As Europe moves towards climate neutrality, every sector must confront its emissions — not only those produced directly on site, but those embedded throughout the value chain. For heavy industries such as steelmaking, this means looking beyond factory gates and into the complex, global web of suppliers, materials, and energy sources. Understanding how emissions are categorised and where they originate is the first step towards effective decarbonisation. In this article, we explore the critical role that supply chains play in the steel sector’s green transition, and how decarbonising these networks is both a challenge and an opportunity.
The Definition of Scopes 1, 2 and 3
When industries and companies seek to decarbonise their activities, it is essential to identify and record the sources of their greenhouse gas emissions. These are typically categorised into three scopes:
- Scope 1: Direct emissions, such as CO2 produced by burning fossil fuels, and released in the atmosphere.
- Scope 2: Indirect emissions, related to the energy used, such as emissions associated with the electricity production.
- Scope 3: All other emissions not directly produced by the organisation itself, such as upstream emissions associated with procured materials and services and downstream emissions from processing waste materials.
Scope 3 emissions are particularly challenging to quantify, as a standard methodology is still lacking, especially to partition responsibilities along the supply chains. Nonetheless, for many industries and organisations Scope 3 emissions represent the bulk of their climate impact.
What Does the Core Supply Chain for a European Steelmaker Look Like?
The key stages in steel production include the mining and sourcing of raw materials, the production of steel, and the transportation of both the materials and products between extraction sites, steel plants, and further processing facilities. A simplified representation of the key value chain of the steel making process is illustrated in Figure 1 for both, the existing integrated Blast Furnace (BF) and Basic Oxygen Furnace (BOF) process, and the decoupled direct-reduced iron (DRI) and electric arc furnace (EAF) process. As we can observe, a key advantage of the DRI-EAF process is that it is more easily integrated with renewable energy sources, while the BF-BOF process is heavily reliant on fossil coal.
Figure 1: Key materials and the need for material transportation in the steelmaking supply chain, taken from SteelWatch [CITE]
Figure 1: Key materials and the need for material transportation in the steelmaking supply chain, taken from SteelWatch [CITE]The integration of the different suppliers, each with their own production timelines, volumes, and environmental impacts, into the making of steel results in a far-reaching and widespread network for the steel supply chain. Figure 2 shows that whilst Europe is the second largest producer for coal, it is heavily concentrated in Eastern Europe, with production volumes corresponding to just 12% of that in Asia. Similarly, Figure 3 demonstrates that Europe has some of the lowest iron reserves, much of this key steelmaking material will need to be imported from the rest of the world.
As Europe moves towards increased steel production via the DRI-EAF route, the roll-out and availability of renewable energy will be a significant part of the steel value chain. The complexity of the supply chain is further increased when considering additive materials used in the steelmaking process, such as lime, dolomite, manganese and other critical raw materials.
Figure 2: Coal production by region, with further regional breakdown for Europe
Figure 3: Iron reserves and resources by region.
Decarbonisation the steel supply chain
While traditional steel manufacturing has high scope 1 emissions, since it uses fossil coal both as a reagent and as a fuel to reach the remarkably high temperatures needed in the furnaces, scope 2 and 3 emissions are also important. The industry-wide average emissions for mining and transport of thermal and metallurgical coal are approximately 280 kgCO2e per tonne of coal. On the other hand, GHG emissions from the mining of iron ore is estimated to be ~250 kgCO2e per tonne.
Optimising the supply chain, in terms of the materials used, and how and where they are produced, can lead to substantial reductions in CO₂ emissions. This optimisation also offers improved return on investment for innovative materials and emerging technologies.
The complexity of the steel supply chain stems from the many stakeholders involved. The optimisation challenge is multi-objective: it must consider economic viability, environmental responsibility, and social impacts, all within the framework of government regulations and policy constraints. Life Cycle Assessment (LCA) offers a holistic, transparent method for quantifying environmental impacts across the supply chain. Combined with production process modelling, LCA can support the strategic integration of novel technologies into existing infrastructure, aligned with the EU’s decarbonisation targets and policy roadmap.
Conclusion
In the race to decarbonise Europe’s heavy industries, rethinking supply chains is as important as rethinking production technologies. For steelmakers, shifting to greener processes like DRI–EAF is a key step — but it must be supported by a broader transformation of the upstream and downstream networks that feed into and out of the plant. By understanding and optimising supply chain emissions, the sector can move from fragmented action to systemic change, bringing Europe closer to a climate-neutral future.
Author: Qiao Yan Soh, ICL