Greening Global Supply Chains – Focus on Energy

An approach towards GHG mitigation actions in the Indonesian industry sector


PAKLIM–adidas Sourcing Ltd. Development Partnership

The Challenge 

Independent, unofficial studies indicate that Indonesia has become one of the world’s largest emitters of greenhouse gases (GHG). The country’s consumption of fossil fuels is growing rapidly due to an increasing demand especially in the industry and transport sectors. The Government of Indonesia (GOI) clearly recognizes the need for action and has communicated its ambitious mitigation targets to the international community. Among others, the industry sector has been identified as one of the focus areas for the required mitigation efforts, especially through improvements in energy efficiency.

Today, most power plants and industries in Indonesia are still equipped with low-efficient technologies excessively emitting GHG. Also, due to shortages on the energy supply side, the industries increasingly experience blackouts and hence interruptions in production processes. In addition, with the envisaged gradual removal of the currently still high energy subsidies, energy prices are seen to rise. Facing these challenges, the industries are in urgent need to make the required technological and system changes already now in order not to lose out against the international competition in the near future.

At the same time, the GOI has enacted several laws in the past few years to promote environmental protection and energy conservation. Nevertheless, there is both lack of enforcement and lack of capabilities to offer services on energy management needed to comply with new regulations. Also, on the companies’ side, most companies consider energy efficieny measures to be cost and time intensive and difficult to implement. Industries often lack energy efficiency related technical knowhow and resources and often are not aware of the benefits of enhanced energy efficiency in terms of cost reductions.

Our Goal

The objective of the PAKLIM–adidas Sourcing Ltd. development partnership is to successfully test the greening of the supply chain – with focus on energy – in selected apparel and footwear industries in Indonesia. This contributes to the development of a sustainable supply chain model for the Indonesian manufacturing industry as a whole and provides best practices for GHG emission reductions (NAMAs – Nationally Appropriate Mitigation Actions).

Our Approach

The development partnership addresses the private partner’s supply chain, thereby focusing on the issue of energy management in selected Indonesian footwear and apparel factories. The project undertakes capacity building for service providers to provide energy managing services to the selected factories as well as to the wider market, and for the selected suppliers to measure and manage their energy consumption and climate relevant values.

Energy audits are conducted and tools for the measurement, monitoring and reporting of energy performance will be developed. In addition, technology options applicable for apparel and footwear industries are identified and evaluated.

The Impact

At the pilot level, energy assessment, monitoring and the implementation of concrete energy efficiency measures will lead to a significant reduction in the factories’ energy consumption and GHG emissions. This contributes to the mitigation of GHG emissions from the Indonesian industry sector.

An enlarged national market of competent service providers in the area of energy management and carbon accounting is provided.

The collected energy data and experiences from the project are fed into the work of the Ministry of Industry on establishing the industry mitigation strategy as well as into the development of NAMAs on energy efficiency in the Indonesian industry sector. A model for the measurement and reporting of climate-related values in supply chains is available for replication.