On February 6th, POSCO was awarded the Leadership (A-) grade in Climate Change Response and Water Resource Management by the Carbon Disclosure Project (CDP).

*Evaluation Grades (in ascending order): Failure (F), Disclosure (D-, D), Awareness (C-, C), Management (B-, B), Leadership (A-, A)

In the 2023 CDP evaluation, POSCO is the only steel company in Korea to simultaneously achieve a ‘Leadership A-‘ grade in both categories.

Founded in the UK in 2000, CDP is a non-profit organization that requests environmental management information disclosure from over 23,000 companies worldwide and analyzes and evaluates this information. As of 2023, CDP provides evaluation information to more than 740 investment institutions, representing a total market value of approximately USD 136 trillion.

Since 2003, POSCO has voluntarily disclosed its activities in response to climate change and information on greenhouse gas emissions to the CDP, submitting evaluation reports. Since 2016, the company has also provided information on water resource management activities and accounting details.

▲On February 6th, POSCO received the Leadership (A-) grade in Climate Change Response (left) and Water Resource Management from the global environmental response evaluation organization, CDP.

In 2020, POSCO declared its commitment to carbon neutrality by 2050, establishing and implementing a reduction plan roadmap. The company has focused on investments in electric furnace installations, operations with a low hot metal ratio (HMR), and the expansion of low-carbon raw material usage. As a result, POSCO has maintained its greenhouse gas emissions per unit of steel produced at a level 2.1% lower than the average from 2017 to 2019.

*POSCO greenhouse gas emissions per unit: The amount of greenhouse gas emissions (tons) divided by the amount of crude steel produced (tons).

Moreover, POSCO encourages participation in water resource management among its suppliers through Supplier Performance Evaluations (SRM). The company also internally manages water pollutants more strictly than legal standards and strives to secure alternative water resources to reduce dam reliance.

These efforts were recognized, and POSCO received excellent evaluations in the Climate Change Response category for risk analysis, the integration of business strategy with financial planning, site emissions, and energy management. The company was highly rated in seven detailed areas in the Water Resource Management category, including business impact, supply chain management, water accounting, and water pollution management.

Baik-hee Lee, Head of Safety Health Environment Division stated, “We believe that our contribution to the national greenhouse gas reduction goals for 2030 and the realization of the 2050 carbon neutrality vision has been recognized by the global capital market. POSCO plans to continue reducing greenhouse gas emissions and enhancing sustainable competitiveness by commercializing HyREX and systematic water resource management.”

More than 150 global businesses set a public goal to source 100% of their electricity consumption from renewables. Shifting away from the traditional use of fossil fuels, the companies are identifying this shift as an opportunity to reduce green gas emission thereby minimizing their environmental impact and support cleaner energy alternatives – while also meeting the demands of the environmentally conscious communities, customers and investors. Increasingly, there are compelling business cases for switching to renewables – more companies are transitioning to renewables to reduce the energy costs.

l What is RE100?

RE100, meaning Renewable Energy 100%, is an initiative seeking to source 100% of electricity consumption from renewables. A UK nonprofit CDP introduced the initiative in 2014 in partnership with the Climate Group. The member companies are energy consumers, not producers, who work together to increase demand for – and delivery of – renewable energy. The voluntary membership involves coming up with their own renewable energy consumption target and the year, and the participating companies submit performance reports annually in accordance with the technical standards provided by RE100. The eligible renewable energy sources are biomass, biogas, geothermal, solar, wind and hydropower.

l How RE100 Emerged

1. Favorable Political Climate
Governments around the world set bold targets to supply renewable energy. Their support for renewables through subsidies, tax benefits, and deregulations alleviated anxieties about investing towards renewables. To meet their goal for renewable energy supply, governments are likely to maintain such policy atmosphere by identifying obstacles from investors’ perspectives and offering practical solutions.

<Renewable energy targets set by governments>

It was the European governments who took to transforming the global energy market early on, seeking to accelerate the expansion of renewables. The European Union set a binding renewable energy target of at least 32% by 2030. All EU countries hold national renewable energy action plans and strive to meet the shared goals as members of the EU community.

Even within the EU however, the reality of each country’s renewable energy varies. Denmark who has the highest proportion of wind power in the world naturally set a bold goal of 100%. Meanwhile, countries like France with less favorable infrastructure for renewables proposed a lower target of 40%. The circumstances were similar for the countries with high dependence on the existing energy infrastructures like nuclear power plants.

Asian and Latin American countries came on board at a relatively later date. Due to the difficulty in securing supply chains as well as the sheer lack of professional services in the renewable sector, these countries presented with more conservative goals.

2. Increased competitiveness of renewables
Renewable-related technologies and facility efficiencies continue to evolve, improving the cost competitiveness of renewables accordingly (e.g. solar energy: $304/MWh → $86 MWh). Furthermore, tighter regulations on fossil fuels and nuclear power are bringing down the appeal toward those energy sources, and the business case for switching to renewables is more compelling than ever.

3. A major shift in the consumer landscape – consumer roles expanded
More companies are sourcing their energy that reflects community values, leaning towards more sustainable energy sources. Low cost and stable energy supply are no longer default preferences for the leading global companies. Corporate responsibility to limit our environmental impact is increasingly becoming a critical factor in their business decisions.

l Performance Records of RE100 Partner Companies

Launched in 2014, the number of companies joining RE100 initiative has been steadily increasing: a total of 160 companies (as of January 2019 ). Companies like Google, Microsoft, Starbucks, and Mark & Spencer have already announced their successful 100% shift to renewables.

<Targets set by key partner companies>

No Korean companies have yet to join the RE100 initiative, though Greenpeace is consistently calling on Korean companies to lead by example and exercise their corporate responsibility. Considering the esteemed market status and influence, Greenpeace officially demanded Samsung Electronics to declare a shift to renewables. In response, Samsung announced a plan to expand their use of renewable energy to 3.1GW in all its sites across the globe (as of June 2018). Within Korea, the company is in the process of installing solar panels at their production facilities in Suwon, Hwaseong, and Pyeongtaek. SK Hynix, South Korean memory semiconductor supplier and the world’s second-largest memory chipmaker after Samsung Electronics, also aims to go 100% renewable at its overseas plants in China by 2020. SK Hynix further announced their 2022 ECO vision, purported to cutting greenhouse gas emissions by 40% compared to 2016.

l Potential Implications for the Korean Companies

Compared to Korean companies, the RE100 partner companies currently implementing their energy shift commitments, operate in a relatively favorable atmosphere. For them, renewables are readily available at lower costs, whereas Korean companies must overcome several hurdles beforehand. With no secure transaction route in place, Korean companies should pay a considerably higher sum to purchase renewables. What must precede is political and institutional changes that help pave the way towards reasonable costs and availability.

Because an electricity market reform is yet to take place in Korea, the industry option for renewable energy purchase is minimal. Companies in the United States and Europe who underwent the restructuring earlier can purchase renewables through various methods like Power Purchase Agreement (PPA), self-consumption, green pricing, unbundled certificates, etc. In Korea, the only available legal option is self-consumption. Grid parity, which indicates the level of cost competitiveness of renewables – compared to existing energy sources like thermal and nuclear – is much lower compared to those in Europe and North America. There, renewable energy has been active since the early 2000s.

Therefore, Korean companies must overcome challenging circumstances to be more proactive about purchasing renewables. What needs to happen is securing purchase routes for Korean companies for renewable energy source through institutional reforms. The Korean government is recognizing such institutional hurdles and plans to introduce premium pricing schemes within the year. They are also reviewing other reforms like PPA. Korean companies, on their part, need to become selective about the system that works for them, establishing a review plan for a preemptive application to minimize the costs.

Nevertheless, the policy and market shift propelled by RE100 are likely to increase the burdens on Korean companies. Increasingly the RE100 participating companies are demanding commitments to renewables not just from within, but from their partner companies in their supply chain. Apple has asked their partner companies to use renewables, and Korean battery companies also received similar requests. Going forward, companies sourcing their energy elsewhere other than renewables might face adverse circumstances in their contracts.

Now is the time for Korean companies to step up and take ambitious corporate action by switching to renewables to meet the demands of global clients and stakeholders, and by redefining their community and economic values. Furthermore, it’s important to make smart strategic decisions by utilizing their own resources to remain competitive in the global market. Above all, the companies must face the realities of energy transition head-on and establish strategies that respond to the demands of the time and the global community we all belong.

In its October 2016 “Nerve of Steel” report, the Carbon Disclosure Project, or CDP, found that steel companies had quite a ways to go in order to meet targets set by the Paris Agreement – the industry as a whole would need to reduce emissions by 70% by 2050. While their report found that most companies were not doing enough to meet these targets, some companies, like POSCO, have been forging ahead with new technologies for more sustainable production.

Why are Reductions in Carbon Emissions Important?

In 2015, nations around the world met at the United Nations Climate Change Conference to negotiate the Paris Agreement. The goals of the Paris Agreement were to keep global warming below 2 degrees Celsius while also calling for zero net GHG emissions in the second half of the 21st century.

A 2-degree increase in global temperature is generally agreed upon by scientists to be the tipping point at which numerous problems arise including droughts, floods, and reductions in crop yields. However, many scientists also believe that if carbon emissions are not curbed quickly, and drastically, temperatures could rise by almost 6 degrees Celsius this century.

Due to the increasing urgency of curbing emissions, governments, businesses, and policymakers around the globe are working to find ways to cut GHG. To help inform this process, CDP transforms environmental performance data from cities, states, and businesses into detailed analysis on critical environmental risks, opportunities and impacts.

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Their “Nerves of Steel” report on the steel industry’s work to cut GHG emissions found few bright spots. The industry as a whole continues to be the main contributor of global carbon emissions with only a few companies, like POSCO, stepping forward to create more sustainable steel production technologies.    

Objectives and Findings of the CDP Report

CDP’s “Nerves of Steel” report found that overall progress in reducing emissions and energy use was limited and uneven across the industry. They found that in the past seven years more companies had increased their emissions intensity and energy intensity than had reduced them. Because of this lack of progress, they found that the steel industry was responsible for between 6-7% of total global emissions. Also, in order to meet Paris Agreement objectives, the industry as a whole would need to reduce emissions by a staggering 70% by 2050.  

Drew Fryer, a Senior Analyst at Investor Research at CDP noted that “The steel industry will have to play a huge part in achieving the 2-degree scenario laid out in the Paris Agreement. However, there has been no progress in reducing its emissions over the past decade. Steelmakers need to prioritize funding of a technology transformation to reduce emissions in order to ensure targets are met.”

Despite the grim outlook on the industry as a whole, CDP did highlight several companies that were working hard toward creating more sustainable steel production technology – among those top performers were POSCO, SSAB, ThyssenKrupp, and Hyundai Steel. See the table below for a full listing of CPD’s rankings.

How POSCO is Leading the Steel Industry in Sustainable Steel Production

CDP ranked POSCO first among all steelmakers for its work to produce steel through more sustainable processes. They noted that POSCO performed strongly across most key areas with below average emissions intensity. Also, unlike several other steelmakers, POSCO demonstrated an ability to reduce its emissions intensity significantly in recent years.

[clickToTweet tweet=”POSCO’s work to limit emissions has proven that more sustainable production can also be more competitive.” quote=”POSCO’s work to limit emissions has proven that more sustainable production can also be more competitive.” theme=”style6″]

While the report placed a strong focus on the industry not focusing on targets to limit global warming (six out of the 14 companies did not even publish targets beyond 2016), CDP noted that POSCO’s targets remain consistent with the goal to cut emissions significantly enough to reach the Paris Agreement objectives.

In particular, CDP highlighted POSCO’s FINEX technology that was developed and commercialized to provide incremental emissions reductions from steelmaking by eliminating sintering and coke oven processes. They also noted that the technology has the potential to be combined with carbon capture & storage (CCS) due to high concentrations of CO2 in waste gases, POSCO’s other active projects to separate and capture CO2, and their early stage work on carbon capture & use (CCU) and hydrogen-based steelmaking.

POSCO’s technological advancements in sustainable steel production have helped it reduce emissions while becoming more competitive.

In addition to these developments, POSCO continues its work to make its factories run smarter and more efficiently. AI and IIoT technology are helping to improve product quality for POSCO’s customers while also reducing waste and pollution. In addition, to be recognized by CDP as a leader in the steel industry, POSCO’s efforts have also been recognized by the Corporate Knights’ Global 100 list (#1 in Metals and Mining), and they have also been listed on the Dow Jones Sustainability Index for 12 straight years.

As the world works toward hitting emission reduction targets, governments, policymakers, and industry leaders must step forward to lead. POSCO’s work to limit emissions has proven that more sustainable production can also be more competitive.

*Cover image courtesy of the World Steel Association

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