Outokumpu Embeds Sustainability into Procurement, Reducing Scope 3 Emissions from 1.14 to 0.81 t CO2/t Stainless Steel

Outokumpu established a “circularity first” approach to procurement, prioritizing recycled materials and steel scrap wherever technically feasible. This sourcing principle was directly linked to the company’s commitment to the 1.5°C target and its broader ambition to reduce climate impacts across the value chain. 

Where primary raw materials were still needed, Outokumpu focused on identifying lower-emission sourcing options. To support this, the company began collecting emissions data from suppliers and using it to inform purchasing decisions.

Outokumpu applies sustainability requirements to both new and existing suppliers, while adapting sustainability to each stage of the supplier relationship. For new suppliers, the company introduced a structured onboarding process focused on transparency across the value chain. Suppliers are expected to provide relevant documentation, such as details of the full supply chain, certifications as well as human rights policies and sustainability reports. Acceptance of Outokumpu’s Supplier Code of Conduct and Supplier Requirement is also requested as part of the onboarding process and incorporated into supplier agreements. This helps Outokumpu to assess alignment with its sustainability expectations before entering or expanding a business relationship. 

For existing suppliers, Outokumpu integrated sustainability into supplier scorecards used to assess performance over time. These scorecards have a meaningful influence on purchasing decisions, especially when results are discussed with suppliers and improvement actions with implementation timeline agreed. Those may include recommendations on e.g. calculation of product specific CO2 emissions, building a decarbonization roadmap as well as formalizing ways of working into policy frameworks or management systems into certifications.

This ensures sustainability is a routine part of supplier management, procurement decisions, and long- term sourcing relationships.

Outokumpu strengthened supplier sustainability due diligence by developing a risk-based approach aligned with the expectations of the UN Guiding Principles on Business and Human Rights. This approach combined several tools, including supplier onboarding, supplier sustainability risk assessments, sustainability self-assessments and on-site assessments. 

The company assesses supplier risk using factors such as country risk, value chain risk, assessments results, certifications, previous audit findings and other relevant inputs. This allows Outokumpu to focus attention on suppliers and raw material value chains with higher potential impacts, rather than applying the same level of review to every supplier. 

Since 2021, Outokumpu has conducted sustainability audits and human rights impact assessments on 18 medium- and high-risk suppliers focusing on risks of the supplier, its country and industry as well as the maturity of their due diligence practices. In addition, Outokumpu has conducted around 50 sustainability visits and HSEQ (health, safety, environment and quality) assessments on lower-risk suppliers. 

As the approach matured, in 2024 Outokumpu further sharpened its due diligence priorities by identifying high- risk value chains as well as salient human rights impacts across its own operations and upstream value chain.

The company strengthens long-term collaboration with key suppliers, especially those providing scrap and low-emission alloys. Outokumpu uses ongoing supplier engagement to share best practices and support improvement over time. This helps create a more practical basis for working on emissions reduction, transparency, and responsible sourcing with suppliers that have a significant influence on the company’s overall footprint. 

Outokumpu has also made agreements and invested in companies such as Cronimet, FPX Nickel and Greenland Resources to secure access to low emission materials in the future.

Outokumpu worked to improve traceability by documenting existing knowledge about supply chains and by filling in the gaps together with direct suppliers. This was the first step in improving data quality for raw material flows. Then Outokumpu was also able to start collecting and using supplier specific emissions, instead of using secondary emissions data for raw material scope 3 emissions. 

The company recognizes that suppliers have different levels of sustainability maturity, so data gaps are not treated as automatic disqualifiers. Outokumpu utilizes third-party sustainability self-assessment tools to gain more understanding of suppliers’ strengths and development areas. Better data helps procurement and sustainability teams identify risks earlier, prioritize engagement with higher-impact suppliers, and make more informed sourcing decisions.

Implementation required close collaboration between procurement, supplier sustainability, operations, legal & compliance, and sustainability teams. Legal and compliance teams are tightly involved in policy and contract work, but also in supplier onboardings and regular screenings. Group Sustainability team supports with company-wide CO2 calculations and reporting and coordinates sustainability due diligence work across the company. Operations play a key role in providing feedback regarding new types of raw materials. 

Leadership embedded sustainability and climate targets into company strategy and targets already earlier, and procurement was given a clear mandate to implement the necessary actions. External experts were also brought in to support areas where the company did not yet have in-house capacity, such as the development of its initial social audit approach.

Outokumpu is now working to reflect a wider set of sustainability considerations in procurement decisions. While biodiversity and social considerations are already integrated into supplier on-site assessments, the company aims to strengthen how these factors are considered in supplier selection and evaluation where relevant. This would help move sustainable procurement beyond climate performance alone and support a more integrated approach to responsible sourcing across the value chain.

Outokumpu found that procurement can only drive meaningful change when sustainability is built into core sourcing decisions, supplier selection, and long-term supply strategies, rather than managed as a separate process.

Companies do not need to have every process fully developed from the outset. A more effective approach is to begin with the areas where procurement decisions create the greatest sustainability risks and opportunities. For Outokumpu, this meant updating the supplier onboarding process early on, so that sustainability expectations were embedded before new suppliers entered the supply chain. This helped prevent the company from onboarding suppliers that did not meet its requirements and created a stronger foundation for scaling responsible sourcing practices over time.

Outokumpu learned that audits, scorecards and self-assessments create the most value when they are used to start practical conversations with suppliers about improvement areas, rather than only to identify risks or make exclusion decisions.