Steel, one of the most widely used commodities, forms the backbone of our industrial societies. While it is crucial for our modern world to function, few realize the environmental cost behind its production. Steel manufacturing is responsible for a staggering 7% of the world's CO2 emissions - a harsh reality often overlooked. Even lesser known are the impacts on nature and biodiversity within the steel supply chain.
With the forthcoming European Supply Chain Act, EU companies will be required to carefully manage social and environmental impacts along their entire value chain. This includes direct and indirect suppliers, their own operations, as well as products and services. Consequently, companies may find themselves accountable for biodiversity impacts they weren't previously aware of.
Aggregated risk: Biodiversity risk of sourcing iron ore from the 7 biggest producers.
At ESG Nature Risk, we undertook a study of the steel supply chain for one of Norway's largest energy companies. Our research encompassed an impressive 55% of the world's iron ore production and assessed the potential impacts on 28,000 different species. We then ranked the company's 10 key steel suppliers against each other based on their biodiversity risk.
Our findings revealed a broad spectrum of risk. While some suppliers demonstrated robust environmental stewardship, others were found to have significant biodiversity risks within their operations. Alarmingly, there was also a noticeable lack of transparency surrounding these risks.
Since steel is a homogeneous product in terms of quality and price, we advised our client to shift some of their supply away from high-risk suppliers. This move towards more environmentally responsible sourcing did not compromise quality or result in increased costs.
Risk: Aggregated biodiversity risk for 10 key steel suppliers. By simply shifting some of the supply, the company can considerably reduce their supply chain biodiversity risks.
The steel industry, like many others, must grapple with its environmental impact in an increasingly ecologically conscious world. At ESG Nature Risk, we are committed to helping businesses understand and manage these challenges effectively, paving the way towards more sustainable practices.
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