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Our continuing low-carbon innovation programme is vital for our long term resilience and competitiveness. The risk of our breakthrough technologies failing is dependent the availability of innovation funding to test and develop them appropriately, and the emergence of suitable policy to support them. For example, the viability of our Smart Carbon route depends on circular economy policy incentivising the reuse of carbon.
A significant part of the $10 billion capital costs we outline for our global 25% target will be allocated to our European operations. In addition, we have made a series of applications to the ETS Innovation Fund to support the development of several new technologies, and continue to ask for supportive policy instruments.
PHYSICAL RISKS.
Acute.
Time horizon: medium term.
Status: stable/increasing.
Adverse weather events, such as extreme low temperature, very high winds and flooding may on occasion hamper our supply and distribution routes. Our Mexico and Calvert JV plants are in an area prone to hurricanes, for example, and wildfires are a risk to our sites in Kazakhstan and South Africa. Meanwhile northern Europe has recently experienced extreme flooding. These events can cause significant disruptions for our supply chain partners, transport routes, own production of steel, and customer deliveries which translate into increased operating costs, higher raw materials costs, reduced production, sales and reputation damage for the company.
We have undertaken initial modelling of this risk over the next 10 years to inform the business. This is corroborated by independent studies and/or prediction models conducted by recognised third-parties, universities and scientific research institutions. Currently, the magnitude of impact is considered to be medium-low.
Our risk management process enables us to understand our exposure to existing and new emerging risks and to build appropriate resilience and recovery plans for our plants and supply chains, including emergency procedures, engaging fire fighting services etc.
Our experience in this area is at the early stages and will evolve where extreme events are currently rare but may be more frequent or intense in the future.
We will undertake further analysis of our physical risks as part of a comprehensive scenario analysis in line with TCFD recommendations.
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 45
Risk and status Nature of risk Mitigation.
PHYSICAL RISKS (cont.)
Chronic.
Time horizon: medium term.
Status: stable.
Although water is recycled many times in a steel plant, its regular supply is crucial to our steelmaking processes. Some facilities such as in Brazil and South Africa have been at higher risk of being affected by long periods of chronic drought conditions. If the authorities were to restrict a licence to withdraw water as a result this could increase operational costs, reduce production capacity and so revenues. Also in areas of chronic water-stress, we could face reputation impacts.
We have modelled these risks for Brazil and are in the process of conducting assessments for other sites in water-stressed areas, including South Africa and Mexico.
We consider the potential impact to be medium-low.
We developed a water management plan in Brazil and South Africa to mitigate our risk exposure to chronic water risks. In Brazil, the actions set out in site-level resilience plans reduced the company’s water intake by more than six million m3/year, despite a 17% increase in production. This program was recognised by worldsteel when it was awarded the annual Steelie Award for ‘Excellence in Sustainability’ (2018).
To increase water security and ensure the stability of our operations, we have invested in a desalination plant in Tubarao, Brazil.
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 46
leading a global cement company and has been a board member of the World Business Council for Sustainable Development for three years. 36% of directors are female. The Board’s two committees are made up of independent directors to ensure further oversight, with responsibilities including climate-related issues. Risks are also considered by boards of subsidiaries worldwide. CEO Mr. Aditya Mittal is a member of the Board.
Board of Directors Chaired by Executive Chairman Mr. Lakshmi N. Mittal.
The Board led by the Chairman have overall responsibility for the governance and strategic direction of ArcelorMittal, which includes taking into account the effects of climate change and other sustainable development trends. Directors have experience of leading companies in heavy industry, mining and consulting sectors, with expertise in strategy, climate and safety, while the lead independent director has experience.
Board of Directors.
Sustainable development council.
Group management committee.
Group CTO council.
XCarb™ technical panel Chair: Brad Davey.
Investment allocation committee Chairs: Aditya Mittal, Brad Davey.
Corporate Finance and Tax Committee Chair: Genuino Christino.
Group Climate Council Chair: Brad Davey.
ARCGS committee Chair: Lead Independent Director Bruno Lafont.
Audit & Risk committee Chair: Karyn Ovelmen.
Segment Business Reviews.
Executive office.
Section 3 Our opportunities, risks and governance of climate change 3.3 Governance.
ARCELORMITTAL • CLIMATE ACTION REPORT 2 47
Group CTO Council Chaired by Chief Technical Officer Mr. Pinakin Chaubal.
The technical council coordinates and oversees progress on the global technology roadmap via regional and project-based committees involving CTO and R&D.
Sustainable Development Council Chaired by EVP business optimisation Mr. Brad Davey.
The Sustainable Development Council ensures that material sustainability issues and progress reports are brought to the attention of the ARCGS, and that guidance from the ARCGS is duly followed up in action plans.
XCarb™ Technical Panel Chaired by EVP business optimisation Mr. Brad Davey.
The purpose of the panel is to review requests from the network to have their products or projects appearing beneath the XCarb™ brand.
Group Climate Council Chaired by Mr. Brad Davey, EVP business optimisation.
Group Climate Council is responsible for informing and shaping the company’s climate change strategy, considering both technology and stakeholder relations. Members of the group include VP government affairs, VP corporate communications and corporate responsibility; VP head of corporate strategy; VP technology strategy; CTO Europe, VP climate action Europe, GM, head of sustainability; CMO Global Automotive.
Investment Allocations Committee Chaired by CEO Mr Aditya Mittal and Mr. Brad Davey, EVP business optimisation.
The Investment Allocations Committee authorises large capex projects, including those designed to deliver carbon and environmental improvements, and reviews CO2 impact of all proposals. Committee members include EVP and chief financial officer, Mr. Genuino Cristino, chief technical officer, Mr. Pinakin Chaubal, and VP head of corporate strategy, Mr. David Clarke. The IAC reviews the CO2 impact of all projects as part of the evaluation process.
For decarbonisation projects in particular, investment project concepts are given the green light at executive level as part of the investment strategy discussed at the Climate Investment Strategy Committee. These are then scrutinised at the IAC which, after the launch of our new global targets, will also ensure that no approved project that is not specifically aimed at decarbonisation, will reduce the company’s chances of achieving our CO2 reduction targets.
Audit & Risk Committee Chaired by non-executive independent director Ms. Karyn Ovelmen.
The Audit & Risk Committee ensures that the interests of the company’s shareholders are properly protected in relation to risk management, internal control and financial reporting. It oversees both the identification of risks to which the ArcelorMittal group is exposed, via regular senior management reports, and the management response to these risks.
Executive Office Executive Chairman Mr. Lakshmi N. Mittal, and CEO Mr. Aditya Mittal.
The Executive Office works closely with executive officers and members of the Management Committee on key strategic issues.
Group Management Committee Chaired by Group CEO Mr. Aditya Mittal.
The Group Management Committee regularly considers climate-related risks and group-level strategy. Members includes the leaders of all segments and major corporate functions.
Corporate Finance and Tax Committee Chaired by Mr. Genuino Christino, CFO.
The CFTC meets regularly to review the financial performance, tax planning and treasury analysis of the business. It is responsible for introducing policies and controls and implementation of strict policies and procedures to manage and monitor financial market risks. The CFTC approves all corporate finance/funding/treasury files including for example the Revolving Credit ESG facility.
Appointments, Remuneration, Corporate Governance and Sustainability (ARCGS) committee Chaired by lead independent director Mr. Bruno Lafont.
The ARCGS oversees the implications of sustainable development issues for the company under five sustainability themes, of which one is climate change. Members of the ARCGS are independent and receive regular training on climate changerelated issues. Their experience of sustainability has been gained through their leadership roles in the cement, mining and global consulting sectors. The committee is chaired by the lead independent director on the Board, Mr. Bruno Lafont, who has been a board member of the World Business Council for Sustainable Development for three years.
The Committee considers the implications of climate change for the business and oversees the company’s strategic planning of resources and investments in response to the risks and opportunities that arise, as well as having oversight of policy and stakeholder trends. It receives regular reports from senior management on stakeholder expectations, the company’s lowemissions technology strategy, climate-related policy engagement and carbon performance.
Each year the ARCGS Committee spends time undertaking a deep dive on climate change to ensure they remain updated with the latest science, technology and stakeholder developments. The chair of the ARCGS liaises closely with the chair of the Audit & Risk Committee, and provides a summary of its work on climate change to the full Board.
Section 3 Our opportunities, risks and governance of climate change 3.3 Governance.
ARCELORMITTAL • CLIMATE ACTION REPORT 2 48
In 2020, the absolute CO2 footprint for our steel and mining operations was 160.3 million tonnes, an 18% decrease against 2019. For our steel operations, our footprint fell 20% to 148.5 million tonnes. While most of this decrease was as a result of the fall in the Group’s steel output due Covid-19, to some extent it is also the result of a number of carbon and energy efficiency projects implemented in our steel operations in 2020.
In 2020, the average carbon intensity in our steel business was 2.08 tonnes of CO2 per tonne of steel, a 1.6% improvement over 2019. In relation to the sites we operate today that we operated in 2007, in 2020 the specific Group footprint for the steel business decreased by 7.9% compared to 2007. These metrics cover scopes 1, 2 and 3 as defined in our Basis of Reporting. This is based on data for almost 100 steelmaking sites across the Group.
Due to the variable impacts of Covid-19, production at some sites reduced more than at others. On analysis, a general pattern has emerged that those sites where production was most reduced were also those which perform better in terms of CO2. Therefore, the average impact of our CO2 reduction measures on CO2 intensity across the Group was lower than anticipated, and as a result we did not fully reach our 2020 CO2 reduction target.
By comparison, the global average figure provided by the World Steel Association is 1.83tCO2/ts (worldsteel 2019). The key reason for our higher carbon intensity is that the share of our production from the more carbon-intensive primary steelmaking route stands at 81% – compared with 72% in the global steel market as a whole (worldsteel 2019).
Making primary steel via the BF-BoF route emits more CO2 than secondary steelmaking in the EAF. Yet making primary steel is a necessary investment to generate the recyclable scrap stocks of the future that we need to enable fully circular steelmaking. In 2020, the average carbon intensity of our primary (BF-BoF) steelmaking operations fell by 0.86% year on year.
The table on the right shows the baseline for our new 2030 targets, based on the steel and mining assets we own and operate today. It includes both CO2 equivalent emissions (scopes 1 + 2). Sites we have sold or no longer control since 2018 have been excluded from these figures.
Section 4 Metrics 4.1 Carbon performance in 2020.
Following the formation of ArcelorMittal in 2006, we set ourselves a target of reducing our CO2 per tonne of steel by 8% by 2020 over 2007. By the end of 2020, we had achieved a 7.9% reduction.
Note: Figures below include ArcelorMittal USA and Acciaierie d’Italia (ex ArcelorMittal Italia).
Absolute Emissions scope 1+2 2018 2019 2020 million tonnes CO2e ArcelorMittal Steel+Mining 152.2 145.8 124.4 million tonnes CO2e Europe 67.4 63.8 51.2.
Intensity & Target (scope 1 and 2)
CO2 equivalent Emissions per ton Crude Steel 2018.
Targeted % improvement 2018-2030 2030 target tonnes CO2e per tonne of steel*
ArcelorMittal Steel+Mining 2.06 25% 1.54 tonnes CO2e per tonne of steel.
Europe 1.70 35% 1.11.
Footnote: 2018-2020 data excluding ArcelorMittal USA and Acciaierie d’Italia (ex ArcelorMittal Italia).
For more metrics please see our Fact Book 2020.
Summary of key metrics with 2018-2020 data excluding ArcelorMittal USA and Acciaierie d’Italia (ex ArcelorMittal Italia)
ARCELORMITTAL • CLIMATE ACTION REPORT 2 49
Section 5 Technology 5.1 Technology pathways.
As a result, Innovative DRI has a broader and more immediate potential to reduce CO2e than DRI solely based on green hydrogen. Indeed, an initial transition to natural gas-based DRI production would more than halve existing CO2e emissions from a BF-BOF facility on a per tonne basis. As clean energies become more readily available and commercially viable, these facilities can transition to net-zero. Another advantage of transitioning to DRI technology is the reduction in other pollutants.
Although many steelmakers have started to develop hydrogen-DRI projects, ArcelorMittal has a development advantage as we are already a major DRI producer with over 10 DRI facilities globally, and the only one in Europe to date.
We have also announced plans to expand this technology at our German plants in Bremen and Eisenhüttenstadt, Sestao in Spain, and at France in Dunkirk, where we are also partnering with Air Liquide to source low-carbon hydrogen. See Section 2.3.1 for more information on these projects.