Marc-Simon Schaar, Chief Procurement Officer at Outokumpu
Someone asked me not long ago, “What do Scope 3 emissions look like in the stainless steel industry?” I was in a good position to answer, having spent some time with the topic at our company.
Scope 3 emissions refer to those that occur outside of a company’s direct control but within its value chain. Outokumpu’s Scope 3 emissions, for example, mainly include those from activities related to raw material sourcing and supply, like extracting and processing metal ores. In addition, those from business travel, product distribution, outsourced work, and more, also fall into this category. Although frequently overlooked, Scope 3 can be extremely significant — in our case, comprising over 70% of the company’s total emissions. This is why at Outokumpu we don’t believe that overlooking them is a viable option.
Confronting Scope 3 emissions certainly isn’t the only way we are working toward sustainability, but it’s a major one. There’s arguably no bigger opportunity for impact. That being said, sustainability clearly transcends emissions alone, and demands a holistic approach that encompasses people, planet, and product. That is the basis of our commitment to the United Nations Guiding Principles on Business and Human Rights, and why we have a Supplier Sustainability Team. This team is unique in its form and shape across the industry, conducting Human Rights Impact Assessments and Social Audits across our entire raw material value chain.
So, what do Scope 3 emissions look like in stainless steel? Depending on your point of view, they can look like a lot of things — many categories, countless data points, strategic inroads, and so on. But to me, they look like an opportunity:
An opportunity to make the biggest possible difference
Our business model revolves around the concept of circularity, with our product containing over 89% recycled steel, referred to in the industry as “scrap” which makes up the largest proportion of our recycled content at 94%. Scrap is the raw material we use the most, and due to the fact that it is recycled (i.e., it has already led a useful life), we define it as a “secondary” raw material, coming with very low emissions.
However, we also rely on so-called “primary” raw materials such as chromium and nickel. These are more costly and are associated with higher emissions but are necessary in order to ensure the right alloying content of individual stainless steel grades. As the overall demand for stainless steel rises, and as increasingly demanding applications require even higher alloyed grades, the need to source these primary raw materials will only increase in the future.
On one hand, we could see this as a major obstacle. For example, the Scope 3 emissions associated with our nickel supply alone are greater than all of our direct (Scope 1) emissions put together. On the other hand, we can look at it as a huge opportunity. First, because we know where those emissions are coming from, giving us a chance to do something. Second, instead of needing to tackle dozens of problems at the same time in order to create significant change, we can put a lot of focus on this single large one.
This is precisely why we are currently exploring possibilities for how to strengthen the supply chain for nickel while simultaneously decreasing its emissions. One recent milestone was to acquire a share in the Canadian company FPX Nickel who is expected of having one of the lowest carbon footprints in the industry. As Outokumpu we are continuously looking for further collaboration with business partners to reduce emissions from primary raw materials. Luckily, we already have our own ferrochrome production with a 42% lower carbon footprint than the industry average.
An opportunity to turn risks into a foundation for the future
Scope 3 emissions present a risk for both, the planet and businesses. In order to address these risks, we’ve developed a comprehensive strategy, centered around the raw material value chain, that considers long-term sustainability, availability, pricing dynamics, and profitability – things that, no matter what you hear, are not mutually exclusive.
Having such a strategy — and executing it — helps add to our credibility and authority as an industry pioneer. It resonates with investors, shareholders, and consumers, and it appeals to our employees as well as potential ones, among which are an increasing amount of sustainability-conscious people. The list of benefits associated with tackling Scope 3 emissions goes on and on, and the more seriously we take this opportunity, the stronger our foundation for the future will become in line with our vision to be our customer’s first choice in sustainable stainless steel.
Furthermore, I strongly believe that companies can no longer get by with calculating and reporting only direct emissions from own production (Scope 1) and indirect emissions from energy and steam (Scope 2) — even though in the stainless steel industry, unfortunately, many are still doing it. Bringing Scope 3 into the spotlight is necessary, and we want to act as a role model to help others.
The other option? Ignore it, and face the consequences later, unprepared. Worse yet, we could claim to care but fail to take any action. This brings us to:
An opportunity to walk the talk
In terms of business operations, it’s almost impossible to overstate the need for a modernized, innovative approach. Every company must now be a technology company in some sense. In terms of values, however, there’s still nothing better than “old school.”
By “old school,” I mean that a business should say what it means and mean what it says. This is the ultimate way of building loyalty among customers and partners, the ultimate method of self-regulating, and the ultimate strategy for preventing greenwashing. At Outokumpu, we see this as part of our company DNA. We walk the talk.
For example, we have a near-term science-based target of reducing direct and indirect emissions as well as our supply chain emissions by 42% per tonne of stainless steel by 2030 from a 2016 base year. The updated targets cover our value chain from raw materials to our own production and delivery. Personally, my dream and vision would be that as a company, we reach carbon neutrality as soon as possible and help make it feasible for our industry as well as others to follow the same path.
For the same reasons, we champion the idea of providing a Product Carbon Footprint, because consumers deserve transparency, but also a choice – and that choice can only be given if the entire value chain of a consumer product is transparent. So that besides quality and technical properties, also the product’s carbon footprint can be considered in the customer’s purchasing decision.
Many wise people have noted that “in order to fix something, you have to start by recognizing it as a problem.” To the extent that Scope 3 emissions represent a problem for stainless steel, understanding and reporting on those emissions are what allows us to go forward in solving it.
At Outokumpu, we are optimistic. Part of that optimism comes from the fact that stainless steel is already a very sustainable material compared to many others — and when producers care about people and the environment, it becomes even more sustainable. If we keep looking at the challenges we face as opportunities to be better, our industry will be an increasingly important part of building a better, more livable world for ourselves and generations to come.
After all, at Outokumpu, we’re working towards a world that lasts forever.