GSCC: Stressing the ‘S’ in ESG

Information on environmental performance is becoming key for companies, as all stakeholders, including employees, customers and financing sources, want to know a company’s environmental impact and climate transition plan.

For example, the new European Sustainability Reporting Standards are part of the European Union Corporate Sustainability Reporting Directive to address climate change and environmental degradation through increased transparency. U.S. Trade Representative Katherine Tai requested the U.S. International Trade Commission (ITC) develop a report on greenhouse gas emissions associated with steel and aluminum production in the U.S. by January 2025.

Under the new EU reporting standards, companies must disclose whether they have climate transition plans along with social factors to inform of the investment risks and opportunities presented by environmental, social and governance (ESG) variables. Large companies will be required to publish their first reports with 2024 data, while smaller companies will be phased into the program. EU authorities also are developing industry-specific disclosure requirements.

Many believe that the recently established EU standards are not strict enough and that their incomplete methodology hinders the creation of a precise, reliable sustainability reporting framework. Still, the climate discussion is being materially coded into legislation that will influence access to public and private financing.

Getting to know GSCC

According to Phillip Bell, president of the Washington-based Steel Manufacturers Association (SMA), the global steel industry must coalesce around a standard. Various metrics suggested in recent years have not resulted in consistent adoption, providing an opportunity for the Global Steel Climate Council (GSCC) standards.

Bell says the industry should develop these systems proactively before they are dictated to it, adding the lack of clarity in some models and the building of exceptions or multiple metrics in others have made it difficult to build momentum.

“The GSCC standard is key at two levels,” Bell says. “First, the standard is process agnostic and can apply globally and, secondly, it allows for other steelmaking technologies that will come down the road.” GSCC does not distinguish between the steelmaking route or the raw material utilized, instead focusing on the absolute value of carbon emissions.

Contenders in the certification world at present are the GSCC, green steel certifications, First Movers Coalition and the International Energy Agency (IEA).

Bell notes that the GSCC has adopted from the leadership and early efforts of other organizations, along with observing the strengths and pitfalls of earlier systems, enabling it to adjust to narrowly focus on what really matters: emissions.

Nucor Corp., Steel Dynamics Inc., Commercial Metals Co., and Celsa Group provided seed funding to launch GSCC. Although several founding members are U.S.-based firms, Bell says the GSCC is not a U.S. standard, but a truly international emissions-focused system that is gaining support globally. In fact, international steelmakers including Deacero, Tenaris, Alfa Acciai Group, Icdas, Megasa and Tokyo Steel have accepted GSCC standards, says Dave Miracle, manager of environmental sustainability for Nucor.

“The GSCC Steel Climate Standard is the right approach to leveling the playing field among steel producers while also recognizing the key role that recycled steel plays to meet decarbonization goals in the decades ahead,” says Robin Weiner, president of the Washington-based Institute of Scrap Recycling Industries, which represents members globally.

Education and allowing public comment were some of the first steps in developing the GSCC. It included sending an invite for evaluation to steel producers and Fortune 500 companies along with other supply chain stakeholders such as original equipment manufacturers (OEMs), before concluding a successful comment period in June.

The council has different membership categories for steel producers, nonsteel producers and nongovernment organizations (NGOs).

To become a part of this coalition members must reach milestones in their emissions journeys alongside third-party verification. Bell notes global automotive producers and advanced manufacturing companies have expressed interest in supporting the emissions-focused standard. “It is important for an OEM to have sustainability claims tie into raw materials.”

“The fact it has a clear and objective goal, keeps the GSCC from ‘greenwashing’, ‘greenhushing' or ‘fuzzy marketing campaigns’,” Bell says. The cost will be loosely based on a steelmaker's annual production.

Many OEM members are essential eco-partners to auto manufacturers who want a direct comparison for emissions.

“Whether they will be able to pay a premium for the cleaner, greener steel is yet to be determined,” Bell says. “But investors, environmentalists, governments, and people in general want a lower carbon future. The way steel can contribute to that is by adopting the GSCC standard.”

Miracle says Nucor disagrees with the sliding scale and got involved in the discussion in late 2022 when it seemed the U.S. Trade Administration could adopt such a measure erroneously.

The GSCC standard includes direct emissions from operations, indirect emissions from electricity and a wide range of significant Scope 3 emissions that are important when trying to understand the total embodied carbon content within the purchased steel.

Nucor says it has a short-term goal of reducing Scope 1 and 2 emissions 35 percent by 2030 using a 2015 baseline and aims for net zero emissions by 2050.

GSCC requires members to set science-based targets within the first two years of joining. Nucor plans to fully embrace the GSCC’s emissions standards and bring all its products under certification. A calculation and alignment for every mill is anticipated by the end of the third quarter of 2024.

Miracle says Nucor is 20 years below the Paris Agreement’s requirement curve but that GSCC is excellent even for ambitious companies to stay below that curve. Nucor recently invested in the lowest embodied carbon direct-reduced iron (DRI) or hot-briquetted iron (HBI) in North America at its Louisiana site.

Supporting new legislation

Bell says the GSCC has received positive feedback from public policymakers. The U.S. Department of Commerce via the International Trade Administration (ITA) has planned to review the standard. The Department of Energy, Office of the U.S. Trade Representative and other national forums also have been briefed. Bell says legislators had to be educated as to why the green steel certifications principles are not ideal for the U.S. steel panorama.

Moreover, an additional cost for imports of higher-carbon-emissions steel is in the works in the U.S.

New legislation called the Providing Reliable, Objective, Verifiable Emissions Intensity and Transparency (PROVE IT) Act of 2023, co-sponsored by Sens. Bill Cassidy of Louisiana, Chris Coons of Delaware and Kevin Cramer of North Dakota, seeks reliable and quantifiable data for emissions and trade. The bill seeks ways to verify the carbon emissions of imported goods into the U.S. and quantify the climate benefits in U.S. investments. The legislation will compare imports to U.S.-made goods and, if sold in the U.S., determine the cost of entry to do so. The U.S. already has among the lowest carbon-emitting steel producers and other manufactured products.

Tsvetelina Kuzmanova, senior policy adviser at E3G, a London-based independent climate think tank, commented to Bloomberg and other media outlets on the limitations in the new European Sustainability Reporting Standards only. The E3G upon review, is not endorsing the GSCC. In fact, it is part of a coalition of civil organizations that have expressed opposition to its use in trade agreements. Several representatives in the coalition will be interviewed by Davis Index for the fourth installment on this discussion.

Scrap included

The assertion that more companies are unable to move to electric arc furnace (EAF) technology because of a shortage of scrap has been determined to be inaccurate by the latest research that assessed steel products’ lifespans.

Scrap is an elastic commodity; as the price goes up, so does availability, and developing countries are joining developed countries with wider availability. Within the U.S., Cleveland Cliffs and U.S. Steel report plentiful scrap supplies in their latest financial reports. U.S. Steel has made a substantial investment in Big River Steel, which produces high-end steel, and its 2024 expansion.

Countries are subsidizing their steel industries in Europe and Canada to convert inefficient blast furnaces to EAFs or to make metallic-based investments. Increasingly, Bell says, the rest of the world will embrace better technology such as EAF production, but companies leading in environmental stewardship should be differentiated.

Miracle notes that collection and sorting are part of the carbon boundary but a small piece of the footprint. Technology improvements will further reduce emissions, but much relies on transportation choices and other technologies to be explored, such as fossil-free electricity.

Zulma Herrera is chief operating officer at Davis Index and can be reached at zulma.herrera@davisindex.com.