Steel

We have developed science-based target-setting methodologies, tools and guidance for steel companies and other stakeholders. Our aim is to help companies to understand and implement the level of climate ambition required to meet the 1.5°C goal of the Paris Agreement.

New guidance for the steel sector

The Steel Science-Based Target-Setting Guidance is the world’s first framework for companies in the steel sector, and potential users of steel such as the automotive industry, to set 1.5°C-aligned near- and long-term climate targets at a corporate level.

This guidance offers a granular methodology that includes an iron & steel core boundary aligned with the sector’s carbon budget, differentiated pathways based on scrap input, and a mandatory scope 3 target covering upstream emissions from fuels. It provides a stepwise approach on the target-setting process, and indicates how much and how quickly a company needs to reduce its emissions in line with the Paris Agreement.

Why take action?

Globally, the steel sector’s direct CO2 emissions amounted to 2.6 Gt in 2019, 7% of total energy sector emissions and 28% of industrial emissions. When indirect emissions are included, this total rises to around 3.6 Gt.

Demand for steel is projected to continue rising. If action is not taken to optimize its efficiency in use, we will see an increase in absolute demand by approximately 30% by 2070. According to CDP, if the global steel industry does not reduce its environmental impact, 14% of the potential value of steel companies could be at risk by 2040.

Given its influence in industries like infrastructure, construction, transportation and renewable energy, the steel sector is key to fostering the transformation needed to enable a net-zero future.

Applying best practice in the steel industry

In 2015, the Science Based Targets initiative (SBTi) developed the Sectoral Decarbonization Approach (SDA), a scientifically-informed method for companies to set GHG reduction targets necessary to stay within a 2°C temperature rise above pre-industrial levels. This led to the development of a 2°C and a well-below 2°C pathway.

However, the Paris Agreement and the recent IPCC 6th Assessment Report have highlighted the need to keep global warming within a 1.5°C temperature rise, if we are to secure a liveable future for all.

Our new 1.5°C-aligned methodologies, tools and guidance have been built on the previous SDA methodology, to enable companies to set targets that align with science-based decarbonization pathways, taking into account the unique context of the sector.

By setting emission reduction targets in line with this goal and defining appropriate decarbonization strategies, steel companies can help accelerate the transformation to a net-zero economy and prevent the worst effects of climate change.

Initial funding for this project was provided by ArcelorMittal.

Project participants

The SBTi is the project lead and convener. Participating in this project was possible via the following groups:

Technical partner: The Energy Transitions Commission (ETC) has been SBTi’s technical partner in the development of this project. The ETC is part of the Mission Possible Partnership (MPP), an alliance of climate leaders focused on accelerating the decarbonization of industrial sectors. Led by the ETC, RMI, the We Mean Business Coalition and the World Economic Forum, its goal is to propel a committed community of CEOs from carbon-intensive industries, together with their financiers, customers, suppliers, to agree and, more importantly, to act on the essential decisions required for decarbonizing industry and transport in this decade.

Expert Advisory Group (EAG): Composed of technical experts from stakeholder organizations and companies interested in setting science-based targets, and contributing to the project execution. Invitations for participation in the EAG considered the need for a balance of stakeholder categories, geographical diversity and gender balance. The EAG consisted of the following:
- Aceros AZA S.A.
- Aperam
- ArcelorMittal
- Baoshan Iron & Steel Co Ltd (Baosteel)
- Bellona
- BlueScope Steel Limited
- Cleveland-Cliffs Inc.
- E3G
- Energy Transitions Commission (ETC)
- Environmental Coalition on Standards (ECOS)
- Gerdau
- Imperial College
- JSW Steel Ltd.
- Liberty Steel UK
- Nippon Steel Corporation
- Outokumpu Oyj
- Ovako
- POSCO
- Potsdam Institute for Climate Impact Research
- ResponsibleSteel
- Rocky Mountain Institute (RMI)
- Severstal PAO
- Tata Steel
- Transition Pathway Initiative
- VALLOUREC
- Voestalpine AG
- World Steel Association
- WWF (Finland)

General stakeholder consultation: Both industry and non-industry representatives provided feedback on each project component through the public consultation process that the SBTi held from November 23, 2022 to January 23, 2023.

The SBTi Steel Project includes the following guidelines and tools:

Integration of new pathways in SBTi’s target-setting tool to allow modelling of targets at the sub-sector level (primary and secondary sources) and integration of sub-sector level targets at the company level.
Identification and assessment of scenarios for modelling of 1.5°C-aligned near- and long-term net-zero targets for primary and secondary steel production.
A target-setting tool that integrates adjusted SDA calculation method for the steel industry.
A guidance for science-based target-setting in the steel sector.

To socialize the resources developed as part of this project, we envision joint capacity building activities, including webinars and/or workshops.

Project timeline

End of November 2021: Convening the EAG and project kick-off
December - April 2022: Initial review of different scenarios, carbon budgets, steel demand and reports
May - August 2022: Review of target-setting methodologies and pathways and development of recommendations and draft target-setting methodology (technical partner)
August - September 2022: Preliminary SBTi review
October 2022: Feedback on the methodology by EAG and drafting the guidance
November - January 2023: Public consultation
February - April 2023: Revision of the guidance documents and tools
May - June 2023: SBTi review and approval
June 2023: Incorporation of new resources into SBTi Target Validation Protocol
July 2023: Publication of final deliverables (tools and guidance)
September 2023: Official launch and socialization of resources developed