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ResponsibleSteelRequirements,OptionsandConsultationQuestionsonResponsibleSourcingofInputMaterials
DraftVersion1.0
03August2020
ResponsibleSteeldraftrequirements,optionsandconsultationquestionsfortheresponsiblesourcingofinputmaterials 2
TableofContents
Background 3
Aboutthisdocument 4
Responsiblesourcingofinputmaterials 5Criterion1.Responsiblesourcingcommitment 6Criterion2.Supplychainmapping 8Criterion3.Responsiblesourcingclaims 9Consultationquestiononthresholdformaking'certified'claims 9Consultationquestiononourapproachtoscrap 11Consultationquestiononriskmanagement 12Consultationquestiononinputmaterialstocover 14Criterion4.SupplychainESGriskandimpactassessmentandprioritisation 15Criterion5.SupplychainESGriskandimpactpreventionandmitigation 16Criterion6.Supplychainreporting 17
Annex1(forconsultation):InputmaterialstobecoveredbyESGriskmanagementrequirements 18ConsultationquestiononinputmaterialstobecoveredbyESGriskmanagementrequirements 18
Annex2(forconsultation):ProposalsfordraftrequirementsthatwerediscussedwithResponsibleSteelmembersbutnotprogressed 20
Consultationquestiononotheroptions 20
Annex3(forinformation):Illustrationofmassbalanceandconversionfactors 22
Annex4(forinformation):ResponsiblesourcingrequirementsinapprovedStandard 24Criterion1:CorporateValuesandCommitments 24Criterion2.2:ResponsibleSourcing 24
ResponsibleSteeldraftrequirements,optionsandconsultationquestionsfortheresponsiblesourcingofinputmaterials 3
Background
InNovember2019,version1-0oftheResponsibleSteelStandardwasapprovedandratifiedbyourmembershipandboard.Steelsitescanchoosetobeindependentlyauditedagainstthe12PrinciplesoftheStandardtodemonstratethattheymeethighlevelsofperformancewhenitcomestoenvironmental,socialandgovernance(ESG)issues.SteelsitesthatbecomecertifiedagainsttheapprovedStandardareabletoclaimthattheirsiteisoperatedinaresponsiblemanner.
TheapprovedStandardcontainsrequirementsforinputmaterials(thencalledrawmaterials)inits"ResponsibleSourcing"Criterion2.2andforgreenhousegas(GHG)emissionsinits"ClimateChangeandGHGEmissions"Principle8.Theinputmaterialsrequirementsaskforahigh-levelcommitmenttoresponsiblesourcingandforevidencethatthiscommitmentisbeingimplemented.However,itdoesnotprovideincentivestosteelcompaniesandtheirsupplierstoworktowardshighlevelsofESGperformanceinsupplychains.TheGHGPrincipleisambitiousinthatitrequirescompanyandsitelevelstrategies,plansandtargetsalignedwiththeachievementofthegoalsoftheParisAgreementandinthatitrequiresthatsteelcompaniesandsitestoreportontheirperformance.However,itdoesnotsetthresholdrequirementsforsites’currentGHGemissionsperformance.
TheResponsibleSteelmembershipandBoarddeterminedthatfurtherrequirementsfortheresponsiblesourcingofinputmaterialsandinrelationtogreenhousegas(GHG)emissionswouldbedevelopedin2020.MeetingtheserequirementsinadditiontothealreadyapprovedStandardwouldallowsteelsitestonotonlymakeclaimsaboutthewaytheirsiteisoperated,butalsoabouttheirsourcingofinputmaterials.SteelsitesparticipatinginResponsibleSteelwouldbeabletochoosewhethertheywanttobeauditedagainsttheadditionalrequirements,buttheywouldnotbeobligedtodoso.Incentivestomeettheadditionalrequirementswouldcomefromthemarketintheformofcustomer,publicpolicyandgreenfinancespecifications,fromcivilsocietyandpeerpressure,orfromthewishtodistinguishfromcompetition.
TheResponsibleSteelcertificationprogrammeisbeingdevelopedtocovertheentiresteelsupplychainfromminesiteorcommercialscrapcollectordowntothesteelenduser(e.g.thecar,constructionorwhitegoodsmanufacturingcompany).ThecurrentResponsibleSteelStandardcanbeapplieddirectlyatsiteswhereinputmaterialsareprocessed,andatsteelmakingandsteelprocessingsites.
Upstreamsupplychainactivities,suchasmining,beneficiationorthecommercialcollectionandprocessingofscrap,willbecoveredthroughotherprogrammesthatareeitheralreadyexistentorthatarestilltobedeveloped.Ratherthancreatingamultitudeofstandardstocoverallstepsofthesupplychain,ResponsibleSteelwillidentifyandrecognisecredibleprogrammesthatsetasimilarlyambitiousstandardandrunanequallyrobustassuranceprogramme.Thefirststepsinthisdirectionstartedmorethantwoyearsago,whenResponsibleSteel,theInitiativeforResponsibleMiningAssurance(IRMA)andtheTowardsSustainableMining(TSM)programmeworkedtogethertocomparetheirrespectivestandardsandstartedthinkingaboutamechanismforrecognisingothersystemsupanddownthesupplychain.TheseeffortsarestillongoingandResponsibleSteelwillsoonpresentadraftrecognitionmethodologytoitsmembersandstakeholdersforfeedback.OurcollaborationwithIRMAandTSMisnotexclusiveandwewillalsoanalysetheprogrammesofBettercoalandtheInternationalTinAssociation(ITA).OtherprogrammesareinvitedtoletusknowiftheywanttobeanalysedandassessedforrecognitionbyResponsibleSteel.Forscrap,wewillapplythesameapproachaswetaketominingandotherstagesofthesupplythatarenotcoveredbytheResponsibleSteelStandard.Wewillanalyseexistingstandardsandthird-partyverificationprogrammessuchasISOIWA19(Guidanceprinciplesforthesustainablemanagementofsecondarymetals)andtheRecyclingIndustryOperatingStandard(RIOS)todeterminewhethertheycanberecognisedbytheResponsibleSteelprogramme.
ResponsibleSteeldraftrequirements,optionsandconsultationquestionsfortheresponsiblesourcingofinputmaterials 4
In2021,ResponsibleSteelwilllookintooptionsofincludingdownstreamsupplychainsintheResponsibleSteelcertificationprogramme.Weareenvisagingapplyingasimilarapproachastoupstreamsupplychains.Discussionsonthiswithourboardandwithmemberswillbekickedofflaterin2020.
Aboutthisdocument
Thisdocumentpresentsdraftversionsoftheadditionalrequirementsfortheresponsiblesourcingofinputmaterials.Onceapproved,theserequirementswillhavetobemetinadditiontothealreadyapprovedStandardversion1-0ifasteelsitewishestoclaimthatitssteelproductsareResponsibleSteelcertified.Wehaveprovidedguidanceonmostoftheproposedcriteriaandrequirementstoexplainkeytermsandconcepts.Thedocumentalsooutlinessomeoptionsforalternativerequirementsandconsultationquestionsthatweaskstakeholderstoconsider.Weareawarethatsomeofthedraftrequirementsandoptionspresentedinthisdraftmaybeunworkableormaybeunauditable,orthatthecostsandpracticalitiesmayoutweighthebenefitstheywillachieve.Wherestakeholdersfeelthatthisisthecase,wewelcomeclearfeedback,sothatwecanrevisetherequirementstomakesurethatfuturedraftversionsarepractical,auditableandeffective.
TheAnnexestothisdocumentcontainthealreadyapprovedrequirementsonresponsiblesourcingsothatreadersunderstandwhatisalreadycoveredbyourexistingStandard.Theyalsocontaintheinputmaterialsthatareproposedtobecoveredbytheresponsiblesourcingrequirementsanddescribesomeproposalsinrelationtothesourcingofinputmaterialsthatwerediscussedwithmembersbutnottakenforwardforthisversionofthedraftrequirements.ItisimportantforustoreceiveyourfeedbackontheAnnexesaswell.
ThisdocumenthasbeendraftedbytheResponsibleSteelSecretariatbasedondiscussionswithourBoard,Membersandstakeholdersoverthelastthreeyearsandisputoutforpublicconsultationwithstakeholders.TheproposalsinthisdocumenthavenotbeenendorsedbytheResponsibleSteelBoard,itsStandardsandAssuranceCommittee,orbytheResponsibleSteelmembership.
Wearekeentohearfromstakeholderswhethertheysupportourdraftrequirements,whethertheypreferanyoftheprovidedoptionsandwhattheiropinionsareontheconsultationquestionsweareposingtothem.Ifstakeholdersfeelthatthereareotherapproachesnotoutlinedherethatwouldbebetterplacedtoachieveourlong-termobjectiveofresponsiblesupplychainswithstrongESGperformance,weverymuchappreciatehearingthem.Stakeholdersareaskedtosubmittheirfeedbackonthedraftrequirements,options,consultationquestionsandAnnexestoResponsibleSteelby02October2020viatheGoogleformonhttps://forms.gle/RbS1rT2F7i3sA11K7.
StakeholdersshouldnotethatconsultationontheadditionalrequirementsforGHGislikelytostartinmid-August.
Followingthepublicconsultation,wewillcollateandreviewthereceivedfeedback.WeareplanningtoholdworkinggroupmeetingsandasecondroundofpublicstakeholderconsultationontheinputmaterialsandGHGrequirementstowardstheendof2020,andbeforethedraftrequirementsareputtoourMembersandourBoardforapprovalandratification.WeaimtohavecompletedbothworkstreamsoninputmaterialsandonGHG,ifconsensuscanbereachedacrossourMembership,inSpring2021.
Ifyouhaveanyquestionsontheinputmaterialrequirements,pleasecontact:
MarnieBammertTechnicalandAssuranceDirectormbammert@responsiblesteel.org
ResponsibleSteeldraftrequirements,optionsandconsultationquestionsfortheresponsiblesourcingofinputmaterials 5
DRAFTRequirements
Responsiblesourcingofinputmaterials
Objective:
ResponsibleSteelcertifiedsitesincreasinglydemandandsourceinputmaterialsfromsupplychainswithcrediblethird-partyverificationofstrongESGperformanceandproactivelyaddressenvironmental,socialandgovernancerisksandimpactsintheirsupplychains.
Background:
Stakeholders,customersandsocietyatlargeexpectcompaniestotakeresponsibilityforwhatisgoingonintheirsupplychains.Thisexpectationreachesbeyondthedirectsuppliersofcompaniesandencompassesallstagesofthevaluechain.TheResponsibleSteelStandardtakescompaniesuponthischallengeandtakesthemonajourneytoachievefullyresponsiblesupplychains.
Thefirstaskoftheresponsiblesourcingrequirementsisthatcompaniescommittoincreasinglysourceinputmaterialsfromsupplysitesthatareverifiablyoperatinginaresponsiblemannerandtoaddressenvironmental,socialandgovernance(ESG)risksandimpactsintheirsupplychains.
Thedifferenttypesandgradesofsteelaremadefrommanydifferentminedmaterialsthatmightberaworprocessed,passthroughmanydifferentsuppliersandaremixedandmeltedatvariousstagesofproduction.Steelisalsomadefromrecycledmaterial,whichsavesalotofenergy,butthescrapoftencomesfromhighlyfragmentedandopaquesupplychains.TheResponsibleSteelStandardrequirestransparencyalongthesecomplexsupplychainsandexpectsthatsteelsitesunderstandwhereexactlytheirinputmaterialscomefrom.OnlywhentheoriginofmaterialandthedifferentsuppliersitpassesthroughareknowncansteelsitesstartworkingwiththeirsupplychainstoimproveESGperformance.
ResponsibleSteelrecognisesthatthird-partyauditsagainstcredibleandrobuststandardsarethebestevidenceofstrongESGperformanceatsupplysitesandsoourStandardallowscertifiedsitestosellsteeltheyproduceas'ResponsibleSteelcertified'totheextentthattheysourceinputmaterialsfromsupplychainswhereeachlinkinthechaincanprovidethiskindofperformanceevidence.Apartfromminedmaterial,scrapisakeyingredientinsteelproduction.Siteswithelectricarcfurnace(EAF)relyheavilyonscrap.ForEAFsites,suchafullyverifiedsupplychainisonewheresupplysiteshaveeithersuccessfullyundergoneathird-partyauditagainstarecognisedscrapstandardorhavebeensubjecttoeffectiveESGriskandimpactassessmentandmitigation.Thisistoacknowledgethatscrapcontributestosustainableproductionsinceitisrecycledmaterial,butalsothatscrapsupplychainsaremorediversified,withmanymoreplayersofdifferentsizes,levelsofformalisationandmaturity.
Wheresupplysitescannotprovidethird-partyevidenceofstrongESGperformance,identifiedESGrisksandimpactsmustbeassessedandaddressedovertime.SteelsitesarelikelytofacemanyESGchallengesandwillnotbeinapositiontoaddressthemallatonce.TheResponsibleSteelStandardacknowledgesthatandaskssitestoaddressthemostsevereandimminentonesfirstbeforeturningtoother,lesspressingissues.
Finally,ResponsibleSteelcertifiedsitesmustreportpubliclyontheirprogressinsourcinginputmaterialsinaresponsiblemanner.
Thefollowinggraphsummarisesthe6proposedresponsiblesourcingCriteria:
ResponsibleSteeldraftrequirements,optionsandconsultationquestionsfortheresponsiblesourcingofinputmaterials 6
Sourcingfromverifiedsupplysites(i.e.certifiedorstrongESGperformanceverifiedby3rdpartyaccordingtoRS-recognisedprogramme.
ProactivelyaddressingESGrisksandimpactsinsupplychains
95%ofinputmaterialfromknownsupplysiteswithin3years
Supplysites=uptominesiteorcommercialscrapsupplier
Canclaimonlyasmuchsteelproducttobecertifiedassitereceivesinputmaterialfromcertifiedor3rdpartyverifiedsupplysites(notfromsupplysitesthathavebeensubjecttorisk-basedapproach)
Classifyashigh,Addressmostmediumorlowimminentonesandprioritisethemfirst,accordingtosetplansandstrategy
CentralreportingviatheResponsibleSteelwebsiteonkeyperformanceindicators
SteelsitesthatarecertifiedtotheseresponsiblesourcingrequirementsinadditiontothealreadyapprovedResponsibleSteelStandardlaunchedinNovember2019,mightmakethefollowingkindofclaim:“Thesite(nameofsteelsite)of(nameofcorporateowner)isResponsibleSteelcertified.Thesitehasshowninathird-partyauditthatitismanagedresponsiblyandincreasinglysourcesinputmaterialsfromresponsiblesupplychains”.Theexactwordingofanyallowedclaimsistobediscussedoverthenextfewmonthsaswedeveloptherequirementsfortheresponsiblesourcingofinputmaterials.
Sourcingisoftendoneatthecorporatelevelratherthanatindividualsteelsites.Duetothis,engagementofthecorporateownerofasteelsiteinResponsibleSteelauditsisexpectedandnecessarytodemonstratethattherequirementsoftheResponsibleSteelStandardaremet.Therequirementsforresponsiblesourcinghavethereforebeenphrasedinawaythatallowsforthiscorporate-levelengagement.
Criterion1.Responsiblesourcingcommitment
Thesite'scorporateowneriscommittedtosourcinginputmaterialsforsteelmakingandprocessinginaresponsiblemanner.
1.1.Thesite'scorporateownerhasapubliclyavailableresponsiblesourcingcommitmentto:
a) sourceinputmaterialfromsupplychainsthathaveachievedcrediblethird-partyverificationofstrongESGperformance,asrecognisedbyResponsibleSteel
b) wherecrediblethird-partyverificationisnotavailable,toeffectivelyaddressESGrisksandimpactsinsupplychains.
1.2.EvidencetoshowthattheresponsiblesourcingcommitmentisimplementedforthesiteisprovidedduringResponsibleSteelaudits.
Committoresponsiblesourcing
Mapinputmaterial
supplychains
Claim‘certified
steel’basedonverifiedinput
AssessESGrisksandimpactsin
supplychains
AddressESGrisksand
impactsovertime
Reportoncommitmentimplemen-tation
Stakeholderviewsaredividedhereandwearelookingforyour
constructivefeedback
ResponsibleSteeldraftrequirements,optionsandconsultationquestionsfortheresponsiblesourcingofinputmaterials 7
Guidance:
Inputmaterial:Annex1liststheinputmaterialsthatarecoveredbyourresponsiblesourcingrequirements.WeprovidedifferentOptionshereandwouldappreciatehearingfromstakeholderswhichoftheOptionstheypreferandwhy.
Corporateowner:ThelegalentityorentitiesthathaveultimatecontrolovertheactivitiesofasitethatappliesforcertificationofconformitywiththeResponsibleSteelStandard.
Note:Thecorporateownerwilltypicallybetheparentcompanyunderwhosenameasiteoperates.Inthecaseofjointventures,therequirementsofthecorporateownermayapplytomorethanonelegalentity.Theidentificationofthecorporateownershallbedeterminedaspartoftheapplicationprocessforsitecertification.
Crediblethird-partyverificationofstrongESGperformance,asrecognisedbyResponsibleSteel:Thismeanseither:
• certificationofasupplysiteagainstthestandardofaprogrammethatisrecognisedbyResponsibleSteelasbeingcredibleandrobust,or
• achievementofapre-definedhighlevelofESGperformancedemonstratedinathird-partyauditthatwasconductedaccordingtotherulesofaprogrammethatisrecognisedbyResponsibleSteelasbeingcredibleandrobust.
Overthenextfewmonths,wewilldevelopcriteriaandamethodologyforassessingESGverificationprogrammesthatapplytosupplychainstagesthattheResponsibleSteelStandardapprovedinNovember2019doesnotcover.Thisisthecase,forexample,attheminesitelevel.SincearigorousstandardisnotsufficientforensuringstrongESGperformance,ourrecognitionassessmentswillconsider:
• thestandardoftheprogramme• theassuranceandauditingprocess• thegovernanceoftheprogramme• engagementofexternalstakeholdersinauditsandinprogrammegovernance• assuranceofauditorcompetence• oversightmechanismsfortheprogramme• claimsthatcanbemadebysupplysitesthathavebeenaudited.
Weacceptnotonlycertificationbutalsoothercrediblethird-partyverificationsincemanyESGprogrammesdonotresultinabinarycertified/notcertifieddecision,buthavedefineddifferentachievementlevelsorratingscalestoclassifysupplierperformance.ResponsibleSteelwilldeterminefromwhichachievedlevelsofperformanceminesandothersupplychainactivitiescanberecognisedascontributingtomakingresponsiblesourcingareality.Wewillconsultwithmembersandstakeholdersonthecriteria,methodologyandrequiredperformancelevelsfortheserecognitionassessments.
Oncethisisinplace,wewillassesstheminesiteverificationprogrammesoftheInitiativeforResponsibleMiningAssurance(IRMA),TowardsSustainableMining(TSM),BettercoalandtheInternationalTinAssociation(ITA)todeterminewhethertheyareambitious,rigorousandindependentenoughtoberecognisedascontributingtoachievingourvisionof"maximisingsteel’scontributiontoasustainablesociety".OtherprogrammesarewelcometoapproachResponsibleSteelandasktobeassessedforrecognitionaswell.TheapproachwetaketominingwillalsobeappliedtootherstagesofthesteelsupplychainthatarenotcoveredbytheexistingResponsibleSteelStandard,forexamplethecommercialprocessingofscrap.ExamplesofstandardstolookathereareISOIWA19(Guidanceprinciplesforthesustainablemanagementofsecondarymetals)andtheRecyclingIndustryOperatingStandard(RIOS).
ResponsibleSteeldraftrequirements,optionsandconsultationquestionsfortheresponsiblesourcingofinputmaterials 8
Wherecrediblethird-partyverificationisnotavailable:ThismightbethecaseforsupplychainstageswherethereisnoverificationprogrammethatResponsibleSteelrecognises,orwhereinputmaterialfromthird-partyverifiedsupplysitesdoesnotmeetthespecificationneededforaparticularproduct,orwherethereisnotsufficientsupplyfromthird-partyverifiedsupplysitestomeetmarketdemand.
Evidencetoshowthattheresponsiblesourcingcommitmentisprogressivelyimplemented:NotealsoCriterion6,whichasksforpublicreportingonprogress.
Supplysite:Anindividualsitethatproducesorprocessesinputmaterialsusedinsteelmakingandsteelprocessing.
Supplychain:Allsupplysitesofthesteelsite,backtotheminesitelevel,whereminedmaterialisconcerned,orbacktothecommercialsupplysiteofexternalscrap,wherescrapisconcerned.
Commercialsupplysiteofexternalscrap:Thiscouldbeamanufacturingsitewherethescrapistheresultofmanufacturingprocessesoffinalproducts,suchasautomobilesandbuildings(manufacturingscrap).Or,whereitisend-of-lifescrap,itcouldbeascrapdealeroraship-breakingsite,upstreamofwhichthescraphadapreviouslife.
Criterion2.Supplychainmapping
Thesupplychainsoftheinputmaterialsusedatthesitearemappedandtransparencyofsupplychainsismaximisedovertime.
2.1.Thereisamappingofthesupplychainsforallinputmaterialsusedatthesite.Themappingidentifiesallknownsupplysitesandallsupplychainstageswithunknownsupplysites:
a) backtotheminesitelevelforminedmaterialb) backtothecommercialsupplysiteofexternalscrap.
2.2.Themappingcontainsatleastthefollowinginformationforallknownsupplysitesofthesite:
a) nameb) countryandmunicipalitywherethesupplysiteoperatesc) providedinputmaterial(s)d) whetherthesupplysitehasachievedcrediblethird-partyverificationofstrongESGperformance,as
recognisedbyResponsibleSteeland,ifso,forwhichinputmaterial(s)andwithwhichresult.
2.3.Foreachinputmaterial,thefollowinginformationiscollectedonaregularbasis:
a) receivedquantityfromsupplysitesthathaveachievedcrediblethird-partyverificationofstrongESGperformance,asrecognisedbyResponsibleSteel
b) receivedquantityfromsupplysitesthathavenotachievedthatverification,identifyingwhetherthesupplysitesareknownorunknown
2.4.Forscrap,thefollowinginformationiscollectedonaregularbasis:
a) receivedquantityfromsupplysitesthathaveachievedcrediblethird-partyverificationofstrongESGperformance,asrecognisedbyResponsibleSteel,dividedintomanufacturingscrapandend-of-lifescrap
b) receivedquantityfromsupplysitesthathavenotachievedthatverification,dividedintomanufacturingscrapandend-of-lifescrapandidentifyingwhetherthesupplysitesareknownorunknown
c) producedquantityofinternalscrap.
ResponsibleSteeldraftrequirements,optionsandconsultationquestionsfortheresponsiblesourcingofinputmaterials 9
2.5.Within3yearsofbecomingcertifiedtotheserequirements,themappingforthesiteshowsthatatleast95%ofthequantityofreceivedinputmaterialsisfromsupplychainswherealllinksinthechainareknown,backtotheminesitelevelortothecommercialsupplysiteofexternalscrap.
2.6.Inthecaseofnewsuppliers,ResponsibleSteelcertifiedsitesknowalllinksintheirsupplychainforthedeliveredinputmaterial,backtotheminesitelevelortothecommercialsupplysiteofexternalscrap.
Guidance:
Mapping:Thiscouldbeatable,matrixorsimilarshowingwhatisknownandwhatisnotknownaboutthedifferentinputmaterialsupplychains.
Quantity:Formofmeasurementfortherespectiveinputmaterial,forexamplemassintons.
95%:Thismeans95%ofthetotalinputmaterial,not95%ofeachindividualinputmaterial.
Receivedquantityofscrap:Whereitisnotpossibletodistinguishbetweenmanufacturingandend-of-lifescrap,anestimateofmanufacturingandofend-of-lifescrapisacceptable.
Internalscrap:Scrapfromacrudesteelproductionunitthatisthenrecycledwithinthesameunit(adaptedfromISO20915:2018(E)Lifecycleinventorycalculationmethodologyforsteelproducts).
Criterion3.Responsiblesourcingclaims
Thequantityofsteelproductsoldas'ResponsibleSteelcertified'iscalculatedandcontrolledaccordingtoadocumentedsystem,ensuringthatthecertifiedquantitydoesnotexceedthecalculatedallowanceforthesite.
3.1.ForBF-BOFsites:Thereisadocumentedsysteminplaceforthesiteto:
a) recordthequantityofinputmaterialthatisfromfullyverifiedsupplychains,meaningsupplychainswhereeverylinkinthechain,uptotheminesitelevelortothelevelofthecommercialsupplysiteofexternalscrap,hasachievedcrediblethird-partyverificationofstrongESGperformance,asrecognisedbyResponsibleSteel
b) calculatethepercentageofthatinputmaterialinrelationtotheoverallquantityofreceivedinputmaterial,usingtheResponsibleSteelChainofCustodyStandard
c) sellsteelproductas'ResponsibleSteelcertified'onlyifthequantityofinputmaterialfromfullyverifiedsupplychainshasreachedatleast10%oftheoverallquantityofreceivedinputmaterial
d) ensurethatthepercentageofsteelproductsoldas'ResponsibleSteelcertified'doesnotexceedthepercentagecalculatedunderb).
Consultationquestionsonthresholdformaking'certified'claims
Thedraftrequirementsabovemeanthatonlyasmuchsteelproductcanbesoldas'ResponsibleSteelcertified'asthesitereceivesinputmaterialfromfullyverifiedsupplychains.Forexample,ifthepercentageofinputmaterialfromfullyverifiedsupplychainscomparedtothetotalofallinputmaterialis10%,only10%ofoutgoingsteelproductcanbesoldascertified.ThispercentagerecognisesthattherearenotmanysupplysitesouttherewithstrongESGperformanceasevidencedthroughacrediblethird-partyprogramme.10%seemshighenoughtobecredible,yetachievableenoughforsteelcompaniestostrivefor.
Wearekeentohearfromstakeholderswhether10%isindeedacrediblethresholdtostartmakingclaimsorwhethertheythinkthatalowerorhigherpercentagewouldbemoreappropriateand,ifso,whichpercentage.IfstakeholdersfavourtheOption"Focussingoncrediblethird-partyverificationratherthan
ResponsibleSteeldraftrequirements,optionsandconsultationquestionsfortheresponsiblesourcingofinputmaterials 10
addressingESGrisksandimpactsinsupplychains"presentedinthetablebelow,is10%appropriateorshouldsteelcompaniesbeexpectedtohaveachieved,forexample,50%ofverifiedinputmaterialbeforetheywouldbeallowedtosell50%oftheirsteelproductas'ResponsibleSteelcertified'?
Guidance:
NotethatinternalscrapisconsideredcertifiedsinceitisproducedbyasitethatiscertifiedtotheResponsibleSteelStandardversion1-0,launchedinNovember2019.
Fullyverifiedsupplychain:Asupplychainwhereeverylinkinthechain,uptotheminesitelevelortothelevelofthecommercialsupplysiteofexternalscrap,hasachievedcrediblethird-partyverificationofstrongESGperformance,asrecognisedbyResponsibleSteel.
Chainofcustody:Processbywhichinputsandoutputsandassociatedinformationaretransferred,monitoredandcontrolledastheymovethrougheachstepinthesupplychain.Thechainofcustodymodelweintendtouseis'MassBalance'.Thismodelallowsthatinputmaterialsfromverifiedsupplychainsismixedwithinputmaterialsfromnon-verifiedsupplychains.However,steelproductcanonlybesoldas'ResponsibleSteelcertified'totheextentthatinputmaterialisfromfullyverifiedsupplychains.Forexample,ifthepercentageofinputmaterialfromfullyverifiedsupplychainscomparedtothetotalofallinputmaterialis10%,only10%ofoutgoingsteelproductcanbesoldascertified.
Forsteelsitesandsupplysites,MassBalancemeansthaton-siteseparationofverifiedandnon-verifiedinputmaterialisnotnecessary.However,downstreamcustomerswillnotknowwhetherthespecificproducttheyreceiveindeedcontainsinputmaterialfromfullyverifiedsupplychains.MassbalanceenablesaChainofCustody,i.e.itassuresthatthepercentageofsteelproductsoldascertifieddoesnotexceedthepercentageofreceivedinputmaterialfromfullyverifiedsupplychains.However,MassBalancedoesnotallowfulltraceabilityupthesupplychaintotheminesitelevelorthecommercialsupplysiteofexternalscrap,meaningonecannotfollowthemovementofverifiedinputmaterialthroughthechain.WeproposetouseMassBalancesincetraceabilityisdifficulttoachieveforcomplexsupplychainswithmixingandmeltingofinputmaterial.WealsobelievethattheimpactthatprogrammeslikeResponsibleSteelcanhaveintermsofESGimprovementsalongthesupplychaindoesnothingeonthetypeofChainofCustodymodelused.
IfwedecidetogowithMassBalance,afullChainofCustodyStandardwillhavetobedeveloped,includingrequirementsformanagingaChainofCustodysystem,fordocumentedinformationandcontrolofthatdocumentation,forconversionfactorstocalculateinputmaterialfromfullyverifiedsupplychainsandoutputs(meaningpercentageofsteelproduct)thatcanbesoldasResponsibleSteelcertified,aswellasforinventorybalancing.Inaddition,wewoulddevelopconversionfactorsthatreflectdifferinglevelsofESGperformanceofsupplysitesasawayofrecognisinghigherperformanceandtoprovideincentivesforsteelcompaniestoworkwiththeirsuppliersonimprovingESGperformanceovertime.SeeAnnex3whereMassBalanceandtheuseofconversionfactorsareillustrated.
ThekindsofclaimsthatcertifiedsteelsitescouldmakeifweadoptedaMassBalancemodelwouldbealongthelinesof“Thesite(nameofsteelsite)of(nameofcorporateowner)isResponsibleSteelcertified.Thesitehasshowninathird-partyauditthatitismanagedresponsiblyandhassystemsinplacetoincreasinglysourceinputmaterialsfromresponsiblesupplychains”.Theexactwordingofanyallowedclaimsistobediscussedoverthenextfewmonthsaswedeveloptherequirementsfortheresponsiblesourcingofinputmaterials.
ResponsibleSteeldraftrequirements,optionsandconsultationquestionsfortheresponsiblesourcingofinputmaterials 11
3.2.ForEAFsites:Thereisadocumentedsysteminplaceforthesiteto:
a) recordthequantityofexternalscrapthatisfromfullyverifiedscrapsupplychains,meaningsupplychainswhereeverylinkinthechainuptothecommercialsupplysiteofexternalscraphasachievedcrediblethird-partyverificationofstrongESGperformance,asrecognisedbyResponsibleSteel
b) separately,recordthequantityofexternalscrapthatisfromsupplychainswhereeverylinkinthechain:i. isknown,uptolevelofthecommercialsupplysiteofexternalscrap(asdefinedinCriterion2)ii. hasbeensubjecttoriskandimpactassessment,andiii. isun-associatedwithhighormediumESGrisksandimpacts(seeCriteria4and5)
c) recordthequantityofnon-scrapinputmaterialthatisfromfullyverifiedsupplychainsd) calculatethepercentageoftheinputmaterialina)toc)inrelationtotheoverallquantityof
receivedinputmaterial,usingtheResponsibleSteelChainofCustodyStandarde) sellsteelproductas'ResponsibleSteelcertified'onlyifthequantityofinputmaterialcalculated
underd)hasreachedatleast10%oftheoverallquantityofreceivedinputmaterialf) ensurethatthepercentageofsteelproductthatissoldas'ResponsibleSteelcertified'doesnot
exceedthepercentagecalculatedunderd).
Consultationquestiononourapproachtoscrap
Asstated,scrapsupplychainsaremorecomplexanddiversifiedthanthesupplychainsofotherinputmaterials.Throughourrequirements,weaimtoincreasetransparencyandunderstandingofESGissuesassociatedwithexternalscrapandincentivisesteelcompaniestoaddresstheseissuesovertime.Wehaveframedourrequirementstoachievethat,butwerecognisethattheremightbeotherwaystogettothesameoutcome.Ifstakeholdershavealternativesuggestionsforscrapsupplychains,wewouldlovetohearthem.
Guidance:
NotethatinternalscrapisconsideredcertifiedsinceitisproducedbyasitethatiscertifiedtotheResponsibleSteelStandardversion1-0,launchedinNovember2019.
Fullyverifiedscrapsupplychains:Onewhereallsupplysitesinasupplychain,uptothecommercialsupplysiteofexternalscrap,haveeithersuccessfullyundergoneathird-partyauditagainstarecognisedscrapstandard,orhavebeensubjecttoeffectiveESGriskandimpactassessment,preventionandmitigation(seeconsultationquestionbelow).Thisistoacknowledgethatscrapcontributestosustainableproductionsinceitisrecycledmaterialandthatscrapsupplychainsaremorecomplexanddiversified.
Recognisedscrapstandard:Overthenextfewmonths,ResponsibleSteelwillanalyserelevantstandardstodetermineiftheyarecomprehensiveandrobustenoughtomeetstakeholderexpectationsontheresponsiblesourcingofscrap.ExamplesofstandardstolookatareISOIWA19(Guidanceprinciplesforthesustainablemanagementofsecondarymetals)andtheRecyclingIndustryOperatingStandard(RIOS).ForRIOS,itisalreadyclearthatadditionalrequirementswouldhavetobedefinedandmettosatisfyResponsibleSteelstakeholderexpectationssinceRIOSfocusesontherecyclingfacilityseekingcertificationanddoesnottakeintoaccountupstreamsupplysites.
ResponsibleSteeldraftrequirements,optionsandconsultationquestionsfortheresponsiblesourcingofinputmaterials 12
Consultationquestiononriskmanagement
DiscussionswithResponsibleSteelmembersandstakeholdersoverthelastyearsconfirmedthatcrediblethird-partyverificationofstrongESGperformanceiswhatwewanttoachieveinthelong-term.OurproposedCriterion3(Responsiblesourcingclaims)addressesthis.
Thequestionishowcanwemosteffectivelydrivedemandforcrediblethird-partyverificationand,recognisingthatthisisnotyetwidelyavailable,shouldwerequiresteelcompaniestoinvesttimeandmoneyinESGriskandimpactmanagementinsupplychainsinthemeantime,acceptingthatthiswilldriveawayresourcesfromourultimategoal?
Whenthinkingaboutthisquestion,stakeholdersshouldkeepinmindthefollowingconsiderations:
• theinfluenceofsteelcompaniesonsuppliersthatarenottheirdirectsuppliersisverylimitedsincethereisnocontractualrelationshipbetweensteelcompaniesandsuppliersfurtherupstream
• thismeansthatthereisnocontrolofsteelcompaniesoveractivitiesinthesesupplychainstages.Asaconsequence,steelcompanieshavetorelyontheassertionsofsupplysitesthatESGrisksandimpactshavebeenreliablyaddressed,butthereisnosuretyforsteelcompaniesandResponsibleSteelstakeholdersthatthisisindeedthecase
• wheretheavoidanceormitigationofESGrisksandimpactsinsupplychainsseemstobetooonerousorunachievable,steelcompaniesmightsimplychangesupplierstofocusonthosewithlow-riskprofilesratherthanhelpingimprovethewaythatcurrentsuppliersoperate.Wherethishappens,thatthereisnopositiveimpactontheground.
• theeffortrequiredtoidentify,assessandaddressESGrisksinsupplychainsisimmensewithlittlereturn,asillustratedabove
• inaddition,theappropriatenessofESGriskandimpactassessmentandmanagementischallengingtoauditsinceResponsibleSteelauditorswillhaveacontractallowingthemtovisitthesteelsite,buttheywillnotbeauthorisedtovisitupstreamsupplysites.Thismeansthattheywillnotbeinapositiontoverifyevidencefirst-handandconfirmthatrisksandimpactshaveindeedbeeneffectivelyaddressed.
Asstatedabove,ResponsibleSteel'sultimategoalistoachievestrongESGperformanceinsupplychains.Thiswillhavetobedemonstratedthroughcrediblethird-partyverificationofsupplysiteperformance.ResponsibleSteelwillanalyseexistingverificationprogrammestoidentifywhichonesarerobustandcomprehensiveenoughtoberecognisedashelpingtoachieveourvision.Wefavourthird-partyverificationofsupplysiteperformanceagainstcrediblestandardsbecause:
• itrequirescommitmentfromsupplysitestoachievetherespectivestandardratherthanimposingactionsonsupplysites,whichiswhatriskmanagementdoes
• supplysitesareassessedaccordingtocriteriathathavebeenagreedbystakeholdersfromdifferentbackgrounds,whereasriskmanagementisapproachedverydifferentlyfromcompanytocompany
• supplysiteperformanceisnotonlyassessedthroughadocumentreviewbutalsothroughon-sitevisits
• supplysitesarejudgedbyqualifiedauditors,ofteninvolvingtheviewsofdifferentexternalstakeholders,ratherthanbythesupplysiteitselforacompanythathasaninterestinthesupplysite.
Ifweweretoallowsteelcompaniestofocusonpushingforcrediblethird-partyverificationofsupplysitesandnotspendtimeandresourcesonESGriskmanagement,thiswouldverylikelyacceleratetheavailabilityofinputmaterialfromsupplychainswithstrongESGperformance.
ResponsibleSteeldraftrequirements,optionsandconsultationquestionsfortheresponsiblesourcingofinputmaterials 13
AlloftheseconsiderationsshouldbekeptinmindbystakeholderswhenreviewingtheOptionsmatrixbelowtodeterminewhichonetheydeemtobebestplacedtohelpachieveourvisionof"maximisingsteel'scontributiontoasustainablesociety".
Focussingoncrediblethird-partyverificationratherthan...
Usingready-madetoolsfor... Usingsteelcompany'sownmethodologyfor...
...addressingESGrisksandimpactsinsupplychains*
Pros Wouldleadtogreaterandquickerdemandforcrediblethird-partyverificationofstrongESGperformancesincesteelcompaniescanfocusonthat.
Hasgreatestpotentialforpositivechangeatsupplysites.
Wouldavoidspendingtimeandresourcesonsomethingthatdoesnotcontributetoourultimategoal.
AllsupplysitesandallcountrieswouldbeassessedusingthesamecriteriaforESGriskandimpact.
Resultscouldbesharedwithallsteelcompanies,soallwouldbeworkingfromthesamebasis.
Effortforsteelcompanieswouldberelativelylow.
Wouldanswertostakeholdersthatexpectcompaniestoconductsupplychainduediligence.
WouldmakesurethatsteelcompaniesareawareoftheirsupplychainESGrisksandimpacts.
Wouldanswertostakeholdersthatexpectcompaniestoconductsupplychainduediligence.
Cons ESGrisksandimpactsinsupplychainsmightgounnoticed.
CredibilityriskforResponsibleSteelanditsparticipantsandsupporterswhilecrediblethird-partyverificationofstrongESGperformanceisnotwidelyavailable.
Impliesthatriskmanagementleadstopositiveandlastingsolutionswhilesupplychainscannotbefreeofriskandimpact.
Willdivertconsiderableresourcesawayfromgettingsupplysitesintocrediblethird-partyverificationprogrammes.
Impliesthatriskmanagementleadstopositiveandlastingsolutionswhilesupplychainscannotbefreeofriskandimpact.
Riskandimpactassessmentsdonebydifferentsteelcompaniesononeandthesamesupplysitemightshowverydifferentresultssincecompanieswouldusedifferentapproaches.
*Usingsteelcompany'sownmethodology:SteelcompanieswouldbeaskedtoanalyseandassesstheirESGrisksandimpactsininputmaterialsupplychainsinlinewithadocumentedmethodology.Theywouldhavetoprioritisepreventionandmitigationofrisksandimpactsandimplementactionplansdependingontheirprioritisation.ThisOptionisdescribedindetailinCriteria4and5below.
ResponsibleSteeldraftrequirements,optionsandconsultationquestionsfortheresponsiblesourcingofinputmaterials 14
Usingready-madetools:ResponsibleSteelwouldidentifyanumberofexistingtoolsthatsteelcompaniescouldusetoidentifyandassessESGrisksandimpactsassociatedwithsupplychains.Examplesofsuchtoolsare:
ForESGrisksassociatedwithspecificinputmaterialsandcountries:Thereport'ResponsibleSourcingandDueDiligencefortheWorldsteelMembership'compiledbyTheDragonflyInitiative(TDI)forworldsteel.ThereportdescribesandcategorisesESGrisksspecifictoimportantsourcedinputmaterialsandtocountrieswheresupplysitesmightoperate.Itisavailabletoworldsteelmembersonly.
ForESGrisksspecifictoindividualsupplysites:TheRiskReadinessAssessment(RRA)bytheResponsibleMineralsInitiative(RMI)isaself-assessmenttoolformineralsandmetalsproducersandprocessorstoassessandcommunicatetheirriskmanagementpracticesandperformanceusingbenchmarkednormsestablishedthroughastandardscomparisonprocess.TheRRAcomeswithanonlineplatformtoadministerandshareassessmentresults.Todate,theRRAcoversthefollowingmetalsandminerals:Aluminum,Alumina,Bauxite,Cobalt,Copper,Gold,Graphite,IronOre,Lead,Lithium,Mica,Molybdenum,Nickel,Palladium,Platinum,RareEarthElements,Silver,Steel,Tantalum,Tin,Tungsten,andZinc.
Consultationquestiononinputmaterialstocover
WhenconsideringwhichoftheOptionspresentedaboveismostlikelytohelpensurethatsupplychainsareresponsible,stakeholdersshouldalsothinkaboutwhichinputmaterialsourrequirementsshouldapplyto.ThemorematerialsweasksteelcompaniestocoverinESGriskmanagement,themorecomplexouraskwillbecome.WeighinguptheeffortthathastobeputinandthepotentialpositiveimpactwemightderivefromESGriskmanagementisimportanthere.WeareproposingtwoOptionsbelowandwouldliketohearfromstakeholderswhichonedoesthatbalancingactbest:
Description Inputmaterialscovered
Top3inputmaterialcategories
The3mostimportantinputmaterialcategoriesforsteelmakingandsteelprocessing,byquantity.
ThisOptionislikelytocoverbetween70and90%ofinputmaterialsusedinsteelmakingandprocessingatanygivensteelsite.
• Ferrousrawmaterial• Processcoal,cokeand/orcharcoal• Externalscrap
SeeAnnex1fordetails
Toppurchasingpower ThisOptionwouldincludeallthoseinputmaterialswherethesteelsectorbuys50%ormoreoftheglobalannualproduction.
Thiswouldleveragethepurchasingpowerofthesteelsectorandthusthepowertopositivelyinfluencesupplychainactivities.
• Ferrousrawmaterial• Processcoal,cokeand/orcharcoal• Externalscrap
Non-ferrousrawmaterial:Zinc
Ferroalloys:
• Chromium• Manganese• Molybdicoxide• Nickel• Niobium• Vanadium
ResponsibleSteeldraftrequirements,optionsandconsultationquestionsfortheresponsiblesourcingofinputmaterials 15
Note:
Criteria4and5illustratehowwemightimplementtheOption"Usingsteelcompany'sownmethodology"fromthetableabove.ItshowswhatacomprehensiveapproachtoESGriskandimpactmanagementmightlooklike.
Criterion4.SupplychainESGriskandimpactassessmentandprioritisation
ESGrisksandimpactsassociatedwiththeinputmaterialsupplychainsofthesitearefullyunderstoodandprioritiesfortheirpreventionandmitigationaresetdependingonseverityandlikelihood.
Note:
Criterion4wouldnothavetobeappliedtosupplysitesthathaveachievedcrediblethird-partyverificationofstrongESGperformance,asrecognisedbyResponsibleSteel.
TheOption"Focussingoncrediblethird-partyverificationratherthanaddressingESGrisksandimpactsinsupplychains"wouldmeanthatCriterion4wouldnotexist.
4.1.Thereisadocumentedproceduretoidentify,analyseandassesstheESGrisksandimpactsassociatedwithinputmaterialsupplysitesuptotheminesitelevelortothecommercialsupplysiteofexternalscrap,andtoprioritiserisksandimpactsthatmustbeaddressedintheshort-term.
4.2Theprocedurehasbeenappliedtoallinputmaterialsupplychainsto:
a) analyseandassesstheESGrisksandimpactsassociatedwithallknownsupplysitesaccordingtotheirlikelihoodandseverityandclassifythemashigh,mediumorlow
b) classifyallsupplychainstageswithunknownsupplysitesasbeingassociatedwithhighESGrisksandimpacts
c) identifysupplysitesandsupplychainstageswithhighESGrisksandimpactsthatmustbeaddressedasaprioritythroughtheimplementationofshort-termandlonger-termpreventionandmitigationplans.
4.3.Theresultsof4.2are:
a) documentedandjustifiedb) reviewedandupdatedregularlyandwhenneeded,followingthedefinedESGrisksandimpacts
procedure.
Guidance:
ESGrisksandimpactstoaddressasapriority:Risksandimpactsthatcanresultinsignificantharmtohumanrights,healthorcriticalecosystemswillhavetobepreventedormitigatedasapriority.Thiswillapply,forexample,inthecaseofchildandforcedlabour,contaminationofrivers,streamsorlakes,andminesitetailingsdamsusingout-of-datetechnology.ResponsibleSteelwillprovidemandatoryguidanceinthisrespect.Indoingso,wewilltakeintoaccountthatsomerisksandimpactswilltakelongertoaddressthanothers,sosomerisksandimpactswillbesubjecttoshort-termpreventionandmitigationplanswhileotherswillbesubjecttolonger-termpreventionandmitigationplans.
Procedure:Aformal,approvedmethodforimplementingaprocessorpartofaprocesseffectivelyandconsistently.Stateshowtheprocessneedstobedone.Defineswho,what,where,when,andwhy.Aprocedure(orelementsoftheprocedure)maybeformalisedasdocuments,videos,on-lineresources,etc.,butmustbeauditablebothintermsofitsexistenceandintermsofitsimplementation.
Short-term:Dependingonthetypeofrisk,areasonabletimeframeseemstobebetween1monthand1year.
ResponsibleSteeldraftrequirements,optionsandconsultationquestionsfortheresponsiblesourcingofinputmaterials 16
Longer-term:Dependingonthetypeofrisk,areasonabletimeframeseemstobebetween1yearand5years.
Regularly:Scheduledatplanned,appropriateintervals.Thedeterminationofappropriateintervalsdependsonthematterathand.Theintervalsmustbefrequentenoughtodetectchangeandmusttakeaccountofrisk.Annualmightbeasuitablefrequencyforsomematters.Wherechangescanhappenquicklyorwhereriskishigh,theintervalsmustbeshorter.
Whenneeded:Forexample,duetochangesinsupplysiteactivities,duetocontractingnewsuppliersorbecauseariskmitigationplanhasbeenfullyimplemented.
Criterion5.SupplychainESGriskandimpactpreventionandmitigation
ESGrisksandimpactsassociatedwiththeinputmaterialsupplychainsofthesiteareaddressedaccordingtoclearprioritiesanddefinedplans.
Note:
Criterion5wouldnothavetobeappliedtosupplysitesthathaveachievedcrediblethird-partyverificationofstrongESGperformance,asrecognisedbyResponsibleSteel.
TheOption"Focussingoncrediblethird-partyverificationratherthanaddressingESGrisksandimpactsinsupplychains"wouldmeanthatCriterion5wouldnotexist.
5.1.Short-termpreventionandmitigationplanshavebeenimplementedinlinewiththesetprioritiesforaddressinghighESGrisksandimpactsininputmaterialsupplychains.AnupdatedrisksandimpactsassessmentandevidenceprovidedtotheResponsibleSteelauditorsshowthattherisksandimpactshavebeenreducedatleasttomediumpriortothesitebecomingcertifiedtotheresponsiblesourcingrequirementsoutlinedinthisdocument.
5.2.Longer-termpreventionandmitigationplansforhighESGrisksandimpactsininputmaterialsupplychainsarebeingimplementedforthesiteinlinewiththesetpriorities.Theplans:
a) aretime-boundb) arecostedc) specifymitigationactivitiesandmilestonesd) outlineresponsibilitiesforactivitiese) describehowprogressofplanimplementationistrackedandverifiedf) arebackedupbyevidenceofprogressiveplanimplementation.
5.3.AstrategytopreventandmitigatemediumandlowESGrisksandimpactsassociatedwiththeinputmaterialssupplychainsofthesiteisbeingimplemented.
5.4.WherenewhighESGrisksandimpactsbecomeknownafterthesitehasbecomecertifiedtotheresponsiblesourcingrequirementsoutlinedinthisdocument,thesearereducedatleasttomediumwithin12months.
Guidance:
SeeunderCriterion4.
ResponsibleSteeldraftrequirements,optionsandconsultationquestionsfortheresponsiblesourcingofinputmaterials 17
Criterion6.Supplychainreporting
Keyfiguresanddevelopmentsregardingtheresponsiblesourcingofinputmaterialsforthesitearereportedpubliclyandregularly
6.1.ThefollowingisregularlyreportedforthesitetoResponsibleSteelforpublicationontheResponsibleSteelwebsite:
a) percentageofinputmaterialthatisfromfullyverifiedsupplychainsb) increaseofinputmaterialfromfullyverifiedsupplychainssincethelastreportingperiod,in
percentc) percentageofinputmaterialthatisfromknownsupplysitesd) percentageofinputmaterialthatisclassifiedashigh,mediumandlowESGriskorimpacte) descriptionofESGriskandimpactpreventionandmitigationplansthathavebeenimplemented.
Guidance:
n/a
ResponsibleSteeldraftrequirements,optionsandconsultationquestionsfortheresponsiblesourcingofinputmaterials 18
Annex1(forconsultation):InputmaterialstobecoveredbyESGriskmanagementrequirements
Below,welistimportantinputmaterialsusedforsteelmakingandsteelprocessingandpresenttwoOptionstohelpdeterminewhichoftheseinputmaterialsshouldbecoveredbyESGriskmanagement:
• Top3inputmaterialcategories:ThisOptionislikelytocoverbetween70and90%ofinputmaterialsusedinsteelmakingandprocessingatanygivensteelsite.
• Toppurchasingpower:Inputmaterialswherethesteelsectorbuys50%ormoreoftheglobalproduction.TheseinputmaterialshavebeenidentifiedthroughaprojectconductedbyTheDragonflyInitiativeforworldsteel.
OtherinputmaterialforsteelmakingandprocessingnotincludedintheseOptionswouldbeoutofscopeoftheESGriskmanagementrequirements,forexamplechemicals,electrodes,energyinputs,industrialgases,lubricants,oils,refractoriesandrolls.
ConsultationquestiononinputmaterialstobecoveredbyESGriskmanagementrequirements(relatedtoCriterion3)
WhichofthetwopresentedOptionsdoyouthinkarebestplacedtohelpensurethatsupplychainsareresponsible?IfyoudonotfavouranyofthepresentedOptions,whichotherOptiondoyouproposeandwhy?NotethattheseconsultationquestionshavebeenposedunderCriterion3already.
Top3inputmaterialcategories
Toppurchasingpower
Rawmaterial Rawmaterialsub-categoryFerrousrawmaterial Concentrate
Directreducediron(DRI)FinesHotbriquettediron(HBI)LumporePelletsPigironSinter
Processcoal,cokeandcharcoal
AnthraciteCharcoalCokeCokingcoalsPulverisedcoalforinjection
Externalscrap ManufacturingscrapEnd-of-lifescrap
Ferroalloy ChromiumManganeseMolybdicoxideNickelNiobiumVanadium
Non-ferrousrawmaterial Zinc
ResponsibleSteeldraftrequirements,optionsandconsultationquestionsfortheresponsiblesourcingofinputmaterials 19
• Ferrousrawmaterial:Rawmaterialfromtheearththatbecomesoneofthemainconstituentsofsteelproducts,andwhichmayhaveundergoneintermediateprocessingtoprepareitforironmaking
• Processcoal,cokeandcharcoal:Coal,cokeandcharcoalusedinironandsteelmakingprocesses
• Externalscrap:Manufacturingscrap(scrapfromthemanufacturingprocessesoffinalproducts,suchasautomobilesandbuildingsandend-of-lifescrap(scrapfromaftertheendoflifeoffinalproducts)
• Ferroalloy:Alloyofironwithnon-ironalloymetals,suchasmanganese,siliconorchromiumusedinthesteelmakingprocess
• Non-ferrousrawmaterial:Non-ferrousingredientmaterialforsteelproductsotherthanferrousrawmaterial,processcoalorferroalloys
(Definitionsadaptedfrom'ISO20915:2018(en)Lifecycleinventorycalculationmethodologyforsteelproducts')
TheOptionspresentedabovewouldexcludethefollowinginputmaterials:Ferroalloy Aluminium
BoronCobaltMagnesiumPhosphorousSiliconTitaniumTungsten
Non-ferrousrawmaterial AluminiumMagnesiumTin
Otherinputmaterial(Materialinputandconsumablesforsteelmakingandprocessingotherthanferrousrawmaterials,processcoal,ferroalloysandnon-ferrousrawmaterials)
Material Materialsub-categoryLime,Dolomiticlime,Dolomite,LimestoneBF&Slagadditives OtherfluxesforslagandBFDesulfurizingProducts
CaC2(calciumcarbide)CaF2(calciumfluoride)Lime-MgMg(magnesia)
ResponsibleSteeldraftrequirements,optionsandconsultationquestionsfortheresponsiblesourcingofinputmaterials 20
Annex2(forconsultation):ProposalsfordraftrequirementsthatwerediscussedwithResponsibleSteelmembersbutnotprogressedResponsiblesourcingcommitmentItwassuggestedthatweaskforapercentage-basedyear-on-yearincreaseofsupplysitesorofsupplyvolumethathasachievedcrediblethird-partyverificationofstrongESGperformance,asrecognisedbyResponsibleSteel.Sincethiskindofverificationisnotyetwidelyavailableforminesitesandforothersupplychainstages,wedismissedthatoption.SupplychainmappingWeareaskingfor95%butnotfor100%ofthequantityofinputmaterialtobefromknownsupplysitessincesuppliersmightchangefrommonthtomonthtoensuresupply,achievethespecificationthatisneededforaparticularproduct,etc.Somesuppliersarealsonotcooperativeandsteelcompaniesmightnotbeinapositiontosimplychangesuppliersincetheremightbeonlyaverysmallnumberofsuppliers,thecompanymightnothaveleveragetopushthroughdemandsduetotheirsize,etc.Also,weareaskingfor95%ofthequantityoftotalinputmaterialtobefromknownsupplysites,notfor95%ofeachindividualinputmaterialsincetheoriginofsomeinputmaterialisveryhardtotrack.ResponsiblesourcingclaimsItwassuggestedthatsteelproductcanbesoldas'ResponsibleSteelcertified'ifaduediligence-typeapproachhasbeenapplied,i.e.ifESGrisksandimpactsassociatedwithsupplysiteshavebeenaddressed.Webelievethatrisk-basedapproachesareafirststepincreatingresponsiblesupplychains,buttheydonotdeliverthelevelofassurancethatisneededtomarkresultingsteelproductas'certified'.Onlythird-partyauditsagainstclearlydefinedandcomprehensivestandards,followinganagreedauditprotocolbytrainedandcompetentauditorscanachievethat.
However,wearesuggestingtomakeallowancesforEAFsites,whichrelyheavilyonscrapasaninputmaterial,tonotputthematadisadvantagebutrathertoprovideincentivestoseekResponsibleSteelcertification.Scrapsupplychainsaremorediversified,withmanymoreplayersofdifferentsizes,levelsofformalisationandmaturityanditwillbeverychallengingandmighttakemanyyearstoseeaconsiderablenumberofscrapsuppliersachievearecognisedlevelofESGperformanceinathird-partyaudit.Atthesametime,scrapcontributestosustainableproductionsinceitisrecycledmaterial.Ratherthanexcludingscrap,weareproposingtoallow'certified'claimsonscrapsourcedfromsupplychainsthathavebeensubjecttoeffectiveESGriskandimpactpreventionandmitigationmeasures.Weconsideredclaimsaboutsteelproductbeing'ResponsibleSteelcertified'tobeaccompaniedbythepercentageofinputmaterialthatisfromfullyverifiedsupplychains,forexample"Oursteelcoilsaremadefrom25%inputmaterialthatisfromsupplychainsoperatingtohighESGstandards".Claimsofthisnaturearecomplexanddifficulttoexplainandbeartheriskofconfusingstakeholders.Inaddition,thereareonlyafewminesitesandafewsupplysitesinotherstagesofthesupplychainthatmightbeabletoprovideproofofstrongESGperformancethroughathird-partyprogrammerecognisedbyResponsibleSteel.Ifthepercentageweretogowiththeclaim,thiswouldallowthosefamiliarwiththesteelsectortoidentifythesuppliersofasteelcompany,whichcouldcausecompetitionissues.
Consultationquestiononotheroptions
Arestakeholdersinfavourofexploringanyoftheoptionsoutlinedherethatwedidnotprogressforthedraftrequirements?Ifso,whichonesandwhy?
ResponsibleSteeldraftrequirements,optionsandconsultationquestionsfortheresponsiblesourcingofinputmaterials 21
Arethereanyoptionsnotpresentedinthispaperatallthatstakeholdersfeelwouldbebetterplacedtoachieveourlong-termgoalofresponsiblesupplychainswithstrongESGperformance?Ifso,pleasedescribethembrieflyinyourfeedback.
ResponsibleSteeldraftrequirements,optionsandconsultationquestionsfortheresponsiblesourcingofinputmaterials 22
Annex3(forinformation):Illustrationofmassbalanceandconversionfactors
ResponsibleSteeldraftrequirements,optionsandconsultationquestionsfortheresponsiblesourcingofinputmaterials 23
ResponsibleSteeldraftrequirements,optionsandconsultationquestionsfortheresponsiblesourcingofinputmaterials 24
Annex4(forinformation):ResponsiblesourcingrequirementsinapprovedStandard
AlreadyincludedintheResponsibleSteelStandardv1-0,approvedNovember2019:
Criterion1:CorporateValuesandCommitments
Thesite’scorporateownershavedefinedanddocumentedthevaluesandpoliciesforresponsiblebusinessconducttowhichtheyarecommitted.
1.1.Thesite’scorporateownershavedefinedanddocumentedthevalues,policiesandcommitmentsthattheyrequiresitesundertheircontroltoimplement,includingatleastthefollowing:
...a)tod)
e)AresponsiblesourcingpolicythatincludesacommitmenttosourcerawmaterialsfromsupplierswhosepoliciesandpracticessupporttheimplementationoftheResponsibleSteelprinciplesandcriteriaasapplicabletothesourcingofrawmaterials.
1.2.Thevalues,policiesandcommitmentstowhichthecorporateownersarecommittedareeffectivelycommunicatedtothesite'sworkers,andarereadilyaccessibletothepublic.
Guidance:
Overarchingpolicies,procedures,codesofconduct,etc.maybesetatthecorporateowneror‘group’level,ratherthanseparatelybytheindividualsitesseekingcertification.Insuchcases,auditorswillevaluatewhetherthepolicy,procedure,codeofconduct,etc.isaccessible,known,understoodandeffectivelyimplementedatthesitelevel.Sitesmustbeabletodemonstratetotheirauditorthatthisisthecase,butarenotrequiredtodeveloptheirownpoliciesatthesitelevel.
Publicationofcommitmentsinacompany’sannualreportorina‘corporatesocialresponsibility’reportwouldbeevidenceofimplementationof1.1.1.
ISO20400:(2017)Sustainableprocurement–Guidancemighthelpwiththeimplementationofsustainableprocurementpractices.
Criterion2.2:ResponsibleSourcing
Thereareeffectiveproceduresinplacetoensurethattheresponsiblesourcingcommitmentsofthesite’scorporateownerareimplementedforthesite’sownprocurement.
2.1.Thereareeffectiveproceduresinplacetoimplementthecorporateowner’spolicycommitmenttoresponsiblesourcing(seerequirement1.1.1.e)atthesite.Proceduresincludeatleastthefollowingelements:
a) Thecorporateowner’scommitmenttoresponsiblesourcingiscommunicatedtothesite’stier1suppliersofkeyrawmaterials;
b) Therearedocumentedprocurementspecificationsthatimplementthecorporateowner’scommitmenttoresponsiblesourcingasapplicabletothesite;
c) Tier1suppliersofkeyrawmaterialstothesitearerequiredtodocumenttheirownresponsible
ResponsibleSteeldraftrequirements,optionsandconsultationquestionsfortheresponsiblesourcingofinputmaterials 25
sourcingcommitments(ifany)andtomaketheseavailabletothepersonnelresponsibleforthesite’sprocurement.
2.2.Thesitehasaccesstoalistingofitstier1suppliersandtocopiesoftheircommitmentstoresponsibleconductorresponsiblesourcing.Ifthesupplierdoesnothavesuchacommitmentthisisrecorded.
2.3.Keyperformanceindicatorsforthepersonnelresponsibleforthesite’sprocurementofrawmaterialshavebeenspecifiedandarealignedwiththecorporateowner’scommitmenttoresponsiblesourcing.
Guidance:
Therequirementsrecognisethattheresponsiblesourcingpolicyandproceduresmaybeimplementedatcorporateorgrouplevelorbyanotherdepartmentthatmayoperatefromanoff-sitelocation.Thefundamentalrequirementisthattheproceduresmustapplytothesite’sprocurement,mustbeeffective,andcanbeauditedassuch.
Thesite’scorporatesourcingpolicymust,asaminimum,coverthesourcingofthekeyrawmaterialslistedinAnnex2wherethesematerialsareusedbythesite.Thesite’scorporatesourcingpolicymayapplybeyondthetier1suppliersofkeyrawmaterials.Wherethisisthecase,thesite’sproceduresshouldreflectthis.
Wheretier1suppliersdonothavetheirownpolicyonresponsibleconductorresponsiblesourcing,thiswouldberecorded.Thiswouldnotofitselfbeanon-complianceforthesite.However,theabsenceofaresponsiblesourcingpolicybyatier1supplierdoesnotsupporttheimplementationofthecorporatecommitmentrequiredunder1.1.1.e,sotheauditorwouldexpecttoseeactionbeingtakenovertimetodiscontinuesourcingfromsuchsuppliers.
Notethatadditionalrequirementsinrelationtothesite’sresponsiblesourcingarebeingdevelopedbyResponsibleSteel,inconsultationwithitsmembersandotherstakeholders,andwillbefinalisedin2020.Achievingtheseadditionalrequirementswillallowsitestomakestrongerclaimsabouttheirperformanceand,inparticular,aboutthesteelproducedatthesite.ResponsibleSteelanticipatesthatdownstreamcustomers,civilsociety,financialinstitutionsandotherstakeholderswillincreasinglydemandthatsteelcompaniesachievethishigherlevelofperformance.