The automotive industry is one of the largest end users of steel, representing about 16% of global steel consumption. With a huge demand for high-quality steel, automakers are well-positioned to be early adopters of low-carbon steel in their products.
As a transition to battery-powered cars the amount of greenhouse gases that are released during the usage of a vehicle are decreasing, meaning a growing share of emissions in the automotive lifecycle will come from materials.
However a report from Greenpeace East Asia claims that car manufacturers are not taking sufficient steps to decarbonize their steel supply chains. According to the report, which was also referred to by Reuters, the world's 16 biggest automakers consumed 40 to 67 million tons of steel in 2021, estimating that the carbon footprint of the steel materials these car manufacturers used could have been at least 77 million tons of carbon dioxide (CO2) in that year.
Stronger impact by higher proportion of primary steel
Compared to other steel-product industries automobile manufacturers have a relatively less complex supply chain, which allows a more stable relationship with steelmakers. In parallel there is also a relatively insignificant incremental cost of a vehicle if made with low-carbon steel.
In 2021, 1839 million tons of steel were used across all industries according to World Steel Association, with about 300 million tons going to the automobile industry alone and emitting approximately 573 million tons of CO2.
As a comparatively higher proportion of primary steel is used to make cars, the automobile industry is in a good position to drive the decarbonization in the metallic value chain. A stronger commitment in procuring decarbonised steel could lead the way for steel producers to invest in the transition. However, according to Greenpeace, car manufacturers lack "concrete actions" to decarbonize their steel supply chain, despite their net-zero commitments.
As a response to Greenpeace, the automotive companies Volkswagen and Toyota said in statements to Reuters that they are aiming to be carbon neutral by 2050, while Hyundai Motor Group said Hyundai Motor and Kia are "accelerating efforts" to become carbon neutral across their business operations.
Collaboration, frameworks, and joint efforts to drive the transformation
Geopolitical disputes, financial crisis, and climate change are also impacting the necessary transformation to a more sustainable steel supply chain. Big challenges that hard for companies to address on their own. Therefor sector specific collaborations and frameworks have been formed to ease and accelerate the transition towards a more sustainable industry.
Two European examples of organizations in the automotive industry are Catena-X and Odette:
Catena-X – standardized global data exchange
The Catena-X consortium is funded by the German Federal Ministry for Economic Affairs and Energy's "Future Investments in the Vehicle Industry" funding program. In contrast to classic funded projects, Catena-X is a transfer and implementation initiative that also envisages concepts of operation.
Catena-X is a collaborative, open data ecosystem for the automotive industry, linking global players into end-to-end value chains. Catena-X was the first globally active network for the automotive industry. The common goal is a standardized global data exchange based on European values, with small and medium-sized companies operating side by side with large corporations. Catena-X is an open system, and other industries and ecosystems can be integrated.
Odette – support the digitalization of supply chain processes
For Odette the mission is to develop standards and best-practice recommendations, and provide tools and services to support the digitalization of supply chain processes and secure the exchange of confidential commercial and engineering data exchange throughout the world. The aim is to improve the efficiency and enhance the competitiveness of the European automotive industry within the global economy. Another major role of Odette is to build global communities where major players from the automotive industry can meet in a neutral environment and take advantage of the immense networking benefits that arise from working collaboratively on solutions to supply chain challenges.
These kind of collaboration initiatives plays an important role in harmonizing and accelerating the decarbonisation of steel within the automotive industry.
Efficient, secure, and transparent tools and processes are crucial for tracing and visualizing the emissions end-to-end in the metallic value chain. ChainTraced are happy to be a contributing member of both Catena-X and Odette, giving us important insights of challenges and success factors of steel decarbonization within the industry. Are you interested to learn more about how ChainTraced help steel product companies along the metallic value chain to improve CO2 traceability for a more sustainable future? Read more and book an introduction meeting here
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*The article is inspired by Greenpeace report “Breaking The Mold: The Role of Automakers In Steel Decarbonisation” and Reuter article “Despite promises, automakers lack 'concrete actions' to decarbonise steel – Greenpeace”.
