Volvo boosts carbon neutrality commitments with SteelZero pledge

Volvo Cars has become the first car maker to sign up to the SteelZero initiative to help accelerate a transition to carbon neutrality.

By signing up to SteelZero, Volvo Cars commits itself to stringent CO2-based steel sourcing requirements by 2030. By 2050, all the steel it sources should be net-zero steel, which is in line with the company’s ambition to be climate neutral by 2040.

Steel production is a major source of CO2 emissions for the automotive industry, averaging 33 per cent of all production-related emissions for a new Volvo car in 2021. Globally, steel production is responsible for around seven per cent of all greenhouse gas emissions.

Volvo Cars’ ambition to be climate neutral by 2040 is part of its comprehensive climate action plan, one of the most ambitious in the auto industry. It aims to become a fully electric car maker by 2030 and plans to roll out a whole new family of pure electric cars in the coming years.

The company’s electrification plans are part of its ambition to reduce the lifecycle carbon footprint per car by 40% between 2018 and 2025, including through reducing carbon emissions in its supply chain by 25% by 2025.

“A sustainable approach to steelmaking is not just good news for the environment, it is also good business because it limits our exposure to future climate risks and regulations,” said Kerstin Enochsson, Chief Procurement Officer at Volvo Cars. “We are pleased to join the SteelZero initiative and support its ambitions to transform the steel industry. By signalling our demand for responsibly sourced low- and zero-carbon steel, we aim to help drive an increased supply to our sector.”

Jen Carson, Head of Industry at Climate Group, said: “Volvo Cars joining SteelZero marks an important step change in the global demand signal for low-emission and net-zero steel, and a pivotal moment for the automotive industry. This sector plays a central role in driving the net-zero transition of steel. It is supporting the creation of a decarbonised steel market internationally that can enable the sector to meet its own net-zero targets and deliver a product that is truly aligned with the climate agenda.”

SteelZero was launched by the Climate Group in partnership with ResponsibleSteel, a steel industry-wide standard and certification body which Volvo Cars will also join. Through ResponsibleSteel, Volvo Cars gains access to reliable, third-party-verified and audited information about its steel supply chain and relevant sustainability credentials, helping to ensure it is responsibly sourced.

As well as CO2 reductions, ResponsibleSteel also focuses on other important issues in the steel supply chain such as labour and human rights, engagement with local communities, water use and biodiversity impact.

The SteelZero signing is only the latest initiative by Volvo Cars to address one of car making’s most intensive sources of CO2 emissions. Only last year, it announced a collaboration with Swedish steel maker SSAB to jointly explore the development of fossil-free, high-quality steel for use in the automotive industry through SSAB’s HYBRIT initiative.

Volvo Cars is the first car maker to work with SSAB and HYBRIT, an ambitious and advanced project in fossil-free steel development. HYBRIT aims to replace coking coal, traditionally needed for iron ore-based steelmaking, with fossil-free electricity and hydrogen. The result is expected to be the world’s first fossil-free steelmaking technology, with virtually no carbon footprint.

In terms of its own operations, the company aims for climate-neutral manufacturing by 2025. Already now, all of Volvo Cars’ European plants run on 100 per cent clean electricity, while its Torslanda plant in Sweden is fully climate neutral. Elsewhere in the world, its Chengdu and Daqing sites in China are also powered by climate-neutral electricity.

Last year, Volvo Cars introduced an internal carbon price of 1,000 SEK for every tonne of carbon emissions from across its entire business, the first car maker to implement such a mechanism across all its operations. The aim is to future-proof its organisation and be ahead of the regulatory curve, since it anticipates and favours more governments implementing a carbon price in the coming years.

Under the scheme, every car project undergoes a ‘sustainability sense check’ and a CO2 cost is imposed for every anticipated tonne of carbon emissions throughout the car’s lifecycle. The aim is to ensure that each car model would be profitable even under a strict carbon-pricing scheme, steering all project and sourcing decisions towards the most sustainable option on the table.