It's time for the steel industry to mine for sustainable materials

Today, the steel industry contributes 7% of global carbon dioxide emissions. After all, steel is essential in a number of industries, including mining, construction, and manufacturing. As the world increasingly turns to lowered emissions, third party risk manager DNV has released a report providing advice for the steel industry.

This report is called “Shaping the future of sustainable steel: Lessons from Europe's steel Industry,” and references Europe to see how the region has been implementing sustainability measures, advocating for increased use of technology to generate better adaptations.

Behind the study

DNV was founded in Norway in 1864 with a focus on the marine industry, to help assess and manage the ships entering and exiting Norway’s ports. Presently, it has expanded to a number of industries and specifically focuses on helping companies with their long-term risk management. In this day and age, that often means helping companies with sustainability issues by ensuring that they are being mindful of the environment, social, and governance (ESG) factors.

This may be especially applicable to companies who hope to work with the European Union, as this is a region that has been getting stricter with a number of their sustainability regulations, such as with deforestation. One larger example is the European Green Deal, which aims to transform the EU into a carbon neutral, resource-efficient, and competitive economy. Any company hoping to have a presence in the region is also impacted by this. 

The steel industry is not exempt, especially as the EU has been imposing steel safeguard measures that reduce the competitiveness of imports from other countries. If companies from outside the EU want to continue their relationships with the region, implementing low emission methods of mining and manufacturing may well position them to be more competitive. 

This is why the DNV studies Europe’s steel industry to provide advice for other companies in the region, to learn directly from the source. Even for companies that don’t want to work with the EU, the day when discussions of ESG turn toward industries like the steel one will come sooner or later, so it is better for companies to start their sustainability transition ahead of the curve instead of scrambling to catch up.

How to move forward

DNV’s report strong advocates for digitalisation in the transition process. Presently, the report believes that carbon emissions data is managed using outdated sources. The role of data is imperative for companies to understand where they can improve their process, as they can make better decisions in their efforts to decarbonise. 

However, only 8% of respondents actually saw inadequate digital records as a concern of making supply chains more sustainable. 

This seems to be part of a larger misunderstanding about how data can be leveraged. The report reveals that of the respondents from the metal and mining industry, one fifth of them did not understand what a life cycle assessment was. A life cycle assessment with regards to emissions calculates the environmental impact of the products throughout its entire lifecycle, from mining, to manufacturing, to being discarded.

Therefore, efforts to decarbonise the industry must be made by everyone throughout the steel supply chain. Various companies will have to research and develop carbon efficient methods. 

Christopher Lilholm, acting Head of ESG & Sustainability, Supply Chain and Product Assurance at DNV, said: “The current scarcity of low-emissions steel means early movers in the steel value chain such as in downstream sectors that invest early in supply will have a great position to secure long-term contracts while their rivals are playing catch up and will have limited access and opportunity.”

“Switching to a renewable energy supply can provide a big emissions reduction — particularly for electric arc furnaces recycling steel. Meanwhile, innovations to improve the performance and lifetime of scrap steel reduce emissions, by lowering the amount of prime steel that is required each year. Prime steel production will still be required, but careful choice of iron ore supply could have a big impact relatively quickly.”

Factors to consider

However, this is easier said than done. The term green steel sounds appealing, but there are presently no uniform standards of low emission or green steel. The lack of consistent standards may make sustainable steel sound like a gimmick, which may make steel customers wary.

Presently, steel producers are using regulations such as the EU claims directive, which holds companies accountable for false environmental and sustainability claims; Carbon Border Adjustment Mechanism, which imposes a carbon tax on imports from countries with lower environmental standards; and the Corporate Sustainability Reporting Directive, which, requires companies to report details about their ESG activities for investor reference. 40% of producers responding to the report claim to be compliant with these regulations. 

While it is good that these companies are adhering to regulation, it would still be beneficial for the industry to set a definition for what is sustainable steel for greater trust and transparency. This way, consumers don’t have to look up three different sets of regulations to understand just how sustainable the steel that they are buying is, and have a shorthand for reference. Those across the industry will also know exactly what is expected of them.

“If steel consumers cannot be confident of manufacturers emissions reduction claims, they will not be committed to paying a premium price for low-emissions steel,” said Geir Fuglerud, CEO of the Supply Chain and Product Assurance at DNV.

“The credibility of sustainable steel claims will depend heavily on robust assurance mechanisms. Verified data builds trust with consumers and investors alike, creating a positive cycle that encourages further investment in decarbonization.”

By leveraging on data to implement changes to their process, and implementing legislative standards for sustainable steel, the industry will better position itself for the future, when ESG conversations become even more discussed and strict.