Decarbonisation, ESG a challenge and opportunity for steelmakers: EY Report

Over the past few years, there has been consistent improvement in metrics of sustainability within the steel industry but the environmental impact needs to be reduced further with a well chalked out plan, an EY India report titled, “Towards Greener Steel - Steering the Transition” said on Monday.

Ernst & Young (EY) is one of the big four accounting firms that provides consulting and advisory services.

For steelmakers, an accelerating decarbonisation agenda and the growing importance of environmental, social and governance (ESG) performance represent both a challenge and an opportunity, said the report.

“Steelmakers have long prioritised energy efficiency and more recently have made a concerted effort to adopt circular economy principles. The major challenge that remains in the face of more stringent emission targets is to significantly reduce emissions in the steelmaking process. A well chalked out roadmap will be critical for a successful set up. All such pathways will represent an informed choice of clean technologies while balancing business risks, quality of end products and capital cost while improving sustainability metrics across the steel value chain,” Saurabh Bhatnagar, partner and national leader, Metals & Mining, EY India was quoted as saying.

To improve on material efficiency, the usage of high-quality iron ore and coal should increase to achieve higher efficiency, said the report.

“Stakeholders like governments, the United Nations, academia, communities and steel associations are likely to play an important role in supporting the implementation strategies of steelmakers. Other than carbon pricing mechanisms, governments will need to provide support for R&D and finances to encourage and catalyse change,” said Bhatnagar.

Companies in the high emission range are the ones largely using Blast Furnaces (BF). As most BF processes are already technologically mature, CO2 abatement is not possible without significant investments in radical technologies such as carbon capture and top gas recycling.

“Steelmakers that move now on a journey to improve the sustainability of operations can get ahead of developing carbon regulations and capitalize on ESG metrics to gain a competitive edge. Many investors are seeking more sustainable portfolios, demanding greater ESG compliance and performance from potential investment targets. Improving ESG metrics will reap benefits for steelmakers beyond compliance with regulations and stakeholder expectations. Companies with a better ESG performance will have access to better and larger pool of financing, reduce operational risk and be more resilient against economic shocks,” the report quoted Chaitanya Kalia, partner and climate change and sustainability services (CCaSS) Leader, EY India as saying.

However, achieving sustainability will require steelmakers to roll out strategies across the entire value chain, it said.

As demand for green steel increases, countries with more sustainable steelmaking industries are likely to reap a competitive advantage. As origin of steel becomes a bigger part of trade negotiations between steel producers and Original Equipment Manufacturers (OEMs), it’s likely that Brazil, Russia, India and China (BRIC) nations will accelerate their adoption of sustainable alternatives to retain competitiveness in the long run.

In the domestic market, Tata Steel, AM/NS, state-owned Steel Authority of India (SAIL), JSW Steel, Naveen Jindal-led Jindal Steel & Power (JSPL) are among the primary producers of steel.

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