Climate Management

🌱 Climate Strategy & Risk Management

Pupuk Kaltim is committed to addressing climate change through focused and sustainable decarbonization strategies towards Net Zero Emission 2060.

🌱 Climate Strategy

Pupuk Kaltim is committed to addressing climate change through focused and sustainable decarbonization strategies. As part of our efforts towards Net Zero Emission 2060, the company implements various mitigation and adaptation initiatives to reduce emissions, improve energy efficiency, and strengthen operational resilience against extreme climate risks.

In the short term, Pupuk Kaltim focuses on energy efficiency and emission control in production processes. In the medium term, the company expands the implementation of low-carbon technologies and develops green products such as green ammonia. Meanwhile, in the long term, Pupuk Kaltim targets transformation towards a sustainable chemical company based on circular economy through green product innovation and the implementation of carbon capture and utilization (CCU) technology.

This strategy is implemented with strong sustainability governance under the supervision of the Board of Commissioners Committee and cross-functional ESG Team, ensuring every step towards green energy transition is measured and impactful.

⚡ Climate Change Risks and Opportunities

As part of our commitment to supporting the transition to a green economy and Indonesia's Net Zero Emission 2060 target, Pupuk Kaltim actively identifies, manages, and integrates climate-related risks and opportunities into the Company's strategic and operational planning. Climate risk management is carried out through identification and mitigation of physical and transition risks in the upstream to downstream sectors, to identify potential impacts and develop mitigation and adaptation plans.

This approach is integrated into the Enterprise Risk Management (ERM) system and implemented through energy efficiency, utilization of low-carbon technology, implementation of circular economy, adaptation of business processes to short-term to long-term climate change, and sustainability reporting based on ESG and TCFD. With these steps, Pupuk Kaltim ensures operational sustainability and makes real contributions to national energy transition.

To strengthen oversight, Pupuk Kaltim adopts ISO 31000:2018, by integrating climate-related risks and opportunities into the ERM process. These risks and opportunities are reported monthly to the Risk Management Director and quarterly to the Risk Monitoring Committee, to ensure continuous monitoring and alignment with Net Zero targets.

Pupuk Kaltim has summarized the main climate-related risks and opportunities for 2024, along with the mitigation measures that have been implemented in response to these issues, as follows:

Physical Risk

Time Frame	Scenario Description	Potential Business Impact	Mitigation and Adaptation Strategy
Short Term (< 2030)	- Increased intensity of heavy rain and local storms - Disruption to drainage systems - Risk of local flooding and waterlogging in operational areas	- Plant shutdown due to flooding, water supply disruption, or employee access to workplace - Road access to ports or production areas disrupted by waterlogging or infrastructure damage - Damage to pump equipment, electrical systems, and other utilities due to flooding or high humidity - Increased operational costs	- Optimization of energy efficiency in production - Strengthening drainage systems - Buffer stock of critical raw materials - Routine maintenance of electrical systems and protective embankments - Socialization and training for extreme rain/flood preparedness
Medium Term (2031-2040)	- Increased frequency of extreme rain and regional storms - Risk of major flooding and environmental contamination - Impact on supply chain	- Damage to production infrastructure, pipelines, and ports affected by tidal flooding and seawater intrusion - Prolonged production disruptions - Increased asset repair costs - Delays in raw material and product distribution increase	- Reforestation and green belt programs in industrial areas - Smart Production & Smart Distribution - Integration of extreme weather risks into business continuity plans - Protection systems in tank and pipeline areas - Construction of permanent flood barriers - Regular training for employees
Long Term (2041-2060)	- Significant increase in storm intensity and extreme rainfall - Risk of major flooding and long-term operational disruptions - Pressure on existing infrastructure design	- Logistic infrastructure & utilities become unsuitable - Plant location becomes unsuitable - High turnover - Systemic disruption of domestic and export distribution - High insurance costs	- Develop green fertilizer innovations - Long-term studies to relocate utilities or critical facilities from climate-vulnerable zones - Plant design transformation with disaster-resistant infrastructure - Collaboration to strengthen infrastructure and protective vegetation planting in industrial areas - Adjustment of long-term asset financing and protection strategies

Time Frame	Scenario Description	Potential Business Impact	Mitigation and Adaptation Strategy
Short Term (< 2030)	- More frequent and longer heat waves - Extreme temperatures above 35°C for several consecutive days - Increased pressure on cooling systems and electrical equipment	- Reduced operational efficiency due to extreme heat - Increased energy consumption for cooling systems - Risk of equipment overheating and damage - Health and safety risks for workers - Increased operational costs	- Installation of improved cooling systems - Adjustment of work schedules during peak heat - Heat stress management programs for employees - Regular maintenance of cooling equipment - Implementation of heat-resistant infrastructure
Medium Term (2031-2040)	- Extreme heat waves with temperatures above 38°C - Extended periods of extreme heat - Increased risk of heat-related equipment failures	- Significant reduction in equipment lifespan - Frequent production interruptions due to overheating - Increased energy costs for cooling - Worker productivity decline - Higher maintenance and replacement costs	- Investment in advanced cooling technologies - Development of heat-resistant operational procedures - Enhanced employee health monitoring systems - Strategic scheduling of critical operations - Facility design modifications for better heat management
Long Term (2041-2060)	- Extreme and prolonged heat waves above 40°C - Unprecedented heat stress on infrastructure - Systemic challenges to operational sustainability	- Critical infrastructure may become unsuitable - Fundamental operational model changes required - Extreme energy consumption for cooling - Potential need for facility relocation - Significant impact on long-term business viability	- Revolutionary cooling and climate control systems - Comprehensive facility redesign for extreme heat - Development of heat-resilient production technologies - Long-term strategic planning for facility relocation - Investment in next-generation heat-resistant infrastructure

Time Frame	Scenario Description	Potential Business Impact	Mitigation and Adaptation Strategy
Short Term (< 2030)	- Gradual increase in sea water temperature - Impact on coastal cooling systems efficiency - Changes in marine ecosystem affecting coastal operations	- Reduced efficiency of sea water cooling systems - Increased energy consumption for cooling - Potential corrosion issues with marine infrastructure - Impact on port operations and logistics	- Optimization of cooling system efficiency - Regular monitoring of sea water temperature - Enhanced maintenance of marine infrastructure - Development of alternative cooling methods - Corrosion protection measures
Medium Term (2031-2040)	- Significant sea water temperature rise - Increased thermal stress on coastal infrastructure - Marine ecosystem disruption affecting operations	- Major efficiency losses in cooling systems - Accelerated infrastructure degradation - Increased operational and maintenance costs - Potential need for cooling system upgrades - Impact on product quality due to temperature control issues	- Investment in advanced cooling technologies - Infrastructure hardening against thermal stress - Development of temperature-resistant materials - Enhanced monitoring and control systems - Strategic planning for cooling system upgrades
Long Term (2041-2060)	- Extreme sea water temperature increases - Fundamental changes to marine environment - Critical challenges to sea water dependent operations	- Sea water cooling systems may become ineffective - Critical infrastructure vulnerability - Fundamental operational model changes required - Potential relocation of sea water dependent facilities - Significant long-term investment needs	- Revolutionary cooling system technologies - Complete infrastructure transformation - Development of alternative cooling methods - Long-term strategic facility planning - Investment in climate-resilient infrastructure

Time Frame	Scenario Description	Potential Business Impact	Mitigation and Adaptation Strategy
Short Term (< 2030)	- Increased frequency of dry seasons - Water supply shortage during peak demand - Impact on local water resources and supply chains	- Production disruptions due to water shortage - Increased water procurement costs - Risk of equipment damage due to dust and dry conditions - Impact on employee health and productivity - Supply chain disruptions	- Water conservation and efficiency programs - Development of alternative water sources - Enhanced water storage capacity - Dust control and equipment protection measures - Employee health and safety protocols for dry conditions
Medium Term (2031-2040)	- Prolonged drought periods - Severe water shortage and supply disruptions - Increased competition for water resources	- Significant production capacity reduction - Major increase in water costs - Equipment failures due to extreme dry conditions - Workforce health and safety challenges - Critical supply chain vulnerabilities	- Investment in water recycling and treatment systems - Development of drought-resistant operational procedures - Strategic water partnerships and agreements - Advanced monitoring and early warning systems - Infrastructure hardening against dry conditions
Long Term (2041-2060)	- Extreme and persistent drought conditions - Critical water scarcity affecting regional operations - Fundamental changes to water availability	- Operations may become unsustainable - Potential facility relocation requirements - Extreme operational cost increases - Fundamental business model transformation needed - Long-term viability challenges	- Revolutionary water management technologies - Complete operational model transformation - Strategic facility relocation planning - Development of water-independent production methods - Long-term regional water security partnerships

Transition Risk

Climate-Related Risk	Time Frame	Scenario Description	Potential Business Impact	Mitigation and Adaptation Strategy
Carbon Pricing	Short Term (< 2030)	- Government begins to regulate implementation of carbon pricing (carbon tax / carbon pricing) in emission-intensive industrial sectors, including fertilizers - Emission reporting and offset monitoring obligations - Uncertainty in national carbon market mechanisms	- Increased production costs due to carbon tax burden on CO₂ emissions from ammonia & urea production processes - Potential decrease in product price competitiveness in export & domestic markets - Pressure on profit margins - Additional costs for compliance and reporting	- Developing internal carbon management strategy - Strengthening GHG emission inventory & reporting (MRV) - Energy efficiency in low-emission production processes - Internal training on carbon regulations - Cooperation with distributors for green product certification - Market education on low-carbon product added value
	Medium Term (2031-2040)	- National/international carbon prices becoming higher and more stable - Increased demands from investors & buyers for product carbon footprint - Strengthening of carbon trading schemes	- Significant increase in operational costs if emissions are not reduced - Risk of losing export markets to buyers requiring low-carbon products (CBAM/Carbon Border Adjustment Mechanism) - Potential decrease in carbon-intensive asset value (carbon asset stranding)	- Investment in energy efficiency technology and low carbon process - Fuel & energy substitution to low-carbon sources - Price strategy adjustment & trade contracts to anticipate CBAM - Cooperation with distributors for green product certification - Market education on low-carbon product added value
	Long Term (2041-2060)	- Implementation of high and comprehensive carbon pricing - Global market requires low-emission or net zero products - Increasingly strict regulations on emission intensity of fertilizer & chemical industries - Changes in global market structure and supply chain	- Risk of stranded assets if plants do not transform - Decreased global competitiveness if emission intensity is high - Increased operational costs - Potential reputational risk if considered non-adaptive to green transition	- Production process transformation to green ammonia / hydrogen based technology - Implementing CCUS technology (Carbon Capture, Utilization & Storage) - Connectivity strategy for carbon market development & decarbonization - Integration of Net Zero targets into long-term business strategy

Opportunities / Upside Risk

Opportunities	Time Frame	Business Impact	Mitigation and Adaptation Strategy
- Low Carbon & Green Product - Circular Economy - Bio-based & Sustainable Chemistry - Green Financing	Short Term (< 2030)	- Enhance competitiveness and stakeholder trust - Open new market opportunities domestically oriented towards low carbon - Strengthen Pupuk Kaltim's position in the green SOE system - Reduce energy and raw material costs through process optimization	- R&D development and green product pilot - Sustainability audit and baseline - Collaboration with research partners - Green product training (eco-label) and Life Cycle Assessment (LCA) certification - Sustainability reputation campaigns - Sustainable value chain partnerships
	Medium Term (2031-2040)	- Reduce carbon intensity per ton of production - Generate additional revenue from carbon credit and eco-product market - Increase asset value and return to green investor - Expand partnerships with financial institutions and international partners	- Scale of sustainable chemical industry - Integration of circular business model - Integration of CCUS technology - Connectivity of green value chain system from production to distribution - International partnerships in research and marketing of low-carbon products - Enhancement of sustainability human resource capacity
	Long Term (2041-2060)	- Pupuk Kaltim becomes the leader in low-carbon fertilizer industry in Southeast Asia - Increased company valuation through global ESG recognition - Significant contribution to Indonesia's Net Zero 2060 target - Business resilience against energy price fluctuations and emission regulations	- Digitalization and green automation (smart eco-industry) - Strengthening governance and continuous innovation to support national low-carbon economy

🎯 Net Zero Emission 2060 Commitment

Through comprehensive climate strategy and integrated risk management, Pupuk Kaltim is committed to achieving the Net Zero Emission 2060 target while maintaining sustainable operations and contributing positively to the national energy transition.