Steel giant ArcelorMittal faces a tough challenge in making its resources-intensive business sustainable, but it has a plan, and with scale comes impact
Mining ore and manufacturing steel are industries rough on the environment, although in recent years ArcelorMittal, the world’s largest steel manufacturer, has been taking more steps to reduce its toll on natural resources and communities.The most progress, though, seems to be in regions with the strictest standards and most active watchdogs.
In its 2014 corporate responsibility report, “Steel: the sustainability challenge”, Luxembourg-based ArcelorMittal outlines ways it has tried to make heavy industry cleaner and more resource- and environment-conscious. The report cites company successes in, among other areas, reducing its carbon footprint, recycling steel and community development. The report includes the company’s 10 new sustainable development outcomes, which it considers necessary for its steel “to be recognised as one of the world’s most sustainable materials”. Also, for the first time, the report is aligned with the Global Reporting Initiative’s G4 Sustainability Reporting Guidelines.
The 10 sustainable development outcomes, listed in the corporate responsibility report, considered the core of ArcelorMittal’s sustainable development framework, are:
Safe, healthy, quality lives for our people and neighbours
Products that accelerate more sustainable lifestyles
Products to create sustainable infrastructure
Efficient use of resources with high recycling rates
Trusted user of air, land and water
Responsible energy use that helps create a low carbon future
Supply chains that our customers trust
Active and welcomed member of the community
Pipeline of talented and qualified employees for tomorrow
Our contribution to society is measured, shared and valued
ArcelorMittal is active in most of the world and so has a significant carbon footprint to manage. It is the largest manufacturer of steel in North and South America, the European Union and Africa, and one of the largest producers of iron ore in the world. The company is a major steel producer in the CIS region as well, and is moving into Asia, with investments in China and India. Mining facilities include 15 units with mines in operation and development. Its annual achievable production capacity is about 115m tonnes of crude steel, and it has 222,000 employees across 60 countries.
It does remain the top industrial emitterunder the emissions trading scheme of the European Union, according to Alex Luta, policy analyst and campaigner for Sandbag, a UK-based advocacy group.
Despite recent business challenges such as an increase in the volume of imported steel and a decrease in iron ore prices, ArcelorMittal claims achievements in multiple areas in 2014, such as 80 new products in development designed to reduce carbon dioxide emissions and fuel consumption; a 2% reduction in carbon dioxide emissions per tonne of steel produced compared with from 2013; preventing 40m tonnes of carbon dioxide emissions by recycling 31m tonnes of scrap steel and ongoing community development work through its “solidarity holidays”.
ArcelorMittal employees can apply to join one of the company’s annual “solidarity holidays”. For two weeks, teams of employees work together on a specific community project. In 2014, 90 employees took part in solidarity holidays in nine countries, according to the corporate sustainability report. One team collaborated to install a new drinking water system in the village of Douar Laassara, near the company’s operations in Jorf Lasfar, Morocco. This project freed the villagers from having to draw and haul water from a single well. ArcelorMittalteams managed all aspects of the project, from obtaining the necessary government permits to building the housing for the taps, the company says.
A team from the ArcelorMittalplant at Ostrava, Czech Republic, worked with a local charity in August 2014 to help refurbish an abandoned building, so that it could be used by homeless people. The machinery needed to complete the project is also being provided by the Ostrava site. Once finished, the building will provide “starter apartments,”enabling homeless people to take control of their lives and become independent, the report notes. They will be supported by workers from the charity, encouraged to find jobs and receive training in skills such as managing household finances.
The company allocated $375m to environmental projects, more than half of which focus on air and water performance and more than $175m of which is aimed at energy-related capital projects. Some projects are part of ArcelorMittal’songoing $130m environmental improvement programme, 85% of which is subsidised by EU funds.
ArcelorMittal, though, has its share of critics who maintain the company is not as green or as receptive to sustainability practices as it claims to be. According to a 2013 post on the Desmog Blog, the company’s annual emissions at that time were equal to those of the entire Czech Republic.
In Canada, Ontario's Ministry of the Environment issued 13 charges in March 2013 against the company for air emission violations at its coke-making plants between April and August 2012. According to broadcaster CBC, the ministry alleged that the company exceeded visible emission limits set by the province, measured by opacity levels.
Last year, ArcelorMittal Dofasco near Hamilton, Canada, pleaded guilty to six out of the 13 charges – seven were withdrawn – and was fined $390,000, which left residents and environmental activists disgruntled. Several told the CBC the case took too long to settle, the penalties were too light and the pollution was continuing. ArcelorMittal said it was undertaking $87m in upgrades to two of the coke plants and the third was shut down in March of this year.
More recently, the company has lobbied against tough EU emission reduction targets for 2030, arguing they are not realistic, would stifle business growth and force heavy industry to relocate outside the EU where the standards aren’t as strict – resulting in more greenhouse gas emissions. “The burden imposed by the EU’s energy and climate policy/Emissions Trading Scheme will result in losses that will make these operations uncompetitive and ultimately unsustainable,” says Alan Knight, ArcelorMittal’s general manager, corporate responsibility.
“The European Union is an open market and steel producers have to compete against non-EU producers on cost. Imports have already increased as a result of global overcapacity in the steel industry. The cost burden that will be imposed on the European steel industry as a result of the 2030 energy and climate plan will make it impossible for European producers to compete with imports.” Sandbag’s Luta, though, says ArcelorMittalis “trying to paint a picture that the world is standing still. As a result of European leadership, other jurisdictions are creating carbon emissions policies. China already is building away at an emissions trading scheme.”
ArcelorMittal also has successfully played the EU’s Emissions Trading Scheme, which some NGOs say will allow the company to postpone emissions improvements for years. Under the system, companies were allocated credits to use if they were not able to reach emission reduction targets, and often lobbied for more. After the free allowances were depleted, companies are supposed to pay for credits.
Currently, ArcelorMittal has accumulated 124m allowances, and was able to collect them under the original system that allowed companies to appeal to their governments for more free credits, Luta says. But in 2013 the system was changed so that free allowances are issued based on a formula, and fewer will be issued, so companies will have to deplete their surpluses.
“We have historically sold part of our unused CO2 credits,”explains Knight. “In 2013, we decided that no further sales of our historical CO2 credits would take place as we now anticipate needing to purchase additional credits to cover our foreseen shortages.”
Luta says: “Because of the changes, [ArcelorMittal] will no longer will have the largest surplus of allowances. We are happy the surplus is diminishing because the lower surplus they have, the more incentive they have to decarbonise.”
For its part, ArcelorMittal says it plans to cut the carbon intensity of its steel by 8% by 2020 against a 2007 baseline, followed by identifying opportunities to save energy across the business, making more use of recovered steel scrap in furnaces and researching new technologies that could substantially reduce the carbon intensity of steelmaking in the long term.
“If Europe is serious about wanting to maintain industry and a steel industry, then the climate policy has to be reviewed to promote achievable targets,” says Knight. “The steel industry is prepared to play its role in a lower carbon economy, but the policies to encourage this must be fair, and industry-specific.”
But industry-specific targets would rob the system of its flexibility, says Luta. Because the system covers many sectors, companies with higher emissions can buy allowances from sectors that have lower emissions and allowances to spare.
ArcelorMittal’s plan is to have a business “that takes sustainability to the core of our thinking in the sectors in which we operate and products we make”, according to Knight. “It is absolutely clear that this issue matters to a lot of our customers; it has a strong commercial angle, it’s the way to run a business and it’s what customers are looking for. We want a business that has minimised risks and disruption as a result of not being prepared for environmental and social responsibilities.”
The company’s sustainability plan contributes to its success in part by helping with both long- and short-term planning, Knight says. “It’s about how we can maximise our business and hopefully think long term,”he explains.
“All businesses think about quarters and maybe the next year, but not, ‘What two degrees to the left can we do now?’It’s about managing the pace of change and what we can do for the future, as opposed to environmental issues creating knee-jerk reactions. The sustainability plan does makes sure what we do is ahead of and aligned with the thinking of our customers.”
The process of producing steel itself and the company’s huge facilities are among the company’s biggest challenges to expanding sustainability practices, Knight says. “Our carbon footprint is big –there is some of the chemistry that is involved in the process and the plants were built to last.”
The company came under fire in 2013 from an NGO in South Africa for pollution and working conditions at its site in Vanderbijlpark. The Bench Marks Foundation report “Steel at any cost – a community voice perspective on the impacts of ArcelorMittal’s operations in Vanderbijlpark”, was prepared in collaboration with the Vaal Environmental Justice Alliance (VEJA) a mix of environmental groups and various stakeholders.
“The story of ArcelorMittal and its reputation of putting profits before everything else is not a new one,” says Bishop Jo Seoka, chair of the Bench Marks Foundation. Issues cited in the report included hazardous working conditions; high levels of illnesses, injuries and deaths; lack of compensation for ill and injured workers; and high levels of air, water and sound pollution affecting the environment and residents.
“We strongly recommend that ArcelorMittal accepts responsibility for the bulk of the impact on the workers and the environment of Vanderbijlpark due to the length of time the company has operated in the area,” Seoka says. “It must also focus its intervention on real issues that the people are facing such as ensuring that a clear and implementable health plan for workers and ex-workers is put in place and establishing a health trust for members of the community that are impacted upon by the company’s operations.”A response from ArcelorMittal about the Bench Marks study was not available.
Some changes are under way in how the company does business in different parts of the world. Investors have been very supportive of ArcelorMittal sustainable practices, according to Knight,and have become more knowledgeable about sustainability themselves, based on questions they bring to management. “They seem to have more information generally. Some are asking about specific areas such as mining practices,” says Knight. “We’re also moving away from more general statements and more towards practicality. We’re talking about what we are doing in a particular area.”
ArcelorMittal is launching a $150m programme to modernise a power plant at the steelworks in Ostrava, Czech Republic. Among the goals of the upgrade are to reduce nitrogen oxides and sulphur oxides emissions and dust. Plans call for installing a $74m energy-efficient boiler, which will ensure the plant meets upcoming European emissions standards before they take effect, according to the company’s corporate responsibility report.
When the new boiler comes fully online in 2016, the power plant will emit 1,000 tonnes a year less nitrogen oxides, a fall of 49%, reducing the site’s overall nitrogen oxide emissions by 23%, the company’s 2014 corporate responsibilityreportestimates. Overall dust emissions are expected to drop. Last year, Ostrava officialsalso announcedan investment of $6m in new equipment to contain dust.
“Steel is one of the most sustainable raw materials; it’s recyclable and is recycled,”says Knight. “Anything we’re doing with scrap and recycling is a real strength, an example of strength in that sector. The important thing is that that pile [of leftover steel] is not being buried in a hole in the ground or the sea.”
Steel production does use a lot of water, but while the water usage rate is high, the consumption rate is actually very low, according to Knight. “Most of the water we use is for cooling and then we are able to put it back,”he says. “But we still are looking at ways to reduce water usage.”
While ArcelorMittal highlights its progress in areas such as reducing emissions and improving production and its products, it also is paying more attention to how its products can contribute to other businesses’sustainability plans and how it can take a broader view of its responsibilities in the areas in which it operates. Employees receive training in human rights issues. The company cites an economic contribution of $79bn to the economies in which it operates.
“We are seeing a big opportunity as to what our products can do for our customers’sustainability goals,”says Knight. “We can help create sustainable solutions for our customers when they use our products for things such as solar heating.”That includes, for example, designing lightweight parts for cars to help the manufacturers meet their sustainability goals. A large share of ArcelorMittal’s business comes from the automobile industry. About one fifth of the global car production is made from ArcelorMittal steel.
More than half of the company’s investment in product research and development is tied to the automotive industry, and it has five laboratories fully or partly dedicated to R&D for the automotive market. “R&D engineers work with carmakers throughout the lifecycle of their products to develop automotive steels that are stronger yet lighter than existing materials,”the company states. “We also develop new, cost-effective coatings to improve corrosion resistance, paint appearance and application processes.”
Response and responsibility
A turning point for ArcelorMittal in the area of community social responsibility was responding to the Ebola crisis last year while workingin Liberia. “It was a nice piece of work –the approach we took, working with other stakeholders and looking at the broader picture –one of the things I think we should be doing with all projects,”Knight says. “It’s a recipe we can use for other problems.”
The largest international company operating in Liberia, ArcelorMittal spent more than $1.3m responding to the crisis, according to the corporate responsibility report. One of the most influential contributions was to set up the Ebola Private Sector Mobilisation Group, or EPSMG, a coalition whose membership peaked at more than 100 companies, and which concentrated on addressing the outbreak.
The original purpose of the EPSMG, established in August 2014, was to exchange information about the disease, efforts to contain it and its impact on the commercial mining sector in west Africa. The corporate responsibility report states: “We set the group up as part of our wider efforts to tackle the disease, and one of our principal objectives in doing so was to ensure we were doing all we could to protect our employees and contractors, their families and their communities.”
As the membership grew, the aims of the group transformed from just sharing information to more hands-on work, such as enlisting resources to support the humanitarian and healthcare response to the epidemic. Members formed relationships with the UN, including UNMEER and Unicef, the International Red Cross and Resolve. “These relationships have been critical, not just in fighting the spread of Ebola and in caring for those affected by the disease, but also in encouraging the public and NGO sector to look at their business sector not only as donors but as active partners on the front line,”the report states.
Other projects related to the crisis in Liberia included constructing a special treatment unit and two holding centres in Nimba County. The company also donated ambulances, equipment and medical supplies, and funded an Ebola contact tracing project in partnership with a local NGO.
As ArcelorMittal continues to expand and deepen its sustainability programmes, another challenge is to embed the mindset at all levels and locations of the company and ensure efforts are responsive to local needs, says Knight. “Over the long term, we want to make sure the conversation happens at the leadership level and with different geographic leadership,”he says. “We have 10 global outcomes, and an important aspect is to interpret them so as to make them relevant in all participating countries. This is where we have to make relevant corporate and country-level decisions and truly look at those 10 global outcomes, then identify those opportunities and risks and embed them in the business plan. We are shifting the corporate sustainability report from being a report to being a shaper of strategy.”steel extractives mining iron ore ArcelorMittal corporate profile emissions metals
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