Dharsono Hartono, CEO of Indonesian company PT Rimba Makmur Utama, writes about the responsibility of business in halting climate change, and how it is time to build a new “restorative economy”.
Before I set up the Katingan Mentaya Project in 2008, I’d never set foot in a forest. When we first took a flight to survey 157,857 hectares of land in Kalimantan that my business partner, Rezal Kusumaatmadja, and I were looking to secure a concession, I remember thinking at the time that we were crazy.
It wasn’t just that we were two young men with no background and just a dream. At that time, sustainability was in its infancy and the carbon credit revolution had yet to begin. Monetising conservation was a radical new idea, and while I saw the potential, part of me didn’t think it was entirely possible at the time.
But 15 years later, our project has fulfilled its goals—namely reducing deforestation and carbon emissions, protecting biodiversity, creating sustainable economic opportunities for local communities and issuing carbon credits to the global market. Annually, it generates 7.5 million tons of triple gold certified carbon credits, the equivalent of taking two million cars off the road each year. Each credit represents one ton of carbon dioxide removed from the Earth’s atmosphere. Companies purchase carbon credits from us to offset greenhouse gas emissions from industrial production. This volume has increased significantly as more firms move towards reducing their environmental impact; in 2021, the voluntary carbon market hit a record US$1 billion.
Here’s why carbon finance should be on every company’s watchlist.
We can no longer afford to ignore climate change.
As leaders, we can become too fixated on the bottom line, operate the way we always have and be reluctant to make changes. But it’s important to move on climate change. Stakeholder expectations are changing: research shows that a strong sense of purpose is critical if a company wants to survive the next hundred years. This is part of a generational shift, as millennials and Gen Z employees demand purposeful work and for their companies to take a strong position on pressing social issues. In Asia, investors are increasingly looking at ESG principles, which require companies move away from a profit-at-any-cost mindset. At the very least, organisations should show that their activities don’t hurt the environment. Ideally, they should show how they’re actively working to solve climate issues or the many social inequalities we see in the world today.
We need to look beyond sustainability.
As renowned historian and philosopher Thomas Berry wrote in The Dream Of The Earth, “The most difficult transition to make is from an anthropocentric to a biocentric norm of progress. If there is to be any true progress, then the entire life community must progress. Any progress of the human at the expense of the larger life community must ultimately lead to a diminishment of human life itself.”
Sustainability is the heart and soul of what we do at the Katingan Mentaya Project, but I believe we should go beyond sustainability by restoring what has been damaged or lost. In short, we need to build a new “restorative economy”.
The advent of industrialisation has led to sustainable farming practices being replaced with unsustainable ones like chemical fertilisers and slash-and-burn agriculture. To combat this, we started an agro-ecology school to reintroduce local wisdom about sustainable farming that had eroded over years. Nature can help us if we take care of it. For example, using organic fertilisers and the cover crops method helps to manage soil erosion, pests and diseases, while increasing soil quality and biodiversity.
We can empower local communities through carbon finance.
One hundred per cent of the Katingan Mentaya Project’s staff is Indonesian, and about eighty per cent are local community members. The project provides vocational training and has allocated more than a thousand microfinance loans for small business development. It has also helped modernise sanitation facilities and create more efficient supply chains.
Crucially, we also show local farmers that sustainable farming incorporating the latest technology can offer considerable financial rewards and improve their quality of life. For example, instead of just producing fish, an ongoing project involves helping farmers to extract albumin, a high-value pharmaceutical product, from snakehead fish.
As another example, we were aware that the coconut farmers surrounding our concession used to harvest fresh and dried coconuts every three months, which doesn’t earn them much. When Unilever approached us six years ago, saying they had to import the coconut sugar required to produce a brand of sweet soy sauce they’d recently acquired, we realised there was an opportunity to help the coconut farmers. We calculated that if a farmer produced coconut sugar versus just harvesting coconuts on one hectare of land, he could earn up to the equivalent of S$400 (or about US$291), versus just S$60 (US$44). This required vocational training, so we started a training centre. From the initial batch of just two farmers, we now have a few hundred producing a much higher-quality, higher-value product from their crops.
Climate and social impact will become the new measures of profitability.
As CEOs and investors, we typically use metrics that make sense to us, like cash flows or sales comparables. But one thing we have yet to measure properly is impact, whether it’s impact on the community or climate change. I’m certain that impact is on a path to profitability because the world is moving in that direction, and value propositions are changing.
My one piece of advice for leaders is to not get too caught up in the past and traditional metrics—if I’d looked at my company purely from a profit perspective, I don’t think we would have survived beyond three years.
For too long we’ve thought of nature as something we own, but the pandemic has shown us that humans are only a small part of the universe. We need to see ourselves as caretakers of the Earth and protect it for future generations. That’s how we survive.
Dharsono Hartono is the CEO of PT Rimba Makmur Utama, an Indonesia-based company that is developing the Katingan Mentaya Project. Following a Masters in Financial Engineering from Cornell University, Dharsono worked for multinational companies such as PricewaterhouseCoopers and JP Morgan, handling merger acquisition, debt management and financing and raising capital.
This piece is part of a collaboration between Tatler Asia and Young Presidents’ Organisation (YPO), a global leadership community of chief executives, which counts more than thirty thousand individuals from 142 countries among its members.