Deloitte: Green Steel is Key to Decarbonisation Efforts

Adopting green steel production methods offers a transformative opportunity for companies throughout the steel value chain to reduce Scope 3 emissions. 

Green steel production can reduce CO2 emissions by 95% compared to conventional methods. For instance, transitioning from blast furnace production to electric arc furnace (EAF) methods can reduce Scope 3 emissions by more than two-thirds.

The transition not only benefits steel consumers but also profoundly impacts upstream industries such as mining.

Iron ore mining, which contributes approximately 90% of the mining sector's emissions, can address its Scope 3 challenges by supporting green steel initiatives.

Certification systems, such as ArcelorMittal's XCarb certificates, allow customers to report equivalent Scope 3 emission reductions. These certificates align with the Greenhouse Gas Protocol, making it easier for companies to quantify and report their sustainability efforts.

As industries set ambitious net-zero targets, the demand for low-emission, high-quality steel increases.

New technologies, including hydrogen-based steelmaking and carbon capture and storage (CCS), are pivotal in meeting this demand and reducing emissions.

Since blast furnaces account for 95% of emissions in the steel value chain, decarbonising steel production would yield far-reaching benefits across sectors.

Despite the opportunities, challenges persist, including the need for substantial financial investments and technological advancements.

However, green steel is poised to play a critical role in helping companies achieve their sustainability goals, reducing emissions across industries and driving global decarbonisation efforts.

The Deloitte report

A recent report from Deloitte, "Decarbonising the Steel Value Chain: Forging New Paths Together," offers a compelling case for green steel as the key to reducing Scope 3 emissions within the construction industry.

Deloitte argues that green steel could significantly impact the decarbonisation efforts of multiple sectors, with construction standing to benefit the most.

The industry can take considerable strides toward achieving its net-zero targets by transitioning to green steel.

Construction's heavy steel footprint

Steel production is a significant contributor to greenhouse gas emissions.

In 2022, the building and infrastructure sector accounted for 52% of all steel consumed globally, while the automotive and electrical equipment sectors accounted for 12% and 3%, respectively.

With such heavy reliance on steel, construction companies face considerable Scope 3 emissions generated by activities within their supply chains.

Ian Sanders, Deloitte Global Mining & Metals Sector Leader, emphasises the scale of this impact: "As one construction company told us, up to 85% of its total emissions are Scope 3 emissions in its supply chain, of which the bulk originates from steel production."

According to Ian, this reliance on steel "presents a unique opportunity for the largest steel producers to make a far-reaching impact by decarbonising their operations."

The decarbonisation potential of green steel

For the steel industry to make meaningful progress in reducing emissions, it must shift away from traditional blast furnaces and basic oxygen furnaces.

These methods, responsible for about 95% of the steel sector's carbon emissions, depend heavily on metallurgical coal. The reliance ties steel production closely to coal consumption, as coal not only fuels blast furnaces but provides the carbon required to transform iron ore into steel.

The report highlights that the demand for metallurgical coal remains high as steel producers seek stable, low-cost supplies.

Ian suggests that if the world's 20 largest steel companies adopted green steel practices, the steel industry's total emissions could be reduced by as much as 37%.

It would involve using electric-arc furnaces (EAF) powered by renewable energy and fed with reduced iron and scrap steel, moving toward hydrogen and electric-powered production as feasible alternatives to traditional coal-dependent processes.

Concentrated production: An opportunity for change

The report highlights that global steel production is highly concentrated among a small number of companies, presenting a unique opportunity for large-scale impact.

According to Deloitte, shifting these companies toward green steel could reduce primary steel production emissions by at least 60%.

However, Ian warns that overcoming the traditional reliance on coke-fuelled furnaces is only part of the challenge. Achieving this transition will require a significant shift to renewable energy, mainly green electricity and hydrogen, which currently need to be more abundant and affordable in many regions.

Ian emphasises the importance of collaboration in overcoming these barriers: "To enact change, one thing is certain: no one company can decarbonise alone."

He argues that cooperation between key stakeholders, including construction and automotive industries, financial institutions and government bodies, will create a supportive environment for green steel.

A collaborative path forward

According to Deloitte, transitioning to green steel requires a collective approach across the steel production value chain. Ian calls for "a coalition with partners across the value chain" involving public and private stakeholders.

Such collaboration, he explains, would "trigger collective action, spark global and local conversation, drive increased public and private investment and deliver tangible results."

As the construction industry and other sectors face mounting pressure to reduce emissions, Deloitte's report presents green steel as a viable solution.

While challenges remain, the roadmap provided by Deloitte offers a path forward where collaboration, innovation and investment converge to create a more sustainable steel industry - and, by extension, a more sustainable construction sector.

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