Pilot Study Proves Value of RMI’s Steel Industry Guidance
SINAI Technologies study shows real-world application of RMI’s drive to cut steel emissions.
Climate Action Begins with Emissions Transparency
As we race towards 2030, companies are increasingly shifting their focus from making climate commitments to implementing them. In the steel industry, which accounts for roughly 7 percent of global greenhouse gas (GHG) emissions, purchasers have set general emissions targets, such as Scope 3 targets defined by the Science Based Targets Initiative (SBTi), and steel-specific commitments, such as those defined by the First Movers Coalition and the SteelZero initiative.
For organizations to demonstrate their progress towards these commitments, they need to understand the emissions associated with the steel they are purchasing. As a result, steel producers are fielding increasing requests for emissions information from their steel buyers. While this may seem straightforward, the reality is that these requests often call for different information in different formats, and the vast patchwork of GHG accounting frameworks that exist today do not offer a standardized methodology for reporting product-level emissions.
These challenges are part of why, in 2022, RMI launched its Steel Emissions Reporting Guidance to help steel companies report and reduce the GHG emissions impact of their products, giving them opportunities to demonstrate their decarbonization efforts to steel purchasers with ambitious climate targets. RMI can now show evidence of the guidance in action.
RMI, in partnership with SINAI Technologies, a decarbonization and carbon management software platform, and ArcelorMittal, Latin America’s largest steel producer, demonstrated through pilot testing how improved reporting guidance and digital solutions can reduce the reporting burden on producers while providing the necessary transparency to enable low carbon purchasing decisions. Through the pilot, RMI’s Steel Emissions Reporting Guidance was used to calculate product-level emissions using primary data from one of the Latin American steel company’s steel plants captured on SINAI’s platform.
Tackling the Steel Decarbonization Challenge with Emissions Transparency
To pilot test the guidance, the steel producer began by uploading activity data from their steel plant onto the SINAI platform. Next, the SINAI team used the data to create a process-level GHG inventory (which consists of an organization’s emission sources and the associated GHG emissions generated by those sources). Using a dedicated carbon management platform like SINAI enabled RMI to effectively calculate the necessary data reporting metrics from the RMI guidance, providing steel purchasers with the set of information required to understand and value emissions reductions made by steelmakers across the key changes needed to decarbonize the sector. The following findings from the pilot illustrate how a transparent and decarbonization-focused GHG reporting approach can accelerate the steel industry’s net zero future.
1. Reporting Against Consistent Emissions Boundaries to Enable Comparability
Most GHG reporting frameworks focus on reporting against a corporate or operational boundary, which can vary based on differing levels of integration. While one company may own all steelmaking processes, another company may only own a small set of processes along the value chain. The variations in organizational boundaries — and subsequent variations in reported emissions — make it difficult for steel buyers to compare products like-for-like.
To address this problem, the guidance requires reporting against a fixed boundary, which includes all the steelmaking processes from which emissions shall be reported, irrespective of the steel companies’ ownership structure. To further enable comparison, this approach also involves disclosing product-level emissions to a common boundary (in addition to cradle-to-gate). Given that more than 95 percent of steel goes through the hot-rolling process, the guidance uses this common process as the benchmarking boundary for comparison against emissions targets for the sector (such as the International Energy Agency’s Net Zero Emissions scenario).
The RMI team compared the steel company’s organizational boundary to the fixed boundary defined in the guidance, which was extended upstream to include raw materials extraction and downstream to include hot-rolling using data from life-cycle analysis databases. The RMI team was then able to calculate the overall emissions footprint of the steel product both from cradle-to-gate (i.e., raw materials extraction to coating) and to the benchmarking boundary.
2. Understanding the Impact of Scrap for Climate Aligned Trajectories
Steel is produced using ore-based (mined) and scrap-based (recycled) metallic inputs. Although producing steel from recycled scrap requires only one-eighth of the energy as producing steel from iron ore, global scrap supply is limited. Relying on scrap alone will not be sufficient to reach emissions targets, and implementing sustainability goals will require a combination of increasing scrap use and deploying new low-emissions ore-processing technology.
To provide visibility into the decarbonization efforts of steelmakers on both ore-based and scrap-based inputs, the guidance requires steelmakers to disclose the fraction of ore- and scrap-based inputs used to produce their product. Reporting on the metallic input fractions enables purchasers to understand how much emissions were reduced either by increasing scrap use or through new technologies/fuel switching.
3. Increasing Primary Data Share for Better Emissions Reporting Accuracy
Today, most frameworks allow for the use of industry averages and estimates in calculating and reporting GHG emissions, which may not provide companies with actionable insights to address emissions hotspots within their supply chains. While there are still many challenges associated with collecting primary data and obtaining clear information from upstream suppliers, such data is crucial to ensure emissions performance-based decisions drive investments in low-emissions technologies.
To incentivize the use of primary data, the guidance requires the reporting of the fraction of primary data used in calculating emissions. Using the information in the SINAI platform on emissions factor sources, the RMI team was able to calculate the fraction of the steel product emissions footprint which was based on primary data. This data point provides buyers with a relative quality level for the emissions data; the more primary data used — the more accurate and specific the emissions data will be.
4. Transparent Reporting of Emissions Impacts Outside the Boundary to Avoid Double Counting
Some steelmaking by-products outside of the reporting boundary (e.g., blast furnace slag) can be used by other industries, such as concrete. Most reporting frameworks allow this to be claimed as credits on the steel product footprint, reducing steel emissions by the equivalent amount avoided in concrete production. However, this can pose greenwashing risks if the purchaser of the by-product does not assume the equivalent emissions burden.
The guidance addresses this concern by requiring credits to be reported separately from the emissions footprint to the benchmarking boundary. In this pilot, the facility consumed all off-gases for onsite heat use and did not apply an avoided emissions credit to slag. As a result, there were no emissions that needed to be reported separately from the benchmark boundary emissions footprint. This approach ensures that all emissions associated with the steel product are accounted for and allows steel buyers to purchase from steelmakers who invest in decarbonizing steel production processes.
Improving Emissions Reporting at the Product Level to Enable Low-Carbon Purchasing Decisions
Reporting high-quality, granular emissions data in a standardized format not only reduces the reporting burden on producers — it also provides steel buyers with the comparability they need to make low-carbon purchasing decisions. In the next phase of piloting, we will test how this data can be exchanged using a unified data format developed by RMI and how to integrate the reported emissions data into steel buyers’ procurement strategies. By increasing visibility into upstream emissions, buyers will be better able to deliver on their own corporate sustainability commitments and act towards decarbonizing their supply chains.
Ultimately, improving the transparency and traceability of supply chain emissions is critical to decarbonize hard-to-abate sectors such as steel. Emphasizing the importance and use of primary data will be a key factor in both understanding and acting on supply chain emissions, resulting in increasing requests for emissions data from suppliers. Improved emissions reporting methodologies and software solutions are the foundation needed to move these industries from target setting to implementation.
To read the entire case study, click here. If you are interested in learning more about our work on emissions transparency, getting involved, or how to apply our guidance to your own emissions reporting, please contact Lachlan Wright (lwright@rmi.org) and Hao Wu (hwu@rmi.org).