No Time For Caution: Nippon Steel Corporate Climate Assessment 2025 Update

Nippon Steel Corporation is now at a major turning point. Despite being based in resource-poor Japan, the company has grown to become the world’s fourth largest steelmaker, and is now expanding its business to North America, India, Europe, and Australia. However, the “blast furnace-centered” and “domestic-centered” policies that underlie the company’s corporate strategy remain strong.

Nippon Steel is in uncharted waters. It rose to become the world’s fourth largest steel producer in spite of the resource limitations of its home market of Japan, and its ambition for growth has led to plans to expand its holdings from North America, to India, to Europe, and to Australia. However, it has yet to transition its corporate mindset to reflect that it is no longer just a blast furnace steelmaker, or even just a Japanese steelmaker. 

As a global steelmaker, Nippon Steel has a responsibility to ensure its ambition for growth is in line with global efforts to tackle the climate crisis, and that its efforts hasten, not hamper, the decarbonisation of the steel industry. Nippon Steel must be future-fit for the inevitable zero emission economy.

The coming decade is the critical time to future-proof the company, and that requires new thinking for Nippon Steel. In an era of climate crisis, accelerating transition and fierce competition, the company is under increasing pressure to use its global reach to realign supply chains and establish new business models, but it has yet to seriously question its outdated model of importing coal and iron ore to do iron and steelmaking in Japan. 

The reality of steelmaking in a carbon constrained world is that coal is a dead-end. Steelmakers cannot sufficiently decarbonise in a timely manner if coal remains their focus. Attempting to bring incremental ‘improvements’ to this current model is slowing down and limiting the level of business transformation Nippon Steel needs for it to become a globally performing steelmaker. 

Nippon Steel’s Japanese and Korean counterparts are increasingly making bold investments in low-emissions green iron production in favourable geographies from the Middle East to Australia. Nippon Steel’s viability as a steelmaker depends upon its ability to be flexible and reposition for this new era. This report is intended to contribute to a dialogue about what is possible as well as the risks of delayed decarbonisation.

Nippon Steel’s current climate strategy requires urgent action on four fronts:

1. Accelerating decarbonisation before 2040: The current decarbonisation roadmap delays substantial emissions reductions until after 2040, creating critical “empty decades” that leave the company delivering too little on climate too late. Investment in green iron (H2-DRI) production and supply chains in favorable geographies is one critical interim measure to reduce emissions using available technologies, but the company has no clear strategic plan on this yet.
2. Establishing a clear phase-out from coal: During these “empty decades”, the company will deeply entrench coal into its business. It already plans to operate coal-based blast furnaces into the 2050s, making its long-term decarbonisation task harder.
3. Expanding emissions accountability to include its overseas operations: Nippon Steel is expanding coal-based production in India and has pledged additional investment in blast furnaces as part of its proposed acquisition of U.S. Steel. These developments raise questions about the credibility of the company’s carbon neutrality commitments, especially as it plans to further expand operations overseas.
4. Aligning medium-term targets with a 1.5C trajectory: At the last annual general assembly in June 2024, Nippon Steel faced its first-ever climate-related shareholder resolutions, which received substantial support (up to 28%), highlighting investor demands for improvements in lobbying transparency, emissions reduction strategies, and climate disclosures. While the company has since improved on disclosure and active engagement both with investors and civil society, it has yet to shift its course and undertake a fundamental revision of its climate strategy adding new and deeper interim reduction targets.

Nippon Steel has a lot to do on its climate commitments, and little time to do it. To protect its reputation as an industry-leading steelmaker and build the global business it is aspiring to, it needs to take urgent steps to transform its mindset and production process beyond coal.