Structuring Demand for Lower-Carbon Materials: An Initial Assessment of Book and Claim for the Steel and Concrete Sectors

Industry Investment Rating - The report focuses on the steel and concrete sectors, highlighting the urgent need for decarbonization and the potential for innovative procurement mechanisms like Book and Claim to drive lower-carbon materials markets [7][10] Core Viewpoints - Companies are increasingly expanding their climate commitments to include supply chain decarbonization, particularly for steel and concrete, which account for over 10% of global CO2 emissions [7][12] - Three prominent procurement approaches are identified: direct procurement, out-of-sector offset purchase, and in-sector environmental attribute certificate (EAC) purchase, with EAC purchases being the core focus of the report [7][8] - Book and Claim systems, which decouple environmental attributes from physical products, are seen as a logical and catalytic mechanism for decarbonizing steel and concrete, especially when direct procurement is not feasible [10][41] Summary by Relevant Sections Introduction - The report emphasizes the urgent need for rapid carbon emissions reduction to stay below 1.5°C of warming, with companies increasingly focusing on decarbonizing their supply chains, particularly for steel and concrete [7] - Three procurement approaches are outlined: direct procurement, out-of-sector offset purchase, and in-sector EAC purchase, with the latter being the focus of the report [7][8] Why Decarbonize Steel and Concrete? - Steel and concrete are fundamental materials, with concrete being the most used material in the world after water, and steel being critical for the energy transition and infrastructure development [12] - Combined, these sectors account for over 10% of global CO2 emissions and half of heavy industrial emissions, with demand expected to increase by 20% for concrete and 30% for steel by 2050 [12][13] Why Are Organizations Interested in Lower-Carbon Materials? - Leading organizations are setting climate targets that include supply chain emissions, with Microsoft highlighting the challenges of embodied carbon in building materials and hardware components [14] - Companies at the end of the supply chain, such as technology firms, face challenges in reducing emissions from materials like steel and concrete due to their distance from producers [15] How Can Organizations Decarbonize Beyond Direct Procurement? - Book and Claim certificates allow organizations to channel funds directly to alternative material producers, enabling decarbonization of supply chains and meeting Scope 3 targets [19][20] - This model is already used in industries like renewable electricity and sustainable aviation fuel, providing flexibility and verifiability in emissions reductions [24][25] Book and Claim as a Decarbonization Mechanism - Book and Claim systems expand the market for clean commodities by allowing stakeholders who do not directly procure materials to invest in lower-carbon markets [26] - The system requires verifiable, additional, and catalytic certificates to ensure impact, with forward contracting models strengthening additionality by tying certificates to new production facilities [27][31] Infrastructure Needed for Book and Claim - Robust Book and Claim systems require certification schemes, standards, registries, and reporting guidelines to ensure transparency and credibility [53][54] - Certification schemes, such as EPDs and third-party standards, are critical for verifying the environmental attributes of products, while registries ensure the integrity of certificate transactions [57][63] Microsoft's Pilot Process: Lessons Learned - Microsoft's pilot process revealed that the market for Book and Claim certificates is in its early stages, with limited offerings that meet the criteria for significant, verifiable, and additional emissions reductions [72][73] - The market needs stronger collective demand signals, fit-for-purpose accounting methods, and robust infrastructure to de-risk the approach and scale Book and Claim systems [77][79] Next Steps - Collaboration among stakeholders is essential to formalize Book and Claim infrastructure, with a focus on developing certification schemes, standards, registries, and reporting guidance [80] - Market-leading buyers should align and aggregate demand to pave the way for broader adoption of Book and Claim systems in the steel and concrete sectors [80]