The short-term market outlook for our industry is subject to change year on year, but the really long-term challenges remain the same. By 2050 we’ll be living in a world of more than nine billion people with growing lifestyle expectations, six billion of them in cities. Yet the resources to support those lifestyles will all be in acute demand, from land and water, to energy and food.
In short, the world must find solutions for the unintended consequences of growth – reducing CO2 emissions and pollution, and ensuring a wider, shared prosperity. The question is, what role can and should business play in finding these solutions? Expectations of companies are rising, and milestones like the COP21 climate agreement in Paris and the launch of the UN Sustainable Development Goals last year reinforce this.
At the start of 2015 we committed to pursuing 10 sustainable development (SD) outcomes in the long term. These capture both the value our steel can add, and the issues we know we need to address, both as a business and as an industry. Conversations with our stakeholders over the year have reinforced our belief that these are the material sustainability issues we must focus on to help create long-term value both for them and for us. There are some areas in which we increasingly realise we have a leading role to play.
Driving sustainable economies and lifestyles
We believe that steel has a big part to play in a global economy that will enable the emergence of sustainable lifestyles (outcome 2) and infrastructure (outcome 3). The specialist steels we develop with sustainable development in mind will be an increasingly important way to create value, like aiding fuel economy in the automotive market, enabling buildings that are good for the climate and for our health, and enhancing the efficiency of energy generation. Our award-winning R&D team is developing new ways to make and use steel, and our portfolio of innovative processes and products will be key to our long-term ability to create value. At the same time, steel is already a vital component of modern society – it is in everything from cars to washing machines, and from buildings to bridges.
Equally important – now and in the future – is the value we, as a company, provide to society. For example, steel employs over eight million people worldwide, and in our company alone we have a workforce of over 250,000 employees and contractors. For every job in steel, many more jobs are supported in our supply chain, meaning that around a million further livelihoods are supported by ArcelorMittal’s business1. Our local energy provision from our steel mills to the cities where we operate (outcome 6), and our development of a pipeline of talented scientists and engineers (outcome 9) are just two other examples of how we contribute to society. We need to measure and share better the value of all these contributions, as outlined in our SD outcome 10.
1 For example, the German Steel Institute published in 2011 finds an employment multiplier of 6.7.
Carbon and the circular economy
Circular thinking is essential to the notion of sustainable modern lifestyles and a low-carbon future. Because it is a renewable material, which can be easily and infinitely recycled once it’s produced, steel is ideally placed to support a growing population and a planet with diminishing resources. Last year nearly 37 million tonnes of CO2 were avoided through the recycling of scrap. But the circular economy is wider than recycling. It’s also about reusing everything – not just our steel products but also by-products like waste gases and slag (outcome 4). We see a low-carbon future in which the blast furnace could become a ‘hub’ of useful by-products for both communities and industry.
There are big opportunities here – our pioneering partnership with LanzaTech aims to convert waste carbon gases into aviation fuel, for example. It may also be possible to turn carbon into plastic, which would sequester it entirely. These ideas are at the very early stages, but we are evaluating these and other new technologies that may help us reduce our carbon footprint, both for their technical and commercial viability.
Other by-products of steelmaking already have valuable uses: slag, for example, can be used for cement, as roadstone or fertilizer. We enabled the avoidance of 6 million tonnes of CO2 emissions by the reuse of our slag in the cement industry last year.
We expect to see this broader perspective on the steel industry’s contribution growing in importance in the years to come. We already know, for example, that when you look at the carbon emissions from steel both during production and in use, it has better credentials than either aluminium or concrete. What we need to do is understand steel’s potential contribution to a low-carbon economy more fully, so we can communicate it better to the wider world.
The more progressive companies are looking at new business models too, some of which share the usage of products through leasing or other similar arrangements. We’re already doing this – for example, in Luxembourg, our sheet piling products for use in retaining walls are highly effective, but they are more expensive than some alternatives, so we lease them instead. This makes them more affordable, and allows us to reclaim and re-use the steel at the end of its useful life. We’ve also developed innovative products for the construction industry which make it possible to dismantle buildings, so the steel can be easily recovered. There’s more on this in outcome 3, products that create sustainable infrastructure.
Building customers’ trust in our standards
One big opportunity comes from understanding stakeholders’ expectations and managing the business accordingly. Environmental performance has never been more important, and supply chain management is in the spotlight in relation to social issues too, such as human rights. Consumers want products with the right specification, for the right price, and which have been sourced and produced in the right way, and our customers look to us to help them do that.
We’re being open with our customers about the sources and production processes we use, from our coking coal from Mozambique, to tin from Indonesia. This approach has made a big difference to some of our most important customers.
But this approach needs to be consistent across the whole value chain, and the whole steel industry. Other industries – timber, diamonds, and fishing, for example – already have worldwide third-party certification schemes; as customer expectations rise, steel, and other similar materials, will have to do the same. The value in the long term is clear: objective validation of the sustainability credentials of our products compared to alternatives, and one set of standards across the world, rather than the proliferation we’re often dealing with at the moment, which costs both time and money to manage.
In order to build supply chains that our customers trust (outcome 7), we’re taking a leading role in developing the schemes needed, not only for steel products, but also for raw materials in our supply chain. That’s why we joined the steering boards for Responsible Steel and the Initiative for Responsible Mining Assurance in 2015. This work is at a very early stage, but we want to help shape and develop the agenda.
Producing steel more sustainably
But there’s no avoiding the big issues here, which centre on the steel production process itself: we need to find ways to make the light, strong steels the world needs while being a responsible energy user that creates a lower-carbon future (outcome 6), and a trusted user of air, land and water (outcome 5). We also need to do this in a way that provides safe, quality lives for our workforce (outcome 1), and helps us become an active and welcomed member of the community (outcome 8).
There’s no simple answer to these challenges. The steel industry has already made substantial improvements in its environmental performance and energy use – the amount of energy needed to make each tonne of steel has gone down by 60% in the last 50 years, and the European steel industry – including our own plants – has reduced its carbon footprint by 25% since 1990. No-one has yet made the breakthroughs that could stop us being a carbon-intensive industry, but as our LanzaTech partnership demonstrates, we’re working hard in this direction.