Gerdau is a multinational steel manufacturer that focuses on recycling scrap steel. Each year, the company transforms millions of tons of scrap into new steel products, promoting sustainability while at the same time reducing production costs.
I recent caught up with Gustavo Werneck, CEO of Gerdau, about why sustainability and environmental issues are so important to Gerdau, the company’s labour practices, and also how being publicly traded shapes the company’s decision making.
Werneck has been CEO of Gerdau since January 2018 and a member of its board of directors since 2019. Previously, he was head of Gerdau Aços Brasil, the company's flagship business in Brazil. See below for our edited on-line discussion.
Christopher Marquis: Why are sustainability and environmental issues important to Gerdau?
Gustavo Werneck: Gerdau’s business is built around recycling and sustainability. Many of our mills use scrap-based electric arc furnace (EAF) technology, reducing the demand for natural resources and minimizing the release of greenhouse gases, in addition to reducing the amount of material discarded in landfills. Each year, we transform millions of tons of scrap into a variety of new steel products, promoting sustainable development.
Marquis: Steel production is notoriously energy intensive and conventional production still relies extensively on fossil fuels like coal/coke. I know Gerdau focuses a lot on recycled content. What are you doing to change the steel supply chain to minimize use of fossil fuel? How are you thinking about your production of steel from non-recycled raw materials?
Werneck: One example is our symbiotic relationship with the renewable energy sector, an important and growing market for the steel industry. Steel production is an energy-intensive process. The presence of more renewable energy sources on the grid makes steel products even cleaner. The environmental footprint of our operations will continue to improve as more renewable energy sources come online. Gerdau recently partnered with a leading solar energy developer to build one of the largest behind-the-meter (BTM) solar facilities in the U.S., adjacent to Gerdau’s Midlothian, Texas steel mill. The BTM system will provide power directly to the Midlothian steel mill, creating cost and energy consumption benefits. The Gerdau Solar project features Gerdau’s industry leading solar beam pilings, offsets the emissions of more than 13,000 average Texas households and will generate $19 million in tax revenue for the surrounding community over the next 30 years. In Brazil, we have signed a memorandum of cooperation with Shell Energy Brazil to develop solar farms in the country. Our Heze Solar Farm, in the south-eastern state of Minas Gerais, has an installed capacity of 260 MWp and from 2024 will supply part of the electricity requirements of our steelmaking facilities in the region.
Marquis: In the recycling industry, there is heavy use of scrap gathers, scrap dealers, etc. I'm curious how you obtain the scrap and ensure the labour in the scrap supply chain is being treated equitably.
Werneck: Gerdau maintains a Code of Ethics that reflects the ethical principles we use in our interactions with various stakeholders: suppliers, customers, competitors, shareholders, government officials, communities, and the environment. Our business partners are held accountable to these standards if they wish to conduct business with Gerdau.
Marquis: As a publicly traded company, how do you weigh need for short term financial performance, with the long term investment needed to be environmentally sustainable?
Werneck: I believe that a link exists between financial performance and being a responsible company. We are committed to providing our shareholders with strong, sustainable results. In addition to being the right thing to do for the communities where we work and live, numerous stakeholders – including employees, customers, investors, and governments – are calling on manufacturers to improve their environmental performance. This is a major driver behind Gerdau’s pursuit of certification as a B Corp, increasing our sustainability standards on the path to becoming a better company.
Marquis: Transforming the steel industry to be environmentally sustainable is more than one company can do. How are you working with industry partners to collectively solve environmental issues?
Werneck: We have numerous internal initiatives to improve our environmental performance. While our current greenhouse gas emissions are a fraction of the global average for the steel industry, Gerdau has established public goals to reduce our emissions in the near-term, with an ambition to make our operations carbon neutral by 2050. We are also working to improve the environmental performance of the steel supply chain. This includes the initiatives of Gerdau Next, a new business division that is diversifying Gerdau’s portfolio to complement the steel chain and our customers’ businesses, venturing into segments such as renewable energy, contecs, logistics, and graphene.