September 15, 2021 - Anyone who builds cars cannot do without one material: steel. However, its production is associated with high CO₂ emissions. Rasmus Tröster and his colleagues from Mercedes-Benz Procurement have made it a central goal to reduce these emissions, which are mainly emitted in the supply chain, in the long term. We talked to him about how the sustainable procurement of steel can succeed, what role our direct suppliers play in this and what successes have already been achieved.
Mr Tröster, why is sustainability such an important topic in procurement?
The supply chain in particular represents a significant part of our value creation. Therefore, this is also a correspondingly large lever for change. This can be well illustrated by the example of CO₂. A large share of the emissions is emitted in the supply chain - including the upstream mining and processing of raw materials. To reduce the overall emissions associated with our products - and to make them CO₂-neutral, as we are aiming for with Ambition2039 - we therefore already need to focus on the supply chain.
What exactly do you deal with?
In the procurement and supplier quality department, I focus on addressing the issue of CO₂ emissions in our supply chain. This includes raising awareness among our suppliers and working together to find levers for the consistent reduction of CO₂.
My tasks today fit well with my career: I already dealt with the topic of "sustainability" during my studies and also in the course of my doctoral thesis.
You also deal with sustainability in the steel supply chain. Why is this important?
When you consider that steel is proportionally the most widely used material in many vehicles, it quickly becomes clear why sustainability aspects are very important for us. All types of steel have an energy-intensive production in common. This concerns the upstream and downstream process steps, such as refinement, but especially the production of the actual steel in the steel mills. This is where most of the CO₂ emissions arise - in the classic blast furnace route, for example, this amounts to more than two tonnes of CO₂ on average for the production of one tonne of steel. That is why CO₂, in addition to human rights and resource conservation, is also our focus when it comes to steel. Due to the importance and complexity of the topic, we have established an interdisciplinary working group for sustainable steel procurement at Mercedes-Benz together with the operational buyers, those responsible for body shell development and materials technology as well as the Group Environmental Protection department. This allows us to address different aspects in a bundled way.
What are you working on specifically?
We are working on obtaining consistent data on CO₂ emissions from our suppliers. This is very important for us to establish comparability. Although there are internationally recognised frameworks, there is also room for manoeuvre here. For this reason, we have developed guidelines for our suppliers on how to account CO₂ emissions. In principle, we only have contractual relationships with our direct suppliers. Accordingly, the central question for us is how we can ensure that our requirements are taken into account in the upstream supply chain as well.
And: How can we do that?
We are placing particular priority on certain areas of focus on the road to CO₂ neutrality. These are materials and components that are particularly CO₂-intensive to manufacture and process, such as battery cells, plastics, aluminum and steel.
Our most important goal is to ensure that our suppliers meet our requirements regarding CO₂ reductions and also pass these on to their sub-suppliers. In our working group, we have therefore developed requirements that address the upstream process stages beyond our direct suppliers. We want our supply chain to follow our claim of climate neutrality. For this reason, we only allow suppliers to be awarded who have confirmed to us in writing that they will supply us with CO₂-neutral products from 2039 at the latest. This means that CO₂ neutrality must be guaranteed at all stages of the value chain. This is done via a so-called "Ambition Letter". Only when this has been signed, the suppliers have a chance of being selected for the contract. In this way, we create a good basis for initiating actual reductions with our direct suppliers and in the supply chain. Suppliers who account for almost 90% of Mercedes-Benz's annual purchasing volume have already signed an ambition letter, agreeing to supply us only with CO₂-neutral products in future. Among them are also important steel suppliers.
What milestones have we already reached on the way to sustainable steel?
(laughs) How much time do I have to answer? There are a few!
In principle, we are pursuing the goal of a green steel supply chain along with all our steel suppliers as part of Ambition 2039. In doing so, we deliberately focus on avoiding and reducing CO₂ emissions rather than offsetting them. And we have already made significant progress in reducing CO₂ emissions in our steel supply chain. For example, since 2020 we have been sourcing steel from our US steel supplier Big River Steel, whose production has reduced CO₂ emissions by more than 70% compared to the traditional blast furnace route by using recycled steel scrap and renewable energy. Incidentally, Big River Steel was recently awarded the Daimler Sustainability Recognition 2021 Award. And since this year, we have been purchasing flat steel from Salzgitter AG, which consists of 100% recycled steel scrap, which has reduced the steel's CO₂ emissions by more than 60 per cent.
And what about CO2-free steel?
We are already working on that, too, and have just recently started two really exciting partnerships here. The aim here is to obtain steel in the future that will be almost completely CO₂-free due to its production with hydrogen instead of coking coal.
For one, we were the first car manufacturer to take an equity stake in the Swedish start-up H2 Green Steel (H2GS). Through this investment, we are promoting the transformation of the steel industry as a whole on the one hand, and we will be bringing green steel to the market in various vehicle models from 2025. Furthermore, we have started a partnership with Swedish steel producer SSAB. The production will be almost CO₂-free through the use of hydrogen and 100% fossil-free electricity. Together, we are setting the course to bring green steel into our series-produced vehicles as quickly as possible. The first prototype parts for body shells made of CO₂-free steel from SSAB's pilot plant are already being planned for next year.
All this progress requires a trusting and responsible partnership with our suppliers. For long-term change, however, the development of industry-wide sustainability standards is also necessary. This is because companies can use these as concrete guidelines for reducing their CO₂ emissions and for the sustainable production of materials. For this reason, we are involved in initiatives that develop such sustainability standards.
One such initiative is the Responsible Steel Initiative. What goals are we pursuing with this?
The Responsible Steel Initiative is currently developing a sustainability standard for steel mills and the steel supply chain with the aim of ensuring environmentally friendly and socially responsible steel production along the entire value chain. Like many other stakeholders, such as non-governmental organisations, environmental associations, but also operators of steelworks, we actively contribute to the development process with our experience and requirements. For example, it is important for us that the standard is actually applicable and as concrete as possible. With so many players, it is of course an elaborate process. But one that is worthwhile. Standards that are developed within the framework of such a multi-stakeholder approach have the best chance of becoming established in later application, as they are the most widely accepted.
In future, sustainability in purchasing...
“…will play an even more decisive role.”
I am convinced of my work because...
“…I am very interested in the topic personally and I have the feeling that it is becoming more and more important in the Group.”
For me, living sustainably in my private life means...
“…doing without things that are not absolutely necessary.”