As a result of the increased awareness about sustainability and the circular economy, the global steelmakers, which account for around 8% of the world’s energy demand, are shifting their focus from profitability-driven goals to complying with Environmental, Social, and Governance (ESG) norms to ensure a sustainable future for the whole industry. Following global counterparts, Indian steelmakers have also started reworking their strategies to follow suit and embrace these transformative priorities.
Because of their higher share in overall greenhouse gas emissions, metal sector companies, particularly steelmakers, have been making concerted efforts to shed their reputation as one of the largest contributors to environmental pollution. In their quest to change public perception, they have started to focus on ways and means to make the sector more environment friendly. Higher scrutiny from investors, authorities, and other key stakeholders over issues such as biodiversity, water neutrality, soil degradation, and carbon footprint is also forcing metal companies, including steelmakers, to take some concrete measures, according to a report by EY on ESG challenges.
In addition to pressure from several peer groups, steelmakers are also finding it as advantageous to comply with ESG norms as it enhances their (steel industry) market positioning, unlocks new investment opportunities, and drives long-term profitability. As until now decarbonisation technologies in the steel sector haven’t proved to be economically viable to facilitate the complete transformation to a net-zero emission industry, adherence to ESG norms has become imperative for the steel companies to ensure a sustainable future for the industry.
Steel is vital for decarbonisation objectives
As the world strives to limit global temperature rise to 1.5 degrees Celsius, many countries, including India, have committed to achieving net-zero emissions. And to achieve such an ambitious environment goal, it is extremely important to decarbonise the steel sector, which contributes significantly to global economic development. Investors are increasingly becoming aware that steel as an industry is not only a source of emissions in the value chain but can also be a provider of critical raw materials needed for the global energy transition.
Steel is one of the most important elements of modern development, but its production process is very resource-intensive and it consumes vast amounts of energy, water, and raw materials, leading to substantial emissions. As the urgency to combat climate change increases, steel manufacturers are also embracing sustainable innovations that not only reduce their environmental footprint but also contribute to their long-term viability.
Transformative role of ESG
The ESG’s role is not limited to making the steel sector more environmentally friendly; rather, it has become the harbinger of complete transformation, driving changes that ensures the industry’s sustainable future. By embracing environmental responsibility, social equity, and strong governance, steel manufacturers can not only meet the demands of today’s market but also pave the way for a more sustainable and ethical tomorrow.
As ESG continues to shape industry standards and practices, steel manufacturers must stay committed to these principles, continuously innovating and improving their operations. In doing so, they will contribute to a healthier planet, more equitable societies, and a robust, sustainable economy. Moreover, by embedding ESG principles into their whole operations, steel companies can enhance their image as the driver of positive and social change, which ensuring that their profitability is not adversely impacted.
Challenges and opportunities
The growing importance of ESG compliance in the wake of accelerating pressure to decarbonise the whole sector represents both a challenge and an opportunity for steelmakers. The greatest challenge is securing adequate funding needed to fund the complete transformation of the industry. Steel firms have to invest large financial investments in implementing procedures and production methods that use less energy and have a less environmental impact.
Moreover, as ESG practices go beyond cutting emissions, they also need to encompass the well-being of the workforce, communities, and the whole society in which these companies operate. And this means companies have to equip employees with the skills to adequately figure data and reporting for measuring, monitoring, and communicating performance against these social goals. Besides this, steel manufacturers also have to focus on ensuring a safe, inclusive, and healthy work environment for their workforce to comply with ESG norms, and this requires investment in employee health and safety, skill development, and diversity and inclusion initiatives. By prioritising the well-being and growth needs of their workforce, steel workers can cultivate a culture of mutual respect, collaboration, and shared success.
ESG-driven sustainable future
Despite several challenges, metal industries, particularly steel manufacturing industries, are considered as a cornerstone of the nation’s economic growth, they must adhere to ESG norms to realise the immense potential they hold for economic development and environmental responsibility. Adopting best practices to ensure ESG compliance can help steep companies to maintain healthy and mutually beneficial relations with local communities, worker unions, governments, pressure groups, institutional investors, pensions funds, and other key stakeholders, and will help companies to secure a sustainable future not only for themselves but for the whole ecosystem in the long run.
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