How commercial opportunity is driving carbon transparency journeys

The drive for sustainability is reshaping the metals and energy sectors, which are both energy-intensive and critical to the net zero transition. As the transition accelerates, commercial opportunities are emerging from the demand for low- and ultra-low-carbon materials. Industries like metals and energy face a future where traditional commodities such as oil and coal will significantly decline, while commodities like lithium, copper, and low-carbon versions of essential materials such as steel and aluminum are rising to prominence.

This article explores how this shift is creating lucrative prospects for companies that can meet the growing demand for sustainable products. From dynamic carbon reporting tools to sustainability-linked loans, businesses equipped with the right tools can capitalize on the green premium and secure financial advantages while driving decarbonization efforts.

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From Compliant to Competitive: How Metals and Energy Companies are Turning Carbon Data Into a Market Advantage

Carbon data as commercial opportunity

Proactive leaders in the metals and energy sectors have recognized the opportunity and are moving beyond sustainability as simply an exercise in compliance. While almost all metals and energy companies are now collecting carbon and sustainability data for compliance purposes, the same carbon data that companies are using for compliance purposes can also be put to work for commercial gain. A handful of shrewd commodity traders have recognized the potential to put carbon data to work in sourcing and selling products, and we believe it’s only a matter of time before more companies catch on to this valuable opportunity.

“Carbon-accounted metals products continue to be sought after by eco-conscious end-users and consumers alike, and often are commanding price premiums over comparable standard material.” — S&P Global

‍Demand for low- and ultra-low-carbon materials

The metals and energy industries are facing an uncertain future as a result of the green economic transition. Many traditionally profitable commodities such as oil and coal will face steep declines over the next few decades, with oil and coal consumption estimated to drop by 75% and 90% respectively by 2050. At the same time, demand for commodities such as lithium and copper is expected to increase, while demand for low-carbon versions of traditionally popular materials such as steel and aluminum is also on the rise.

The outlook for low-carbon materials demand

Steel
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Many steel consumers have set ambitious decarbonization targets. Experts predict demand for low-carbon steel will surge from approximately 84 million tons in 2021 to almost 200 million tons in 2030, primarily driven by automotive and construction demand in the EU and China. In particular, the EU market for low-carbon flat steel is expected to remain in short supply until 2030, creating a green premium between 2025 and 2030.

Aluminum
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Manufacturing aluminum with an ultra-low carbon profile is difficult and will require new technology. For this reason, ultra-low-CO2 aluminum is predicted to be undersupplied by 2030. Companies that can produce or sell aluminum with a very low carbon profile may attract significant premiums over the next several years.

Copper
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Like aluminum, copper with an ultra-low carbon profile is difficult to produce. The copper sector supplies buyers with a keen interest in sustainability (particularly electrical and electronics companies), many of which are working towards ambitious decarbonization targets and facing stringent regulation. The opportunity for attracting a premium is high.

‍Data by McKinsey

Do you have the tools to meet demand?

To meet demand for ultra-low carbon products, companies will need a new set of tools. Some may be tempted to invest in R&D internally, but the companies that are already seeing results today have turned to highly specialized external providers like CarbonChain for custom-built products. One such example is an evolved carbon reporting technology.

Dynamic carbon quotes

Where previously product carbon footprints were mostly static assessments that lacked real-time updates and were based mostly on spend estimates, new dynamic and accurate ‘carbon quotes’ are now available through platforms like CarbonChain. Quotes can provide advanced warning to buyers of the carbon intensity of products prior to purchase, effectively acting as forward-looking guidance on carbon emissions. For example, markets where low-carbon suppliers are still under-pricing their low-carbon products allow astute traders to buy low and sell high to carbon-sensitive markets and realize a green premium.

These carbon quotes offer a picture of a given product’s emissions in real-time, giving companies deep insights into the carbon footprint of the products available to them, thereby informing procurement decisions. Such tools “allow companies to create emissions numbers for trades ahead of time, without past transaction data,” says Campbell.

‍“Trading gross margins from low-carbon segments is expected to double by 2030 and further increase two-to-threefold to an average of $60 to $70 billion by mid-century.” — Oliver Wyman

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‍FREE DOWNLOAD

This article is an extract from our free whitepaper:

From Compliant to Competitive: How Metals and Energy Companies are Turning Carbon Data Into a Market Advantage

Sustainability-linked loans

Another opportunity for companies with the right carbon data is the ability to secure new sources of capital at attractive interest rates based on environmental performance. “Instead of making a premium out of their customers,” Campbell says, “these companies are making a premium out of their banks through lower interest rates.”

76% of financial institutions see opportunities in offering sustainable finance products and services. At CarbonChain, we’ve noticed for many banks and financial institutions, offering interest rate discounts (even as small as 0.1%) can be cheaper than purchasing carbon offsets, and create a tenfold decrease in greenhouse gas emissions.

Sustainability-linked loans allow companies to effectively lower their interest rates over time as they decarbonize. And with the right tools pointing companies towards their most powerful decarbonization levers, achieving these targets can be straightforward.

Conclusion

For the metals and energy industries, carbon transparency is not just a box to be checked by compliance teams, but a major driver of commercial opportunity. The demand for low- and ultra-low-carbon materials is reshaping supply chains, creating the potential for new revenue and larger market share for companies that can deliver the kinds of data their customers demand in useful formats and meaningful timeframes.

To capitalize on the opportunities of full carbon transparency, companies will need to invest in appropriate technologies, such as dynamic carbon quoting capabilities, and work collaboratively with stakeholders like financial institutions to proactively share carbon data and work towards environmental targets.

With the right tools, companies can not only meet growing sustainability demands but also unlock financial advantages, ensuring long-term growth in a decarbonizing world.

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FREE DOWNLOAD

This article is an extract from our free whitepaper:

From Compliant to Competitive: How Metals and Energy Companies are Turning Carbon Data Into a Market Advantage

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