What is ResponsibleSteel and what do you see as its main role for the steel industry?
ResponsibleSteel is a global not-for-profit organization that was established to maximize steel’s contribution to a sustainable world by developing and rolling out an international standard and certification scheme for the industry. We currently have over 130 members, including leading steelmakers, buyers of steel, mining companies, and civil society organizations, all working together to deliver on our mission to be a driving force in the socially and environmentally responsible production of net-zero steel, globally.
The steel industry is one of the largest materials industries in the global economy and accounts for between 7% and 9% of global CO2 emissions, so there is a pressing need to decarbonize and address sustainability issues across the supply chain. Our International Standard not only provides a tool for driving down carbon emissions but addresses a range of issues across the entire ESG spectrum, including labour rights, corporate governance, the impact on local communities, water management, and biodiversity.
We have already certified over 50 sites in Europe, Asia, Australia, and both North and South America against the ResponsibleSteel standard. These site certifications cover over 100Mt of steel produced annually and over 150,000 workers. And we’re only just getting started.
Can you talk about ResponsibleSteel’s International Standard V2.0 and what it aims to do for the industry?
Our International Standard was updated last year to include some of the most challenging areas of sustainability for steelmakers, namely the responsible sourcing of input materials and greenhouse gas emissions. Building on the core ESG requirements of the original standard published in 2019, Version 2.0 was launched following extensive consultation with ResponsibleSteel members and wider stakeholders. It now contains 13 principles with over 500 criteria for the responsible sourcing and production of steel.
For sites that are certified to the core set of requirements, they can now opt to gain additional certification to four levels of increasing progress in both these areas. Responsible sourcing requirements drive steel sites to embed ever deeper practices of transparency and sustainability in their supply chains of input materials.
On greenhouse gas emissions, the embodied CO2 of each tonne of crude steel is evaluated using a specific set of accounting rules that enable comparability – for the first time – across every steel site in the world, enabling thresholds to be set by means of a sliding scale, dependent on the amount of scrap being used in production. Level 1 requires producers to be better than average while Level 4 will be awarded to those producers who have achieved “near zero” emissions (below 0.4t of CO2 for steel with no scrap and under 0.05t for entirely scrap-based steel). This means all steel decarbonization is rewarded, both that made with scrap and that made with iron ore.
With this system established, we can now work to create the conditions that encourage steel sites to reach Level 4 as quickly as possible. We have just trained the first group of independent auditors so that the first certifications against these new requirements can begin. We are working with buyers of steel to specify ResponsibleSteel certifications in their procurement approach. We are partnering with the Climate Group to build an alliance of such customers that commit to purchasing increasing levels of ResponsibleSteel certified steel. And we are working with finance providers to harmonize the requirements they have of steelmakers.
We want to ensure that the ResponsibleSteel International Standard is the most trusted standard globally for the industry. That is why we have been at pains to be transparent in the way we have developed the standard, and why our approved auditors are required to consult a range of stakeholders local to the steel site, engaging with workers, local communities, officials, civil society groups, and others to ensure the integrity of a site audit. It is of the utmost importance that we ensure our requirements are rigorous and that we guard against any form of greenwashing or misuse of the standard.
What exactly is green steel and how is it achieved?
This is a question to which everyone wants a simple answer! I think there are a number of interconnected pieces.
Firstly, what is “green”? Green must mean sustainable, not just focusing on carbon but all the other elements in our ecosystem that enable quality lives to be sustained now and tomorrow – clean water, air quality, biodiversity, and people’s wellbeing is intrinsically linked to this too. That’s why we have 13 principles in the ResponsibleSteel International Standard that cover environmental and social principles, together with some governance principles that aim to ensure that sustainability is not just something triumphed by the steel mill being certified, but by its corporate owner across all their steel mills.
Secondly, who gets to define “green” and how? In this world of increasingly unsubstantiated and misleading claims, this is such an important question. There’s an international code of practice for sustainability standard schemes that has been developed to help businesses and governments make informed choices about the systems they work with. The ISEAL Code of Good Practice ensures standards are built on credible standards of practice and drives the schemes to improve. ResponsibleSteel has followed this code in the development of its standard and so, for example, it has been developed not only by stakeholders with commercial interests, nor only from the perspective of one country or one technology, but by a range of interests globally, commercial, and not for profit, through an accessible, transparent process.
Thirdly, how can claims to “green steel” be made? Stakeholders need assurance that they are well evidenced, specifically made, and based on a certification scheme carried out by third party auditors. The final decision should be made by an independent arbiter. The ResponsibleSteel system ensures all these things.
Finally, “green steel” is a definition that will evolve over time. What we think is possible today will only grow tomorrow. As we get closer to our goal of net zero emissions by 2050, we will need to see higher levels of progress by steelmakers for their steel to be considered “green”.
In sum, “green steel” is steel produced at a site which has been certified against the core ESG requirements of the ResponsibleSteel International Standard and, in addition, has met at least a certified level of progress on both GHG emissions and responsible sourcing. We might think of the four levels on GHG as levels of “decarbonization progress”, enabling achievements right across the industry to be recognized, whether at a scrap-based EAF which delivers very low-emissions steel, or at an iron ore-based furnace which delivers steel at GHG intensity levels that are still relatively high, but far lower than before.
What regional differences or disparities do you see?
The steel industry has always been characterized by great differences geographically. Both costs and product markets vary enormously due to variations in raw material quality, energy, transport, and labour costs. One of the differentiating factors today is the stocks of scrap available in different economies, and this reflects the economic growth that has gone before. High volumes of material in scrapyards are only available where buildings have reached their end of life, where large-scale car markets have been operating for many decades, and where population levels have driven high demand for steel in the past.
So, we see developed economies with the ability to make most of their steel from scrap, whereas in developing countries, most must be made from iron ore. When it comes to carbon emissions, this makes a significant difference, since scrap will drive down GHG emissions for every tonne of steel made with it.
This scrap scarcity poses a problem for the global decarbonization quest, however. We must be sure to both incentivize the use of every last tonne of scrap and at the same time reward every step of decarbonization progress made in processes using iron ore.
We also see differences in the potential to generate the clean energy required for industrial decarbonization. The focus on decarbonization could influence changes in the steel value chain of the future, with the most energy-intensive processes being co-located with the clean energy source and product finishing processes with the customer.
Have you seen any significant achievements in the industry over the past few years? Are there clear industry leaders in this space that others can learn from?
Leadership is about scanning the horizon for future trends, turning risks into value opportunities, and providing an example to stimulate leadership in others. And leadership promotes innovation. Where necessary, it may mean creating new structures – business models, partnerships, initiatives.
ResponsibleSteel is the product of such leadership shown by actors in the industry, such as BlueScope (ASX: BSL), ArcelorMittal (ENXTAM: MT) and Tata Steel (BSE: 500470), and civil society stakeholders such as the Climate Group and IndustriALL.
Today, seven years on from its inception, ResponsibleSteel is made up of a growing group of leaders in the steel industry who are ready to do what it takes to make sustainability work for everyone. These are the companies that are managing their risks by building strong internal ESG management systems, engaging openly with their stakeholders, and setting their decarbonization targets at site as well as at company level.
Many of these have designed the steel plants of the future, and are proactively seeking the support, the finance, and the clean energy supplies to turn these into a business reality. They are engaging in new forms of collaboration with customers and suppliers, thinking innovatively about the systems they need to make new sustainable business models successful. This suggests that not only steelmakers, but their innovative customers and suppliers will become an increasingly significant part of the solution. Those investing in the technologies and the business models of the future are the ones we can learn from.
Finally, look at the initiatives driving decarbonization in the steel industry – from the buyers in the SteelZero campaign and the First Movers Coalition, the players in new regional hydrogen hubs, the governments behind the green public procurement initiative IDDI, and the banks in the Sustainable Steel Principles – they all have the potential to change the economics behind the choices steel companies must make.