The Intergovernmental Panel on Climate Change advises that greenhouse gas (GHG) emissions must be halved by 2030 and reach net zero by 2050 to limit global warming to 1.5°C1. Every incremental increase in temperature above 1.5°C will entail increasingly severe physical and systemic risks for companies and investors.
Steelmaking is the largest source of GHG emissions from heavy industry, responsible for 7-9% of global GHG emissions.2 The auto industry is the second-largest consumer of steel, procuring 12% of global supply.3 Low-carbon steel can reduce GHG emissions from vehicle steel by over 95%.4
Supply chain emissions account for approximately 11% of Ford’s contribution to climate change.5 Although Ford has set emissions reduction targets for its operations and use of sold products, these do not include supply chain emissions from sources such as steelmaking, which is responsible for up to 27% of the embodied emissions of a typical vehicle.6 As Ford strives to reach net zero emissions by 2035 in Europe and 2050 globally, it will be challenged to do so without a plan to mitigate supply chain emissions, including significant scaling of low-carbon steel.
Beyond Ford’s commitment that 10% of its primary aluminum and steel purchases will have near-zero carbon emissions by 2030,7 it does not disclose if, or how, it will align supply chain emissions with its net zero goals. Furthermore, Ford lags peers in curbing emissions from steel in particular:
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Volvo and Mercedes-Benz have improved steel supply chain sustainability by participating in the ResponsibleSteel initiative.
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Volvo has joined SteelZero, pledging to procure 50% net zero steel by 2030 and 100% by 2050.
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BMW, Mercedes, Volvo and other automakers have signed offtake agreements for 50% of the net zero steel produced by Stegra’s green hydrogen mill.
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To appropriately respond to climate-related risks and opportunities, Ford should address supply chain emissions with the same ambition as its existing climate risk mitigation efforts.