Gerdau is shaping a more collaborative, inclusive and sustainable future

Gerdau is a multinational steel manufacturer that focuses on recycling scrap metal. Each year, the company transforms millions of tons of scrap metal into new steel products, promoting sustainability while reducing production costs.

I recently sat down with Gustavo Werneck, CEO of Gerdau, about why sustainability and environmental issues are so important to Gerdau, about the company's working practices, and how being listed on the stock exchange shapes the decision-making of the company.

Werneck has been CEO of Gerdau since January 2018 and a member of its board of directors since 2019. Previously, he led Gerdau Aços Brasil, the company's flagship business in Brazil. See below for our edited online discussion.

Christopher Marquis: Why are sustainability and environmental issues important to Gerdau?

Gustavo Werneck: Gerdau's business is based on recycling and sustainability. Many of our plants use scrap-based electric arc furnace (EAF) technology, which reduces the demand on natural resources and minimizes greenhouse gas emissions, in addition to reducing the amount of material thrown into landfills. Every year, we transform millions of tons of scrap metal into a variety of new steel products, promoting sustainable development.

Marquis: Steel production is notoriously energy intensive and conventional production still relies heavily 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 the use of fossil fuels? How do you envision your steel production 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 installations in the United States, adjacent to the Gerdau Steel Mill in Midlothian, Texas. . The BTM system will supply electricity directly to the Midlothian Steelworks, creating cost and energy consumption advantages. The Gerdau Solar Project includes Gerdau's state-of-the-art solar beam piles, offsets emissions for 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 cooperation protocol with Shell Energy Brazil to develop solar farms in the country. Our Heze solar park, in the southeastern state of Minas Gerais, has an installed capacity of 260 MWp and will supply part of the electricity needs of our steel installations in the region from 2024.

Marquis: In the recycling industry, there is a heavy use of scrap collections, scrap dealers, etc. I'm curious how you get the scrap and make sure the scrap supply chain labor is treated fairly.

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 do business with Gerdau.

Marquis: As a publicly traded company, how do you weigh the need for short-term financial performance, with the long-term investment needed to be environmentally sustainable?

Werneck: I think there is a connection between financial performance and being a responsible company. We are committed to providing our shareholders with strong and sustainable results. In addition to being the right thing to do for the communities where we work and live, many stakeholders – including employees, customers, investors and governments – are asking manufacturers to improve their environmental performance. This is a major driver behind Gerdau's pursuit of certification as a B Corp, raising our sustainability standards on the path to becoming a better company.

Marquis: Transforming the steel industry to be environmentally friendly is more than one company can do. How do you work with the industry...