Kimin Tanoto, CEO, Gunung Capital
One of the major events that happened in 2021 was the COP26, held in Glasgow, Scotland, in late October. In this event, as explained by the World Resources Institute (WRI), country representatives came with the goal to develop guidance on the collective assessment of progress towards the Global Goal on Adaptation (GGA), a key component of the Paris Agreement that aims to strengthen resilience and reduce vulnerability to climate impacts.
Ever since then, decarbonisation becomes one of the hottest topics of the year as stakeholders debated, reviewed, and figured out new ways to cut down carbon emissions to zero.
This update is a call for various stakeholders –including the business sector– to make changes in the way they operate by putting the environment at the forefront of every decision-making process.
But how do businesses, particularly those in age-old industries such as iron and steel, implement change after decades of operating in the same way? What does it take for the younger generation of businesspeople to break the cycle and bring innovation to a family dynasty? What lessons can the startup ecosystem learn from it?
In this interview, e27 speaks to Kimin Tanoto, Founder and CEO of Gunung Capital and heir to the Tanoto business dynasty, and Kelvin Fu, Managing Partner of Gunung Capital, to understand their vision in bringing the environment to the forefront of business decisions.
Singapore-based Gunung Capital is a private investment management company focussing on impact investments guided by environmental, social, and governance (ESG) frameworks. Through this interview, we also aim to understand more about their work and how they aim to balance between profit and sustainability.
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Breaking the cycle
For generations, the Tanoto family has been known for its business acumen in the steel and cement industry. Ever since an early age, Kimin Tanoto has been prepared to enter the business world itself.
Fast forward to 2018, after founding and running his own businesses, he returned to the family business to take over its leadership. He began to serve on the Board of Commissioners for PT Gunung Raja Paksi Tbk. During his time, he successfully brought the company to get listed on the Indonesia Stock Exchange in 2019.
“I stepped into the company about three years ago. So I wasn’t expecting to take over the company because I was the second son. Usually, in a very traditional Asian family, we expect the oldest son to take over the family business,” the Cornell University graduate explains.
The success in transforming the business into a new era did not come easily for him. As the second generation of his family, Tanoto has his own views on what a good business should be –and it is not always in line with what the older generation has been running all these years. So he introduced change management to modernise the operations.
“You have long-serving employees and partners here and there; a lot of them also has family ties. So, it was a delicate situation to mitigate, but I think we were quite successful in doing that. The first thing I did was to get all the stakeholders to buy into the idea of change management,” Tanoto explains.
“We talked about using the digital technology to using professionals to ensure transparency. We got the buy-in, and we managed to convince over 90 per cent,” he continues.
Under all-professional management, all decision-making process has to go through a process where individuals have to present ideas and get the buy-in from the professionals, leading to a drastic cultural change. Tanoto also includes heavier use of technology in the process, particularly data analytics.
“People don’t want to change; change is difficult. But the more difficult it is, usually the more profitable the solution,” he stresses.
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In addition to changes in operations and business processes, Tanoto also introduced a new philosophy that brings the environment to the forefront of the company’s decision-making. When asked about how an age-old industry can balance sustainability and profit-making, Tanoto answers by pointing out the differences between the generations –and the challenges that each of them faced.
“In the left lane, we have young environmentalists such as Greta Thunberg, and the Millennial generation, who expect things to get done –and expect it to get done right now. On the other end of the spectrum, there is a generation that is more slow-moving, because they have spent decades trying to build a power plant and cannot just throw it away. Right? It’s 100 years of hard work,” he elaborates. “So I read this in an article [and I want to emphasise it]: Don’t let perfection be the enemy of good.”
This is why, in his approach, Tanoto believes in finding a middle ground and working from there.
“Right now, everything is moving. The environmentalists are pushing an agenda that the older generation cannot accept because they have the responsibility to stakeholders and their bank loans, they cannot just shut things down. So, how do you balance things out?”
Kelvin Fu, Managing Partner, Gunung Capital
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Investing for the future
Previously, as the Managing Partner of Gunung Capital, Kelvin Fu has published his opinion on e27 about the importance for corporates and investors to embrace sustainability.
“If we look at the Paris Agreement, Articles Six, which is to decarbonise the world industry and to reduce carbon emission … the amount of CapEx required to fix this issue is massive. Just look at the steel industry alone or power plants. We are talking about a massive amount of investment, possibly three to 10 times the equity value of the company,” Fu says. “But we have to do it because our environment is dying.”
“On top of that, the government will love this because it will begin to create revenue from the tax if there is more investment to improve energy efficiency, carbon extraction, and new technology to make steel,” he continues. “And rightfully so, because 20 to 35 per cent of the world’s carbon emission comes from power generation coal, cement, and steel.”
To support this transition, Gunung Capital is looking at investing in these two broad categories: helping businesses transition into a low carbon future (that may involve a suite of technology practices) and decarbonisation technologies.
“We would love to work with startups in the region that can help us to improve the way we make steel and decarbonise. But the reality is, most of the startups within the space is currently based in the West, especially in Europe and the US,” Fu says, stressing that the firm is open to working with Asia-based startups in the sector.
Fu also stresses that the firm puts emphasis on the quality –instead of the quantity– of the projects that they are working on. This means, if they can put all their investments into just one project with strong potential, then it is the approach that they are taking.
“I am one of those people who think that diversification is overrated,” he says.
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Image Credit: Gunung Capital
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