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Fortescue (FSUGY) Targets Net Zero Scope 3 Emissions by 2040

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Fortescue Metals Group Ltd (FSUGY - Free Report) has become the first major miner to commit to achieving net-zero scope 3 emissions produced by its customers, including steelmakers, by 2040.

The miner intends to address emissions across its entire global value chain. This includes crude steel manufacturing, which according to the company is accountable for 98% of its Scope 3 emissions. To this end, Fortescue Metals will develop projects and technologies with focus on reducing emissions from iron and steel making, and work with customers on the implementation of the technology and the supply of green hydrogen and ammonia from Fortescue Future Industries (“FFI”). It is part of Fortescue Metals' plan to become the world's first major supplier of green iron ore.

FFI is the 100% renewable green energy and industry company of Fortescue Metals Group. It aims to supply 15 million tons of green hydrogen globally by 2030. It strives to aid Fortescue Metals and its customers and shipping partners to reduce emissions. Fortescue Metals will also decarbonize its own fleet of eight ore carriers, and engage with shipping partners to cut down or eliminate emissions from shipping.

Meanwhile, the company has set some medium-term targets that include a reduction in emissions intensity levels from the shipping of its ores by 50% from fiscal 2021 levels by 2030.  The miner wants to reduce emission intensity levels from its steel making customers by 7.5% by 2030, thus paving the way to hit the 100% mark by 2040.

Scope 1 emissions are the direct emissions from a company’s operations, while Scope 2 emissions are the indirect emissions from the energy used by the company. Scope 3 emissions are indirect emissions that occur in the value chain, such as from the processing and use of products a company sells and the transportation of those products. So far, companies had been focused on Scope 1 and 2 emissions as these were under their direct control. Scope 3 emissions are difficult to quantify. With climate change becoming a pressing concern with each day, companies are now starting to take more responsibility in accounting for Scope 3 and cutting down emissions wherever possible in their value chain.

Fortescue Metals’ close rival, Rio Tinto plc’s (RIO - Free Report) climate goals include partnering with customers on steel decarbonisation pathways and investing in technologies that could deliver reductions in steelmaking carbon intensity of at least 30% from 2030, or with potential to deliver carbon neutral steelmaking pathways by 2050. For Scope 3 emissions, BHP Group (BHP - Free Report) will support the industry in developing technologies and pathways capable of 30% emissions intensity reduction in integrated steelmaking, with widespread adoption expected post 2030. It will support 40% emissions intensity reduction for shipping of its products. The company has set a target of achieving net zero by 2050 for the operational emissions of its direct suppliers. It also aims for net zero by 2050 for GHG emissions from all shipping of its products.

Recently, Phillips 66 (PSX - Free Report) announced plans to reduce greenhouse gas emissions intensity from its operations and energy products by 2030. It aims to reduce Scope 1 and 2 emissions intensity from operations by 30%, and Scope 3 emissions intensity of its energy products by 15% from 2019 levels. Phillips 66 is the first U.S. refiner and only the second U.S. oil company to set emissions reduction targets that include Scope 3.

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