Imagine that of two nearly identical products on a store shelf, one was produced in an environmentally friendly way. Hopefully, the choice would be to buy the environmentally friendly version. But would it still be the preferred option it if it was more expensive?
The demand for sustainable products is increasing rapidly around the world. One survey in Europe found that 85 percent of retailers are reporting higher sales of sustainable products, while 92 percent expect sales of sustainable products to increase over the next five years.1
“There is greater concern about the environment in wealthier countries,” says Fredrik N G Andersson, Associate Professor, Department of Economics at Lund University. “Much of this demand is influenced by social media and NGOs. A small group can have a large impact.”
One recent study found that 65 percent of people wants to buy purpose-driven green brands, but currently only a minority are willing to pay more for them.2 But change is happening, particularly driven by specific demographics. Younger people are more likely to have their consumption driven by sustainable values, and they are willing to pay for it. Another survey found that seven out of ten purpose-driven shoppers will pay a hefty premium of up to 35 percent for sustainable products.3
“One thing we should clarify is what we mean by ‘green’, ‘sustainable’ or ‘environmentally friendly’,” Andersson points out. “There are many different ways production can impact the environment. Many consumers are thinking of climate change, so they equate ‘green’ as not having greenhouse gas emissions.”
This can become even more complicated when “environmental accounting” is used to analyze the entire supply and production chain of a product.
“Emissions can vary drastically throughout the supply chain,” Andersson explains. “A lot of emissions result from producing basic materials like steel, chemicals or paper, because they are energy-intensive sectors. Transporting raw materials and products also causes a lot of emissions, and even how the product is managed or recycled at the end of its useful life can make an impact. Other parts of the supply chain might only produce a tiny amount of emissions.”
Increasingly there is pressure on the supply chain to be more environmentally friendly; pressure that is being exerted at both ends of the chain.
“Primary production companies like SSAB can have a huge impact on the climate, and they know it. You see them and similar firms working to improve their sustainability,” Andersson says. “At the other end, retailers are pushing for more environmentally friendly products and processes, because they feel pressure from the consumer.”
Large companies increasingly require proof that steps towards sustainability are being taken by everyone in their supply chains. This is now becoming a standard part of corporate sustainability reports and business decisions. Consumers are also paying closer attention. The most value-driven shoppers are willing to pay 37 percent more for full transparency and traceability.3 The vast majority of consumers are understandably wary of corporate greenwashing and prefer to see independent verification of claims.
SSAB believes that this strong demand for more sustainable products will continue and has taken significant action to invest in fossil-free steelmaking. Instead of using coking coal in the process, the steel will be made with fossil-free electricity and hydrogen. This steelmaking will result in practically no carbon footprint. Additionally, SSAB is working with partners and customers to create a fossil-free value chain from the mine to the end product.
While fossil-free steel will be more expensive compared to steel created by traditional methods, purpose-driven consumers are willing to pay more for products and services aligned with their values.
Just as some people will pay more for a particular brand name, others will pay more for a brand that shares their beliefs. For SSAB, brand loyalty is built on customers knowing they can rely on products that deliver quality at the operational level, but also at an economic and business level. Now, and in the future, products will also need to deliver sustainability value. As the market leader in fossil-free steel, SSAB offers value-driven customers an environmental reason to continue using their steel.
“Decarbonization is possible, but it requires new thinking,” says Andersson. “It requires a new society, but societies change all the time.”
There are only a few industries as closely intertwined as steel and construction. For over a century, the two sectors have developed together, and now the future of that relationship is sustainability.
The global challenge of halting and reversing current rates of climate change is urgent. The steel industry has the potential to play a significant role in reducing carbon dioxide emissions both in the production phase and by supporting current rates of recycling.