Climate change disclosures, targets, technology and innovations, steel

thyssenkrupp AG – Annual report – 30 September 2019

Industry: steel

Climate, energy and environment
thyssenkrupp attaches great importance to climate and environmental protection and energy efficiency – from the supply chain to internal production and manufacturing processes to products. With our solutions we want to help meet rising 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 its corporate strategy.

thyssenkrupp has ambitious targets to reduce greenhouse gas emissions
The Group’s greenhouse gas emissions – scope 1 and 2 emissions as per Greenhouse Gas Protocol – amounted to around 23 million tons in the reporting period.

Named a global leader in climate performance by CDP for the third time in a row.
We have been working for many years to systematically improve energy and climate efficiency in our production and we work with our customers to develop efficient solutions for the reduction of greenhouse gases. The success of our climate efforts is also confirmed externally on a regular basis. In the reporting year thyssenkrupp was placed on CDP’s A list for the third time in a row; that means that CDP considers us a global leader in climate transparency and management.

Ambitious climate targets by 2030 in line with Paris Climate Agreement.
In the reporting year we significantly advanced our climate strategy and set ourselves ambitious targets. Our long-term target is to be climate-neutral by 2050. On the path to climate neutrality we have defined concrete milestones: by 2030 we aim to reduce our direct emissions (scope 1) and emissions from the purchase of energy (scope 2) by 30% (base year 2018). Indirect emissions in the value chain, mostly associated with the use of our products, are to be reduced by at least 16%. The Science-Based Target initiative (SBTi) closely examined our targets and officially confirmed that they are in line with the Paris Climate Agreement and with the latest climate science.

Our climate targets will be implemented under our corporate program CAPS (Climate Action Program for Sustainable Solutions): within this program our activities are grouped together in the clusters #IMPLEMENT, #ENABLE and #ENGAGE to create synergies. With regard to the emissions associated with our own production, in addition to improving energy efficiency we are pursuing two main parallel approaches: under the CDA approach (Carbon Direct Avoidance) we aim to replace carbon step by step with hydrogen as a reducing agent in steel production and avoid the production of CO2; in parallel with this we will pursue a CCU approach (Carbon Capture and Usage) and capture CO2 and convert it into base chemicals using the Carbon2Chem process developed and tested by our engineers.

To reduce indirect emissions we are also relying on Carbon2Chem for the cement and steel industry; in addition we are focusing on solutions for the use and storage of renewable energies and for sustainable mobility. More information on this is provided in the section “Technology and innovations” and on our website.

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Our environmental, climate and energy management systems are based on the Group’s global environment and energy policy and a corresponding Group Regulation. We have defined three indirect financial targets (IFTs) for the areas of environmental management, energy management and energy efficiency on the basis of our general strategic requirements. Implementation of these targets is supported by internal committees at various levels; in addition we provide corresponding training for auditors and promote regular exchanges of experience by organizing international and
regional conferences within the Group.

Environmental management at our sites
Internationally recognized standards of environmental management implemented worldwide
thyssenkrupp has set itself the binding target for all Group companies with environmentally relevant activities to have implemented an ISO 14001 environmental management system by fiscal year 2019/2020. 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. We have set out clear requirements for our Group companies: They must continuously improve their environmental performance and at the same time meet legal and other requirements and concrete environmental goals at their individual sites.

Activities regarded as environmentally relevant are defined in our Group Regulation. At September 30, 2019 more than 60 thyssenkrupp companies were determined as environmentally relevant in line with this Regulation. Of these more than 90% already comply with the required standard. Related to the overall workforce the Group therefore handles around 60% of its environmental management activities in accordance with ISO 14001.

Continuous improvements in energy efficiency and energy management
Clear increase in energy efficiency through the corporate program GEEP
The Group’s energy consumption came to more than 70 terawatt hours (TWh) in the 2018/2019 fiscal year.

Energy efficiency has always played an important role at thyssenkrupp. Launched five 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 goal in the GEEP program of increasing energy efficiency in the Group as a whole by 200 GWh. At 325 GWh we exceeded this goal. Mathematically these efficiency gains enabled us to avoid around 100,000 tons of greenhouse gas emissions. The goal for the current fiscal year 2019/2020 is to achieve efficiency gains of 150 GWh. In addition, all energy-relevant activities are to be covered by an ISO 50001 energy management system by 2019/2020. Among other things this means setting concrete energy targets for each of the corresponding Group companies, measuring energy flows and optimizing organizational and technical processes. At September 30, 2019 this applies to over 50 companies in the Group; at the end of the reporting year all relevant companies already comply with the standard. In terms of energy consumption this means that more than 90% of energy management activities at thyssenkrupp are covered by the ISO 50001 standard.

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

Technology and innovations (extract)
Innovation strategy
Our research and development efforts are concentrated on the major technological challenges of the future. Key areas are the digital transformation of industry, climate change, the energy transition, and mobility in increasingly densely populated urban areas.

Our global R&D network includes some 4,800 employees at around 90 sites. It is augmented by collaborations with external partners such as universities, research institutes and other industrial enterprises. In the reporting period we registered around 2,500 new patents and utility models. As a result thyssenkrupp’s patent portfolio now contains some 22,100 patents and utility models. In the trademark area there were around 220 new filings, including designs, in the reporting year, bringing the overall portfolio to around 9,400 property rights.

Total spending on R&D at the thyssenkrupp Group came to €761 million in the reporting year, a decrease of 3% year-on-year. Adjusted R&D intensity – the ratio of R&D costs to sales excluding trading and distribution – was 2.5%, in line with our target of a sustainable adjusted R&D intensity of around 2.5%.

In the 2018/2019 fiscal year we capitalized development costs of €79 million, compared with €63 million in 2017/2018. The share of capitalized costs in overall R&D costs – the capitalization ratio – rose to 18.8% from 15.3% a year earlier.

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Climate protection and energy transition
In line with our climate strategy we pushed ahead with various innovations such as Carbon2Chem and water electrolysis which address emissions of climate-damaging gases. The goal is to reduce thyssenkrupp’s emissions and help our customers achieve the CO2 neutrality required by the Paris Accord by 2050. This is of particular relevance because sustainable markets in the order of many billions of euros are evolving in this area. For example we produced ammonia from steel mill gases under the Carbon2Chem project. This is the first time worldwide that C02 from steel mill gases have been chemically converted into ammonia. Steel mill gases are gases from steel production which in addition to CO2 also contain nitrogen oxides. Ammonia is one of the basic materials used in the production of artificial fertilizers, with which agricultural land can be farmed more efficiently. Ammonia production is another milestone in the Carbon2Chem project, which is being funded by the German Federal Ministry of Education and Research with around €60 million. In September 2018, thyssenkrupp succeeded for the first time worldwide in producing methanol from steel mill
gases. Carbon2Chem is a large-scale project coordinated by thyssenkrupp together with institutes of the Fraunhofer and Max Planck Societies and involving 15 further partners from research and industry. The technology, if implemented on an industrial scale, could make around 20 million tons of the annual CO2 emissions of the German steel industry economically utilizable. It could also be used in other CO2-intensive industrial processes, e.g. in the cement industry. Carbon2Chem thus plays a central role in our climate strategy, both in reducing our own process emissions and in reducing CO2 and other environmentally harmful gases at our customers.

At the same time, we are focusing on a concept for steel that prevents the formation of CO2 in the production process from the outset. This path will be taken with the help of hydrogen-based technologies. To gather important findings, preparations were made in the reporting year for the injection of hydrogen into blast furnace 9 at the Duisburg-Nord mill. In a test phase limited to four trials, for the first time in the world pulverized coal will be replaced by hydrogen at one of the blast furnace’s tuyeres. Applied to all the blast furnace’s tuyeres, the process has a theoretical CO2 reduction potential of 20%. The state of North Rhine-Westphalia is funding this pioneering work to the tune of around €1.6 million as part of the state initiative In4Climate.

The new second-generation Oxyfuel process developed under our climate strategy enables the simple capture and utilization of CO2 through the use of pure oxygen in the manufacturing process of cement plants. The required oxygen can be produced on a sustainable basis through water electrolysis. The hydrogen produced simultaneously during water electrolysis can be used to further process the CO2 into useful chemicals, e.g. methanol.