Tata Steel’s three steps to becoming carbon-neutral and circular

No cars, no infrastructure, no wind turbines, no housing, no canned food… Imagine a life without steel. Surely, that’s a daunting task. Tata Steel, a Dutch industry icon with a 100-year legacy, is fully aware of its place in society. With world-class products, Tata Steel contributes to everyday life. It employs thousands of steelworkers of different generations of families living in the region.

Despite all the great products being made from steel, steel manufacturing also has a downside to its work as it’s a very energy-intensive process. Unfortunately, carbon emissions are, for now, inevitable in the steel production process, as carbon is still needed to produce liquid iron. 

Tata Steel in Europe is one of the leading steelmakers when it comes to CO2-efficient steelmaking. Its production site in Velsen outperforms most of its global competition by around 25 percent. Despite that, Tata Steel is aware it’s the second largest CO2 emitter in the Netherlands. The company understands the urgency to address climate change and feels a responsibility for today’s society and future generations to reduce its environmental impact.

Tata Steel Europe - IJmuiden location
Source: Tata Steel Europe

What is needed for a successful transition to a carbon-neutral and circular producer of steel?

The manufacturing industry is as much in a transitional phase as we’ve seen in the chemical industry. Companies are under pressure to redefine their purpose, taking its impact on society and its surroundings into account. We talked to Roger Steens, Director Sustainability of Tata Steel, about becoming a purpose-led organization. Steens believes industry forms and will form an integral part of society and is vital to deliver a shared ambition for sustainable development. 

Three steps have been identified:

Step 1. Recognize how industry and society depend on each other to ensure a strong, circular and carbon-neutral economy

“We at Tata Steel understand that to sustain our business in the long term, we must focus on mitigating climate change. It is our ambition to become a carbon neutral steel maker by 2050,” Roger Steens says. 

Steel is produced from iron ore, an oxide that is converted to iron during a chemical reaction with carbon. In a steel plant, impurities are removed from the raw iron, and alloying elements are added to produce different grades of steel. In the long term, the sustainable solution lies in making steel with hydrogen instead of coal. The chemical reaction would then produce H2O rather than CO2. However, hydrogen from renewable sources is in short supply and it will likely take decades before the technology to produce steel in a carbon neutral way with hydrogen will become commercially available.

We at Tata Steel understand that to sustain our business in the long term, we must focus on mitigating climate change

Reducing emissions in the steel production process

Tata Steel is developing several options to reduce its emissions for the midterm. The company is working together with Dow Chemical to develop a technology to reduce CO2 emissions by converting process gases to ‘feedstock’ for the chemical industry. Tata Steel is also developing a new steelmaking process called HIsarna. This process makes steel production possible with at least 20 percent lower CO2 emissions compared to the present technology. This CO2 reduction can be as high as 80 percent when combined with carbon capture and storage. 

Steens: “Steel is indispensable to produce wind turbines, hydrogen plants and electrical vehicles. In the future, even larger volumes of steel will be needed to build a sustainable infrastructure and offer affordable housing, clean energy, sustainable mobility and to feed everyone.” 

Source: Tata Steel Europe

Having no real alternatives

Tata Steel, and steel in general, have a lot to offer when it comes to contributing to a strong, circular and carbon-neutral economy. Alternatives, such as stopping the production of steel in the Netherlands, would have significant drawbacks. Steens stresses that “We would simply export our problems to areas where emissions are less controlled and import steel from industries with relatively poor environmental performance and working standards. It would definitely result in higher overall emissions of CO2.”

Working together in partnership becomes self-evident when you recognize that you share the same ambition

Steens adds that steel is the most used material in the world and is infinitely recyclable. “Moving to alternative materials often leads to higher overall CO2 emissions. For example, studies show that fully circular buildings made of steel are 30 to 40 percent more CO2-efficient than buildings that are made from alternative materials,” he explains.

This essential role for Tata Steel, and steel in general, to help meet the ambitions for a healthier and sustainable economy should be recognized by all stakeholders, Steens believes. It lays the foundation for successful cooperation. “Working together in partnership becomes self-evident when you recognize that you share the same ambition and each party holds a part of the key….”

Step 2. Implement the right incentives to ensure a ‘level playing field’ for the steel industry

The drivers for the transition to a carbon-neutral and circular economy are in Steens’ opinion different from the ones that changed industry in the past. In the first half of the twentieth century, industries like textile and shipbuilding became uncompetitive and production moved to low-cost countries in Asia. Europe’s car industry survived by focusing on quality and is now thriving by offering superior value and an appealing brand experience. “But now, the call for change is not coming from the market, but from society at large.”

The call for change is not coming from the market, but from society at large

Adhering to (Inter)national regulations

Tata Steel has adopted CO2 emission targets that meet with the Dutch and European ambitions deriving from the Paris Agreement. These targets form the drivers to develop new technologies to lower emissions in steelmaking. Steens: “The investments required to implement these technologies are enormous. So, this is the challenge: how can we become a carbon-neutral steelmaker and stay competitive in our international markets?”

“It will be hard for Tata Steel to remain competitive unless all steelmakers are faced with the same additional costs for carbon dioxide emissions and the same requirements to invest.” The sustainability director confirms that it is the company’s view that climate policies should be dealt with at European level and not at a national level. National initiatives impact the carbon costs of individual steelmakers and, as such, undermine establishing a European level playing field for the entire industry. 

Tata Steel recognizes that early adopters in their markets are interested in more sustainable products and they may be willing to pay for it. This can offer new business opportunities. 

Needing commitment from multiple angles

Making a new development a huge success needs involvement and commitment from multiple angles. Tesla is an excellent example of a company that has become a frontrunner in producing eco-friendly products, electric vehicles in this case. But according to Steens, more needs to be done to drive the system’s change to electric mobility. 

He reflects that this is acknowledged by regulators. Steens points out that the Dutch government facilitates the arrangement of a charging network for electric vehicles and the implementation of tax incentives to make electric vehicles appealing to consumers. This EV example is illustrative for how breaking down barriers encourages the use of new technologies.

“It is our view that similar fundamental market drivers need to be implemented if we really want to move to a circular economy in which no CO2 is emitted and no products and materials are wasted,” Steens continues. "Ensuring that all steel industry stakeholders deal with the same CO2 price across the European market would result in a more level playing field and a healthier competition in CO2 performance to drive the transition to responsible production of steel.”

Step 3. Have an ongoing dialogue …. 

The third, and maybe most important, requirement for success is an ongoing dialogue between stakeholders. Organizations today must realize that the quality of their relationships with all stakeholders and their ability to create successful partnerships is related to trust and whether you appreciate the value that each party has to offer. Maintaining an open dialogue that ensures a good understanding among all parties on what is required to deliver a shared objective is, therefore, paramount.

Tata Steel - Steel workers in dialogue
Source: Tata Steel Europe

Steens: “New technologies and large amounts of renewable energy are needed to produce steel in a carbon-neutral way. We want to cooperate with other industries and customers to integrate our products and by-products into the circular economy so that nothing goes to waste. We’re working with various partners to investigate and test our options to transform our operations and be one of the first steel companies that’s able to support sustainable development with responsibly produced steel.”

Tata Steel also wants to nurture and sustain the communities close to their operational plants. A regular dialogue with people representing these communities helps Tata Steel to understand and address their concerns. “Our goal is to create a better living environment for everyone. Tata Steel is dedicated to continuing to make a positive social impact. We have successfully played our part in the sustainable development of our economy for the past 100 years, and with the help of our communities and partners, we are determined to continue doing so.”

We have successfully played our part in the sustainable development of our economy for the past 100 years, and with the help of our communities and partners, we are determined to continue doing so

Finding your purpose to become a responsible business

Companies that embrace purpose can align the core of their business to new stakeholder expectations. They position themselves into emerging markets and ecosystems that secure growth while also addressing today’s pressing problems. 

Tata Steel is a prominent example of a (steel) company that faces disruption, while being eyed by several stakeholder groups. Finding your purpose and making it an integral part of your organization is essential to continuing the dialogue with your stakeholders, building long-term resilience, attracting and retaining talent, and connecting with clients.

Are you ready to embrace your purpose? We are here to help you shape a responsible business and change for the better.

Author: Femke de Jager