Is sustainability expensive? Here are some facts

Doubts arise when companies consider the ESG framework for their business and operation. One of the arguments is whether companies need to spend higher costs and make products expensive to achieve sustainability.

The answer is no. Having a sustainable business means the company needs to find a way to scale up its enterprises, saving the cost for operations and customers. Moreover, it will be a positive way if sustainability-focused solutions can generate value for the companies. 

From the investors’ perspective, East Ventures always looks for potential investments that can bring sustainable solutions that can be scaled up and compete with incumbent solutions. “It needs to be able to save costs and improve efficiency for businesses and customers. We like to invest in these kinds of solutions, which can scale up and benefit the environment,” Avina Sugiarto, Partner at East Ventures said. 

East Ventures recently signed a Memorandum of Understanding with Indonesia Chamber of Commerce and Industry (KADIN) Net Zero Hub and World Resources Institute (WRI)  Indonesia for the strategic partnership and collaboration in advancing commitment towards net-zero targets. 

As part of the East Ventures’ ecosystem, the GoTo group also established its sustainability goals into three zero commitments by 2030, including zero emissions, zero waste, and zero barriers. In implementing the sustainability and ESG framework, GoTo group does not separate sustainability from other business lines or departments. Instead, it is a priority for the company to implement its operations to replace and reduce operational expenses. Moreover, trying to make sustainability generate value for their stakeholders, including their merchants, driver-partners, consumers, employees, and partners.

“Sustainability is not a cost center. It is designed to create value for our shareholders. We have to be able to measure and track it, which has to be in line with ESG global frameworks or standards, so that we are constantly accountable for the commitments and progress that we have made,” said Tanah Sullivan, Head of Sustainability at GoTo Group. 

Another East Ventures portfolio company is ARIA, an agritech startup that brings farming precision solutions. Aria utilizes drones, big data, and satellite imagery to help customers and small-scale farmers increase efficiency, lower productivity costs in terms of water and fertilizers, and address food security issues. 

“When we started ARIA, our goal was to make agriculture more efficient. But the moment we delve deeper, we realize that we need to fix other things before making that vision a reality. First is the food security issue. Second is plant sustainability and the third is farmer prosperity,” Arden Lim, Co-Founder and Chief Product Officer at ARIA, said.

While Indonesia’s population continues to grow, the condition is imbalanced with the number of farmers and conditions. By 2050, Arden estimated, Indonesia will need to double the food production to feed the population in this country, which means every single part of the land needs to be able to produce more food. However, the current farming practices are not sustainable. The fertilization process, either too much or too little, stresses the land because the excess chemical fertilizers bleach the land, making it very hard to maintain its usefulness. Another related problem leads to the farmers’ prosperity. Farmers are considered the lowest paying job in Indonesia, where none of the youth wants to regenerate and become farmers. 

In tackling all these problems, ARIA utilizes its plant health technology by using satellite and drone imagery to detect macronutrients in the soil for a more accurate recommendation of fertilizer and pesticide treatment.  

Meanwhile, drone services can help farmers to save costs and be more efficient than employing laborers. ARIA can charge about IDR 200,000 – IDR 250,000 per hectare of land, compared to labor fees that could cost between IDR 240,000 to IDR 600,000. Besides, drone technology can save water 80% compared to water in the traditional way.

Collaboration is the key

However, Tanah admitted that many sustainability solutions still come with a fee, which makes those solutions not scalable in Indonesia and quite challenging to be implemented for drivers or merchants. 

“Whether it is an alternative packaging or electric vehicles for driver-partners, we need to understand and ensure if these solutions can be applied and serve our partners and be competitive with the incumbent solutions,” Tanah added.

Therefore, collaboration is essential to find the best solutions to address the problems. GoTo group has opened its ecosystem to work with other startups and stakeholders, including East Ventures to iterate, pilot, and scale in the Indonesian market. 

For East Ventures, collaboration is essential to bring the ecosystem to flourish. Avina mentioned that East Ventures has actively worked together within the ecosystem and business groups because all stakeholders need to figure out the problems and what solutions startups can bring to the table.

The most important thing is the government policy or incentives because the government takes control of the procedure for supporting the companies in transitioning to sustainability. 

***

This article is a content summary of  East Ventures’ panel discussion “Advancing climate tech investment to achieve net zero” in Indonesia Net Zero Summit 2022, hosted by The Indonesian Chamber of Commerce and Industry (KADIN Indonesia) on 11 November 2022.