Green Purchasing of Cement & Steel

Decarbonizing cement and steel production will be critical to achieving national and global climate goals, but it has been slower than in other sectors – like transportation and power – for several reasons.

One prominent reason is the role of carbon dioxide (CO2)-emitting chemical processes in steel and cement production. Alongside entrenched manufacturing practices, slow turnover of equipment in plants, the relatively higher cost of low-carbon technologies and outdated standards, it can be difficult to introduce changes that would decrease emissions.

Green purchasing, or procurement, is one of the most effective policy measures to drive important early demand for low-emission cement, concrete and steel. Along with other enabling policies, green procurement can help accelerate progress toward net-zero emissions in these sectors. Within the public sector, this means prioritizing the purchase of low-carbon products in government-funded construction projects. And in the private sector, it means leveraging the purchasing power of companies to decarbonize their supply chains.

The past few years have seen several green procurement initiatives and policies introduced in the United States and at the international level. These initiatives, however, have different levels of ambition in their emissions intensity benchmarks because of varying standards and definitions for what classifies as ‘green’ or low/near-zero emissions. Harmonized standards with consistent methodologies are critical to ensure that these initiatives and policies are complementary. To be clear, “harmonized” does not mean the same, but that initiatives’ standards use the same basic definitions, data frameworks and methodologies.   

Key Green Procurement Initiatives & Policies

The following are examples of key green procurement programs currently in operation for cement, concrete and steel:

• The Industrial Deep Decarbonization Initiative (IDDI) is an initiative under the United Nations Industrial Development Organization. IDDI launched the Green Public Procurement Pledge in September 2022 to encourage governments to report environmental data and use low-emission and near-zero emissions cement/concrete and steel in their construction projects. So far, nine countries, including the U.S., have joined IDDI and will declare their pledges by the end of 2023.
• World Economic Forum’s First Movers’ Coalition (FMC), is a public-private partnership that was launched in 2021. FMC includes 65 global companies, each of which has committed to using their purchasing power to create markets in at least one of seven key sectors. So far, 18 companies have committed to the steel sector target. At COP27, the coalition launched cement and concrete as its latest sector with five companies as initial signatories.
• The Climate Group’s SteelZero and ConcreteZero initiatives are corporate partnerships with 25 and 22 companies respectively committed to using net-zero steel and low- and net-zero emission concrete — and effectively cement, as its key ingredient. SteelZero, launched in 2020, is a partnership with ResponsibleSteel. ConcreteZero, launched in 2022, is a partnership with WBCSD and WorldGBC.
• The U.S. federal government is the largest domestic buyer of construction materials. In 2021, it launched the Federal Sustainability Plan to achieve net-zero emissions procurement by 2050. To help implement this plan, the Federal Buy Clean Initiative was launched, prioritizing the purchase of low-emissions concrete, steel, asphalt and flat glass. Under this initiative, the General Services Administration (GSA), an agency that manages federal buildings and construction projects, issued the federal government’s first standard for low-carbon concrete (and asphalt) under its P100 Facilities Standard. This standard sets design specifications and performance criteria for the GSA Public Buildings Service. Additionally, GSA is currently drafting a standard for procuring low-carbon construction materials that can qualify for funding under the Inflation Reduction Act (IRA).
• California was the first US state to pass a public procurement policy for construction materials. The Buy Clean California Act (BCCA) of 2017 focuses on steel, flat glass and wood insulation. Since then, multiple state governments — including Washington, Colorado, Oregon, Minnesota, New York and New Jersey — have also enacted Buy Clean or related policies for construction materials.

While the green procurement initiatives above focus on product-level accounting, green procurement policies for construction that require project-level emissions accounting (i.e., that considers the whole construction project and not just individual materials used) have been enacted in countries such as Canada, Germany, Netherlands, UK and Sweden.

Comparing Benchmarks & Ambitions of Product-Level Programs

The main product-level green procurement initiatives and policies for cement and steel – both international and U.S.-specific – come with varying definitions of the regulated material and different benchmarks for what is defined as “low-emissions” or “near-zero emissions.” They also differ in their levels of ambition in emissions intensity benchmarks, the technological readiness of decarbonization options that can meet these benchmarks and their targeted share of total purchases, for example, how much of their total purchases need to be ‘green’ (see figure below). Understanding these differences will help guide conversations about harmonizing standards as low-carbon products become more available.

Among the above initiatives, the FMC is most focused on spurring the adoption of cutting-edge decarbonization technologies in the industrial sector by recruiting cement and steel-consuming companies with high climate ambition. All signatories commit to making sure that at least 10% of their cement, concrete and/or steel bought by 2030 qualifies as near-zero (benchmarks given in the table). The FMC’s high decarbonization benchmarks target a small portion of the market and require technologies and approaches that have significant decarbonization potential but are less developed today and are not technologically ready for large scale deployment across the sector yet. As such, these near-zero products will come with a  (i.e. an additional cost in manufacturing due to the adoption of decarbonization technologies), unless heavily subsidized by supportive national government policies.

IDDI aims to encourage widespread uptake of green public procurement policies in member countries by offering different levels of commitment with decreasing carbon intensity benchmarks. It allows member countries four commitment levels starting from only requiring data reporting to subsequent levels requiring increasing use of low- and near-zero products. IDDI follows IEA’s methodology for cement and steel emissions intensity calculation and sets ranges for emissions intensity benchmarks, allowing countries to set their targets based on nationally determined circumstances. As with FMC, products meeting higher levels of commitments will likely have a green premium.

SteelZero and ConcreteZero have less stringent benchmarks but aim for wider market penetration, compared to FMC, with interim targets to purchase 50% low-emissions steel and concrete by 2030, increasing that to 100% net-zero products by 2050. These two initiatives offer more flexibility to companies with multiple pathways for certification, such as through ResponsibleSteel, SBTi, or other related standards. Products meeting these benchmarks could have a green premium.

Notes: Range for steel, cement and concrete depends on scrap share, clinker ratio and concrete compressive strength respectively. Source: Authors’ analysis

GSA’s Buy Clean policy targets all concrete (and asphalt) products purchased by the agency, but its March 2022 benchmarks, covered under the P100 standard, are not as ambitious as the other initiatives (as shown in the table). This is likely to enable widespread acceptance, allowing producers to use the best available existing technology to meet benchmarks. These standards set fixed numbers in their benchmarks covering 100% of their purchases starting immediately. This is in contrast with international initiatives that have benchmarks that decline over time for different targeted shares of purchases. These initial GSA standards are just one element of the Federal Sustainability Plan, which includes a target of net-zero emissions procurement by 2050. Meeting that target will require these benchmarks to be regularly evaluated and updated.

So far, California’s BCCA is the only state whose buy clean policy has set emissions benchmarks for the construction materials it purchases. Other states such as New York and Oregon are in the process of setting up emissions thresholds for the concrete they purchase. BCCA sets global warming potential limits for a range of steel products that are less ambitious than the international initiatives, but the standard covers all steel products purchases by the state. California plans to update these benchmarks every three years.

Because these initiatives and policies target various levels of ambition and would need technologies at different stages of development that can provide different levels of decarbonization, they can complement each other. For example, less stringent emissions intensity benchmarks with a higher bar on market penetration can incentivize the adoption of technologies and approaches that are widely available today, while more stringent benchmarks can send signals that there is interest in deep decarbonization technologies in the industrial sector and help increase that investment and development. By addressing different stages of decarbonization, this range of initiatives allows countries and companies to make commitments that best fit their circumstances.

Harmonizing Standards

The need for harmonization, or alignment, in standards across these green procurement initiatives and policies doesn’t mean we need a one-size-fits-all solution. We will likely need multiple standards and protocols to cover the types of production and varied manufacturing practices across the world. However, interoperability of standards is key – consistent methodologies for measurements and data reporting and clear definitions for scopes and benchmarks are needed to ensure standards speak a common language and help avoid an undue administrative burden on manufacturers. Lack of alignment could risk sending contradictory signals to the market, resulting in an uneven playing field and undercutting decarbonization efforts.

Below are several important considerations for harmonizing green procurement standards:

• Level of accounting: Initiatives need to be mindful of the differences that exist between how different entities (such as the private and public sectors) account for and set targets for cement, concrete and steel emissions. Approaches include product-level, project-level, facility-level or industry-level accounting (i.e., whether the emissions benchmark is specific to the product, such as concrete; specific to a project that can include many materials; specific to individual facilities; or an industry average for the material). While most green procurement initiatives and policies launched in the last two years have targeted product-level accounting, project-level accounting, such as whole building life cycle assessments, will also be needed in the future to achieve decarbonization goals in the industrial sector. This type of project-level accounting is required within IDDI’s Level 2 requirements and GSA’s P100 standard.
• Scope of coverage: Coherence is needed in the scope (i.e., boundary of emissions accounting) and type of GHG emissions accounted for in each initiative (e.g., only CO₂, or other GHGs as well). Manufacturers supplying low-emission products to government contractors and private companies need to be able to use the same methodologies to account for and report their emissions intensities.
• Reporting mechanism: Alignment in measurement methodologies, data collection and reporting mechanisms like harmonized product category rules and a common methodology for environmental product declarations (EPD) is needed between initiatives and policies to allow an ‘apples-to-apples’ comparison. The International Energy Agency published a  in April 2023 outlining the robust emissions measurement and data collection methodologies that are critical for achieving net-zero in the steel industry. Initiatives such as EPA’s EPD assistance program and IDDI have started the process of harmonizing data reporting standards. For data reliability and interoperability, initiatives will need to ensure the type of accounting used in data reporting is transparently declared in a standardized, digital format.
• Definitions: Definitions such as ‘low-emission,’ ‘near-zero emission’ and ‘net-zero emission’ need to be consistent across initiatives and policies to avoid confusion and misalignment in targets. Standards can be made flexible by setting ranges and categories for emissions intensity benchmarks instead of single, absolute values.

Other Factors to Account For

So far, the standards implemented by international green procurement initiatives have focused on North American and European standards. However, most of the world’s cement and steel production currently takes place in Asia, and demand for these products is set to increase rapidly in Africa. There is an obvious need to expand green procurement initiatives to bring other regions and their standards into the mix for alignment to meaningfully decarbonize the sectors across borders.

Green procurement initiatives should also pay attention to the standards being set by trade-related policies such as the G7 Climate Clubs and the US-EU green steel agreement on imported goods. Such trade policies are considering using industry averages as benchmarks and would typically lie low on the scale of ambition of benchmarks and high on the scale of technological readiness and targeted shared of purchases.

In the U.S., where the federal government and multiple state governments have enacted or are considering enacting Buy Clean or related policies for construction materials, federal and state officials and stakeholders throughout the country will need to pay close attention to the design and implementation of these policies with an eye toward ensuring interoperability across the US economy.

And finally, ‘green’ shouldn’t just mean low GHG emissions. Beyond GHG emissions, cement and steel production can increase local air pollution resulting in negative health outcomes, harm soil and water quality and reduce biodiversity. Accounting for other pollutants and toxicants within green procurement initiatives and standards is important to holistically address the impacts of heavy industries on workers and local communities while also decarbonizing the sectors at scale.