Decarbonising Steel Through Supply Chain Collaboration
The global steel industry faces a critical moment of transformation, with decarbonisation emerging as a paramount challenge for supply chain leaders and sustainability strategists worldwide.
A recent Deloitte report, co-authored by Ian Sanders, Global Mining & Metals Sector Leader, provides a comprehensive analysis of the complex pathway towards sustainable steel production and the profound implications for industrial supply chains.
The carbon footprint of global steel production
Steel manufacturing represents one of the most carbon-intensive industrial processes globally, with current production methods generating substantial greenhouse gas (GHG) emissions.
"I'm passionate about the important role the sector plays in driving the energy transition and contributing towards a more sustainable future," explains Ian, setting the context for the industry's most significant challenge.
The current manufacturing landscape is predominantly characterised by traditional blast furnace methods, which account for approximately 95% of the industry's total GHG. Metallurgical coal – currently used to produce about 70% of the world's 1.8 billion tons of steel annually – remains a critical input.
One construction company referenced by Deloitte's report highlights the severity of the issue, revealing that up to 85% of its total emissions are Scope 3, with the bulk originating from steel production.
Technological pathways to decarbonisation
The transition to green steel requires a radical reimagining of production methodologies.
Electric-arc furnaces (EAF) powered by renewable energy represent a promising alternative, with the potential to reduce primary steel production's carbon footprint by at least 60%.
Ian points out a compelling opportunity: "If the 20 largest steel companies decarbonise their plants, the potential total emissions of the steel industry could be reduced by up to 37%."
Breaking down the emissions landscape, Sanders notes that the current carbon profile includes 95% from manufacturing processes, 4% from mining operations and 1% from logistics – presenting a clear target for comprehensive decarbonisation strategies.
Collaboration key to transformation
The path to sustainable steel production is fraught with significant barriers. Deloitte's report identifies six critical challenges that must be addressed:
- Limited availability of affordable green electricity and hydrogen
- Underdeveloped policy and regulatory frameworks
- Constraints in high-grade iron ore availability
- Workforce skill gaps in decarbonisation technologies
- Capital investment limitations
- Uncertainty surrounding long-term demand for low-carbon steel products
"To enact change, one thing is certain: no one company can decarbonise alone," Ian emphasises. "To successfully decarbonise, core stakeholders in the mining and steel production value chain must work together with end markets such as the automotive and construction industries."
In fact, the report advocates an unprecedented level of cross-sector collaboration, bringing together steel producers, mining companies, end-market industries financial institutions and governments.
This collaborative approach is aimed at triggering collective action, stimulating global and local conversations, driving increased public and private investment and ultimately delivering tangible sustainability outcomes.
The strategy requires a holistic reimagining of the steel value chain, moving beyond traditional competitive boundaries towards a shared vision of industrial decarbonisation.
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