Dr. Ing. Martin Tauber, Industry Consultant, President Critical Raw Materials (CRM) Alliance, Member of International Magnesium Association (IMA) EU Committee Contact firstname.lastname@example.org
Although magnesium still has a strong position in the “lightweight material-mix”, it has certainly lost ground to aluminium, carbon fibre and reinforced steel, with alternatives mostly chosen above magnesium because of supply-related issues. New magnesium primary producers and projects in the pipeline are forming a more sustainable supply base on a global level, and will provide different industries with a beneficial metal, building on strong environmental arguments. Toyota recently announced its intention to completely eliminate all CO2 emissions, including materials, parts and manufacturing, from a vehicle’s lifecycle.
There are arguably CO2 footprint benefits in the Mg primary project pipeline which offer advantages over other lightweight material, and it is possible that magnesium industry benefits could influence future public and private procurement. This could mean that the next generation of global primary magnesium supply may provide the magnesium industry with beneficial sustainability arguments to support the case for high volume growth.
How is sustainability relevant to the magnesium supply value chain?
There are many tailored, often self-serving definitions of sustainability, with but all are fundamentally about:
- Living within the limits
- Understanding the interconnections between economy, society, and environment
- Equitable distribution of resources and opportunities
Sustainability is perhaps the most frequent green “buzz word”, and is well used for “green washing” of information; it is neither a disruption of existing processes nor a direct call for savings. Furthermore, it is difficult to define whether a product or process is more or less sustainable without defining the right indicators. For the magnesium supply value chain, the concept of “Sustainability for Business and Production” can be used, and is described as follows:
- Product: Safe and ecologically sound throughout its life cycle
- Process: Wastes and ecologically incompatible by-products are reduced, eliminated or recycled on-site
- Workers: Their security and well-being is a priority
Sustainability for international and corporate reporting
Most companies and other organisations, as well as governments, have defined their sustainability standards and indicators based on international declarations and adopted non-binding standards. A frequently used term is also “Corporate Social Responsibility”. Sustainability standards are often privately developed principles, providing guidance to businesses on implementation, and may or may not be derived from international norms.
Examples of such privately developed principles are:
- The Global Reporting Initiative (GRI) Sustainability Reporting Guidelines – globally the most widely used, including sector specific guidelines for “Mining & Metals”.
- The ICMM Sustainable Development Principles
- The International Integrated Reporting Council (IIRC)
- The Sustainability Accounting Standards Board (SASB)
- The British Standards Institution (BSI) responsible sourcing sector certification scheme standard for construction products (BS 8902:2009)
An increasing number of stock exchanges (e.g. SGX Singapore) around the world are now mandating sustainability reporting from their listed companies, and as a result, sustainability reporting practices have grown rapidly, and are beginning to receive more attention in Asia as well.
A 2014 pwc CEO study reveals that most CEOs surveyed agree that business has social as well as financial responsibilities; 80% say it’s important for their business to measure and reduce its environment footprint. 74% agree that measuring and reporting non-financial impacts contributes to their business’ long-term success.
From shareholders to stakeholders
In 2014, the European Parliament set a duty in law to report on the non-financial impacts of business activities. After ratification, companies will have to report on their policies on diversity, social issues and on corruption, as well as the risks they pose to human rights and to the environment, including through their supply chains. To-date, 2500 companies have voluntarily produced sustainability reports and this number will rise to nearly 7000 by 2017, when the law comes into effect. As such, they will be making themselves accountable not just to their shareholders, but to all stakeholders.
From voluntary to mandatory – an opportunity for magnesium?
With mandatory sustainable reporting requirements, OEMs and also TIER companies, need to talk about their raw material procurement strategies and related sustainability indicators. Aluminium and automotive association member companies are already including sustainability content in their stakeholder communications.
Jaguar Land Rover (JLR), for example, was honoured with the 2015 Queens Award for Sustainable Development. The Governance structure of JLR expresses very clearly the high level responsibility for sustainability: “Our CEO and Board of Directors are ultimately responsible for sustainable business development at Jaguar Land Rover”. JLR is part of the global Aluminium Stewardship Initiative (ASI), which has developed a performance standard for the whole supply chain by a multi-stakeholder approach.
resources efficiently and, above all, sustainably. Unlike the traditional linear take-make-consume-dispose approach, a circular economy seeks to increase the share of renewable or recyclable resources while reducing the consumption of raw materials and energy and, at the same time, cutting emissions and material losses.
The circular economy is not a single tool, but a package of measures aiming for a much more complete approach than sustainability alone, and it builds on other tools such as the Life Cycle Analysis (LCA), the Product Environmental Footprint (PEF) and the Organisation Environmental Footprint (OEF). The PEF is a measure of all quantifiable environmental impacts over the full life cycle of a product and covers emissions to water, air and soil, use and depletion of scarce resources, and impacts from land use.
Jaguar Land Rover also looks to the Circular Economy, by teaming up and building unique closed loops with its key suppliers. One of them is Novelis, pursuing their key goal of developing low cost alloys with higher recycled and End of Life (EoL) aluminium content. Similarly, JLR invested in a £6m closed loop system in their press shops to capture aluminium by segregating all metal waste to maximise what can be reused. Novelis also announced a new alloy designed for automotive to contain up to 75% recycled content, and strengthened its relationship with JLR: “As a leader in alloy innovation and aluminium recycling, Novelis is honoured to work with Jaguar Land Rover to help lead the automotive industry in sustainable vehicle manufacturing.” This collaboration for a closed-loop value chain is also demonstrated in their earlier REALCAR project (REcycled ALuminium CAR).
However, neither the 2014 JLR nor the Novelis Sustainability Report mentions magnesium.
Life Cycle Analysis
Another tool of sustainability alongside the Circular Economy is the Life Cycle Analysis (LCA), and automotive companies, for example, need to examine every step in their supply and value chain.
Toyota has set itself the target to completely eliminate all CO2 emissions, including materials, parts and manufacturing, from the vehicle lifecycle, and to achieve zero CO2 emissions at all plants by 2050. This is the first OEM to include material and parts in a zero target. Toyota’s Challenge 2 “Life Cycle Zero CO2 Emissions Challenge” aims to develop and expand the use of materials with lower CO2 emissions during production and will reduce the quantity of materials and number of parts used in a vehicle.
Volkswagen offers a different, but no less clearly expressed, perspective, stating that: “aluminium reduces the weight of the vehicle, which can significantly reduce CO2 emissions during the use phase. However, production of aluminium is considerably more energy-intensive than production of steel, leading to higher CO2 emissions at the manufacturing stage….This is why small and mid-range car bodies still tend to be made predominantly of steel. That said, it is perfectly possible to build a lightweight vehicle using steel.”
Almost all aluminium alloys contain Mg as an alloying element, on a range from minor up to 6%, and although only one of many alloying elements for the aluminium industry, it represents the single biggest market for the magnesium industry itself. On the other hand, magnesium parts are in competition with aluminium parts when it comes to lightweight material mix strategies. With concepts like impact reporting, green procurement and sustainability reporting as a whole, primary raw materials, such as magnesium and other minor metals, also need to receive greater attention and transparency, both as a product in their own right, and as alloying elements. Sustainability reporting needs to cover different raw material intakes, not just capturing the fabricated product or part.
As with JLR and Novelis above, most sustainability reports from aluminium companies do not mention magnesium at all in relation to their sustainable sourcing or responsible procurement.
With increasing mandatory non-financial reporting, there will be an opportunity for more sustainable primary magnesium production to be profiled by means of life cycle assessments, in particular with regard to the raw material intake. But primary magnesium supply is not the only area which demonstrates the lack of current profiling of the magnesium industry. Pre-consumer and EoL recycling/treatment are also lacking transparency and knowledge among stakeholders. The fact that magnesium is used as an alloying element and “lives on & on” in secondary aluminium is missing from the message, and even dedicated aluminium recycling information fails to make reference to magnesium. This lack of profile is a significant disadvantage for magnesium, and as a result, it is very difficult to place magnesium within a circular economy approach, if the relevant stakeholders are not informing or being informed about what happens to the magnesium after collection of an aluminium beverage can, an automotive part or a construction profile.
The EU Emission Trading System
The EU Emissions Trading System (EU ETS) is a ‘cap and trade’ system. As the first and largest emissions trading system for reducing Green House Gas (GHG) emissions, the EU ETS covers more than 11,000 power stations and industrial plants in 31 countries. The current goal within the EU is to cut GHG emissions by 80-95% by 2050 compared to 1990 levels.
Within the sustainability context, it is crucial for new magnesium primary projects in the pipeline in Europe to not only put their focus on lower energy consumption across the different processes, but also to secure green contracts based on renewable energy.
Many stakeholders are urging a reform of the ETS Europe, for example Eurometaux’s position is that: “More predictability means we can invest in our European facilities and innovate through research into low-carbon production methods.”
However a carbon cap & trade system is of importance not only for pipeline primary magnesium projects in Europe, there is also the global dimension, determined as a result of Paris COP21: “An interconnected mechanism for sustainable development available to all who want to use it (both developed and developing countries) was agreed.”
The Carbon Impact Factor
The Carbon Impact Factor (CIF) stands for a family of financial instruments to differentiate and reward Carbon Efficiency in commodity production. CIF has global scope and is intended to allow market participants to incorporate the carbon efficiency of a commodity into purchasing decisions and communicate associated carbon migration to stakeholders. CIF also enables OEMs, for example, to demonstrate and communicate their efforts to reduce carbon intensity (risk) within their supply chain.
Despite that, the raw material producers are the major players and contributors to OEMs’ efforts to reduce the carbon intensity within the supply chain, but often there is no traceability of raw material inputs beyond the primary processing point. As a result, different raw material data are aggregated or compounded.
OEM industry and the raw material supply chain
For OEMs in automotive or in other magnesium-using industries such as power tools, sustainability reporting is already a long used non-financial reporting tool, and year after year ambitious sustainability targets are set and measured against achievements in a transparent manner. With differing requirements for official non-financial and in particular sustainability reporting, companies will increasingly be forced to improve their transparency with a focus on raw material sourcing. In recent years, categories such as “Conflict Minerals” or “Critical Raw Materials” are finding their way into corporate sourcing policies and sustainability reporting structures, with raw material supply, and its contribution to GHG emissions becoming more important. However, there is seldom a traceability of raw material input beyond the primary processing point or even from an early part of assembly.
CO2 emissions reduction targets
In Europe, CO2 emissions from new cars have gone down by almost 34% in less than two decades. At the same time, manufacturers have significantly reduced the environmental impact of manufacturing. For instance, total CO2 emissions from car production were cut by 27.4% over the last decade. In the EU, cars are responsible for around 12% of total CO2 emissions. EU legislation sets mandatory emission reduction targets for new cars, which is the cornerstone of the strategy to improve the fuel economy of cars sold on the European market. If the average CO2 emissions of a car manufacturer’s fleet exceed its limit value in any year from 2012, the manufacturer has to pay an excess emissions premium for each car registered.
From 2019, the cost of this penalty will increase from a minimum of €5 for the first gram/km of exceedance to a flat rate of €95 from the first gram of exceedance onwards.
As a result of the UN Climate Change Conference (COP21), 13 North American and European governments have announced that they will strive to make all new passenger vehicles in their jurisdictions zero-emission vehicles (ZEVs) by no later than 2050. This guideline focusses on tail-pipe emissions, and applies to an entire OEM fleet. The applicability to raw materials and their CO2 footprint will centre around weight reduction.
CO2 heritage or footprint as a similar target as CO2 reduction
A similar mandatory legislation would be possible for the overall CO2 footprint of a complete vehicle. The previously mentioned Toyota Challenge 2 “Life Cycle Zero CO2 Emissions Challenge” would build the base for such an approach: The aim is to completely eliminate all CO2 emissions, including materials, parts and manufacturing, from the vehicle life-cycle, by means of:
- Cutting total vehicle lifecycle CO2 emissions, including materials, parts and manufacturing
- Developing, designing and using low-CO2 materials; reducing the amount of material and the number of parts used in order to cut overall CO2 emissions involved in manufacturing materials
- Using recycled bio-materials more widely; designing vehicles for easy dis-assembly;
- Other initiatives focusing on environment-conscious vehicle designs
Every part used in a vehicle has its own CO2 footprint or heritage, and OEM fleets would first have to reach a cap of X tons of CO2 emissions from the sum of the parts of its vehicles and manufacturing processes. This cap would also decrease progressively with the ultimate goal of zero emissions vehicles in all its “life-stages”, namely planning, production, use phase(s) and recycling.
Other industries are using this sort of information mainly to raise awareness, for example the Global Water App or the Global Water Footprint, where one can scan an EAN barcode and immediately see how many litres of water were needed to produce the product. However, if such a scheme included similar “emission” penalty structures, then greater attention on raw materials would be obvious, and zero or low CO2 emission raw materials would already be given higher priority and preference from the planning phase.
The LCA CO2eq materials fight
As sustainability reporting has become more popular, the LCA tool has also produced a high number of different studies for raw materials, components and complete industries. This has primarily been with the aim of beating the direct competition, sometimes without contributing to the bigger picture of building a base for forward-looking planning, to offer not only engineers but also project or procurement personnel a range of alternatives. LCA related standards and projects fall under the direct responsibility of the ISO/TC 207/SC 5 Secretariat. IMA published its “Life Cycle Assessment of Magnesium Components in Vehicle Construction” in full compliance with this standard; however most of the LCA studies looking at magnesium as an alternative or part of the lightweight material mix are still using a reference to the China Pidgeon process based on average GHG values up to 42 kg CO2eq for 1 kg of magnesium. A couple of studies still refer to the already closed Hydro Becancour plant as a state-of-the-art process reference. The IMA study already indicates a lower level for modern Chinese Pidgeon plants down to 19,9 CO2eq when using the waste gas credits. The Chinese Ministry of Industry and Information Technology (MIIT) released the Access Standard for Magnesium Industry and sets strict conditions for companies with the purpose of accelerating industry restructuring, enhancing environmental protection, regulating investment and preventing redundant construction. But as China is lacking a broadly available renewable energy base for powering the present diversified magnesium primary production, the CO2eq level is not expected to decrease significantly. It will need new and different capacity to come on-stream with a much lower CO2eq value base.
High volume growth will require a global diversified primary supply base
High volume growth in automotive, for example, is only possible with a globally spread raw material/semi-fabricated material supply base. Bigger aluminium players invest in primary technology, processing plants and recycling facilities around the globe to enable the increasing demand of aluminium in the transport industry. Hydro has just announced that its new pilot will produce primary aluminium with a 15% reduction in energy consumption, to achieve the lowest CO2 footprint.
But to enable the resulting supply chain with a lower CO2 footprint, not only magnesium pipeline primary projects are needed, but also much lower CAPEX Pidgeon plants able to provide a lower CO2eq by using a raw material intake produced by renewable energy, and offering shorter delivery distances to their customers. For both aluminium and magnesium, pre-consumer and EoL recycling plays an important role when completing the picture from production to use-phase to recycling phase. With very stringent legislative recycling targets, both materials will need to use their synergies and their inter-dependencies.
The concept of sustainability is much bigger than LCA, and it should be noted that the selected current magnesium primary producer and pipeline projects are clearly above the current China average in HSE.
Outlook and conclusions
Today, a selected primary magnesium supply base already has valuable advantages for providing a much more sustainable base for their downstream value chain, and this will be significantly improved by new primary pipeline projects. Magnesium lacks stakeholder knowledge and transparency in many ways, such as an achievable CO2 footprint of primary production, pre-consumer recycling, material flow analysis including EoL and the synergies to be gained from being the most important alloying element for the aluminium industry.
Magnesium has a great opportunity to position itself in a more prominent role, but also as an attractive sustainable alternative, when raw materials, too, become an integrated part in the ambitious emission targets of industry.
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