INTRODUCTION
In today's era where environmental issues are important, many lines of life
are required to apply the concept of sustainability. The reason is, the
occurrence of climate change causes global warming, which can disrupt the
environmental system (Butler, 2018), whereas climate is considered as one of the most crucial things of nature
since it affects people life, is a very important resource, and an essential
aspect that influences the economic and social growth (Chao & Feng, 2018). This
environmental system consists of living things such as animals, plants, and
humans. Meanwhile, to maintain their survival and life, humans need food,
clothing, housing, and other basic living facilities with a certain quantity,
quality, and level of diversity. An example is a fulfillment of clean water in
Bogor Regency which is sustainable in nature, which generally clean water and
sanitation facilities continue to function where the recipients of this clean
water program will continue to operate and manage clean water and sanitation
facilities even though the program has been declared complete. Thus, urban development and sustainability projects must be combined because
ecology is also a part that is expected to be maintained by the company/ organization
(Chang, 2020). It can be seen that organizations around the world have begun to shift from
applying methods that possibly harm the environment to methods that are proven
to be eco-friendlier which as a result of industrial
activities (1750 until now) there have been many variations of climate change (Iqbal, 2020). This is because the concept and issue of
sustainability are centered on three interconnected aspects, environment,
economy, and society (Mensah, 2019).
As described above, the urgency in creating sustainability in today's era
causes companies to be able to create a strategy that supports this concept.
Strategy is considered a company's procedures, not things that they own (Brorstr�m, 2020). Corporate strategy can be defined as types of decisions within a firm that
describe and explain the goals, purposes, or objectives, produce key policies
and plans to get those goals and define the range of business to be pursued by
the company, type of economy, and human organization (Idowu et al., 2013). Meanwhile, attempts to realize its vision and mission
often do not go according to plan due to sudden risks or problems. Similarly, sustainability issues must be included in the company's
strategic agenda. Thus, companies need to create sustainable strategies. This
has led to the convergence of the areas of sustainability and strategic
management (Egels-Zand�n & Ros�n, 2015). Strategic management has an important role in advancing the welfare of
society, helping to solve various business, social, and environmental
(including corporate) challenges (O�Shannassy, 2015). It includes formulating a strategy for sustainable environmental
development, which is a dynamic, stochastic system, aims to continue into the
future and cares about global poverty, technological limitations, and social
organization.
Sustainability is an urgent issue because, business activities are the
sources of many environmental and social issues. They are the main reasons for
the sustainability crisis (Schaltegger et al., 2016). Meanwhile,
several top companies are the main generators in creating sustainable growth.
Forerunners in the niche market for organic food, for instance, can avoid the
�disvalue� of the externalities related to conventional farming and provide
added value to customers who concern about the environment and social life.
Moreover, innovative sustainable entrepreneurs influence and create markets and
society, sometimes more than what the regulators and non-governmental
organizations do, and frequently collaborate or share best practices. Companies are required to develop processes, products, and services that
can achieve environmental and social protection to make a real contribution to
establishing sustainable development (Schaltegger et al., 2016). Therefore, to
ensure the company could contribute, things that they run for business should
accommodate the sustainability concept.
In other words, considering the environmental and social conditions that
have been described previously, it is difficult for the company to become a
sustainable company. With the right, will create a sustainable life between
natural resources and existing human resources, and will always maintain a
balance both now and future generations.
The word sustainable itself describes or gives meaning to a long-term
continuous process or action, which causes or allows something to take place
for a certain period of time, as well as a process or action to make something
happen or make something work. Based on the above, it can be said that in a
sustainable business context, it involves maintaining the company's processes
and actions over time. A sustainable company refers to a company that can
achieve long-term goals and add value by incorporating economic, social and
environmental aspects into its business strategy.
In general, sustainable business refers to the �triple bottom line�, i.e.
the company will imitate its business with its financial, social and
environmental impacts (Gimenez et al., 2012). Every business wants to make a profit, so the focus of business activities
is the pursuit of profit. Activities undertaken to seek profit are to increase
productivity and increase efficiency at the expense of costs. Productivity can
also be achieved by improving management, for example by processes, reducing
inefficient activities, as well as processes and service time. Cost effectiveness
can be achieved by using materials as efficiently as possible and reducing
costs as much as possible.
The environment is very closely related to all aspects of human life. For
example, drinking water and the air we breathe. Unfortunately, many of us still
don't care about the environment because we haven't felt the benefits directly.
This thinking must change. and environmental protection is closely related
to business protection. In a well-maintained environment, there will be
enormous benefits, including maintaining health, comfort, and availability of resources.One of the companies in Indonesia that shows the
existence of sustainable strategy efforts is PT. Krakatau Steel (Persero) Tbk is a company under the auspices of a state-owned
manufacturing company and was established on August 31, 1970, during the reign
of President Suharto, domiciled in Cilegon, Banten,
which acts as the largest producer of industrial goods in Indonesia. The
company's products include iron, steel, coiled tubing, and others which are not
only intended for domestic steel needs but are also marketed in the
international market. During the past decade, apart
from being successful in building a significant business through the
construction of production facilities such as the Sponge Iron Factory, Steel
Billet Factory, Wire Rod Steel Factory, This company
also builds supporting infrastructure, which includes power plants, water
purification centers, ports, and telecommunications systems. This is following
the "Krakatau Steel Bangkit" Transformation
Program, which was initiated in 2009 (PT. Krakatau Steel (Persero) Tbk, 2020).
Considering the description above, it can be seen that there is an urgency
between the company's performance and sustainability issues. As described
above, it is important to see how PT. Krakatau Steel (Persero) Tbk carries out a transformation strategy in creating a
sustainable company that is useful for various walks of life. Thus, the study objective is to identify the company's business
transformation strategy into a sustainable company.�
METHOD
The study followed a qualitative descriptive method. This method is used to
carry out scientific research where the main data is text or language (Creswell & Poth, 2016). The purpose of
the research is to identify and understand a case, phenomenon, or social
problem. The object of research is primary data that comes from the annual
report of PT. Krakatau Steel (Persero) Tbk and
secondary data from national and international journals related to
transformation strategies and sustainable companies. Meanwhile, the data
collection technique uses a literature review of existing data that focuses on
identifying problems in the company's business strategy to become a sustainable
company.
RESULTS AND DISCUSSION
A. Company
Profile of PT. Krakatau Steel
In 2020, PT.
Krakatau Steel (Persero) Tbk has managed to record a
positive performance due to the transformation program entitled 'Krakatau Steel
Rise,' which was launched in 2019. From this transformation program, various
advances have been made, such as debt restructuring, profitability to
increasing labor productivity which has led the company to profitability. With this positive performance,
the company is then determined to continue the transformation program in the
coming years to further enhance the company's value and achieve sustainable
growth. For this achievement, the company has become a major player in the
national strategic industry that contributes as much as possible to the
country's development efforts (PT.
Krakatau Steel (Persero) Tbk, 2020).
B.
Business Transformation Strategy
One
definition of strategy is as a way for an organization to achieve its goals by
integrating the benefits it has to face various current and future threats and
challenges In a business, strategy means pursuing a
long-term, profitable competitive position in the face of the dynamics that shape
industry competition. Business becomes a means of competing for client
preferences among competing firms so that through business, one can obtain a
way to make decisions about relationships with business rivals. The strategy
that becomes the decision-maker is important because it includes important
choices that determine the shape of a company. That way, the company can
maintain and generate profits from the management strategy (Aghazadeh, 2015). In this
highly competitive era, getting better strategies is the most important thing
because this affects the company's performance or business (Islami et al., 2020). Therefore,
it can be seen that strategy is conceived as emergent efforts that have a
particularly powerful effect on the organization (Knights & Morgan, 1991). Strategies
must be adapted to current conditions. Therefore old
or traditional strategies are no longer relevant. In management strategy, there
are three elements, namely the practice, the method, and the theory (Thomas, 2004). Meanwhile,
business strategy and related performance will successfully improve the
company's performance, so that a transformative strategy is needed in today's
era, not only digital transformation (Kraus et al., 2021). However, it
also a transformation that supports sustainability (Feroz et al., 2021).
Sustainability is not produced just like that and immediately but must go
through an ongoing process (M�ller & Pfleger, 2014). Companies must use the power of transformational development by making
'sustainability' a key success factor (Hahn & Scheermesser, 2006).
Transformation often fails in companies because it is considered complex, and
the challenge is that it requires behavior change (Buschmeyer et al., 2016). However, a successful
transformation can create sustainable changes starting from the vision that
results in changes in the organization's products/services, consumers/clients,
markets, skills, sources of margin, competitive advantage, and integrating
these changes with core or core competencies. This organizational transformation is a fundamental
change in the relationship between organizations, individuals, and society as a
whole so that organizational transformation becomes a challenge for
organizational leaders to drive better business performance by innovating, the
steps of transforming an idea into a product or service, which generates the
value that consumers will buy (Sartori et al., 2018).
Organizational
life cannot be separated from the impacts of the internal and external
conditions, changes that cannot be avoided caused by technology, structure,
environment (economic, political, social, and others), systems, and processes. Furthermore, according to Abubakar,
the organizational transformation process can also be achieved through business
process redesign. Business process reengineering is a new paradigm for
innovation thanks to the fundamental overhaul and radical overhaul of
organizational business processes that lead organizations to dramatically
improve their business performance. Redesigning business processes
is not enough to change processes, but mainly to change management, strengthen
human resources, increase creativity and human skills so that organizational
members do not refuse to change and are committed to the organization.
C.
Sustainable Company
With thoughts that worry about future environmental impacts, businesses
worldwide in today's era are required to meet the demands of stakeholders,
namely to participate in being part of environmental sustainability. According to Hanelt et al. (2017) research, if eco-innovation can be included in these processes, there
should be a greater chance to make a better future. This should not happen, but if
environmental innovations present inadequate organizational performance because
adoption will remain low. �Sustainable entrepreneurs often start their business from a niche or with a
small project within a large company, serving as a protected learning
environment. Adaptation takes effect when
those pioneers have left the learning environments in some circumstances
defended by public policy, technical hindrances to be copied and produced by
competitors, or other types of security, and may alter or enter competitive
mainstream markets (Schaltegger et al., 2016).
Sustainable business involves entrepreneurs who have high motivation to
continuously strive to solve social problems, pay attention to human resource
management in terms of recruitment, sustainable development, and training of
the right people in the business (Vivi, 2020). Meanwhile, management's
opinion on the urgency to change is normally influenced by stakeholder demands
to improve the environmental sustainability and management's capability to
identify it, which will then affect their judgments, for example, to decide the
type and the procedure of using environmentally friendly innovations that
become the fundamental triggers of business transformation towards continuity (Schaltegger et al., 2016).
In other words, organizations aim to be sustainable where their performance
concerns should focus on economic performance, social equity, and ecological
(nature) preservation. Sustainable companies are about how companies can become agents that shape
sustainable lifestyles. The trick is to change how business within the company
works and is carried out by incorporating social and environmental concerns
into core business practices (Foss & Saebi, 2017).
Based on several studies used as references related to a business strategy
aimed at developing awareness of the correlation between business strategy
implementation and its output, differences in performance between various types
of strategies can be seen to occur due to the diverse and varied nature of the
environment. In addition, different performance measures also have a large
impact on these differences (Natapermana et al., 2020). PT. Krakatau Steel (Persero) Tbk, in this case, recorded a positive performance in 2020,
which was seen as a result of the transformation program 'Krakatau Steel Bangkit,' which was launched in 2019. The progress achieved
as a result of this transformation program includes debt restructuring, cost
efficiency, and increasing labor productivity, which
has helped this company achieve profitability.
In realizing business transformation, the company is running its business
believes that the sustainability of its business going forward will not only
depend on management's ability to manage financial aspects but is also
influenced by other indicators related to shareholders and stakeholders. Thus, as a business entity that
grows and develops in the community, the company always maintains a harmonious
relationship with the surrounding community by carrying out the practice of
Corporate Social Responsibility (CSR) or partnerships and the Community
Development Program (CDP), which are carried out routinely at every year. As
the company did, CDP activities during 2020 brought several constructive
results to the neighboring community, including the small and medium business
actors who can enhance their businesses by utilizing the business capital loans
through the Partnership Program.
Through the CDP Programs and sponsoring partners, the company seeks to
further expand its sustainable contribution to creating a community structure
that can grow and develop independently. Therefore, the company offers capital
loans and continuously provides various types of training courses relevant to
the business of its fostered partners (PT. Krakatau Steel (Persero) Tbk,
2020).
It can be seen that basically, the implementation of CSR activities of the
company is to support the concept and goals of sustainable development that
puts forward the principle of 3P balance, people, profit, and the planet. To support environmental conservation, Altenburg and Pegels (2012) state that the sustainability
transition requires proactive and targeted regulations to speed up the
production and implementation of 'green technologies. Considering the improbability of future prices and technology choices, high
governance is therefore required, among others: (1) there is a need to address
various market collapses in producing new technologies beyond their commercial
viability, which accepts the capability to select the proper technologies and
organize subsidies properly that these technologies can be produced with
minimal misallocation and political struggle; (2) technology choice indicates
problematic trade-offs and influences stakeholders in various ways. Thus, there
is a need for consensus on the overall direction of change and a political
settlement to compensate the losers in reform; (3) transformations should be created
under substantial time pressure. Particularly in terms of greenhouse gas
emissions, primary policy transformation has to be done in the next ten years;
(4) there is an urgent need to coordinate national and international policy
frameworks to respond to and benefit from the current developing international
environmental governance system.
In realizing the efforts that have been explained previously, the company
has carried out environmental management, and monitoring programs, as well as
Regularly monitored the air emissions from factory chimneys, ambient air
quality, environmental noise levels, indoor dust concentration in the factory,
working environment, and the quality of wastewater consisting of industrial
wastewater and domestic wastewater, rivers and seawater. In addition, monitoring of environmental quality internally and through
independent agencies is also carried out periodically and reported in the form
of reports on the implementation of RKL and RPL to the relevant agencies. This is a form of the company's full commitment to helping to improve the
alignment of business performance and provide benefits to the community and the
environment as stakeholders in the business. Following applicable law, as a
State-Owned Enterprise (BUMN), which has been fairly active and professional in
the steel industry for decades, carrying out CSR programs and/or activities is
an obligation.
On the other hand, the company has also implemented. Since 1997, the ISO
14001 environmental management system has been consistently implemented, a
systematic approach to environmental management. The system is also regularly
audited by an independent certification body. In addition to implementing the
ISO 14001:2015 environmental management system, the company also implements the
environmental laboratory management system SNI ISO/IEC 17025:2008. The policy
aims to measure the implementation of environmental management as a form of
sustainable development to balance the environment, society, and economy.
However, it cannot be denied that industrial activities directly impact the
environment (Vivi, 2020). Even so, the company can fulfill
customers' demands to carry out sustainable development and respond to changes
in environmental conditions that are balanced with socio-economic needs. The
company also consistently takes part in the Company Performance Assessment
(PROPER) program held by the Ministry of Environment and Forestry of the
Republic of Indonesia. This program shows how many
scores are obtained, which indicates the extent to which the company can comply
with environmental laws and regulations. Performance of the company in the
PROPER program in 2020 received the "BLUE PROPER" award.
In addition, PT. Krakatau Steel (Persero) Tbk
also regularly participates in the Green Industry Assessment Program held by
the Ministry of Industry of the Republic of Indonesia. In this Green Industry program, the rankings start from level 1 to 5, with
level 5 being the highest rank. Due to the pandemic in 2020, this program was
abolished by the Ministry of Industry of the Republic of Indonesia. However, PT. Krakatau Steel (Persero) Tbk
continues to implement the concepts of the green industry in every production
process. This is because recognition as a green industry has become a
competitive factor as a result of market demands for green industries due to
the growing market concern for environmental sustainability and sustainable
development.
CONCLUSION
The conclusions were obtained from the study findings,
the business transformation strategy that PT has carried out. To become a
sustainable company, Krakatau Steel (Persero) Tbk is
a transformation that starts from debt restructuring, cost efficiency to
increasing labor productivity. In the end, it can
lead PT. Krakatau Steel (Persero) Tbk to achieve
profitability. In addition, it can also be concluded that as a business
entity that grows and develops among the community, PT. Krakatau Steel
(Persero) Tbk also always maintains a harmonious
relationship with the surrounding community through the practice of corporate
social responsibility (CSR) or partnerships and the Community Development
Program (PKBL) regularly every year. On the other hand, PT. Krakatau Steel
(Persero) Tbk also regularly participates in the
PROPER program. As this study is limited only to identifying the business
transformation efforts of PT. Krakatau Steel (Persero) Tbk
towards sustainable company Thus, more fields have been left untouched, new
research can be done in the future to explore PT. Krakatau Steel (Persero) Tbk from other various perspectives.
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THE
ANALYSIS OF PT. KRAKATAU STEEL (PERSERO) TBK�S BUSINESS TRANSFORMATION STRATEGY
TOWARDS A SUSTAINABLE COMPANY