Iron and steel have been central to human development for three thousand years. Steel is the world's most important and cost-effective engineering and construction material. Steel remains an integral part of the solution to climate change because of its unique properties like strength to weight ratio, ductility, longevity and most importantly infinite recyclability. These properties make steel the material of choice for industries like construction, infrastructure, automotive, white goods, and general application. Steel is also playing an important role in the transition to clean energy with its application in solar panels, wind turbines, hydroelectric dams, and electric vehicles.
As per International Energy Agency (IEA), the steel sector emits 2.6 Gt CO2 annually which accounts for 7-9% of global anthropogenic CO2 emissions. Steel is one of the hard to abate sectors for Greenhouse Gases (GHG) emissions because of metallurgical coal being used as a reductant in iron making process through the Blast Furnace. The Blast Furnace-Basic Oxygen Furnace (BF-BOF) route accounts for 70% of global steel production currently.
Tata Steel is committed towards reducing carbon footprint in production and through the life cycle of the product. We are one of the first companies in India to have endorsed the recommendations of Task Force on Climate-related Financial Disclosures (TCFD), with our Executive Director and Chief Financial Officer (ED & CFO) being a member of the Task Force. We are continually strengthening our production processes, supply chains, internal governance, disclosures, and policy advocacy to facilitate a transition to a lower carbon future.
At Tata Steel, climate action is an integral part of business strategy and risk management and is driven by the Company’s Board, with implementation through an organisation-wide governance structure. The CSR (Corporate Social Responsibility) & Sustainability Committee of the Board is responsible for providing directional oversight on our Climate Strategy, target setting and reviewing progress periodically throughout the year. Additionally, the Risk Management Committee of the Board reviews Tata Steel group level climate change related risks periodically. The Chief Executive Officer and Managing Director (CEO & MD) along with the Executive Director and Chief Financial Officer (ED & CFO) are members of both these Board Committees.
Tata Steel Group’s CEO & MD drives the climate action programme for Tata Steel across all geographies, including its subsidiaries and reviews the same quarterly as chairman of Apex Environment & Sustainability Committee. The CEO & MD also chairs the Technology & Innovation Management Committee which drives the adoption of deep decarbonisation technologies like Hydrogen based steelmaking and Carbon Capture & Utilisation.
In 2018, a Centre of Excellence for GHG reduction and mitigation (cross-functional team with members from Operations, Technology and R&D, Sustainability, Finance and Engineering) was constituted under the leadership of Vice President Safety, Health & Sustainability to develop a climate change response roadmap, suggest policy level interventions, align our expansion/growth plans to a low carbon pathway and review implementation of projects.
The company has also formed a Carbon Impact Centre (C-IC) that is responsible for formulating carbon abatement projects. We use the Marginal Abatement Cost Curve (MACC) tool for prioritisation of projects and Internal Carbon Price (ICP) in India (in line the EU Emission Trading Scheme) to ensure that new projects adequately reflect their intrinsic carbon price and also benefits of any carbon reduction.
Climate Change risks are part of the enterprise risk register and quarterly updates of these risks on likelihood, impact and status of mitigation strategies are reviewed by the Risk Management Committee of the Board.
We have identified 4 Strategic Objectives with long term goals and action plans for each of them. Our Strategic Objective #4 is focused on ‘Leadership in Sustainability’ wherein we’ve set specific long-term goals on carbon emissions along with decarbonisation roadmap. Based on global scenarios on technology, government policy, consumer behavior and company’s asset configuration, our decarbonisation strategy is set out in three-time horizons, as mentioned below:
We engage and support initiatives like ResponsibleSteelTM certification, development of steel sector guidance for science-based target setting, Net Zero Steel Pathway methodology project, Assessment of low-Carbon Transition (ACT), World Economic Forum’s Mining and Metal Blockchain Initiative, World Steel Association’s CO2 benchmarking and STEP-UP programs to chart long-term decarbonisation pathway for the sector.
Tata Steel Group has been rated by CDP in Leadership band for Supply Chain disclosure. We have also been recognised as one of the top 25 most innovative Indian Companies by the Confederation of Indian Industry (CII) for ‘First-of-its-kind’ 5 tonnes per day CO2 capture plant and ‘First-in-World’ Digital Twin in Sinter Making in India.
Tata Steel uses the company wide integrated Enterprise Risk Management (ERM) process for managing climate change risks. The process identifies and assesses business risks through bottom up, top down and outside in perspectives so as to ensure comprehensive risk identification and minimise blind spots. Likelihood, impact, and velocity scores are assigned for each of the risks post a due-diligence process including scenario. Appropriate early warning indicators and mitigation strategies are identified for review including by the Apex Risk Committee and Risk Management Committee (RMC) of Board.
We are congnisant of the fact that both transition and physical risks associated with climate change will have an impact on our organisation’s operations, supply chain and financial planning. Stringent climate laws and regulations for accelerating transition to a low-carbon economy, technology disruptions and shifting customer preferences to alternative materials may adversely impact profit margins, more so if our performance in abatement is inferior to our peers. Also, extreme weather events have become more frequent and severe in the recent years. On the other side, climate change also poses opportunities which includes improved resource efficiency resulting in monetary savings, development of new products & services and access to newer markets, earnings from voluntary carbon markets, access to larger markets / customers requiring steel of low carbon intensity.
In FY 2018-19 we conducted a third-party assessment to arrive at potential climate change risks and opportunities for our India operations and estimate likely impact of the risks on the company’s strategy and financial planning. This assessment involved a holistic approach comprising of internal stakeholder consultation, literature review, peer comparison and scenario analysis. We envisage that the way in which these risks and opportunities will play out in the future will depend on two fundamental factors, viz, ‘Global Policy Response’ and ‘Technology Innovation’. Hence, we developed 4 scenarios based on these two factors considering various global warming temperature ranges to assess impact of these risks on our business strategy and financial planning. The 4 scenarios are – ‘India Role Model’, ‘Late Forced Transition’, ‘Climate Emergency’ and ‘Technology Breakthrough’. Out of the 4 scenarios, we believe ‘India Role Model’ (where there will be strong policy enablement and extensive innovation & technology advancement) is an ambitious scenario that outlines a technologically, industrially & economically possible pathway forward to restrict increase in global average temperature rise to below 1.5°C. It forms our base scenario for financial modeling and strategic considerations.
Extreme weather events like storm, drought, and cyclones due to climate changes have become more frequent in recent years. They not only lead to loss of lives and property but also cause business disruption and financial losses. Mitigation strategies are put in place to avoid significant delays in project execution.
These risks are site specific and are dealt as per site specific “disaster scenario” planning. Our risk register covers climate change induced physical risks in the form of supply chain disruption (potential delays in vessel placements & loading/ unloading at ports/ sites/ stock yards due to adverse weather conditions) as well as capital project delays including unplanned costs and loss of production.
Tata Steel undertook several design-strengthening initiatives during the construction phase after 2013 cyclone during erection of Kalinganagar Plant. The severe cyclonic storm - ‘Yaas’, ravaged the coastal states of Eastern India (where our major operations reside) with peak wind speeds of 140km/h. Our Plants at Kalinganagar, Meramandali and Gopalpur in Odisha remained stable and without production cuts as the cyclone passed.
To future proof our key assets and proposed future capital projects we have completed Natural Hazard and Climate Change Hotspot Analysis for key operating locations covering major upstream mining sites, steel making facilities and ports that are part of our major supply chain networks for our India operations. The potential threats from different natural hazards, extreme events, and climate change were assessed based on globally accepted Climate Change Scenarios (RCP 4.5 & RCP 8.5) for a timeframe of 2030 and 2050.
To further build resilience in our planning and action on climate change adaptation, we are currently working on identifying, assessing, and quantifying long-term physical risks to the business as part of our third-party climate risk assessment.
Over the last few years, planning and budgeting of our R&D programs have been increasingly dedicated to prioritizing projects keeping climate related risks & opportunities and the need of the customers in focus.
Our targets for the India business take into account India’s growth ambitions, increasing steel consumption, evolving policy landscape and Tata Steel’s goals to maintain and increase market share.
Please refer to ESG Factsheet section for details on our decarbonisation performance. ESG Factsheet