We need to look beyond just tailpipe emissions to achieve a truly sustainable automotive sector. One material that’s increasingly under the microscope as companies look to tackle their scope 3 emissions is steel.
Steel can account for roughly 30-40% of production emissions for the average vehicle. The complexity of the type of steel needed leads to higher emissions compared to other sectors. This means the need to hit the brakes on the sector’s steel emissions is even greater.
But there’s also greater potential. Accounting for around 13% of global steel demand, the sector has the scale to drive change. Studies show that carmakers can adopt green steel with minimal impact on final product costs, offering the ability to reduce supply chain emissions, meet rising consumer demand for green products, and help drive a decarbonised global steel industry.
But decarbonisation isn’t a journey any company can do alone. How can the sector collaborate to drive steel decarbonisation and seize the competitive benefits of setting up resilient, future-looking steel supply chains? Check out our best practice guide below for insights.
It all starts with having clear targets. Whether end users of steel like Volvo Cars or Polestar, or a parts supplier like SKF, these businesses have joined SteelZero to send a clear demand for greener steel. They’ve committed to using 50% lower emission steel by 2030, setting a clear pathway to using 100% net zero steel by 2050, at the latest.
“When it comes to steel, our commitment to SteelZero shows our suppliers that we are serious about decarbonisation", said Lisa Bolin, Climate Lead at Polestar.
This clear commitment helps businesses align supply chains with their ambitions and create shared understanding, whether with a parts supplier, client, or directly with a steelmaker. And a critical aspect of this alignment is a shared understanding of what constitutes lower emission steel. The SteelZero commitment is underpinned by clear definitions, as well as emissions intensity and scrap content thresholds aligned with ResponsibleSteel’s Decarbonisation Progress Level 2.
"Our SteelZero commitment is a framework for action. We communicate decarbonisation goals through clear supplier requirements - covering emissions reporting, low-carbon sourcing, and alignment with global standards like SBTi and ResponsibleSteel", said Laura Sguotti, Automotive Sustainability Manager at SKF.
This enables businesses to clearly specify their requirements and drive alignment on expectations across supply chains. Strict requirements like these help drive data transparency, a key pillar of the SteelZero membership, to ensure the ability to measure environmental performance through their steel supply chains.
Action points:
Creating strong demand for lower emission steel opens up new possibilities for collaboration, to work together on the progress that can be made today. This is precisely what SteelZero member SKF has achieved.
“Our work with Voestalpine shows how transforming ideas into action can drive real progress toward decarbonising bearing production", Sguotti added.
In 2024, they announced they’d successfully collaborated with long-standing steel supplier Voestalpine to produce the world’s first prototype bearing produced with direct reduction iron.
“This transparency [of demand and requirements] has enabled deep collaboration, such as our partnership with voestalpine on hydrogen-reduced steel. It also strengthens our supply chain resilience by preparing us for regulatory shifts like the EU’s CBAM and ensuring long-term access to sustainable materials", Sguotti added.
This demonstrates the progress that clear communication of demand and forging of partnerships can unlock to create resilient, forward-looking supply chains in a dynamic, ever changing automotive sector. With more and more businesses doing the same, the sector can substantially advance steel decarbonisation.
Action points:
The International Council on Clean Transportation (ICCT) found that while the automotive sector is a big steel customer, current fossil-free steel commitments only cover 2% of demand. There’s big potential and need for more companies to step up and give steelmakers the confidence to commit to the steel transition, which requires substantial investment and realignment of operational strategies.
This requires moving from clarity of demand to certainty of demand, through long-term offtake contracts. Frontrunners are already reaping the benefits. Volvo Group for instance has secured a long-term agreement for near zero steel from Swedish steelmaker Stegra.
Similarly, SteelZero member Ørsted secured the first offer for lower emission heavy-plate steel from Dillinger for its wind turbine foundations, helping show the business case for investing in decarbonisation.
There's also real value in being part of a leadership network which includes such forward-looking businesses, to collectively showcase strong and consistent demand.
“Not being one of the giants in automotive industry, our membership and commitment shows our suppliers that we are not alone in pushing for lower emissions steel," Bolin commented.
Action points:
The automotive sector has a critical role to play in driving the steel industry’s decarbonisation. Leaders in the sector are forging the way in creating demand for lower emission steel and seizing the benefits for their businesses of doing so. But we need more to step forwards.
Clear collaboration across sector supply chains is needed to drive this change at scale. By making demand for lower emission steel clear, forging strategic partnerships, and bringing suppliers along on the journey, more businesses are unlocking progress towards greener steel supply chains.
Want to learn more about our work? Check out our SteelZero homepage.