Planet

Carbon in procured steel and the projects we deliver

As part of our own Net Zero journey, we are undertaking a range of activities to support the reduction in the carbon content of the projects that we deliver. Our key focus areas are as follows:

• Investing in R&D to develop more efficient designs with lower steel content
• Exploring methods to maximise circularity of our materials and the re-use of steel
• Working with steel suppliers aligned with our climate ambition
• Collaborate with governments and industry wide partners to drive the decarbonisation of the sector

We know that the decarbonisation process will not happen overnight and will require changes to infrastructure and capital expenditure to support the transition. We recognise that within the hard to abate industries, such as steel, a significant proportion of our emissions are generated within our supply chain as a result of the steel that we procure. We are dependent on the steel sector decarbonising to fully address the carbon in our value chain, and a core part of our work around TCFD climate-related scenario analysis focused on the risks within our value chain, and our commentary around action within this area is set out below.

Optimisation of production processes

During 2023, we continued to invest in operational improvements to enhance production processes and optimise the use of steel. This includes research into using higher grades of steel so that the overall embodied carbon within our structures is reduced. This is part of our strategy and is reflective of our drive to remain at the forefront of the steel industry.

Working with Steel suppliers aligned with our climate ambition

The Net Zero transition requires the continued support of our supply chain. As part of SteelZero, a global initiative to speed up the transition to a Net Zero steel industry, we have committed to procuring, specifying, or stocking 100 per cent Net Zero steel by 2050. This means that we will procure:

• Steel produced by corporate owners that have made public their long-term emissions reduction pathway, and their medium-term, quantitative science based GHG emissions targets
• Steel certified as "ResponsibleSteelTM" Certified Steel or equivalent
• Low Embodied Carbon Steel, with a defined specific emissions intensity which takes into account the proportion of end-of-life scrap

We have mapped our supply chain partners with public Science Based Targets commitments, many of which are aligned with commitments to SteelZero. Working with our supply chain partners closely as part of our sustainable procurement strategy, in 2024 we will continue to engage with our supply chain through a formal plan to understand the progress on their own transition plans, as well as governments and industry wide partners to ensure that we are supporting the decarbonisation of the sector as a whole.

Reducing carbon emissions through innovative transport solutions for a large commercial warehouse

One project in particular exhibits our commitment to reducing carbon emissions, where we faced large amounts of steel to transport to site – approximately 6,600 floor beams and associated decking sections. Severfield set out to reduce carbon emissions, costs, and general congestion on UK roads by reducing the number of truckloads by around 50 per cent.

The task proved to be complex, as highway regulations and truck-bed weight capability stipulate exact quantity and load-bearing capacity. Appreciating these logistical demands, we worked with our transport partners and innovatively introduced the use of an extended trailer and a single, reusable steel beam to each transport unit. Doing so meant that length discrepancies were mitigated by the full-length steel beam, the weight could be doubled, and all highway regulations were satisfied.

As a result, each truckload held c.25 tonnes of steel as opposed to c.12 tonnes, which resulted in just 230 deliveries as opposed to the original planned 460. This achieved an approximate 36 tonne reduction in overall CO²e associated with the deliveries. We have calculated this would be the equivalent saving of over 214,000 km driven in an average diesel car.

Sustainability initiatives such as these help Severfield and our customers closer towards out target of achieving Net Zero across scope 1 & 2 by 2040, and scope 3 by 2050.

Reporting our GHG emissions

As required by Streamlined Energy and Carbon Reporting ('SECR'), we report on our CO2 emissions in accordance with the internationally recognised Greenhouse Gas Protocol (GHG) and our metrics include scope 1 and scope 2 emissions. For the year ended 31 March 2023, the Group's global GHG emissions, using a location-based approach, and energy usage, were as follows:

For the year ended 31 March 2023, the Group's global GHG emissions, using a market-based approach, and energy usage were as follows:

Scope 1 emissions are direct GHG emissions that occur from sources under our ownership or operational control. This includes fuel consumed in our factories for fabrication, in our offices for heating and in company vehicles. There are no material exclusions from scope 1.

Scope 2 emissions are indirect GHG emissions from purchased energy. This includes electricity used for all our offices and factories across the Group. There are no exclusions from scope 2.

Carbon offset credits are excluded from our GHG emissions reporting. There have been no changes in reported emissions or changes in methodology.

All scope 1 and scope 2 GHG emissions data is independently verified by Achilles, in accordance with the international standard ISO 14064-1.

Using a market-based approach, which includes the positive impact of switching to green energy and use of alternative fuels on site, our scope 1 and 2 GHG emissions have reduced by 33 per cent against a 2018 baseline. This means we have surpassed our interim target to reduce our scope 1 and 2 GHG emissions by 25 per cent by 2025 (against a 2018 baseline).

Our scope 1 and 2 emissions reductions have been achieved through a combination of the following:

• continued to implement lean ways of working in our offices, factories and on construction sites,
• continued the transition to using hydrotreated vegetable oil ('HVO') across our facilities and construction sites,
• expanded the procurement of renewable electricity for our facilities and completed further research into the feasibility of installing renewable energy generation at our facilities,
• further developed our Group processes to consider energy efficiency and environmental criteria in design, procurement, investment and contracting decisions, including the introduction of an internal carbon calculator, and
• worked with a number of our key suppliers, engaging on our mutual sustainability strategies and delivering decision-enhancing, transparent carbon reporting on a range of our projects.

The information in the table above represents absolute energy usage only, irrespective of whether this is from low carbon sources. To see how successful we have been in reducing our GHG emissions from energy, see Planet.

Scope 3 emissions

Our scope 3 GHG data is independently verified by Achilles, in accordance with the international standard ISO 14064-1.

Our scope 3 GHG data is independently verified by Achilles, in accordance with the international standard ISO 14064-1.

Scope 3 emissions account for all of the other emissions an organisation produces when fossil fuels are burnt within its value chain and are a significant proportion of our total GHG emissions. In the context of the 2050 Net Zero target, this is the most challenging category to address, therefore we have undertaken further mapping and analysis of our data to include more detail around our scope 3 emissions.

Our verified scope 3 GHG emissions have increased largely due to an increase in transport and distribution related emissions. This reflects the geographical spread of the construction sites we have worked on throughout the year in relative distance to our factories. We consider last year's values to be exceptionally low, as our current values (when adjusted for growth) are more aligned with 2021 emissions (2021: 11,137 tonnes of CO²e).

The higher scope 3 GHG emissions also reflect an increasing trend post-pandemic, both nationally and internationally. Our colleagues have increased travel to face-to-face meetings, and returned to our offices, in turn increasing both business travel (including to India and Europe) and colleague commuting within the period. Waste emissions have reduced slightly due to our increased focus to divert waste from landfill. The reduction of scope 3 GHG emissions remains a focus for the Group.

Additional scope 3 categories

As part of our GHG emission reporting and facilitated by the value chain mapping exercise in the previous year, we report on 8 of the 15 categories of scope 3 emissions relevant to our business. As part of SBTi targets submission, further detailed inventory will expand our scope 3 categories going forward. This will provide further understanding and overview of our value chain and provide us with the ability to have additional scope 3 categories verified in the future.

Consistent with most businesses in the construction sector, the majority of our GHG emissions are indirect (scope 3), accounting for 97 per cent of total emissions, on a market-based approach. Within scope 3 emissions, purchased goods and services represent 92 per cent of emissions, largely due to the embodied carbon in steel. These often fluctuate due to the timing, with the 2022 amount reflecting high steel purchases in the previous year, much of which was for project delivery in 2023. We are committed to addressing our scope 3 emissions, in particular those from purchased goods and services, in order to achieve our strategic objective of Net Zero across all emissions by 2050.

The Group has always held emission reduction targets and recognised the impact of its operation on the environment. We committed to the process to set science-based emissions reduction targets across our entire value chain in 2021, and we are on schedule to submit them for validation by the SBTi early in 2024.

Progress against our targets

The Group has made good progress again during the year in managing its energy, fuel consumption and emissions and we have been recognised as leaders in our sector for our work to date in reducing carbon emissions. For the third year running, we have been included in the Financial Times' listing of Europe's climate leaders, published in April 2023.

This list includes c. 500 companies that have achieved the greatest reduction in their scope 1 and 2 GHG emissions intensity over a five-year period between 2016 and 2021.

During the year we surpassed our interim target to reduce scope 1 and 2 emissions by 25 per cent by 2025, having currently reduced them by 33 per cent against the 2018 baseline. This has in part been achieved through the successful switch to green electricity tariffs and the use of HVO at our sites. In 2023 we have continued to increase our green electricity usage, with the aim to have 100 per cent green electricity across the Group.

In 2023, we achieved a 'B' rating in the CDP index, which is above the construction industry average for construction 'C'. This annual rating is based on CDP's evaluation of the Group's strategy, goals and actual emission reductions as well as transparency and verification of our reported data and assesses the completeness of the Group's measurement and management of our carbon footprint, our risk management process and our sustainability strategy. We have also achieved a CDP supply chain score of 'A-', which is well above the construction industry average of C, being amongst 38 per cent of companies that reached Leadership level in our activity group.

Since 2021, the Group has been accredited as an operationally carbon neutral organisation to the Achilles 'carbon zero' standard in accordance with ISO 14064-1. We use carbon offsetting to eliminate the combined scope 1, scope 2 and operational scope 3 GHG emissions generated from our manufacturing facilities and construction sites. In line with the SBTi methodology, carbon offsetting can only be used against the last 10% of residual emissions so we will rely on them less over time. However, at present, they are an important step in our sustainability journey towards Net Zero.

As part of our continued commitment to excellence, we maintained accreditation to the Gold Membership Standard of the Steel Construction Sustainability Charter. Through our Gold Membership with the Supply Chain Sustainability School, we complete learning pathways and attend targeted sustainability training in collaboration with our stakeholders.

2024 areas of focus:

• Obtain our SBTi verified target in line with climate science.
• Review our approach to biodiversity in line with the expected requirements as part of the Taskforce on Nature-related Financial Disclosures (TNFD).
• Re-launch revised supply chain engagement programme in line with our sustainable procurement strategy.
• Implement waste reduction engagement campaign as part of our newly set target.
• Continue to refine our approach to address the GHG impact in our supply chain and other scope 3 emissions.
• Incorporate the recently acquired VSCH into our GHG reporting and assess our future targets accordingly.