Heavy Industry Companies in China and India Are Lagging On the Just Energy Transition

A report ranked 91 keystone heavy industry companies based on an Accelerate Climate Transition assessment of social and climate indicators, including climate targets, supply chains, human rights risks and more.  Seventeen of the 18 lowest-ranking companies received paltry scores of 0.0-2.0 on a scale of 1-100 are based in China, with JiuQuan Iron and Steel Group ranking at the very bottom. Scoring only slightly better were India’s SAIL and Ramco Cements.

“Heavy industries provide a massive opportunity to help us reach and ‘cement’ a rapid, just transition – but if the sector does not accelerate action, they will be a significant obstacle to global decarbonisation targets,” said Vicky Sins, World Benchmarking Alliance’s decarbonisation and energy transformation lead, in a press statement.

Another report released earlier this month from Responsible Steel shows a similar, worrying trend. Steelmaking, considered a subset of heavy industries, alone accounts for 10% of global greenhouse gas emissions, more than Europe’s transportation sector due to its use of coal and fossil gas. Advocates are pushing for a shift to electric arc furnaces or green hydrogen, and some companies have moved towards becoming independently certified as green steel producers. However, China does not have a single certified factory despite being home to more than half of all crude steel production.

Who Are Global Leaders?

The highest-ranked company was Cemex, based in Mexico but with operations in Asia. Of the Asia-based companies, South Korea’s POSCO ranked the highest, at No. 6, followed by Thailand’s Siam Cement at No. 7 and Taiwan’s Asia Cement at No. 10.

They ranked higher because of their plans to shift to cleaner fuels, such as electricity or green hydrogen, and stronger standards for sourcing raw materials like iron ore, bauxite, cobalt and sand. Unfortunately, these were the exceptions, not the norm, as the laggards, led by Chinese and Indian biggest manufacturing companies, were holding the entire sector back.

“We need strong accountability, leadership and urgent action from aluminium, cement and steel producers to ensure a just, low-carbon future,” said Sins. To do that, Chinese and Indian companies, manufacturing sector and automotive industry need to follow the leadership of Cemex, POSCO, Siam Cement and Asia Cement.

Why Do Top Manufacturing Companies Matter?

Industrial emissions account for about a quarter of global emissions – more than all global agriculture, transportation or energy use in buildings. Unfortunately, progress on industrial decarbonisation has lagged behind that in the electricity sector, as the large, often city-sized factories that produce steel and cement need huge amounts of dense fuel, such as coal, fossil gas or petroleum.

China: Global Leader in Industrial Emissions

When it comes to industrial emissions, China is a massive world leader. The country produced 54% of global steel, 59% of aluminium, 51% of cement and 63% of petrochemicals. Steel alone is 15% of China’s total emissions. In fact, industrial emissions are linked to China’s world-leading solar and wind manufacturing industry, as the steel, silicon and other inputs that go into wind turbines and solar panels are made at coal-burning factories. 

Kyle Chan, postdoctoral research associate at Princeton University, said one could “argue that China’s clean tech industries are actually built on dirty industries.”

India

While a much smaller player, India is seeking to become an industrial giant. If it follows the same path as China, relying on coal and gas to fuel its industry, it would have huge, adverse impacts on the global climate. 

One area where nearly no companies are doing well is the just transition, which ensures that the shift away from fossil fuels does not harm communities linked to the factory – such as workers along the supply chain. Australia’s South32 was the highest ranked on that, scoring 10/20, while Chinese and Indian companies nearly all had scores of 0.

A Just Energy Transition for China and India’s Heavy Industry Companies

The good news is that more Chinese companies want to use cleaner energy in their industrial operations. The problem is that they’re failing to address other important issues related to a just energy transition.

Even Chinese companies in the solar and wind space, which have become world leaders, have faced criticism due to lacking frameworks or legal requirements for human rights due diligence. This is a concern in the heavy industry, too, with recent pushes to expand the green industry and limit the use of coal lack guidelines or requirements on a just transition. These include sourcing standards or ensuring there aren’t workers’ rights violations along a supply chain.

The Chinese government has been known for human rights violations, such as the massive camps and use of forced labour of Uyghur Muslims, which has shown some links to solar and electric vehicle production. In places like Indonesia, the Democratic Republic of the Congo and Myanmar, Chinese companies sourcing materials for clean technology have been linked to human rights violations, with some connected having weak ESG or sourcing standards. 

Because China lacks an open civil society or free press, the same types of public shame campaigns used to push European and Japanese heavy industry companies find it difficult to gain traction. There is also no space for shareholder activism, a tool being used to push large industrial companies in Europe, the United States and South Korea.

How To Pressure the Largest Manufacturing Companies

One way to push companies is through collaborative, industry-wide action.

“The rapid, affordable decarbonisation of heavy industry requires collective action across the value chain and urgently compressed transformation,” said Stephanie Jamison, global sustainability services lead at Accenture, in a press statement. “Stakeholders around the world – across industries and governments –must come together to create a new frontier for the economics of decarbonisation, giving heavy industry a firm foundation for reinvention.”

China and India both export steel, cement, heavy machinery, trains and automobiles around the world. Importing countries can push for stronger climate and human rights requirements, which can push companies to change their practices. 

The European Union’s Human Rights Due Diligence regulations, which require many products imported into the bloc to meet ethical standards, could push more Chinese and Indian companies to act. Similar laws are under consideration in the US, Japan and Australia. They can also benefit companies producing steel, cement, solar panels, electric vehicles or other products more sustainably by allowing them greater market access.

In the end, we have no choice – if we’re to build a cleaner, more just, and equitable future, then we need to ensure that heavy industry companies in China, India, or anywhere also shift to clean production and address glaring human and labour rights issues. That is the only path to a just energy transition and a sustainable future.