The key to a greener steel industry

GEIR FUGLERUD

Hello and welcome to Trust and Transformations, Leaders Navigating Change. I am Geir Fuglerud, the CEO of DNV Supply Chain and Product Assurance Business Area. And I'm joined here today by Dr. Dmitrios Dimitriou, Vice President of ESG and Sustainability at EMSTEEL. EMSTEEL is the largest publicly traded steel and building materials manufacturer in the United Arab Emirates and the company's materials have been used in some of the region's most iconic construction projects, including the Burj Khalifa, Emirates Palace and Etihad Towers. Dimitrios, welcome to the podcast.

DIMITRIOS DIMITRIOU

Thank you.

GEIR FUGLERUD

So, Dimitrios, in your role as vice president of ESG and sustainability that places you at the intersection of environmental responsibility and business strategy. How has your leadership approach evolved to kind of foster innovation and collaboration, both within EMSTEEL and across the wider industry, and in order to kind of achieve meaningful progress on sustainability goals?

DIMITRIOS DIMITRIOU

Thank you for the question, Geir. Thank you for the invitation. Innovation and collaboration really are fundamentals of the energy transition and are also key pillars of our corporate strategy. Obviously, our corporate strategy is integrated with our sustainability strategy is integrated with our core business strategy, which automatically reflects these two fundamentals, innovation and collaboration, into our sustainability. So some examples of my approach to foster a culture of innovation and collaboration along these two pillars of collaboration and innovation includes encouraging collaboration across departments such as engineering, for example, or human capital finance technology. As you know, sustainability is a cross-functional topic, so it involves all functions. And by doing that, this creates a holistic approach which fosters innovative solutions that align with our ESG goals.

Actually, to be frank, without collaboration, our sustainability strategy cannot be delivered, whether this is collaboration from internal stakeholders or external stakeholders, as I will come to it later.

GEIR FUGLERUD

So Dimitrios, just as a follow up on that, is this something that has really, that internal collaboration kind of with the joint purpose of sustainability, has that really changed much recently with the kind of sustainability becoming more important in your business?

DIMITRIOS DIMITRIOU  

Yes, definitely. In my view, you cannot get into meeting our mutual energy transition goals and decarbonisation goals without decarbonisation. The whole value chain part is quite critical, which has changed the approach from a transactional approach historically with some of the stakeholders, both internally and externally, to a more collaborative approach. There are a lot of challenges that we need to overcome and the only way to do this is by collaborating.

GEIR FUGLERUD

Yeah, I think that's a very, very important point.

DIMITRIOS DIMITRIOU  

So just to continue with regards to other aspects or examples that I've been following on my approach to foster a culture of innovation and collaboration. Collaboration, for example, with external stakeholders such as technology providers, certification or verification companies, customers, suppliers. This is key and we've seen an increase in our partnerships, strategic partnerships that we've been forming in order to support our sustainability goals and our journey. Stakeholder engagement is also quite critical, whether this is with, let's say the government or non-governmental organizations. We participate and we advocate our goals and our strategy in various forums.

Some forums of this like local forums like ADIPEC or COP 28. We had a large presence last year and we plan to again be present in COP 29 as well as the New York Climate Week where we advocate our goals and our strategies, and we try to share our experience and learn also from our partners.

GEIR FUGLERUD

Yeah. And in that context, right, with your kind of external engagements, do you feel that there is a lot to learn from others in this field? Even from other industries potentially?

DIMITRIOS DIMITRIOU

Definitely, yes. Our core business is steel and more recently building materials since our merger with Arkan. So under our group now we have two, let's say hard to abate heavy emitting sectors, steel and cement. And this is our core business and that's what we've been traditionally doing. So in order for us to now transform into a sustainable steel and building materials producers we enter into kind of new territories for us, which are critical for our transformation, which some of these are, for example, digitalization. Some of them is increasing our, let's say, transparency and credibility through certification of our, let's say, carbon footprint and stuff like that. And also increasingly the role of technology and innovation into some of these, let's say, clean energy technologies that would be necessary for us to decarbonize.

GEIR FUGLERUD

And you Dimitrios, you've been a leader in this field for some time now and based on your experience, do you have any advice to kind of young and aspiring leaders in the field of ESG and sustainability?

DIMITRIOS DIMITRIOU

Yes, my main advice would be to embrace sustainability as a core business strategy and not just as a compliance measure. So in effect, by integrating sustainability into the core of your operations or our operations, you know, we can not only meet our current demands, but also prepare organizations for a more sustainable future. Sustainability by nature is something that it has more of a longer-term impact. So it's kind of difficult to convince, although we're gradually getting there, leaders to commit to changes. It's all about change management as well. So yeah, I mean, my advice to young leaders, it's absolutely critical. It has been elevated as a core function and a core topic. You know, some things I've learned that can be useful to young leaders is that demonstrate how sustainability drives long-term value is things such the role of sustainability in reducing production costs and waste, for example, creating new market opportunities by producing green products. So it's not only about risks, it's about opportunities as well.

Obviously reducing potential risks and associated costs in the long run, as well as boosting morale and productivity of our employees. you know, mitigate, for example, increasingly we see physical risks such as, you know, resource scarcity, supply chain disruptions and stuff like that. So it's very critical this to be part of the agenda. For us, we recently formed our governance, our sustainability governance. So now this has been elevated to a board level topic. So we have our ESG board committee and all the governance cascading down and this is an important topic that will drive our strategy going forward.

GEIR FUGLERUD

Dimitrios, you started talking a little bit already on the big transformation that we're going through. And of course, the energy transformation has become a central theme for many industries. And the steel industry is referred to, as you have already mentioned, a kind hard to decarbonize or hard to abate industry. It actually represents around 7 per cent of global CO2 emissions. So it's a big component of the energy transition.

How has EMSTEEL adapted its operations more specifically to embrace sustainability and contribute positively to the energy transition?

DIMITRIOS DIMITRIOU

First of all, we think of ourselves as being global leaders on sustainability in the steel sector specifically. And I will come to the reasons why we think that. This doesn't mean that we are complacent. In fact, we have what we think of a very robust comprehensive decarbonization strategy, which is built on a few pillars.

These pillars are carbon capture, which we've been doing for a while now. So we are the only steel player globally that captures a significant portion of its CO2 since 2019. So for a number of years now, other pillars include obviously very critical pillars, which will definitely come into play. And we already started exploring them such as green hydrogen. So we already have demonstration facility that is currently under commissioning, which although it has a small impact on our CO2 emissions due to its scale now, it would be the first tangible scale before a step before scaling up to a larger facility, which will have a notable impact on our decarbonization and also monetizing this by producing a product that has premium low carbon characteristics and we can monetize it on the market as the demand starts increasing.

Other pillars that we're looking at, and actually we're implementing those, is clean energy. So part of our process includes large electricity consumption, which we leverage the available mechanism in the country, which is IREX to decarbonize our scope to emissions. Other pillars we're looking at is the increased use of recycled metal or scrap, which comes with zero embedded carbon, which helps us also meet our decarbonization goals. And we plan to increase the utilization of scrap. And last but not least, energy efficiency, which I would call it the low-hanging fruit, things that we can really control. So we have a program of increasing or decreasing our energy consumption. Our main energy source is natural gas. So decreasing our natural gas consumption as well as electricity consumption to become more efficient.

I just want to add something on the cement side because as I said, we are also a group of companies including cement the situation is slightly different. Although we're quite bullish about our decarbonization there as well, but the levers are different due to the different characteristics of the cement process. So the areas we're looking at is mainly alternative fuels or a cleaner substitution as well as energy efficiency and potentially the use of hydrogen as well as a fuel.

GEIR FUGLERUD

It's an impressive list of initiatives that you have and some of these are quite transformational, right? You mentioned carbon capture, green hydrogen, implementation of significant amounts of renewable energy. Which one of these would you say are kind of the, maybe have the biggest potential considering the operations that you have? Or do you need a combination of all of them in order to be successful?

DIMITRIOS DIMITRIOU

You need a combination, that's for sure. So these are, let's say, all the critical levers we have. Some of them will have inadvertently more impact than others. But it's all about balancing also the cost versus the impact. So some of these levers are not mature enough at this point of time or are not cost-competitive enough for us to adapt. That's why we're taking the first steps now by testing and demonstrating these technologies, both from a technical point of view, from a certification point of view, and from a commercial point of view, hoping that these technologies will be adapted more widely in the future. And I'm referring specifically to green hydrogen.

And, you know, which is particularly important for us specifically because of our process, which is a very good technological fit to hydrogen. We are a natural gas-based steel producer. So replacing our natural gas with let's say green hydrogen, which comes with much lower carbon footprint, technologically it's a good fit. But commercially right now it's a still has some way to go.

GEIR FUGLERUD

You briefly mentioned earlier green steel or sustainable steel, which also sometimes is referred to as carbon-accounted steel. That has emerged now as quite an interesting and promising strategy to decarbonize the industry. Could you tell the audience a bit more about sustainable steel and its potential?

DIMITRIOS DIMITRIOU

Sure. So as you said before, the traditional steel, as we call it, it's responsible for about 7 per cent of the global greenhouse gas emissions, the traditional processes. There are different types of technologies to get the steel, but the one dominating the global capacity is coal blast furnaces which is not the route that we're following because we have the luxury to rely on natural gas, which is available and reasonably cost competitive in the region that we operate, which means that automatically combining it with the CO2 capture and the various other levers I've mentioned before, we have a good starting point, but we have a long way to go.

Green steel, it's kind of still to be defined exactly what it is. There are various efforts by various organizations across the world to create a unified definition and standards. But however, it's going to be critical part of the decarbonization because effectively our scope one and scope two emissions are the scope three emissions of the users of green steel. And the energy transition would want to use low embedded carbon steel, so low scope three steel into building cars, into building wind turbines, into building everything you need to also support the energy transition. We’re increasingly seeing signals, I mean even more than signals, requests from customers on providing them with lower carbon intensity steel for example.

GEIR FUGLERUD

So demand is there and on an increasing trend, you would say.

DIMITRIOS DIMITRIOU

Yeah, demand is there. I mean, it also depends a little bit on which sector of steel you operate. So demand perhaps for automotive steel, which is flat steel, is more prominent than the sector that we operate as a company, which is construction steel.

Regardless, we've seen increasing demands and requests from customers to provide them with environment product declarations, to verify and certify our products that come with low carbon intensity, etc. So we've seen that perhaps driven by regulation in the markets where we export our products. But this also is a driver for us to because it's a commercial linked reason to increase and remain competitive, know, compared to other exporters, for example.

GEIR FUGLERUD

When you mentioned earlier, Dimitros, you used to be called Emirate Steel Arkan and now you have kind of rebranded to become EMSTEEL. How does that new identity reflect the broader transformations happening at EMSTEEL, particularly in terms of sustainability, digitalization and ESG goals? What message is it that you hope this rebranding communicates to both industry stakeholders as well as the wider community in which you operate?

DIMITRIOS DIMITRIOU

Yeah, so the history of that is that, as I said before, a couple of years ago, we merged with Arkan, which includes a cement plant in Al Ain, now called Emirates Cement, as well as some other building material units. So we became a group of companies, including steel, cement, and also to reflect our growth ambitions in a way, we have placeholders for additional expansion that we will do in the future. But saying that, the new brand name and the new brand identity, it's really a reinforcement of our strategy, which focuses on sustainable growth and delivering value and continuing to deliver in sustainable value to our stakeholders. And specifically, stakeholders such as our customers, our partners in order to work together and collaborate to deliver our sustainability program and decarbonize. Our employees, which are at the heart of this journey and in that specific case, the rebrand reflects our dedication to fostering a culture of mutual growth, recognition and opportunity. And finally, our expansion in our markets with our strategy focusing on expanding into new markets, enhancing our competitiveness through providing creative and sustainable solutions.

GEIR FUGLERUD

I would like to go a little bit into the topic of trust and collaboration, you might say. In an industry that is often seen as rather resource intensive, how does EMSTEEL manage transparency around sustainability efforts and how important is this transparency for maintaining your stakeholder trust?

DIMITRIOS DIMITRIOU

Yeah, let me first start from the second part of the question. So it's extremely important. We are also a public listed company. And, you know, it's important to, you know, disclose and advocate our positions to our shareholders. So we think that we are as open book as it can get. So, you know, we disclose our ESG strategies, we disclose our ESG policies and other types of procedures and policies related to supply chain, as well as our employees on our website. As I said, we are a public listed company so obviously we publish our sustainability report that we use third party assurance companies to verify our claims. So apart from that, we have presence coming to a previous question that you've done in various forums where we speak about our plans and our targets going forward.

GEIR FUGLERUD

You already mentioned the importance of collaboration and collaboration is key to driving industry wide change. And you earlier referred to your involvement in COP and other similar forums. How does EMSTEEL collaborate with other companies, with governments or NGOs to kind of advance the sustainability goals? And I understand you quite recently, you have a recent partnership with Magsort, the Finnish decarbonization company. Maybe you can talk a little bit on this topic.

DIMITRIOS DIMITRIOU

Sure. So it's all about partnerships and collaborations as we discussed before. So just to answer your question with regards to Magsort, this is an initiative we launched during Chemtech, MEA in 2024. And it really, it's also a demonstration of how can we synergize between our two business units, and cement because it's the initiative, know, the integrity behind this initiative is to utilize the by-product from the steel plant, which is slag and process it in order to substitute a limestone that we use in our cement process. So it's all about the synergies and circularity of our business, which will when this project is implemented, will have a significant impact on our group decarbonization strategy and footprint.

GEIR FUGLERUD

Yeah, very interesting. And I also understand that EMSTEEL recently signed a deal with the Abu Dhabi National Energy Company to create the region's first green steel plant. So we've been discussing green steel a little bit already. And can you give us some insight into how that project is progressing and what lessons that you have learned so far?

DIMITRIOS DIMITRIOU

Sure, this is actually very close to my heart, this project. Because of my background, I was in the hydrogen business development before. And I originated this project when I joined the company here. So as I said before, it's a first of a kind in the MEA region demonstration project.

It's a tangible demonstration that we have a leap of faith and we take the first step into implementing green hydrogen in our process because we think of it as a critical lever for our decarbonisation. So we are in the process now of commissioning, we are nearly there. So hopefully soon we will have an opportunity to share the news with the public that the operation will start soon and we'll start testing green hydrogen in our facilities to produce green steel. We're trying to extend this again through collaboration into a value chain demonstration so potentially involving a commercial partner to demonstrate the full value chain, starting from the clean energy, which is the master part and the electrolyzers, producing green steel and certifying it and demonstrating the value chain by, for example, maybe building the first green building in the UAE or abroad using green steel from green hydrogen.

GEIR FUGLERUD

I can clearly see that this is something that you're very passionate about, Dimitrios. Very interesting and exciting project. I'm sure there's a very interesting point in time now in terms of getting this up and running, which I'm sure is not always easy either. This is a lot of new technology and new operations in this.

DIMITRIOS DIMITRIOU

Yes, yes, absolutely. And you know, but as I said, we're not doing this just for the show. We're doing it for, you know, the main reason behind this is to test because we see this lever as a necessary lever in our decarbonization, not only our decarbonization, but you know, we're also very keen to share the knowledge that we're going to get out of this with a wider steel community. We see steel as being one of the most promising end uses of hydrogen and we are trying to contribute. As you know, the green hydrogen industry has been facing quite a lot of challenges lately with regards to its speed of adoption. So we're trying to play our role in accelerating this by implementing this project and hopefully the idea is that in a few years from now we will be able to scale up.

GEIR FUGLERUD

Yeah, and also then hopefully take commercial benefits, right? Because I think in the end, that when that technology also become commercially viable, that will really accelerate the decarbonization journey of the industry.

So we talked quite a bit now about the energy transition, but the steel industry is not only undergoing an energy transition, it is also undergoing a significant digital transformation. You touched upon that briefly. And of course, these two transformations, they are related. How is digitalization playing a role in enhancing sustainability and operational efficiency at EMSTEEL?

DIMITRIOS DIMITRIOU

You know, you said it very rightly, it's also very critical, digitalization. There is so much data that needs to be managed both internally and most critically also across the supply chain where there is currently less visibility. So we started our journey. So we started implementing earlier this year the world's first AI led green steel monitoring and certification system. This was created again in partnership, again collaboration comes into the discussion, with a company called Central World that leverages their cloud-based software. So now we are equipped to calculate emissions at the heat level, as we call it, in the steel industry by product level and ensure blockchain enabled traceability, which our customers will also be able to access. And we are still in the beginning of the journey, so we're still learning, but we took this first step. Yeah, also on the supply chain, we have started implementing other solutions such as carbon software which gives us information about the footprint of our suppliers, which helps us also with our reporting needs.

GEIR FUGLERUD

So there's quite a few digital tools and techniques and technologies that you're now implementing across the company to kind of support your sustainability and decarbonization journey I understand.

So let's look a little bit ahead into the future, Dimitrios. So looking at the steel industry at large, what do you see as the next major kind of challenges and opportunities from a sustainability and innovation perspective? And what role do you see EMSTEEL kind of now playing in shaping the future?

DIMITRIOS DIMITRIOU

Yes, let me say first that, you know, we feel that we are committed all the way from the leadership level, which is very important. There is a big drive in transforming. There is one of the challenges, you know, definitely that there is it takes time to transform the culture and in a very big organization such as ours cascade a culture of sustainable innovation. This is a journey and it takes time. But I think we have the right ingredients and we've made the first big steps. First of all, by integrating sustainability to our strategy and practicing really what we preach by taking the first tangible step towards implementing sustainable practices, sometimes at a cost.

This all comes from our strong leadership and commitment in sustainability. There are many challenges just to address your other part of your question. In my view, some of these challenges are, for example, the different pace of development in the regulatory regimes across the different countries that we operate, including our own country here, the UAE, which makes it difficult to plan with regards regulations, regards, for example, to carbon pricing, to carbon border adjustment mechanisms, etc. The commercial challenge is a big one, know, the so-called chicken and egg problem. I'm sure you've heard about it. So there are a lot of challenges, but you know, we are determined to make it happen and push that out.

GEIR FUGLERUD

So finally, and maybe to round off, what advice would you give to other leaders and companies in the steel industry, now seeking to integrate sustainability more deeply into their operations while remaining competitive? And I think that it’s also important in this remaining competitive. You seem to have come quite a long way on this journey, Dimitrios.

DIMITRIOS DIMITRIOU

Yes, again, I would go back to my advice to the young leaders that you've asked me in the beginning. So I would say the same applies. It's basically embracing sustainability as a core business strategy. We know it's coming, I mean, it has come already and it will increasingly become important for various reasons. It could be from a compliance point of view initially and as a risk management approach, but it opens up to a lot of opportunities. The challenge is that, you know, it's very difficult to sometimes to balance the short-term benefit with a longer-term benefit. So that's the challenge.

So I would say that, you know, obviously this needs to be balanced, but I think there would be a large, you know, there will be a turning point where the things will start accelerating and the new markets will open up largely driven initially by regulation, which will start settling in the various countries, you know.

GEIR FUGLERUD

Yeah, no, and I think you're right. And this is also what any transformation is all about, right? It's short-term challenging, but long-term there are big opportunities. And if you don't take the long-term view, then also you may not be successful longer term as a company.

DIMITRIOS DIMITRIOU

Yes, I agree. You might be out marketed in the end.

GEIR FUGLERUD

Yeah. So embrace the challenges and take the long-term view.

DIMITRIOS DIMITRIOU

Yeah, I hope that's not just philosophical discussion and we can see some traction.

GEIR FUGLERUD

Yeah, I really hope to see some of the Green Steel pilot projects that you have that this will really pay off as a really good investment into the future. So, Dimitrios, thank you so much for sharing your insights with me today. It's been a great pleasure talking to you.

And I wish EMSTEEL, and not least yourself, the best of luck in your decarbonization and sustainability journey.

DIMITRIOS DIMITRIOU

Thank you so much. It was my pleasure to speak to you. Thank you.

GEIR FUGLERUD

Thank you.