ESG in the Steel Industry: Navigating the Path to Sustainable Growth

Environmental, Social and Governance (ESG) considerations have become central to strategic decision‑making in the steel sector. The World Steel Association (Worldsteel) has been reporting the industry’s sustainability performance since 2004 and collects data from up to eight indicators. In 2021, 94 steel companies provided data covering over 1 billion tonnes of crude steel—about 54 % of global production. Many steel companies voluntarily report metrics such as carbon dioxide emissions and lost‑time injury frequency rates and sign up to Worldsteel’s Sustainable Development Charter. These trends show that ESG is no longer an optional add‑on but a core licence to operate.

Growing regulatory and investor pressure

Governments are tightening regulations to cut greenhouse‑gas emissions, and the European Union’s Carbon Border Adjustment Mechanism (CBAM) is starting to levy a carbon price on imported steel. Investors increasingly screen companies based on ESG performance, and ESG ratings influence access to capital and insurance. The SMS group, which supplies steel plant technology, notes that ESG has become a core business requirement for metals companies. As governments tighten rules and investors demand sustainability, customers expect transparent reporting; companies must reduce CO₂ emissions, energy use and water consumption while meeting robust social and governance standards. The willingness of end‑customers to pay a premium for “green” steel directly correlates with investments in green technologies and emission‑monitoring tools.

Stakeholder expectations and profitability

Beyond regulators and investors, customers and communities are exerting pressure. SMS group argues that sustainability should not be confined to greenfield projects – the majority of emission savings must come from retrofitting existing facilities. Transparency and regular sustainability audits help producers identify opportunities to reduce emissions, energy usage and water consumption while improving profitability. These audits demonstrate that ESG can enhance profitability by improving operational efficiency and unlocking access to new markets.

Environmental dimension: decarbonising steel

Steelmaking accounts for roughly 7–8 % of global anthropogenic CO₂ emissions, so the environmental pillar is central to ESG. The industry is moving away from coal‑based blast furnaces toward electric arc furnaces (EAFs) and emerging hydrogen‑based processes. Worldsteel’s sustainability indicators show that average CO₂ intensity per tonne of crude steel cast increased from 1.81 t CO₂/t in 2018 to 1.89 t CO₂/t in 2020; energy intensity rose from 19.51 GJ/t to 20.62 GJ/t during the same period. While this suggests progress has been slow, several developments offer hope:

• Hydrogen‑based direct‑reduction iron (DRI): Companies such as SSAB, ArcelorMittal and H2 Green Steel are investing in pilot plants that use green hydrogen instead of natural gas or coke. SMS group’s Stegra project in northern Sweden, which combines hydrogen and modern plant design, aims to cut carbon emissions by up to 95 % compared with conventional plants.
• Electric arc furnaces: Many integrated mills are retrofitting or replacing blast furnaces with EAFs. Algoma Steel, for example, is investing in EAF technology that builds on recycling and environmental stewardship to significantly lower emissions.
• Carbon capture and storage (CCS): Large integrated producers are exploring CCS to capture CO₂ from blast‑furnace off‑gases. Pilot projects in Europe and Japan aim to demonstrate commercial feasibility.
• Energy and material efficiency: The Worldsteel indicators show material efficiency in the steel sector above 97 % and continuous improvement in energy management systems. Process optimisation, waste‑heat recovery and digital control systems contribute to reducing resource use.

The environmental pillar also includes water management and biodiversity. ResponsibleSteel™ certification requires site assessments covering material sourcing, noise and vibration reduction, water stewardship, air emissions, biodiversity monitoring and decarbonisation strategy. Plants with real‑time carbon‑footprint tracking tools, such as SMS group’s Viridis platform, can monitor emissions, energy and water use and produce certified carbon‑footprint reports.

Social dimension: people and communities

The social pillar covers occupational health and safety, labour rights, diversity and community relations. Worldsteel collects data on lost‑time injury frequency rate (LTIFR) and training. In 2020 the LTIFR was around 0.85 injuries per million hours worked, while employees received an average of 7.18 training days. These metrics underscore the importance of safe workplaces and skills development. Algoma Steel’s ESG statement emphasises protecting the health and safety of employees and contractors, fostering a diverse and inclusive workforce and contributing to community prosperity. The company links ESG factors directly to long‑term value and commits to achieve net‑zero CO₂ emissions by 2050 in alignment with the Paris Agreement.

Stakeholder engagement is equally important. ResponsibleSteel certification, pursued by Big River Steel in the United States, involves independent audits of material sourcing, human and labour rights, and engagement with local communities. CDM Smith, which helped Big River Steel achieve the certification, notes that third‑party audits provide verification and require cross‑disciplinary expertise to evaluate decarbonisation, water conservation and human rights across supply chains.

Governance dimension: accountability and transparency

Governance issues encompass board oversight, ethical conduct, risk management and transparent reporting. Steel companies are enhancing governance by embedding ESG into corporate strategy and risk management frameworks. Algoma Steel’s ESG approach includes complying with environmental laws, assessing sustainability‑related risks, supporting diversity and inclusion, and providing a safe environment. Transparency is paramount: Algoma plans to publish its inaugural ESG report aligned with the Sustainability Accounting Standards Board (SASB) and Task Force on Climate‑related Financial Disclosures (TCFD) frameworks. Similarly, worldsteel’s sustainability indicators programme collects and publicly reports data, which encourages benchmarking and peer pressure.

ResponsibleSteel certification also contains governance components such as ethical business conduct, supply‑chain due diligence and stakeholder engagement. Companies seeking certification must demonstrate compliance with over 370 elements across environmental, social and governance themes. This ensures that ESG claims are backed by measurable actions rather than greenwashing; CDM Smith highlights that third‑party audits give credibility and help companies track factors like water consumption per tonne of steel.