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The future of the European Steel Market, Costs vs Emissions in Steel Sourcing

Nazário Baptista Guerreiro Ferreira, Duarte LU (2025) MTTM02 20241
Production Management
Engineering Logistics
Abstract
Background: Growing corporate awareness of environmental and social impacts, coupled with
initiatives like the Science-Based Targets initiative (SBTi), is driving companies to address
greenhouse gas emissions, particularly indirect Scope 3 emissions which often constitute the largest
share of their carbon footprint. For ASSA ABLOY, Scope 3 emissions represent 99% of its total
footprint, with purchased goods and services, especially steel, being major contributors. The steel
industry itself is a significant global emitter, facing substantial decarbonization challenges to align
with climate goals.
Purpose: This project’s purpose is to examine the steel market, its current situation, future prospects,
initiatives and the concept of... (More)
Background: Growing corporate awareness of environmental and social impacts, coupled with
initiatives like the Science-Based Targets initiative (SBTi), is driving companies to address
greenhouse gas emissions, particularly indirect Scope 3 emissions which often constitute the largest
share of their carbon footprint. For ASSA ABLOY, Scope 3 emissions represent 99% of its total
footprint, with purchased goods and services, especially steel, being major contributors. The steel
industry itself is a significant global emitter, facing substantial decarbonization challenges to align
with climate goals.
Purpose: This project’s purpose is to examine the steel market, its current situation, future prospects,
initiatives and the concept of green steel; and how this influences Assa Abloy´s Scope 3 Science
Based Targets performance and supplier selection in the short and long term.
Research questions:
RQ1 - How will the demands of the Science Based Targets' Scope 3 affect the procurement of steel
and the cost of the products?
RQ2 - How can the environmental footprint be reduced, focusing on the steel sourcing, guaranteeing
its procurement process is sustainable?
RQ3 - How does this sustainability approach affect the cost of goods sold (COGS)?
Methodology: A single case study that performed a supply market analysis on the European steel
market, designed according to the literature. By following the framework, new understandings about
the market were gained and thus contributed to a foundation for future sourcing strategies. When
performing this study, data was collected through interviews, documentations, market reports and
news articles.

Findings:
This thesis explores the evolving European steel market's alignment with decarbonization goals,
focusing on Assa Abloy’s strategic sourcing goals to meet Scope 3 emissions targets under the
Science-Based Targets initiative. Through a single case study combining supply market analysis,
cost-benefit assessments, the research evaluates how steel suppliers’ current and future production
technology and sustainability initiatives impact procurement costs and emission reductions. The
research reveals that meeting SBTi Scope 3 targets will significantly reshape ASSA ABLOY's steel
procurement, necessitating a shift in supplier selection towards those with credible decarbonization
roadmaps and transparent environmental data (e.g., EPDs), often involving premiums for low-carbon
steel which will impact product costs. Reducing the environmental footprint requires a phased
sourcing strategy, initially prioritizing steel from Electric Arc Furnaces (EAF) utilizing scrap and
mass-balance certified products, and transitioning towards hydrogen-based Direct Reduced Iron
(H2-DRI) as these technologies mature and become more available. This sustainability-driven
approach is anticipated to increase the Cost of Goods Sold (COGS) due to green steel premiums,
though this is crucial for achieving long-term sustainability goals, mitigating risks, and maintaining
competitiveness. The study provides a roadmap for European steel suppliers' capacity transitions and
benchmarks costs versus emission reductions for available steel products. (Less)
Please use this url to cite or link to this publication:
author
Nazário Baptista Guerreiro Ferreira, Duarte LU
supervisor
organization
alternative title
The future of the European Steel Market, Costs vs Emissions in Steel Sourcing - An explorative case study at ASSA ABLOY
course
MTTM02 20241
year
type
H2 - Master's Degree (Two Years)
subject
keywords
Supply Market Analysis, Green Steel, Scope 3 Emissions, Decarbonization, Sourcing Strategies
other publication id
6051
language
English
id
9202844
date added to LUP
2025-06-25 09:30:55
date last changed
2025-06-25 09:30:55
@misc{9202844,
  abstract     = {{Background: Growing corporate awareness of environmental and social impacts, coupled with
initiatives like the Science-Based Targets initiative (SBTi), is driving companies to address
greenhouse gas emissions, particularly indirect Scope 3 emissions which often constitute the largest
share of their carbon footprint. For ASSA ABLOY, Scope 3 emissions represent 99% of its total
footprint, with purchased goods and services, especially steel, being major contributors. The steel
industry itself is a significant global emitter, facing substantial decarbonization challenges to align
with climate goals.
Purpose: This project’s purpose is to examine the steel market, its current situation, future prospects,
initiatives and the concept of green steel; and how this influences Assa Abloy´s Scope 3 Science
Based Targets performance and supplier selection in the short and long term.
Research questions:
RQ1 - How will the demands of the Science Based Targets' Scope 3 affect the procurement of steel
and the cost of the products?
RQ2 - How can the environmental footprint be reduced, focusing on the steel sourcing, guaranteeing
its procurement process is sustainable?
RQ3 - How does this sustainability approach affect the cost of goods sold (COGS)?
Methodology: A single case study that performed a supply market analysis on the European steel
market, designed according to the literature. By following the framework, new understandings about
the market were gained and thus contributed to a foundation for future sourcing strategies. When
performing this study, data was collected through interviews, documentations, market reports and
news articles.

Findings:
This thesis explores the evolving European steel market's alignment with decarbonization goals,
focusing on Assa Abloy’s strategic sourcing goals to meet Scope 3 emissions targets under the
Science-Based Targets initiative. Through a single case study combining supply market analysis,
cost-benefit assessments, the research evaluates how steel suppliers’ current and future production
technology and sustainability initiatives impact procurement costs and emission reductions. The
research reveals that meeting SBTi Scope 3 targets will significantly reshape ASSA ABLOY's steel
procurement, necessitating a shift in supplier selection towards those with credible decarbonization
roadmaps and transparent environmental data (e.g., EPDs), often involving premiums for low-carbon
steel which will impact product costs. Reducing the environmental footprint requires a phased
sourcing strategy, initially prioritizing steel from Electric Arc Furnaces (EAF) utilizing scrap and
mass-balance certified products, and transitioning towards hydrogen-based Direct Reduced Iron
(H2-DRI) as these technologies mature and become more available. This sustainability-driven
approach is anticipated to increase the Cost of Goods Sold (COGS) due to green steel premiums,
though this is crucial for achieving long-term sustainability goals, mitigating risks, and maintaining
competitiveness. The study provides a roadmap for European steel suppliers' capacity transitions and
benchmarks costs versus emission reductions for available steel products.}},
  author       = {{Nazário Baptista Guerreiro Ferreira, Duarte}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{The future of the European Steel Market, Costs vs Emissions in Steel Sourcing}},
  year         = {{2025}},
}