From Cost to Carbon: Rethinking Sustainable Steel Procurement

With decarbonisation targets intensifying across the steel industry, procurement now serves as both the barrier and the enabler. Scope 3 emissions, driven by the extraction, processing, and transport of raw materials, account for the largest share of most producers’ carbon footprint.

Yet, procurement teams in steel mills still operate with limited access to verifiable emissions data and without the tools needed to act on it. Offers are compared on price and delivery terms, while critical factors like carbon intensity, source traceability, and ESG risk remain either optional or absent.

This misalignment is no longer tenable. Buyers are setting stricter sustainability criteria. Regulators are enforcing mandatory disclosures. Lenders are linking financing terms to upstream transparency. What procurement can document now defines commercial positioning, cost of capital, and eligibility for contracts.

Upstream emissions have become the defining variable in steel’s carbon footprint. For producers using the BF–BOF route, emissions from raw material sourcing can exceed 90% of total output. Even in EAF operations, where scrap is the dominant input, the upstream footprint remains material, depending on energy mix, scrap origin, and logistics.

This exposure is difficult to manage because procurement teams lack access to standardised, verifiable data. Product Carbon Footprint (PCF) figures, when available, are often self-declared or based on unverifiable averages. Lifecycle assessments, if conducted at all, are rarely integrated into sourcing workflows. Buyers are left to operate across fragmented data environments, with inconsistent reporting standards, limited supplier transparency, and no clear benchmark for comparability.

Yet the pressure to act is growing. Scope 3 reporting obligations under CSRD, carbon pricing under CBAM, and due diligence requirements under CSDDD all place procurement at the centre of emissions accountability. Buyers must document not just what they purchase, but also where it comes from, how it is produced, and how emissions are distributed across the supply chain.

This complexity is compounded by market conditions. With demand for steel expected to exceed two billion tonnes annually, and global investment in mining and smelting projected to rise by $3 to $4 trillion by 2030, upstream sourcing decisions will carry both financial and emissions impact.

Material-level emissions can vary dramatically by region, process, and transport mode. The carbon footprint of ferronickel sourced in Indonesia, for example, is almost incomparable to that of Canadian material, emitting over four times more CO₂ per tonne. Yet, current procurement systems often treat them interchangeably.

Without supplier-specific emissions data, buyers are forced to rely on assumptions. This introduces risk at the point of decision, limits the credibility of reported reductions, and undermines the effectiveness of procurement in achieving climate targets.

Procurement is no longer judged only on cost efficiency. It is now a visible driver of emissions, a key focus for regulators, and a measurable variable in financing and customer selection. The implications are structural.

Financing terms are changing. Banks and insurers increasingly differentiate between producers based on their carbon exposure and transition readiness. In the EU, steelmakers with traceable emissions data and documented procurement practices are already securing better financing conditions. Sustainability-linked loans now tie interest rates to Scope 3 reduction targets, requiring that procurement decisions be based on verifiable supplier data, not assumptions or averages.

Buyers are redrawing supplier criteria. Large industrial customers, particularly in the automotive and construction sectors, are shifting their procurement frameworks to prioritise emissions transparency and ESG traceability. In practice, this means suppliers without PCF data or sustainability documentation are excluded from tenders. Several well-established producers have already lost access to vendor pools due to insufficient reporting. Commercial eligibility now depends on upstream visibility.

Regulatory requirements are tightening. Three overlapping EU regulations, CSRD, CBAM, and CSDDD, are forcing steelmakers to treat procurement data as regulatory infrastructure. CSRD requires digital Scope 3 disclosures tied to specific materials and suppliers. CBAM introduces a carbon price at the point of import. CSDDD mandates ESG due diligence beyond tier-one suppliers. Each regulation places new reporting demands on procurement. Together, they set a compliance baseline many current systems cannot meet.

Procurement now sits at the intersection of compliance, finance, and sales. Teams that cannot document supplier emissions or ESG risk exposure will face rising capital costs, reduced market access, and greater reporting burdens. Those that can will gain structural advantages, including access to capital, commercial differentiation, and readiness for an increasingly regulated market.

While sustainability is often framed as a cost, it increasingly creates pricing power. Low-emission steel is beginning to command real price premiums, and procurement is the enabler. Steel producers are now expected to deliver on quality, delivery and emissions performance measured at the material level. Buyers such as BMW, Mercedes-Benz, and Volvo have committed to sourcing low-CO₂ or carbon-neutral steel within this decade. In parallel, ESG scoring systems and procurement protocols are evolving to include Scope 3 performance as a decisive factor in supplier evaluation.

This shift is creating measurable commercial uplift. Verified transactions for flat steel products with embedded emissions below 800–1000 kg CO₂e per tonne have shown price premiums ranging from €100 to €300 per tonne, equivalent to a 35–50% increase over standard benchmarks. These are not widespread yet, but they are no longer exceptional. Fastmarkets and S&P Global have introduced transaction-based indices to track this emerging segment, reflecting growing demand for transparency and standardisation.

The importance of structured data was underscored during a panel discussion at the Metalshub Summit 2025, where speakers highlighted that ESG and trading data combined with common standards are foundational to unlocking green price signals. Without verifiable, comparable information, market mechanisms cannot distinguish sustainable products at scale, and the value remains latent.

Supply, however, is trailing. In the EU flat steel market alone, McKinsey projects a shortfall of 14 million tonnes between green steel demand and available supply by 2030. The gap is even wider globally. This imbalance favours producers who can demonstrate low upstream emissions today, not just through internal decarbonisation, but through emission-aware procurement.

Yet documentation remains a barrier. “Green” claims are inconsistently defined, with certification bodies applying divergent thresholds and methodologies. Procurement teams cannot credibly communicate emissions reductions or meet buyer requirements without clear, verifiable PCF data. Offers that lack substantiated carbon data are increasingly filtered out.

Capturing green premiums requires procurement systems capable of screening suppliers by emission intensity, filtering offers based on CO₂ thresholds, and documenting sustainability performance in a format buyers can trust. The market is moving quickly, and steelmakers with the data to prove their sourcing advantage are securing better prices and preferred status in the next generation of supply chains.

Sustainable procurement cannot remain a stated ambition; it must be operationalised. That means embedding emissions and ESG considerations into every stage of the sourcing process, with systems built to handle both commercial and regulatory complexity.

Procurement teams must be able to compare offers by carbon intensity, evaluate suppliers against ESG risk, and generate audit-ready documentation that meets disclosure standards. Manual tracking is no longer feasible, nor is acting without verifiable data.

Metalshub provides the infrastructure to meet these demands. The platform integrates emissions and ESG data directly into procurement workflows, enabling buyers to assess, select, and report based on material-level impact.
At the offer level, Metalshub captures transaction-specific emissions data and benchmarks it using lifecycle assessments from Minviro. This allows procurement teams to compare suppliers by CO₂ footprint, production route, and country of origin, while maintaining continuity in Scope 3 tracking even when supplier-specific data is unavailable.

To support compliance, Metalshub offers standardised ESG questionnaires, supplier self-assessment tools, and structured documentation to streamline CSRD, CBAM, and CSDDD reporting. All commercial, emissions, and ESG data is centralised within a single dashboard, ensuring procurement teams maintain year-round visibility and audit readiness.

Beyond internal visibility, Metalshub connects users to a verified network of more than 2,500 buyers and suppliers. This unlocks new sourcing options, supports rapid supplier evaluation, and enables teams to act with greater agility in response to market shifts, whether driven by green steel demand, carbon pricing, or regulatory milestones.

Early adopters are using Metalshub to align procurement with sustainability goals, reduce risk, improve reporting accuracy, and secure a competitive edge in tenders where emissions transparency matters.

The role of procurement is changing. It is central to emissions reduction, regulatory alignment, and commercial value creation. Digital platforms like Metalshub are shaping sustainability into a structured, auditable process, making procurement fit for purpose and fit for the future.

This whitepaper is built for procurement, ESG, and compliance leaders in the steel and metals industry. Inside, you’ll learn:

1. Why Scope 3 emissions are now a procurement priority
2. How CSRD, CBAM, and CSDDD are reshaping sourcing and reporting
3. What’s driving demand and premiums for low-emission steel
4. How to make sustainable procurement operational, with real examples

It also includes a glossary of key terms and full source references.

Download the full whitepaper here.