportation and logistics.
- Heat stress affecting workers and equipment.
- Drought or water scarcity affecting industrial processes.
- Extreme weather disrupting suppliers.
- Coastal hazards affecting ports and transportation infrastructure.
Steel manufacturers with complex supply chains need to consider not only risks at their own production facilities but also risks affecting suppliers, ports, transportation routes, energy systems, and customers.
Transition Climate Risks
Transition risks arise from the economic and technological changes associated with the shift toward a lower-carbon economy.
Examples include:
- Changes in environmental regulations.
- Carbon pricing mechanisms.
- Growing customer demand for lower-carbon steel.
- Changes in energy prices.
- New production technologies.
- Investor expectations regarding decarbonization.
- International market requirements.
The Task Force on Climate-Related Financial Disclosures encourages companies to consider how these risks could affect business models and financial performance.
Challenges Facing Indonesia’s Iron and Steel Industry
The Indonesian iron and steel industry faces several operational, financial, competitive, and environmental challenges.
-
Raw Material Price Volatility:
Prices of iron ore, scrap steel, alloying materials, energy, and other production inputs can fluctuate significantly. -
Global Competition:
Domestic companies compete with international producers that may operate at different production costs and technological levels. -
Pressure for Operational Efficiency:
Companies need to improve energy and material efficiency to maintain competitiveness. -
Environmental Impact:
Iron and steel production can be carbon-intensive, particularly where production relies heavily on fossil fuels. -
Technology Transition:
Lower-carbon steel production may require substantial investment in new equipment, energy systems, and production technologies.
Carbon Emissions in the Iron and Steel Industry
The iron and steel sector is considered an important industrial source of greenhouse gas emissions because traditional steelmaking processes can require large quantities of energy and carbon-intensive raw materials.
Emission sources can include:
- Fuel combustion.
- Electricity consumption.
- Coal and coke use.
- Industrial process emissions.
- Transportation.
- Raw material production.
- Waste management.
Understanding these emissions is important when preparing disclosures aligned with the Task Force on Climate-Related Financial Disclosures.
Companies in Indonesia’s Iron and Steel Industry
Several companies operate within Indonesia’s iron, steel, pipe, and steel-processing industry. Examples include:
- PT Jakarta Kyoei Steel Works Tbk
- PT Steel Pipe Industry of Indonesia Tbk (SPINDO)
- Aneka Baja Perkasa Industri
- PT Indonesia Nippon Steel Pipe
- PT Super Steel Karawang
Each company may have different production technologies, energy sources, product categories, supply chains, and climate-related risk profiles.
For this reason, climate disclosure should be based on the specific circumstances of each organization.
Benefits of Task Force on Climate-Related Financial Disclosures for the Steel Industry
Applying the principles of the Task Force on Climate-Related Financial Disclosures can provide several benefits for companies operating in the iron and steel industry.
1. Better Climate Risk Management
The framework helps companies identify and evaluate physical and transition climate risks.
Physical risks may include floods, droughts, heat, storms, or infrastructure disruption.
Transition risks may include new regulations, carbon pricing, technological changes, customer expectations, or changing market conditions.
Understanding these risks allows management to incorporate climate considerations into enterprise risk management.
2. Development of More Sustainable Strategies
Task Force on Climate-Related Financial Disclosures principles encourage companies to consider climate change within business strategy and financial planning.
For the steel industry, possible strategies may include:
- Energy efficiency.
- Renewable electricity.
- Increased use of recycled steel.
- Process optimization.
- Lower-carbon fuels.
- Electrification.
- Development of lower-carbon steel products.
3. Improved Transparency
Climate-related financial disclosure can improve transparency regarding how companies identify and manage climate risks.
Investors and other stakeholders can better understand whether management has considered how climate change may affect operations, costs, assets, supply chains, and long-term strategy.
4. Better Access to Investors and Financial Institutions
Investors and financial institutions increasingly evaluate climate-related risks as part of broader investment and lending decisions.
Companies that provide structured and credible climate information may make it easier for capital providers to understand their climate exposure and transition strategy.
This does not automatically guarantee access to financing, but better disclosure can reduce information gaps between companies and financial stakeholders.
5. Improved Operational Efficiency
Climate-risk assessment can also reveal opportunities to improve operational efficiency.
Reducing energy consumption, minimizing material losses, improving recycling, and optimizing logistics can potentially reduce both greenhouse gas emissions and operating costs.
Governance under Task Force on Climate-Related Financial Disclosures
The first pillar of the Task Force on Climate-Related Financial Disclosures is Governance.
Companies should explain how climate-related issues are overseen at board and management levels.
Important questions may include:
- Who is responsible for climate-related risks?
- How often does management review climate performance?
- How does the board oversee climate strategy?
- Are climate responsibilities integrated into existing governance structures?
For steel companies, effective governance helps ensure that climate-related decisions are not isolated within the environmental department but integrated into corporate strategy.
Strategy under Task Force on Climate-Related Financial Disclosures
The Strategy pillar focuses on how climate-related risks and opportunities could affect the company over the short, medium, and long term.
Steel manufacturers may need to consider how energy transition, carbon pricing, new technology, changes in raw materials, and customer demand could affect future operations.
Companies can also evaluate potential opportunities such as:
- Low-carbon steel products.
- Greater scrap utilization.
- Renewable energy.
- Energy-efficient production.
- Green infrastructure markets.
Climate Scenario Analysis
Scenario analysis is an important tool for evaluating how different climate futures could affect a business.
A company may examine multiple scenarios involving different levels of global warming, carbon prices, energy-transition speeds, regulatory requirements, and market conditions.
Scenario analysis does not attempt to predict exactly what will happen.
Instead, it helps management understand how resilient its business strategy might be under different plausible futures.
Risk Management under Task Force on Climate-Related Financial Disclosures
The third pillar is Risk Management.
Companies should explain how they identify, assess, prioritize, and manage climate-related risks.
Ideally, climate risks should be integrated into existing enterprise risk-management processes.
For the steel industry, risk assessment can include:
- Energy price risk.
- Carbon price risk.
- Supply-chain disruption.
- Water scarcity.
- Extreme weather.
- Technology transition.
- Market demand changes.
Metrics and Targets under Task Force on Climate-Related Financial Disclosures
The fourth pillar focuses on measurable indicators and targets.
Steel manufacturers can use climate-related metrics such as:
- Scope 1 greenhouse gas emissions.
- Scope 2 greenhouse gas emissions.
- Relevant Scope 3 emissions.
- Energy consumption.
- Renewable energy percentage.
- Carbon intensity per tonne of steel.
- Scrap utilization.
- Water consumption.
- Emission reduction targets.
Metrics allow companies to monitor whether climate strategies are producing measurable results.
Greenhouse Gas Inventory for TCFD-Aligned Reporting
A reliable greenhouse gas inventory provides important data for climate-related financial disclosure.
Companies should understand their Scope 1, Scope 2, and relevant Scope 3 emissions.
This helps management identify major carbon hotspots and establish an appropriate emissions baseline.
For steel companies, Scope 1 emissions may be particularly important because significant emissions can occur directly from fuel combustion and industrial processes.
Steps to Prepare a Task Force on Climate-Related Financial Disclosures Report
Companies in the iron and steel industry can follow a structured process when preparing climate-related disclosures based on the Task Force on Climate-Related Financial Disclosures framework.
-
Establish a Climate Disclosure Team
- Form a cross-functional team involving finance, operations, sustainability, risk management, engineering, and other relevant departments.
- Assign responsibilities for coordinating climate-related data and disclosure.
-
Identify Climate Risks and Opportunities
- Identify physical and transition risks relevant to the business.
- Evaluate impacts on operations, supply chains, customers, financial planning, and markets.
-
Collect Relevant Data
- Collect greenhouse gas emissions, energy consumption, production, water, financial, risk, and sustainability data.
- Document data sources and methodologies.
-
Conduct Climate Scenario Analysis
- Evaluate different plausible climate and transition scenarios.
- Assess the resilience of business strategy under those scenarios.
-
Prepare the Climate-Related Disclosure
- Address Governance, Strategy, Risk Management, and Metrics and Targets.
- Connect climate information with financial implications where appropriate.
-
Review the Disclosure
- Check data consistency, completeness, methodologies, assumptions, and internal approvals.
- Consider alignment with IFRS S2 where relevant.
-
Publish and Update Regularly
- Disclose climate information through appropriate corporate reporting channels.
- Update the disclosure periodically as risks, strategies, targets, and performance change.
Building a TCFD Team in the Steel Industry
A cross-functional team is important because climate change affects more than environmental performance.
Finance teams may evaluate financial effects.
Operational teams understand production technology.
Engineering teams can assess technical decarbonization options.
Procurement teams understand suppliers and raw materials.
Risk-management teams evaluate corporate exposure.
Sustainability teams can coordinate greenhouse gas calculations and climate reporting.
Collecting Data for Task Force on Climate-Related Financial Disclosures
Good climate disclosure depends on reliable data.
Steel manufacturers may need information about:
- Production volumes.
- Electricity consumption.
- Fuel consumption.
- Coal and coke use.
- Greenhouse gas emissions.
- Raw materials.
- Scrap use.
- Transportation.
- Water consumption.
- Climate-related capital expenditure.
Companies should establish consistent data-management procedures so climate disclosures can be updated regularly.
Task Force on Climate-Related Financial Disclosures and Decarbonization
The Task Force on Climate-Related Financial Disclosures framework can also support decarbonization planning.
Once a company understands its carbon emissions and climate risks, it can identify appropriate reduction strategies.
Possible actions for the steel industry may include:
- Improving furnace efficiency.
- Increasing scrap utilization.
- Using renewable electricity.
- Improving heat recovery.
- Electrifying selected processes.
- Reducing material losses.
- Optimizing logistics.
- Exploring lower-carbon steelmaking technologies.
Task Force on Climate-Related Financial Disclosures and Supply Chains
Steel companies should also consider climate risks throughout their supply chains.
Raw material suppliers may face flooding, drought, regulatory changes, carbon costs, or energy-transition challenges.
Transportation infrastructure may also be exposed to extreme weather.
Understanding these risks allows companies to improve supplier diversification, procurement planning, and business continuity.
Task Force on Climate-Related Financial Disclosures and Investor Confidence
Climate-related financial disclosure can reduce information gaps between companies and investors.
Investors can better understand how management identifies climate risks, evaluates opportunities, develops strategies, and monitors performance.
Clear disclosure does not eliminate climate risk, but it provides greater transparency about how the company intends to manage that risk.
Transition from TCFD to IFRS S2
Companies that previously prepared disclosures based on the Task Force on Climate-Related Financial Disclosures have an important foundation for adopting IFRS S2.
The four TCFD pillars remain reflected in IFRS S2: Governance, Strategy, Risk Management, and Metrics and Targets.
However, companies transitioning to IFRS S2 should review additional disclosure requirements and determine whether existing data, governance systems, and reporting processes are sufficient.
This transition is particularly relevant for companies seeking internationally comparable sustainability-related financial information.
Why the Steel Industry Should Prepare for Climate Disclosure
Climate transition is likely to influence how steel is produced, financed, purchased, and valued.
Customers may increasingly request lower-carbon materials.
Investors may evaluate transition plans.
New technologies may change production economics.
Carbon-related regulations may create additional costs or incentives.
Companies that understand these changes early can incorporate them into long-term investment and business planning.
Actia Support for Task Force on Climate-Related Financial Disclosures
Preparing climate-related financial disclosures requires collaboration between sustainability, finance, operations, risk management, and senior management.
Actia can support companies in understanding and preparing disclosures based on the Task Force on Climate-Related Financial Disclosures framework while considering the transition toward newer international sustainability disclosure standards.
Support can include climate-risk identification, greenhouse gas inventories, climate metrics, scenario analysis, disclosure structure, and development of climate-related strategies.
Click here to discuss TCFD and climate-related disclosure services with Actia.
The Future of Task Force on Climate-Related Financial Disclosures in the Steel Industry
The Task Force on Climate-Related Financial Disclosures has had a major influence on the development of corporate climate reporting.
Although the Task Force itself has completed its work, its four-pillar framework remains highly relevant and has been incorporated into newer international sustainability disclosure standards.
For Indonesia’s iron and steel industry, climate-related disclosure can provide a structured approach for understanding physical risks, transition risks, greenhouse gas emissions, financial impacts, and long-term business opportunities.
Governance allows climate responsibilities to be clearly assigned.
Strategy helps companies evaluate how climate change may affect future business models.
Risk Management provides a structured method for identifying and controlling climate exposure.
Metrics and Targets allow progress to be measured over time.
Combined with greenhouse gas inventories, scenario analysis, energy efficiency, technological innovation, and decarbonization planning, the Task Force on Climate-Related Financial Disclosures framework can help steel companies improve transparency and strengthen long-term climate resilience.
For companies preparing for the future of sustainability reporting, TCFD-aligned practices can also provide a practical foundation for transitioning toward IFRS S2 and more comprehensive climate-related financial disclosure.