Why this is important for ArcelorMittal
Across the world, companies are increasingly expected to make more than a financial contribution – our stakeholders and communities want us to play a wider role locally, nationally, and internationally. With the adoption of the United Nations Sustainable Development Goals in 2015, conversations between global stakeholders are exploring how we can measure such contributions. Developments in reporting, and concepts such as ‘net positive’ and ‘shared value’, are all pointing towards the same goal.
For all these reasons, it’s vital that we develop better measures of the real long-term value we create through our operations, investments and products.
We’ve made the measurement of our contribution to society a separate outcome, so that it gets the detailed attention it needs. It’s also a key element of the approach to corporate reporting known as integrated reporting, encapsulated in the Integrated Reporting Framework, which covers both the financial and non-financial aspects of a company’s performance. This is gaining ground with investors, and we are taking the first steps towards integrated reporting with this annual review.
That said, measuring such contributions still isn’t easy, and many of the impacts are intangible, but there are also many significant contributions we make which can be evaluated, and which we haven’t yet communicated as well as we could, such as the tax we pay, and the infrastructure we invest in, especially around our mines.
Some of our businesses have already made considerable progress here, demonstrating the value of this kind of measurement and reporting. South Africa’s Factor report is a good example.
This outcome is sponsored at group level by Henk Scheffer, head of group compliance, who is also responsible for coordinating the governance responsibilities of the group in Luxembourg. With these roles, Henk is has a good understanding of the expectations of regulators and investors, and so, when it comes to our contributions to society, he is in a good position to oversee the evolution of how we report to these key stakeholders.
At the end of 2015 we set up a working group for this outcome to develop a consistent approach to assessing what we provide to society, and measuring our contribution. The challenge is to cover not only economic value but social and environmental contributions too, in all the countries we operate in.
A reporting roadmap
In addition to our sustainability reporting at corporate level, nineteen of our country operations also produce a sustainability report, and we have this year outlined a roadmap for all our reporting to ensure we capture the value that our business creates for all our stakeholders. We have outlined 5 levels of reporting, from level 1 involving the initial steps of data collection and CEO engagement, to level 5, integrated reporting. This year at a group level we are taking a first step towards integrated reporting by updating stakeholders on the strategic importance of sustainable development in this Annual Review, and capturing the contribution we make to society, which we have shown in our infographic. As part of our roadmap, we will also support our country operations to do the same in their national context.
Focus on contribution, not activity
We want to provide stakeholders with less of a focus on what we did, and more on the contribution we have made – in other words, not inputs but outcomes. This means looking at the context in which we operate, for example, by looking not at the amount of steel we sold to the automotive industry, but how the special qualities of that steel helped reduce the CO2 emissions from cars; or looking not at how much we paid our suppliers, but what the impacts were on the local economy of these relationships. For every job in steel, for example, there are many more indirect jobs supported in the supply chain. We aim to establish a group-level framework for this outcome in 2016, so that we can research our impacts and publish more data on them at both global and local levels. We have set the direction of travel for our local sustainable development reporting and we expect these reports to include an increasing volume of data on our contributions.
Reporting on local impact
We have already made some good progress. In 2015, we began researching our second Factor report in South Africa, after the original 2014 report proved very valuable in helping us align our business decisions with the country’s development priorities. For example, it mapped where we could contribute more to broad-based economic activity in the country through the development of local suppliers, and helped us to create an effective enterprise development plan. As a result, in 2015, we achieved full marks for enterprise development performance in our BBBEE (broad-based black economic empowerment) score, having received no points in 2014, and the report was featured as an example in the WBCSD publication on ‘social capital decision-making’.
We also produced a US factbook with detailed information about our social contributions to our employees; and a European factbook, which maps the geographical and market contributions of our steel from European sites.
Measuring the sustainability value of our products
Another important aspect of this work is to measure the sustainability value of our products. Lifecycle analysis is a strong discipline within our business, and we are part of a circular economy research group at CIRAIG, an international network of lifecycle reference centres. We use this discipline to produce Environmental Product Declarations, as described in outcome 3. For projects within global R&D that could lead to new products or processes, we’ve also developed a new tool to enable researchers to assess the potential contribution of their project to our 10 outcomes.
At a strategic level, we are taking part in a new Worldsteel Association product sustainability committee which aims to improve the ways in which we communicate the sustainability value of steel. This needs to be about more than environmental value, and for the past 18 months we have hosted a PhD student in our global R&D team to work on a methodology for evaluating the ‘social value’ of steel. This involves consulting stakeholders about the most important aspects of steel’s value chain that should be considered within the scope of social value.