Datasets:
WHATX
/
ESG_Report

Dataset card Data Studio Files
xet
 Community
text
stringlengths
0
7.73k
Section 2 Our decarbonisation strategy 2.6 Leading and collaborating 2.6.3 Working towards a just transition.
The steel industry will undergo a transformation over the next two decades unparalleled since the 19th century, with many aspects of industrial activity along the value chain changing beyond recognition. An important aspect of this will be the social transformation that accompanies it, and ensuring that this brings enhanced qualify of life and standards of living across the value chain. As we plan for the transition of each of our steelmaking sites, we are working with government and unions to optimise these impacts. In Spain, for example, where we plan to move from blast furnace steelmaking to DRI/EAF route, we anticipate a positive employment impact along the value chain, both in the construction of the new assets, the decommissioning of existing assets, and in the development of the renewable energy infrastructure and hydrogen production and transportation systems. In addition, the transition will contribute to improvements in environmental impacts across the steel value chain.
ArcelorMittal has also developed a tool which will help us understand the social impact of our decarbonisation strategy. Based on best practice principles developed by UNEP and with a Roundtable on Social LCA group of leading companies, we will be able to use this tool alongside our environmental impact expertise to consider the overall impacts of our transition plans, starting with a pilot at our Sestao facility. This will provide further data to support our work with key stakeholders, including the need for policy to support the industrial and social transition.
ARCELORMITTAL • CLIMATE ACTION REPORT 2 40
emissions rather than only in-use emissions means that the CO2e embodied in the materials used becomes a key focus for automotive customers. Steel performs well against alternatives: its production emits fewer greenhouse gases than aluminium.
Similar trends are seen within the rail and heavy transport sectors. In addition, as society transitions towards the low-carbon economy, we expect increased demand for innovative steel solutions for transport that enable the construction of urban and mass transport systems i.e. railways and subways.
The design of solutions that meet the complex and changing needs of our automotive customers is a key focus of our global R&D team. The development and roll-out of our S-in-motion® portfolio is one of the major success stories of ArcelorMittal’s R&D. Our catalogue of solutions for the electrified vehicles market and the company’s S-in Motion® projects for Hybrid vehicles, Battery Electric Vehicles and battery packs, enables our customers to build these solutions into the growing number of EV designs.
In 2020 we launched a total of 29 new products and solutions to accelerate sustainable lifestyles.
EU taxonomy classification: 3.3 Manufacture of low carbon technologies for transport 6.14 Infrastructure for rail transport 6.13 Infrastructure for personal mobility, cycle logistics offering a wide-range of innovative products and engineering solutions designed to assist architects and specifiers to minimise the lifecycle CO2e emissions of buildings. Our new Steligence business (see Section 6), launched in 2019, demonstrates the value we can bring to this market, with a 19% year on year volume increase in Europe in Q1 2021 and a 28% volume increase in Brazil (vs the same quarter last year). Our R&D in this area continues apace, and in 2020 we launched 27 products and solutions to support sustainable construction, infrastructure and energy generation.
Mobility.
A wholesale switch to electric mobility is a key element in the economic transformation needed in a net zero world. This could involve as much as a 3500% increase in electric vehicles on the road by 2030 compared to 2020 under a 1.5°C scenario REF: IEA.
Expanding the availability of electric vehicles on the scale required necessitates making them affordable to the mass market, and steel is widely seen as the material of choice among automotive customers since it offers the optimum combination of strength, light weight and cost-effectiveness needed to make safe, affordable vehicles. In addition, as is already the case in the built environment sector, the emphasis on lifecycle.
EU taxonomy classification: 3.5 Manufacture of energy efficiency equipment for buildings 7.1 Construction of new buildings 7.2 Renovation of existing buildings.
Development Scenario (net-zero by 2070) implies an increase of 4.7TW by that time, compared to just 1.4TW solar and wind capacity installed today. ArcelorMittal has a promising outlook in these markets, with a strong business supplying heavy plate for wind towers, specialist electrical steels for generators, and weather-resistant Magnelis™ steel proving a successful innovation for use in solar farms and other projects exposed to harsh environmental conditions.
As hydrogen networks are developed as part of society’s decarbonisation, steel will again play a key role both in the hydrogen electrolysis plants and in new hydrogen transportation networks. As much as 850GW electrolyser capacity could be developed by 2030 under the IEA’s Net-Zero by 2050 Scenario.
Low carbon buildings.
Built environment stakeholders are increasingly showing interest in the life-cycle emissions of a construction project, rather than simply those emissions from the use phase. This brings an enhanced focus on the embodied CO2e of the building materials and assembly methods used. Through the work of our global R&D team, ArcelorMittal has developed a growing business,
EU taxonomy classification: 3.1 Manufacture of renewable energy technologies 4.9 Transmission and distribution of electricity 4.14 Transmission and distribution networks for renewable and low-carbon gases.
As stakeholder expectations increase in Europe and beyond, and governments strengthen their policy frameworks to pursue their Nationally Determined Contributions under the Paris Agreement, we can expect to see a step change in the pace of demand growth for steel solutions that help our customers reduce their emissions, and steel with lowembodied CO2e. We are already generating revenues from branded products in these markets of some US$3.9* billion in 2020, and we believe there is a positive future outlook for these markets on a significant scale.
Across the board, ArcelorMittal will capture value where it can meet the needs of customers in these growing markets through innovative product design. Where we can also offer steel with an advantageous embodied CO2, there is further value to be gained, as we have seen with our XCarb™ products launched in March 2021.
We break down these opportunities below into a number of different markets, in line with the EU taxonomy regulation’s categorisation of those economic activities that make a substantial contribution to climate change mitigation and adaptation.
Renewable energy.
A seismic shift in the energy system is underway and is likely to intensify in the next decade as the world accelerates its efforts to decarbonise in line with the Paris Agreement. The IEA’s Net-Zero by 2050 Scenario envisages a rapid growth in renewable energy capacity in the years to 2030, with 8TW solar and wind power capacity installed by that year. Even its less aggressive Sustainable.
Section 3 Our opportunities, risks and governance of climate change 3.1 Opportunities.
Footnote: * Sales of branded steel solutions that help our customers reduce their emissions, and steel with low-embodied CO2e, represent 7.3% of total revenues in 2020.
ARCELORMITTAL • CLIMATE ACTION REPORT 2 41
Section 3 Our opportunities, risks and governance of climate change 3.1 Opportunities for steel in a circular, low-emission economy.
Over time, we intend to develop our portfolio of XCarb™ products to enable customers to take advantage of all our efforts to decarbonise as we progress towards our net zero by 2050 target.
EU taxonomy classification: 3.9 Manufacture of iron and steel.
Zero emissions steelmaking.
The interest of our customers in low-embodied CO2e steel has been growing in recent years. ArcelorMittal has made investments in those decarbonisation technologies that are already viable, as outlined in this report, yet the policies to enable the sheer scale of investment necessary to make physically decarbonised primary steel have to date been in short supply.
As the cost of emitting carbon increases in certain jurisdictions and supportive policy develops, we see an increasing opportunity to decarbonise our integrated steelmaking sites and benefit from the market rewards of being a ‘first mover’. On this basis, ArcelorMittal is planning a number of projects, outlined in this report, which will enable the production of the physical zero carbonemissions steel.
In order to take meet the demand from customers, and take advantage of ArcelorMittal’s existing decarbonisation investments, we decided to offer our customers products which enable them to benefit directly from these investments. Our XCarb™ green steel certificates represent direct CO2 savings from blast furnace transformation projects, verified by an independent auditor, across our European operations in quantities equivalent to tonnes of net zero steel, and these are offered to the customer alongside our steel shipments. Our XCarb™ recycled and renewably produced steel is made in the EAF using both scrap and certified renewable energy, enabling it to reach very low levels of embodied CO2e.
displace CO2e emissions in the chemicals industry as part of that industry’s decarbonisation journey. We aim to start producing Carbalyst® bio-products by the end of 2022, at a scale of 80 million litres of bio-ethanol per year, and are working to develop partnerships with potential customers in the use of this new product. The sales of bio-ethanol from our Carbalyst® process are forecast to translate into increased revenues, forecast initially at ~€75 million a year. These could expand as we develop other biochemicals and biomaterials, including bio-plastic, bio-fabrics and biochemicals.
ArcelorMittal also has a wide portfolio of coproducts which use residues from the steelmaking products. Dust, sludges and slags, for example, are captured and reformed into products which can be reused in industry, agriculture and elsewhere. The most prominent example is our successful business in granulated blast furnace slag, which can be used as a replacement for Portland cement, and in 2020, we sold over 10 million tonnes of such slag to the cement industry.
EU taxonomy classification: 4.13 Manufacture of biogas and biofuels for use in transport and of bioliquids 3.7 Manufacture of cement 5.9 Material recovery from non-hazardous waste.
Other sectors will also demand innovative steels.
Similar trends can be seen across many other sectors. In the packaging sector, for example, where customers are demanding lighter and stronger steels to enable reduced embedded carbon and transport emissions of the products, ArcelorMittal has responded with lighter weight packaging solutions. In the shipping, agricultural and industry sectors, where the demand for specialised vehicles and capital equipment are following a similar trend in the automotive sector, albeit at a slower pace, ArcelorMittal can deliver solutions with high degrees of strength and lower volumes of steel.
Materials recovery, and development of co-products.
Many of the efficiencies gained in the steel industry in recent decades have been the result of innovations in materials recovery and recycling. The wide recovery of scrap steel is the best known example, but the industry also recovers and reforms a wide range of ‘residues’ – from slags, sludges and refractories to waste gases and heat – in order to create additional value either within ArcelorMittal or in external markets.
New circular carbon products such as bio-ethanol, produced from the waste gases of the blast furnace, promise particular value since they will.
EU taxonomy classification: 3.6 Manufacture of other low-carbon technologies.
XCarb low embodied CO2 steel.
Renewable energy.
Green fuels.
Green cement.
Low carbon buildings.
CCUS + H2 infrastructure Coastal defence.
Transport.
Revenue opportunities in the next 10 years.
ARCELORMITTAL • CLIMATE ACTION REPORT 2 42
ArcelorMittal identifies, assesses and manages risks – including climate-related risks – on an ongoing basis through a variety of mechanisms.
At a strategic level, keeping pace of the latest stakeholder and scientific trends on climate change, including the expectations of investors, customers and policymakers, is important to ensuring the company’s response minimises risk and takes advantage of opportunities. This is the purpose of the Group Climate Council, made up of senior managers of relevant corporate functions, each of which may have their own working groups which support the company’s focus on its climate response. It is chaired by the EVP in charge of business optimisation, who reports to the Executive Office. Reports from this committee are regularly made to the Appointments, Remuneration, Corporate Governance and Sustainability (ARCGS) Committee of the Board.
Section 3 Our opportunities, risks and governance of climate change 3.2 Risks.
Climate-related trends, and the risks and opportunities identified as arising from them, are used to inform the company’s strategic outlook and planning on climate. This work is coordinated by ArcelorMittal’s executive officer for business optimisation, Brad Davey, in consultation with segment CEOs, discussed on a regular basis by the group management committee, and overseen by the Executive Office, which provides leadership and guidance. The company’s climate strategy is reviewed regularly by the ARCGS of the board.
At segment level, key climate-related financial risks are brought to the attention of the management committee, and where financially significant at a group level they are addressed at the Corporate Finance and Tax Committee.
Central to our approach is our work to advocate for policy support strategy to ensure we can respond to rising carbon prices with viable investments in decarbonisation technologies, as outlined in this report. At the same time, all our business segments are required to prepare CO2e reduction plans to reach net zero by 2050 as part of the annual planning cycle.
This report, and the assessment of the resilience of our business to the transition and physical risks described in this report, has been discussed and approved by EVP business optimisation, Bradley Davey; chief financial officer, Christino Genuino; CEO, Mr. Aditya Mittal; lead independent director and ARCGS committee chair, Bruno Lafont; and Executive Chairman Mr. Lakshmi N. Mittal.
Read more on our Alignment with TCFD recommendations in Appendix C.
3.2.1 Identifying and managing climate-related financial risk.
ArcelorMittal identifies, assesses and manages short, medium and long term risks – including climate-related risks – on an ongoing basis.
In 2020, Group Assurance formalised a quarterly process enabling corporate functions to identify medium and long term risks and opportunities to the business – based on social, environmental, regulatory, workforce, stakeholder, resource, technological and other trends – and specify mitigation actions. A consolidated report is shared on a quarterly basis with the Executive Office and Audit and Risk Committee.
In the medium to long term, climate change poses a number of risks to the business and the key risks are identified in the table below. These are analysed by building models and developing scenarios to understand potential financial impacts, such as our exposure to carbon costs in different jurisdictions.
Short-term risks within a 12-month timeframe are identified through a bottom-up process by site management teams. Business segments consolidate the identified risks and report the top risks to the Executive Office quarterly. The company uses a risk management framework based on a blend of a COSO, ISO 31000 and an in-house model. Sites assess risks by assigning them a probability of occurrence and a potential financial impact and/or non-financial consequence such as environmental harm.
ARCELORMITTAL • CLIMATE ACTION REPORT 2 43
Risk and status Nature of risk Mitigation.
TRANSITION RISKS.
Policy risk.
Time horizon: short and medium term.
Status: increasing.
Our most substantial climate-related risk will arise where we are unable to make the necessary investments to decarbonise and reach our 35% European target by 2030 due to the design of European policy. We could face a financial impact in phase 4 of the EU ETS resulting from a rising carbon price in combination with reduced allocations under the EU-ETS cap and trade system whilst competing with imported steel in the absence of a fair and competitive landscape. Such financial impacts could limit our ability to make the significant investments needed to reach our 2030 target unless public funding is available. This applies to all our European plants, making up 50% of our total capacity.
Therefore in Europe, the implementation of an effective carbon-border adjustment mechanism (CBAM), the continuation of free allocations, and the availability of public support, are all vital to ensure we can make sufficient investments to decarbonise our European assets. We are encouraged by the recent announcements from the EU Commission in its Fit for 55 package, which is moving in the right direction, although many details need to be refined in order for it to be an effective package.
The successful implementation of the group’s decarbonisation strategy, including advocacy to ensure decarbonisation investments are viable in a fair and competitive landscape, could in time significantly reduce ArcelorMittal’s sensitivity to changes in the price of carbon in Europe. However, given the difficulty in forecasting the relevant variables (such as changes in our production levels, free allocation levels, the impact of the CBAM on the steel market in Europe, or the availability of public support for decarbonisation investments), here we show our annual sensitivity to a €5 increase in the price of carbon in Europe under two scenarios to reflect the fact that several factors, including the level and carbon intensity of production at the group’s European steel operations as well as the level of free allocation of allowances. In the first scenario, based on levels of free allocations, production and CO2 intensity from 2019, the approximate annual impact of a EUR5 increase in the price of carbon would be ¤50 million. In the second scenario, where the level of free allocations are reduced to zero, the sensitivity to a EUR5 change in the carbon price would increase to over ¤290 million per annum. Any decarbonisation investments we make will reduce this exposure but these cannot be done without the appropriate level of public support.
We are also tracking the potential impact of carbon market policy developments in all other jurisdictions where we operate. We consider that the financial risks arising from these are less significant in the next 5 years.
Our decarbonization strategy to achieve a 35% CO2 intensity reduction by 2030 over a 2018 baseline includes the following levers to mitigate this risk: • advocacy to influence the development of an effective policy framework – in Europe and other jurisdictions where a carbon price applies, to ensure a fair and competitive landscape for low-emission steel, including an effective CBAM, the funding to enable the rollout of new technologies, access to sufficient clean energy, and a market for low carbon steel.
• the successful implementation of our decarbonization target plans at affected sites, which will depend on government support to ensure these investments are viable.
• short term hedging to mitigate short term risks arising from shortages in allocations.
Success in moving these levers together could in time significantly reduce the company’s sensitivity to changes in the price of carbon, particularly in Europe.
Section 3 Our opportunities, risks and governance of climate change 3.2 Risks 3.2.2 Our climate related financial risks.
ARCELORMITTAL • CLIMATE ACTION REPORT 2 44
Risk and status Nature of risk Mitigation.
TRANSITION RISKS (cont.)
Reputation.
Time horizon: short to medium term.
Status: stable.
The credibility of our decarbonisation plans, as evidence of our net zero commitments, will affect the ratings we receive from customers, investors and other initiatives. The quality of our disclosures on these plans and the extent to which we have engaged stakeholders to understand our intent behind will also be key factors.
We engage widely with our investors on climate change alongside other sustainable development topics throughout the year, and share the evolution in our transition planning with all stakeholders via our series of Climate Action Reports. We benchmark our progress against the Climate Action 100+ Net-Zero Benchmark, as can be seen in Annex 1.
Technology.
Time horizon: short to medium term.
Status: increasing.