Climate change disclosures, targets, technology and innovations, steel

thyssenkrupp AG – Annual report – 30 September 2021

Industry: steel

Climate, energy and environment

thyssenkrupp attaches great importance to climate and environmental protection and energy efficiency – at all levels of the value chain, from upstream supply chains to internal production and manufacturing processes through to our products. With our solutions we want to contribute to satisfying rising global demand for goods and services in a resource-efficient way. Climate and environmental protection are therefore a core component of thyssenkrupp’s sustainability approach and thus our corporate strategy – but also a basis for sustainable success in our markets.

thyssenkrupp Climate Action Program for Sustainable Solutions (CAPS)

thyssenkrupp has set itself ambitious targets on the path to greenhouse gas neutrality. Our long-term target is to be climate-neutral by 2050. We have defined the following milestones for getting there: by 2030 we aim to reduce our direct emissions (scope 1) and emissions from purchased energy (scope 2) by 30% from a 2018 baseline. Indirect emissions in our value chain (scope 3), mostly associated with the use of our products, are to be reduced by at least 16%. The Science-Based Target initiative (SBTi) has closely examined our targets and officially confirmed that they are in line with the Paris Climate Agreement and climate science. All our businesses develop roadmaps and action plans for meeting these targets. In view of the current debate and the German Climate Change Act we are reviewing whether we can become climate-neutral at an earlier date. Future success in meeting thyssenkrupp’s climate targets will be integrated into long-term compensation for the Executive Board and top-level management in fiscal year 2020 / 2021.

Work towards achieving our group climate targets will continue in the context of our thyssenkrupp CAPS program. The high share of process-related emissions involved in steel production means that for the emissions bound up with our own production we are counting on two technological pathways, in addition to improvements in energy efficiency: avoiding carbon emissions by using hydrogen (known as carbon direct avoidance, CDA) and using the carbon dioxide produced (carbon capture and usage, CCU). In steel production we want to use CDA technologies to successively replace carbon by hydrogen as a reducing agent and thus avoid the emission of carbon dioxide altogether. To this end we have developed a process that is currently unique: we have combined a 100% hydrogen-capable direct reduction plant with an integrated electrical melting unit, in order to produce climate-friendly pig iron. The concept has been confirmed as technologically feasible, scalable and innovative by a scientific institute of the RWTH Aachen. This process enables us to continue offering our customers the full range of high-quality steel grades and thereby contribute to making the downstream stages in the value chain climate-neutral. Within the CCU path we want to capture the CO2 that is still produced and convert it into climate-friendly base chemicals using the Carbon2Chem process developed and tested by our engineers.

We are also counting on our Carbon2Chem technology for the cement and steel industries in order to reduce the emissions of our products at the customer. In future this solution will also enable our customers to reduce their emissions and produce valuable by-products. Furthermore, we are working continuously on solutions for producing renewable energy, particularly wind energy, and on various innovative solutions for sustainable mobility. Further information can be found in the chapter “Technology & Innovation” and on our website.

In the reporting period the group’s greenhouse gas emissions – i.e. scope 1 and scope 2 emissions as per the Greenhouse Gas Protocol – came to just below 25 million tons.

We have been working for many years to systematically improve the energy and climate efficiency of our production operations, and to develop efficient solutions to reduce greenhouse gases for and in cooperation with our customers. The success of our climate efforts is also regularly confirmed by external sources. In 2020 thyssenkrupp was included on the “A” list compiled by the non-profit organization CDP (formerly Carbon Disclosure Project) for the fifth year in succession; according to CDP that makes us an international leader with regard to climate transparency and management.

Environmental management at our sites

Our environmental, climate and energy management systems are based on the group’s global environmental and energy policy and a corresponding group regulation. This regulation requires all companies with environmentally relevant activities to operate an environmental management system in accordance with ISO 14001. This international standard covers all relevant environmental aspects, from the reduction of wastewater, waste and emissions to the environmental impact of products during use through to disposal. The requirements for our group companies are clear: They must continuously improve their environmental performance and at the same time meet legal and other requirements and concrete environmental targets at their individual sites.

Activities regarded as environmentally relevant are defined in a group regulation. Since fiscal year 2019 / 2020 all environmentally relevant companies within the meaning of this regulation have had an environmental management system certified in accordance with ISO 14001. In the reporting period around 72% of our sites – in terms of the total workforce – had an environmental management system that was implemented and certified in accordance with ISO 14001.

Continuous improvements in energy efficiency and energy management

The group’s energy consumption came to around 74 terawatt hours (TWh) in the 2020 / 2021 fiscal year.

Energy efficiency has always played an important role at thyssenkrupp. Launched seven years ago, the global Groupwide Energy Efficiency Program (GEEP) includes measures such as better use of waste heat, the reduction of stand-by times and the replacement of plant components. In the reporting year we set ourselves the target of increasing energy efficiency in the group by 80 GWh. We exceeded this target with around 325 GWh. Mathematically, these efficiency gains enabled us to avoid around 140,000 tons of greenhouse gas emissions. The goal for the current fiscal year 2021 / 2022 is to achieve efficiency gains of at least 110 GWh. Since fiscal year 2020 / 2021 all companies with environmentally relevant activities have implemented an energy management system and had it externally certified in accordance with ISO 50001. Among other things this includes setting concrete energy targets for each of the corresponding subsidiaries, measuring energy flows and optimizing organizational and technical processes. In terms of energy consumption this means that slightly more than 98% of energy management activities at thyssenkrupp meet the ISO 50001 standard in fiscal year 2020 / 2021.

Further information on climate, energy and environment can be found in the chapter “Technology & Innovation”, in the “Opportunity and risk report” and on our website.

Technology and innovations (extract)

Innovation strategy

With its technological expertise thyssenkrupp can make decisive technological contributions to solving the most urgent challenges of the future. For this reason our research and development work (R&D) concentrates on climate protection and the energy transition, the digital transformation of industry and the future of mobility.

Our global research and development network includes 78 sites with some 3,600 employees. It is augmented by collaborations with external partners such as universities, research institutes and other industrial enterprises. In the reporting period we registered around 1,880 new patents and utility models. As a result thyssenkrupp’s patent portfolio now contains some 18,100 patents and utility models. The trademark portfolio comprises around 9,550 property rights.

Total spending on research and development at the thyssenkrupp group came to €600 million in the reporting year (prior year: €681 million), a reduction of 12%. The adjusted R&D intensity was 2.6% (prior year: 3.4%). The adjusted R&D intensity refers to the R&D costs as a proportion of sales, without trading and distribution. The R&D ratio is lower than the corporate target of 3.0% because R&D expenses were lower whereas sales increased.

In the 2020 / 2021 fiscal year we capitalized development costs of €12 million for the continuing operations, compared with €20 million in 2019 / 2020. The share of capitalized costs in overall R&D costs – the capitalization ratio – fell to 5% from 7% in the prior year.

1) Impairment losses on capitalized development costs are no longer reported within depreciation and amortization from 2020 / 2021 onwards. The prior-year figure was adjusted accordingly from €149 million to €34 million.

2) See preliminary remarks.

Climate protection and energy transition

The Institute for Process Metallurgy and Metal Recycling at the RWTH Aachen has examined the concept for one central component on the way towards carbon-free steel production and confirmed its technical feasibility (see also chapter “Climate, energy and environment”). The tkH2Steel plan for green steel proposes processing iron ore into direct reduced iron or ‘sponge iron’ by using hydrogen in what is known as a direct reduction plant. In the next process stage it is transformed into liquid pig iron in a new type of furnace and prepared for further processing in the smelter. The investigation focused on the concept for the furnace, which the scientists rated as technically feasible, scalable and innovative. This ensures that the value chain downstream from pig iron production, the established processes this entails and so the range of high-quality steel grades available to our customers can continue unchanged.

As an interim stage on the way to carbon-free steel production we are working to reduce the carbon intensity per ton of steel by around 70%. This climate-friendly effect is achieved by the use of hot briquetted iron (HBI), which is sponge iron that has already been reduced. This means that less coal can be used for the reduction process in the blast furnace, which cuts emissions accordingly.

Our Carbon2Chem project has received a grant of €75 million from the German Federal Ministry of Education and Research (BMBF) for the second project phase. Carbon2Chem already received a grant of €60 million from the BMBF in its first phase. The project aims to convert industrial CO2 emissions into valuable chemical substances with the help of hydrogen. In the first project phase it was quickly possible to produce ammoniac, methanol and higher alcohols from the process gases from steel production for the first time. In the second phase the aim is to prove that the solutions remain stable over a long period in the complex interactions between steel production and chemical synthesis, and that the Carbon2Chem technology can be immediately scaled up in a multi-industry alliance. In addition, the focus is on its applicability to industries other than steel production. So additional sectors considered to be major sources of CO2 are to be included in the project – like cement and lime production, as well as waste incineration plants. Lastly, the second project phase is intended to get the project ready for the market.

In the Element One project thyssenkrupp continues to work on expanding the size of electrolyzer modules for the production of green hydrogen to 20 megawatts. Hydrogen production is seen as a key technology for the energy transition. Research and development work concentrates on the development of the module and the cells, and on improving and automating the production and assembly process. Economies of scale and optimization offer an opportunity to significantly reduce the costs of hydrogen production.

thyssenkrupp will supply a water electrolysis plant with a capacity of 20 megawatts to the US customer CF Industries. The power for the water electrolysis will come from renewable sources. The hydrogen will be converted in the company’s existing ammonia plants into 20,000 tons of green ammonia per year. This can be used as a highly efficient storage and transport medium for renewable energy and also directly as a climate-neutral fuel, in shipping for instance. The engineering and sourcing activities have begun and the production start is planned for 2023.