Volume 9—Iron & Steel Producers

Title: Volume 9—Iron & Steel Producers

Category: Part B—Industry-based Guidance for IFRS S2

Source: IFRS Foundation (https://www.ifrs.org)

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Year: 2023

Type: Industry

Industry-based Guidance on implementing

Climate-related Disclosures

Volume 9—Iron & Steel Producers

June 2023

IFRS S2

IFRS

® Sustainability Disclosure Standard

International Sustainability Standards Board

This Industry-based Guidance accompanies IFRS S2 Climate related Disclosures (published

June 2023; see separate booklet) and is issued by the International Sustainability

Standards Board (ISSB).

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IFRS S2 CLIMATE-RELATED DISCLOSURES–JUNE 2023

Introduction

This volume is part of the Industry-based Guidance on Implementing IFRS S2 Climate-related

Disclosures. This guidance suggests possible ways to apply some of the disclosure requirements in

IFRS S2 but does not create additional requirements.

This volume suggests possible ways to identify, measure and disclose information about

climate-related risks and opportunities that are associated with particular business

models, economic activities and other common features that characterise participation in

this industry.

This industry-based guidance has been derived from Sustainability Accounting Standards

Board (SASB) Standards, which are maintained by the International Sustainability

Standards Board (ISSB). The metric codes used in SASB Standards have been included for

ease of reference. For additional context regarding the industry-based guidance contained

in this volume, including structure and terminology, application and illustrative

examples, refer to Section III of the Accompanying Guidance to IFRS S2.

IFRS S2 INDUSTRY-BASED GUIDANCE

Volume 9—Iron & Steel Producers

Industry Description

The Iron & Steel Producers industry primarily consists of entities producing iron and

steel in mills and foundries. The steel producers segment produces iron and steel

products from its own mills. These products include flat-rolled sheets, tin plates, pipes,

tubes, and products made of stainless steel, titanium and high alloy steels. Iron and steel

foundries, which cast various products, typically purchase iron and steel from other

entities. The industry also includes metal service centres and other metal merchant

wholesalers, which distribute, import or export ferrous products. Though entities are

developing alternative processes, steel production primarily relies on two primary

methods: the basic oxygen furnace (BOF), which uses iron ore as an input, and the

electric arc furnace (EAF), which uses scrap steel. Many entities in the industry operate

on an international scale. Note: With a few exceptions, most entities do not mine their

own ore to manufacture steel and iron products. There exists a separate standard for the

Metals & Mining (EM-MM) industry.

Sustainability Disclosure Topics & Metrics

Table 1. Sustainability Disclosure Topics & Metrics

TOPIC

METRIC

CATEGORY

UNIT OF

MEASURE

CODE

Raw steel production, percentage from: (1) basic oxygen furnace processes, (2) electric arc furnace processes Quantitative Metric tons (t),Percentage (%) EM-IS-000.A Total iron ore production 10 Quantitative Metric tons (t) EM-IS-000.B Total coking coal production 11 Quantitative Metric tons (t) EM-IS-000.C Greenhouse Gas Emissions Topic Summary Iron and steel production generates significant direct greenhouse gas (GHG) emissions,

primarily carbon dioxide and methane, from production processes and on-site fuel combustion. Although technological improvements have reduced the GHG emissions per ton of steel produced, steel production remains carbon-intensive compared to other industries. Regulatory efforts to reduce GHG emissions in response to the risks posed by climate change may result in additional regulatory compliance costs and risks for iron and steel entities because of climate change mitigation policies. Entities can achieve operational efficiencies through the cost-effective reduction of GHG emissions. Capturing such efficiencies can mitigate the potential financial effects of increased fuel costs from regulations that limit—or put a price on—GHG emissions.

Metrics EM-IS-110a.1. Gross global Scope 1 emissions, percentage covered under emissions-limiting regulations 1 The entity shall disclose its gross global Scope 1 greenhouse gas (GHG) emissions to the atmosphere of the seven GHGs covered under the Kyoto Protocol—carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs),

perfluorocarbons (PFCs), sulphur hexafluoride (SF6), and nitrogen trifluoride (NF3).

1.1

Emissions of all GHGs shall be consolidated and disclosed in metric tons of carbon dioxide equivalent (CO2-e) and calculated in accordance with published 100-year time horizon global warming potential (GWP) values.

To date, the preferred source for GWP values is the Intergovernmental Panel on Climate Change (IPCC) Fifth Assessment Report (2014).

1.2

Gross emissions are GHGs emitted into the atmosphere before accounting for offsets, credits or other similar mechanisms that have reduced or compensated for emissions.

10 Note to EM-IS-000.B – The scope of production includes iron ore consumed internally and that which is made available for sale.

11 Note to EM-IS-000.C – The scope of production includes coking coal consumed internally and that which is made available for sale.

IFRS S2 INDUSTRY-BASED GUIDANCE 4© IFRS Foundation

2 Scope 1 emissions are defined and shall be calculated according to the methodology contained in The Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard (GHG Protocol), Revised Edition, March 2004, published by the World Resources Institute and the World Business Council on Sustainable Development (WRI/WBCSD).

2.1

These emissions include direct emissions of GHGs from stationary or mobile sources that include production facilities, office buildings and product transportation (marine, road and rail).

2.2

Acceptable calculation methodologies include those that conform to the GHG Protocol as the base reference, but provide additional guidance, such as industry- or region-specific guidance. Examples include:

2.2.1

GHG Reporting Guidance for the Aerospace Industry published by the International Aerospace Environmental Group (IAEG)

2.2.2

Greenhouse Gas Inventory Guidance: Direct Emissions from Stationary Combustion Sources published by the U.S. Environmental Protection Agency (EPA)

2.2.3

India GHG Inventory Program

2.2.4

ISO 14064-1

2.2.5

Petroleum Industry Guidelines for reporting GHG emissions, 2nd edition,

2011, published by IPIECA

2.2.6

Protocol for the quantification of greenhouse gas emissions from waste management activities published by Entreprises pour l’Environnement (EpE)

2.3

GHG emission data shall be consolidated according to the approach with which the entity consolidates its financial reporting data, which is generally aligned with the ‘financial control’ approach defined by the GHG Protocol and the approach provided by the Climate Disclosure Standards Board (CDSB) that is described in REQ-07, ‘Organisational boundary,’ of the CDSB Framework for reporting environmental and social information.

3 The entity shall disclose the percentage of its gross global Scope 1 GHG emissions covered under an emissions-limiting regulation or programme intended to limit or reduce emissions directly, such as cap-and-trade schemes, carbon tax/fee systems, and other emissions control (for example, command-and-control approach) and permit-based mechanisms.

3.1

Examples of emissions-limiting regulations include:

3.1.1

California Cap-and-Trade (California Global Warming Solutions Act)

3.1.2

European Union Emissions Trading Scheme (EU ETS)

3.1.3

Quebec Cap-and-Trade (Quebec Environment Quality Act) IFRS S2 CLIMATE-RELATED DISCLOSURES–JUNE 2023© IFRS Foundation 5

3.2

The percentage shall be calculated as the total amount of gross global Scope 1 GHG emissions (CO2-e) covered under emissions-limiting regulations divided by the total amount of gross global Scope 1 GHG emissions (CO2-e).

3.2.1

For emissions subject to more than one emissions-limiting regulation, the entity shall not account for those emissions more than once.

3.3

The scope of emissions-limiting regulations excludes emissions covered under voluntary emissions-limiting regulations (for example, voluntary trading systems), as well as reporting-based regulations.

4 The entity may discuss any change in its emissions from the previous reporting period, including whether the change was because of emissions reductions,

divestment, acquisition, mergers, changes in output or changes in calculation methodology.

5 In the case that current reporting of GHG emissions to the CDP or other entity (for example, a national regulatory disclosure programme) differs in terms of the scope and consolidation approach used, the entity may disclose those emissions.

However, primary disclosure shall be according to the guidelines described above.

6 The entity may discuss the calculation methodology for its emissions disclosure,

such as if data are from continuous emissions monitoring systems (CEMS),

engineering calculations or mass balance calculations.

EM-IS-110a.2. Discussion of long- and short-term strategy or plan to manage Scope 1 emissions, emissions reduction targets, and an analysis of performance against those targets 1 The entity shall discuss its long- and short-term strategy or plan to manage its Scope 1 greenhouse gas (GHG) emissions.

1.1

Scope 1 emissions are defined and shall be calculated according to the methodology contained in The Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard (GHG Protocol), Revised Edition, March 2004,

published by the World Resources Institute and the World Business Council on Sustainable Development (WRI/WBCSD).

1.2

The scope of GHG emissions includes the seven GHGs covered under the Kyoto Protocol—carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O),

hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), sulphur hexafluoride (SF6), and nitrogen trifluoride (NF3).

2 The entity shall discuss its emission reduction target(s) and analyse its performance against the target(s), including, if relevant:

2.1

The scope of the emission reduction target (for example, the percentage of total emissions to which the target is applicable);

2.2

Whether the target is absolute or intensity-based, and the metric denominator if it is an intensity-based target;

IFRS S2 INDUSTRY-BASED GUIDANCE 6© IFRS Foundation

2.3

The percentage reduction against the base year, with the base year representing the first year against which emissions are evaluated towards the achievement of the target;

2.4

The time lines for the reduction activity, including the start year, the target year and the base year;

2.5

The mechanism(s) for achieving the target; and

2.6

Any circumstances in which the target or base year emissions have been,

or may be, recalculated retrospectively or the target or base year has been reset.

3 The entity shall discuss the activities and investments required to achieve the plans or targets, and any risks or limiting factors that might affect achievement of the plans or targets.

4 The entity shall discuss the scope of its strategies, plans or reduction targets, such as whether they pertain differently to different business units, geographies or emissions sources.

5 The entity shall discuss whether its strategies, plans, or reduction targets are related to, or associated with, emissions limiting or emissions reporting-based programmes or regulations (for example, the EU Emissions Trading Scheme,

Quebec Cap-and-Trade System, California Cap-and-Trade Program), including regional, national, international or sectoral programmes.

6 Disclosure of strategies, plans or reduction targets shall be limited to activities that were ongoing (active) or reached completion during the reporting period.

Energy Management Topic Summary The production of steel requires significant energy, sourced primarily from the direct fossil fuel combustion as well as energy purchased from the grid. Energy-intense production has implications for climate change, and electricity purchases from the grid can result in indirect Scope 2 emissions. The choice between various production processes—electric arc furnaces and integrated basic oxygen furnaces—can influence whether an entity uses fossil fuels or purchases electricity. This decision, together with the choice between using coal versus natural gas or on-site versus grid-sourced electricity,

may influence both the costs and reliability of energy supply. Affordable, easily accessible and reliable energy is an important industry competitive factor. Energy costs account for a substantial portion of iron and steel manufacturing costs. How an iron and steel entity manages its energy efficiency, its reliance on various types of energy and associated sustainability risks, and its ability to access alternative sources of energy can influence its profitability.

IFRS S2 CLIMATE-RELATED DISCLOSURES–JUNE 2023© IFRS Foundation 7

Metrics EM-IS-130a.1. (1) Total energy consumed, (2) percentage grid electricity and

(3) percentage renewable 1 The entity shall disclose (1) the total amount of energy it consumed as an aggregate figure, in gigajoules (GJ).

1.1

The scope of energy consumption includes energy from all sources,

including energy purchased from external sources and energy produced by the entity itself (self-generated). For example, direct fuel usage, purchased electricity, and heating, cooling and steam energy are all included within the scope of energy consumption.

1.2

The scope of energy consumption includes only energy directly consumed by the entity during the reporting period.

1.3

In calculating energy consumption from fuels and biofuels, the entity shall use higher heating values (HHV), also known as gross calorific values (GCV), which are measured directly or taken from the Intergovernmental Panel on Climate Change (IPCC).

2 The entity shall disclose (2) the percentage of energy it consumed that was supplied from grid electricity.

2.1

The percentage shall be calculated as purchased grid electricity consumption divided by total energy consumption.

3 The entity shall disclose (3) the percentage of energy it consumed that was renewable energy.

3.1

Renewable energy is defined as energy from sources that are replenished at a rate greater than or equal to their rate of depletion, such as geothermal, wind, solar, hydro and biomass.

3.2

The percentage shall be calculated as renewable energy consumption divided by total energy consumption.

3.3

The scope of renewable energy includes renewable fuel the entity consumed, renewable energy the entity directly produced and renewable energy the entity purchased, if purchased through a renewable power purchase agreement (PPA) that explicitly includes renewable energy certificates (RECs) or Guarantees of Origin (GOs), a Green‐e Energy Certified utility or supplier programme, or other green power products that explicitly include RECs or GOs, or for which Green‐e Energy Certified RECs are paired with grid electricity.

3.3.1

For any renewable electricity generated on-site, any RECs and GOs shall be retained (not sold) and retired or cancelled on behalf of the entity for the entity to claim them as renewable energy.

3.3.2

For renewable PPAs and green power products, the agreement shall explicitly include and convey that RECs and GOs be retained or replaced and retired or cancelled on behalf of the entity for the entity to claim them as renewable energy.

3.3.3

The renewable portion of the electricity grid mix that is outside of the control or influence of the entity is excluded from the scope of renewable energy.

3.4

For the purposes of this disclosure, the scope of renewable energy from biomass sources is limited to materials certified to a third-party standard (for example, Forest Stewardship Council, Sustainable Forest Initiative,

Programme for the Endorsement of Forest Certification or American Tree Farm System), materials considered eligible sources of supply according to the Green-e Framework for Renewable Energy Certification, Version 1.0 (2017) or Green-e regional standards, or materials eligible for an applicable state renewable portfolio standard.

4 The entity shall apply conversion factors consistently for all data reported under this disclosure, such as the use of HHVs for fuel usage (including biofuels) and conversion of kilowatt hours (kWh) to GJ (for energy data including electricity from solar or wind energy).

EM-IS-130a.2. (1) Total fuel consumed, (2) percentage coal, (3) percentage natural gas and (4) percentage renewable 1 The entity shall disclose (1) the total amount of energy consumed as an aggregate figure, in gigajoules (GJ).

1.1

The calculation methodology for fuel consumed shall be based on actual fuel consumed as opposed to design parameters.

1.2

Acceptable calculation methodologies for fuel consumed may include methodologies based on:

1.2.1

Adding fuel purchases made during the reporting period to beginning inventory at the start of the reporting period, less any fuel inventory at the end of the reporting period

1.2.2

Tracking fuel consumed by vehicles

1.2.3

Tracking fuel expenses 2 The entity shall disclose (2) the percentage of fuel consumed that was coal.

2.1

The percentage shall be calculated as the amount of coal consumed (in GJ) divided by the total amount of fuel consumed (in GJ).

2.2

The scope of coal consumed may include thermal coal, metallurgical coal,

coke and coke breeze.

3 The entity shall disclose (3) the percentage of fuel consumed that was natural gas.

3.1

The percentage shall be calculated as the amount of natural gas consumed (in GJ) divided by the total amount of fuel consumed (in GJ).

4 The entity shall disclose (4) the percentage of fuel consumed that was renewable fuel.

4.1

Renewable fuel generally is defined as fuel that meets all the following requirements:IFRS S2 CLIMATE-RELATED DISCLOSURES–JUNE 2023© IFRS Foundation 9

4.1.1

Produced from renewable biomass;

4.1.2

Used to replace or reduce the quantity of fossil fuel present in a transportation fuel, heating oil or jet fuel; and

4.1.3

Achieved net greenhouse gas (GHG) emissions reduction on a lifecycle basis.

4.2

The entity shall disclose the standard or regulation used to determine if a fuel is renewable.

4.3

The percentage shall be calculated as the amount of renewable fuel consumed (in GJ) divided by the total amount of fuel consumed (in GJ).

5 In calculating energy consumption from fuels, the entity shall use higher heating values (HHV), also known as gross calorific values (GCV), which are directly measured or taken from the Intergovernmental Panel on Climate Change.

6 The entity shall apply conversion factors consistently for all data reported under this disclosure, such as the use of HHVs for fuel usage.

Water Management Topic Summary Steel production requires substantial volumes of water. Entities face increasing operational, regulatory and reputational risks associated with water scarcity, costs of water acquisition, regulations on effluents or amount of water used, and competition with local communities and other industries for limited water resources. These risks are particularly likely to affect regions where water is scarce, resulting in water availability constraints and price volatility. Entities unable to secure a stable water supply could face production disruptions, while rising water prices could directly increase production costs.

Consequently, entities adopting technologies and processes to decrease reduce water consumption may reduce operating risks and costs by mitigating the operational impacts of regulatory changes, water supply shortages and community-related disruptions.

Metrics EM-IS-140a.1. (1) Total water withdrawn, (2) total water consumed; percentage of each in regions with High or Extremely High Baseline Water Stress 1 The entity shall disclose the amount of water, in thousands of cubic metres,

withdrawn from all sources.

1.1

Water sources include surface water (including water from wetlands,

rivers, lakes and oceans), groundwater, rainwater collected directly and stored by the entity, and water and wastewater obtained from municipal water supplies, water utilities or other entities.

2 The entity may disclose portions of its supply by source if, for example, significant portions of withdrawals are from non-freshwater sources.

2.1

Fresh water may be defined according to the local laws and regulations where the entity operates. If no legal definition exists, fresh water shall be considered to be water that has less than 1,000 parts per million of dissolved solids.

2.2

Water obtained from a water utility in compliance with jurisdictional drinking water regulations can be assumed to meet the definition of fresh water.

3 The entity shall disclose the amount of water, in thousands of cubic metres,

consumed in its operations.

3.1

Water consumption is defined as:

3.1.1

Water that evaporates during withdrawal, use and discharge

3.1.2

Water that is directly or indirectly incorporated into the entity’s product or service

3.1.3

Water that does not otherwise return to the same catchment area from which it was withdrawn, such as water returned to another catchment area or the sea 4 The entity shall analyse all its operations for water risks and identify activities that withdraw and consume water in locations with High (40–80%) or Extremely High (>80%) Baseline Water Stress as classified by the World Resources Institute’s (WRI) Water Risk Atlas tool, Aqueduct.

5 The entity shall disclose water withdrawn in locations with High or Extremely High Baseline Water Stress as a percentage of the total water withdrawn.

6 The entity shall disclose water consumed in locations with High or Extremely High Baseline Water Stress as a percentage of the total water consumed.

Supply Chain Management Topic Summary Iron ore and coal are critical raw material inputs to the steel production process. Iron ore mining and coal production are resource-intensive processes. Mineral extraction often has substantial environmental and social impacts adversely affecting local communities,

workers and ecosystems. Community protests, legal or regulatory action, or increased regulatory compliance costs or penalties can disrupt mining operations. Iron and steel entities could face supply disruptions as a result, or in some cases, also may be subject to regulatory penalties associated with the environmental or social impact of the mining entity supplier. Minimising such risks through appropriate supplier screening,

monitoring and engagement, iron and steel producers may manage their direct critical raw materials suppliers proactively to ensure they are not engaged in illegal or otherwise environmentally or socially damaging practices.

Metrics EM-IS-430a.1. Discussion of the process for managing iron ore or coking coal sourcing risks arising from environmental and social issues 1 The entity shall discuss its policies and procedures for managing environmental and social risks that may affect sourcing that are present in its iron ore or coking coal supply chain.

1.1

Discussion shall include any existing or projected risks or constraints in obtaining raw materials (for example, iron ore or coking coal) within the supply chain, including those related to restricted/limited availability,

political situations, local labour conditions, natural disasters, climate change or regulations.

1.2

The scope of disclosure may include description of the use of screening,

codes of conduct, audits and certifications.

2 If audits are discussed, the entity may disclose whether audits are internal (first party), independent (third party) or administered by peers (for example, trade organisations).

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