OPERATIONS

OUTLOOK

Paving the Path to Sustainable Production:

Tata Steel's Comprehensive Strategy- Part I
Shashank Bhardwaj
In an era marked by heightened concerns about climate change and environmental sustainability,
companies worldwide are undergoing a profound transformation. They are re-evaluating their
practices and committing to reducing their carbon footprint. One standout participant in this global
movement is Tata Steel Group (TSG). Recent data reveals TSG's unwavering determination to
confront its scope-3 emissions, with a particular focus on emissions stemming from purchased
goods and services, which account for approximately 36% of their total emissions.1 This figure
significantly surpasses that of their industry counterparts, compelling TSG to take proactive and
innovative measures.

The Challenge of Addressing Emissions

from Purchased Goods and Services

According to a comprehensive study by the

Science-Based Targets Initiative (SBTi), a
staggering 78% of respondents
acknowledge that addressing emissions
from purchased goods and services is the
most formidable challenge when it comes to
reducing scope-3 emissions. Several factors
contribute to the complexity of this
challenge, including supplier fragmentation,
disintermediation, power imbalances in
negotiations, and the intricacies of supplier
relationships. Moreover, access to essential
data to construct a baseline inventory for
scope-3 emissions remains a substantial
roadblock. Currently, less than 10% of
companies possess supplier-specific
emissions data, leading to disparities in
comparability and tracking. 2

Building a Framework for Supplier-Specific

Emissions Data

To surmount these challenges, it is crucial for

TSG to establish a framework that mandates
supplier-specific emissions factors. This
approach will enable more precise accounting
and tracking of emissions associated with
purchased goods and services. At present, fewer
than 5% of businesses employ supplier-specific
scope-3 greenhouse gas (GHG) emission
accounting, highlighting the urgency for a more robust end-to-end data collection method, with a
focus on emissions from the inception of production to the point of purchase.

1. Supplier Engagement Strategy: Driving Change and Innovation

1
Integrated Report & Annual Accounts 2022-23 (116th year) and related documents (tatasteel.com)
2
SBTi-The-Scope-3-challenge-survey-results.pdf (sciencebasedtargets.org)
A pivotal element of this framework is the implementation of a Supplier Engagement Strategy. This
strategy revolves around comprehending supplier behaviour, incentivizing change, and fostering
innovation and collaboration. Research indicates that primary data collection from suppliers can
lead to an annual reduction of up to 9.9% in scope-3 emissions, which is a significant step towards
sustainability.

2. Mandating ISO Certifications3 for Suppliers

As part of the engagement and incentivization process, TSG can categorize its supplier base into
low, mid, and high-impact suppliers and mandate ISO certifications accordingly. These
certifications, including ISO:14001, ISO:45001, and ISO:50001, can serve as standards aligned with
the level of environmental impact. This approach has the potential to drive collaborative
innovations among suppliers, ultimately leading to the use of greener, cleaner, and safer raw
materials.
ISO 14001:2018 ISO 45001:2018 ISO 50001:2018
It is an international standard for It specifies requirements for an It is an international standard for
environmental management occupational health and safety energy management systems
systems (EMS). It provides a (OH&S) management system, and (EnMS). It provides a systematic
framework that organizations can gives guidance for its use, to enable approach for organizations to
use to develop and implement organizations to provide safe and establish, implement, maintain, and
effective environmental policies and healthy workplaces by preventing continually improve energy
practices, as well as reduce their
work-related injury and ill health, as performance and efficiency. overall
environmental impact.
well as by proactively improving its energy performance.
OH&S performance.

3. Proxies and AI for Data Collection

Recognizing that information collection can be resource-intensive for some suppliers, particularly
smaller ones, proxies like Environmentally Extended-Input Output Analysis factors (EE-IOA) can be
developed. Additionally, in the near future, artificial intelligence (AI) is poised to play a pivotal role
in learning patterns and enhancing data collection, forecasting, and framework improvement,
making data collection more efficient and accurate.

4. Implementing Internal Carbon Pricing (ICP) for High-Impact Suppliers

TSG should also consider the implementation of an Internal Carbon Price (ICP) for high-impact
suppliers. Studies reveal that ICP can reduce greenhouse gas (GHG) emissions by up to 6.9%
within four years. The revenue generated from this tax can be invested in green projects such as
SIGHT (Strategic Intervention for Green Hydrogen Transition)4 and SHIP (Strategic Hydrogen
Innovation Partnership), aligning with TSG's decarbonization roadmap and further demonstrating
their commitment to sustainability.

In a nutshell, TSG is at the forefront of addressing the challenges associated with its scope-3
emissions, particularly those related to purchased goods and services. By implementing a
comprehensive framework that includes supplier-specific emissions factors, a Supplier
Engagement Strategy, ISO certifications, data collection proxies, and internal carbon pricing, TSG
can make a significant stride towards reducing its carbon footprint and contributing to the global
effort to combat climate change and enhance environmental sustainability.

3
ISO - Standards
4
Press Information Bureau (pib.gov.in)