Sims Limited (SGM) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Sims Limited Investor ESG Update. [Operator Instructions]. I would now like to hand the conference over to Mr. Alistair Field, Group Chief Executive Officer and Managing Director. Please go ahead.

Thank you, and good morning to everybody, and welcome to the Sims ESG briefing. As a kickoff, I would like to begin by acknowledging the traditional custodians of the land I'm on today, the Gadigal people of the Eora Nation. We recognize and respect their deep and continuing connection to land and waters, their long tradition of innovation and their continued stewardship of this place, and I pay my respects to the elders past, present and emerging. The development of Sims purpose, we kicked off in 2018. And this purpose that we set about is really a blueprint that guides our decision-making, governs our behaviors and frames our interactions with customers and partners across all of our jurisdictions and the communities that we operate in. This is very clearly a purpose-led global strategy that we set out in 2018 and shared that with the market in 2019. So when you have a look at Slide 5, we very clearly set that strategy and looked out to the year 2050, obviously, something that's still within our lifetimes and worked with a lot of thought leadership around economies and scientists and really futurists and academics. And at that process in step, we worked around 120 megatrends with the potential to shape the world and assess both their probability and potential impact on Sims operations. We naturally distilled that list down to about 40 megatrends at the end of that process. These trends we looked at created opportunities and threats for the broader environmental industry within which Sims operates. So a really key part of our focused strategy, integrated approach. When you bring that forward to where we are sitting today and you look at the tailwinds that sit behind Sims, we're in a very fortuitous position that we have set our strategy a number of years ago with the long-term outlook. These tailwinds that we see on Slide 5, when we look at increasing environmental challenges right across the globe, the push for higher quality in almost all the metals that we deal with, the demands for both copper and aluminum. And really, the actual demand for recycled material is growing, and that is not slowing down at all. When we had to look at all these megatrends that we covered both from a social megatrend, environmental, technological or political, these were key aspects to our integrated strategy that we needed to take forward. And when I have a look at our sustainability strategy that we have put in place and that we're going to share partly with you today, that framework of operating responsibly, closing the loop, partnering for change is really key to that framework and the actual discipline that we need to undertake to deliver these strategies that we've set about. The growth strategy that you can clearly see on Slide 5 as well is underway and has been for a number of years now. And we set those FY '25 targets in F '19 and shared that with you. We're on that journey, and it's a really important journey given the context of our purpose, but also the actual structure of this organization and the ability for us to deliver. And I think partly that journey that I wanted to share with you also on Slide 6 is where we look at the sustainability highlights that we've undertaken and are achieving already on that journey. The electricity and the renewable challenges and the reduction by 37% at this stage is really good start. Likewise, with a 21% carbon reduction that we've seen, all good starts for our journey. And I think part of this is the actual executive management team and the Board's commitment to delivering on this strategy and making sure that we continue to focus and learn on this journey as well is really important. So I think from my point of view, a really good start for Sims, very clearly, in a very strong framework. And I'd like to hand over now to Gretchen that can actually take you through the governance and the oversight of all of this.

Thank you, Alistair. It's a pleasure to speak with everyone today. I'll begin with governance. Our Chief Risk Compliance and Sustainability Officer, Elise Gautier, who's with us today, is a member of the executive leadership team and reports to Alistair, as I do as the General Council. The seniority of these roles ensure that sustainability has a voice and executive discussions and decisions. Sustainability is the foundation of our business. It's integrated with our strategy, our business goals and with our employee performance framework and our remuneration structures. The Board and its 5 committees are structured to have oversight of our sustainability strategy, the goals and its performance. As Alistair mentioned, our management team, our Board is committed to our sustainability strategy. We, as a management team, report to the Board and its committees at each meeting on our progress and the directors ensure that the company remains inflexible. At our Investor Day back in March, we stated that we had allocated environmental CapEx to improvements to some of our shredders. I'll now give you some more context for the purpose of that CapEx. Historically, it was not possible to measure volatile organic compounds, or VOCs, from shredders. But as technology has progressed and shredders are closed, VOCs could be directed to a stack and measured. It's now possible to determine the level of VOCs through testing. And with this ability to test, in some cases, we found that we need to change the type of air permit that we have. We have air permits in each of the states in which we operate. Now what are VOCs? Our shredder VOCs are believed to be mostly due to the presence of incidental levels of petroleum products and end-of-life vehicle in feed materials. In order to minimize VOCs, we take a number of steps prior to shredding materials, including removal of fluids, such as oil and fuel. And to be clear, shredding is a purely mechanical process. No chemicals are added, no heat is added in the metal shredding process. And also to be clear, Sims complies with applicable VOC thresholds at each of its facilities, in each of the states that it operates. And a finding from a recent study conducted for a competitor identified no health risk at -- while operating at these thresholds. Now we're actively working with the U.S. EPA and the individual state EPAs on the implementation of advanced VOC controls at a number of our shredders. We believe this is the right thing to do as it will lift the standards of our industry by deterring unsustainable participants from entering the market and participants with poor environmental practices from remaining in the market. Now how do we determine whether to install advanced VOC controls as several factors are considered, including the shredder size, the amount of material shredded throughput, the type of material and the location of the shredder. Because of the size of the project, the significant design, engineering, permitting installation process we're going through, and the cost, we need to take a cautious stage-gate approach with one shredder at a time. Based on the work to date, Sims will install VOC controls at its shredders in Chicago, Illinois, Jersey City, New Jersey and Mooresville, Pennsylvania. These shredders are our priority based on their size or the amount of material that they handle and their location. And as a first step, we're also planning to test the VOCs at our shredder in Redwood City, California. And the slide sets out the timing for that -- for the process. Now a case study. We've included a case study for your review that is illustrative of the regulatory framework in the U.S. We have a federal EPA. We have state EPAs. And then we also have some local authorities. We are a well-regulated industry. You may have seen press coverage regarding the denial of a city of Chicago operating permit for a competitor's facility in Chicago. In that case, our competitor was moving from a wealthy suburb to a disadvantaged predominantly minority neighborhood in Chicago. The Mayor of Chicago denied the competitor an operating permit for a new facility. In contrast, we've operated in the [indiscernible] neighborhood of Chicago for over 30 years. And this slide reviews our successful application process for our construction permit to build our advanced VOC controls. The history. In 2019, following the protocol approved by the U.S. Environmental Protection Agency, Sims performed a VOC test and agreed with the USEPA the appropriate throughputs or the operating restrictions for our shredder. Sims was prepared to use this as we went through the permit renewal process with the Illinois state for our air permit. However, Illinois asked that we retest. And again this technology is very new, the testing is new, the advanced controls are new, and different regulators have different views on the appropriate testing protocols. We engaged with the State of Illinois. And after discussion and discussion internally, we decided in light of our corporate purpose and our community's feedback, that we would just go straight to the installation of the advanced VOC controls. We were far along in our process of design and engineering. We knew that we planned to roll out these controls at some of our shredders, including Chicago, and we decided it made sense to start with Chicago rather than spin time testing and debating. The discussions with the Illinois Attorney General and with the Illinois EPA have been constructive and a necessary step to the approval of our construction permit. And we're very pleased that Illinois EPA granted our construction permit a couple of weeks ago. Separately, we're also renewing our city operating permit. Again, we're well regulated. In Chicago, we have both a city operating permit and a state air permit. The city permit is a 3-year permit, we renew it on a 3-year cycle, and we are currently in the renewal phase. Our renewals generally do not generate much public attention. But with our competitors attempted relocation and the press with that, there has been a fair amount of press attention, which you may have picked up. But I think to conclude, just on that case study, we've been in the community for 30 years. We are focused on -- and continuing to engage with the local community where we've operated and we've built our relationships, and that's really our priority. Now I turn it over to Elise.

Thank you, Gretchen. Good morning, everyone. It is a pleasure to be here today to talk to you about progress we have made in our ESG strategy. We have a lot to celebrate this year. We released our first climate report, which is going to be submitted for a nonbinding vote at the upcoming AGM. And we let some [Technical Difficulty] ahead of time. Today, we will focus on the good that we do, which is innate to our business model. Additionally, we will cover our sustainability performance in fiscal year 2022. In the next set of slides, I will explain in more detail Sims' leading role in the energy transition and decarbonization of our customers' supply chains. Sims has a diverse range of businesses. Sims Metal is at the core of the group. Sims Municipal Recycling, Sims Life Cycle Services, Sims Resource Renewal and Sims Energy in partnership with LMS Energy are adjacent businesses that provide the opportunity of diversification and access to growing areas with a strong alignment with our purpose and where we have the right to win. Each individual business assists our customers in lowering their respective carbon footprint. This role is increasingly important as governments and corporations accelerate the pathway to net zero. Sims Metal, for example, provides high-quality recycled metal in place of virgin materials, enabling the avoidance of emissions, including those associated with the extraction, refining and production. Sims Life Cycle Services helps its customers reduce their emissions and close their loops by providing circular solutions for technology, including a wide variety of IT asset disposition and electronics recycling services. Sims Municipal Recycling provides recycling services for recovering metal, glass, plastic and paper from curbside collateral programs. Sims Resource Renewal aims to transform waste into valuable products. Finally, through Sims Energy, we convert landfill gas to renewable energy and contribute significantly to Australia's carbon emission reductions. In fiscal year '22, our entire portfolio of businesses generated 98% to 100% green revenue. In other words, in fiscal year '22, we not only created value to our shareholders by increasing our revenues by 56.6%, but we also enhanced the environment. On the next slide, research from the Ellen Macarthur Foundation shows that building a circular economy is key if we are serious about making real progress towards decarbonization. Moving to renewable energy, we'll only address 55% of the global greenhouse emissions. The remaining 45% will have to come from the circular economy. The recycling of everyday goods, such as cars, fridges and washing machines is a key decarbonization lever. Steel production accounts for 7% of global emissions and 28% of industrial emissions. We know that reducing emissions from the steel industry is essential to meet global emission targets. We also know that the decarbonization of the steel industry starts with scrap. So using those scrap and improving the quality of scrap is the first logical step to reducing emissions. The impact that scrap has on steel production is quite significant. Steel produced via an electric arc furnace, or EAS, which could be charged with up to 100% scrap, produces 75% fewer emissions in its production cycle when compared to a blast furnace production. The decarbonization of the steel industry is usually challenging and will require important investment in emerging technologies over the coming decades. Our positive impact is meaningful today. 8.3 million tonnes of ferrous metal recycled with Sims Metal last year had the potential to avoid 13.4 million tonnes of CO2 equivalent. To put it into perspective, this is equivalent to the annual emissions of some of Australia's largest coal-fired power plants. On the next slide, as Alistair mentioned before, nonferrous metal is a core pillar of our growth strategy. Copper and aluminum are critical for the energy transition. The increase of electrical vehicles, power grids, solar panels and wind turbines is expected to continue driving demand and prices for both metals. Recycling aluminum, for example, saves 97% of greenhouse gas emissions produced in the primary production process. And copper requires 85% less energy than primary production. Moving to Slide 18, here we cover the positive impact of our adjacent businesses. In fiscal year '22, the total avoided emissions impact of our SLS operations was 439-kilo tonnes of CO2 event. That's equivalent to taking more than 90,000 cars off the road for 1 year. Sims Resource Renewal, through the use of plasma gasification technology, aims to divert more than 1 million tonnes of auto shredder residue from going to landfill and transforming it into useful products for society. Turning now to the sustainability strategy and fiscal year '22 performance. Since sustainability strategy is designed to drive a positive impact on society, the environment and for our stakeholders, including our shareholders and employees. As Alistair explained at the beginning, our growth strategy is embedded in our sustainability strategy. Our growth targets are blended with our sustainability targets and they are key KPIs in the remuneration structure. This strong alignment differentiates us and is incredibly important because it sets us up for success over the long term. It also makes our decision-making process easier as our ESG impact and financial returns are equally considered. Our [ first word ], operate responsibly. It's about how we operate. It gives us a clear framework to engage with our customers and employees and ensures that our network of suppliers uphold our values. The objectives of the Close the Loop pillar is to reduce the impact on the environment and keep resources in use as long as possible by reducing waste. And finally, the partner for change pillar seeks to amplify our impact and to build trusted relationships in the communities. You may have seen this diagram before on Slide 21. It lists the 9 ambitions and the 27 targets supporting our sustainability pillars. I know it's quite a busy slide but it's very clear and detailed KPIs. So I will let you go through it and you're on time by referring to our sustainability report. The targets presented here were set in fiscal year '20 with the exception of some climate targets. In a pivotal year for climate action, we accelerated our carbon-neutrality target and created or modified some of the other climate-related targets to ensure that we continue to challenge ourselves to do more. This year we have achieved great progress across all our pillars, in particular, in the operate responsibly pillar, where we met some targets ahead of time. We reached our goal of maintaining gender balanced Board of Directors as well as the goal of increasing our women representation in senior management roles. Representation, which is now at 26%. All our employees completed the training on human rights, modern delivery and labor rights. And all our employees as well as agents what trend on the code of conduct and anti-bribery policies. As a business, we have a responsibility to ensure that we operate in an ethical manner. To that end, we are very pleased with the early achievement of these goals. The progress achieved on other goals brings us closer to our ambitions. We have decreased our operational emissions by 21% compared to fiscal year '20, which is our baseline year. We have also measured Scope 3 emissions for the first time, which I will explore later. 37% of electricity across all our operations was originated from renewable resources. We achieved our best year on record for safety with the loss recordable injury frequency rate ever of 1.1 per 200,000 hours. And experienced the lowest number of lost time injuries and critical risk incidents. Critical risks, which often lead to fatality or serious injuries decreased by 88% in fiscal year '22 compared to fiscal year '19. And I will explain in a minute the drivers of this progress. We have also reduced the gender pay gap from 9.4% in fiscal year 2021 to 8.2% in fiscal year '22. It's rolled out elevated human rights due diligence for new high-risk suppliers across Sims Metals and our global trade entities. New suppliers from high-risk countries or industries are subject to additional due diligence steps that include completing a human right questionnaire and screening for sanctions and adverse media. As you may know, we buy most of our materials from commercial accounts and municipalities. And we have a very experienced commercial team that is trained to detect anomalies and suspicious behaviors when the materials are presented in our yards. While risks exist across our supply chain, we believe we are managing them effectively. Our performance is, of course, detailed in our sustainability reporting suite, which is a new format this year with a sustainability report but also a data book and a climate report. Also, this year, we have expanded the external assurance over our matrix and in addition to assurance over our greenhouse gas emissions, we have had data relating to water, waste and safety performance independently assured. Moving on now to our progress on the Operate Responsibly pillar. On Slide 24, as we said previously, this year, we have achieved our best year on record in safety. It was primarily driven by the ongoing successful implementation of our critical risk management program. I'll provide more information on this shortly. Historically, women have been underrepresented in the scrap industry. We want to change this. Achieving gender diversity is a strategic imperative for Sims. There are studies that show that having a more gender-balanced workforce isn't just good for women, it's good for business. In industries where women are underrepresented, it is key to create an environment where women can excel. So before we set our strategy to attract and retain female workers, we spent time through external research and with internal focus groups to better understand what was missing in our recruitment practices and what changes we had to make in our workplace culture, particularly in our operations in order to attract and retain female workers. Some of the initiatives implemented in fiscal year '22 included the launch of the program, Women Leading at Sims, which aims to support female leaders. We have just finished the first round, and we are pleased to see that 33% of participants were promoted during or after the program. We are running it again this year. The second round started in Q1 of fiscal year '23. Within the past 12 months, the percentage of women who were hired for and promoted to senior leadership positions was significantly higher than previously. In fact, it was double the percentage of fiscal year '21. One of our biggest challenges is to increase women participation in our operations. To that end, we have modified the recruitment process for senior leadership roles and also formed partnerships with organizations like Women In Trucking in the U.S. to reach out to diverse talent populations more effectively. We are committed to eliminate the gender pay gap across the organization. This year, we adopted a global methodology for calculating the gender pay gap to unify what had previously been a disparate set of country level metrics, driven by local regulatory requirements. Importantly, we have implemented universal job grading and ratified our salary structure to avoid entrenching bias in our system. At the end of fiscal year '22, we reported a pay gap of 8.2%. And I'm really pleased to say that at the end of Q1 of fiscal year '23 and after our annual pay review cycle, we have reduced the pay gap to 5%. Of course, we have more work to do, but the progress made shows our commitment and is the result of changes made during the year, which has enabled us to nearly half the gap we had in fiscal year '21. At the Board level, with the appointment of Vicky Binns as Nonexecutive Director, 4 of 7 nonexecutive Board members were women in fiscal year '22. Sims supports the continuous learning and personal development of each employee and continues to add more learning opportunities and programs to increase their scale levels and they are also available in 6 languages to ensure accessibility for our diverse teams. I have highlighted that 67,000 courses were completed last year with Sims University, up from [ 14,000 ] in 2019 when the tool was first launched. Finally, to ensure commitment and accountability of the management team and throughout other layers of the organization, we linked performance metrics and remuneration incentives to our sustainability strategy and targets I showed earlier. For instance, the fiscal year '22 short-term incentive was linked to climate, safety and gender diversity and other culture-related KPIs. We all know that there is competition for talented people in the workforce, including millennials and Gen Z employees. One thing we know about this cohort is that they want to make a difference and are attracted to organizations whose purpose and work aligns with their values. At Sims, our purpose is what we do every day, and we see that young people are really responding to our culture of sustainable practices as well as the technical challenge we offer, as you can see on Slide 25. This is feedback from our cadet program, whose purpose is to attract millennials and Gen Z cohorts at the very beginning of their careers. With regards to safety now, we continue to make significant progress in decreasing the number of critical incidents and injuries taking place in our sites. In fiscal year '22, we have achieved our lowest recordable and lost time injury frequency rates on record, further improving on last year's previous record low. We continue to execute a multiyear focus on critical risks. These were validated through a global taxonomy study of 10 years' worth of incidents that had taken place in our organization and also based on employee feedback. The focus on critical risk grows to the simplification of our standards, development of training but also, and very importantly, the monthly evaluation and enhancement of the critical controls that should be put in place to prevent a fatality or serious injury. This review is done globally via an app, which allows best practices to be shared and controls standardized. In fiscal year '22, we piloted state-of-the-art technologies in our management of safety. For example, we partnered with [ PreVenture ] an Australian-based company that helps identify body stresses as employees perform their work tasks via the use of body sensors. The information gathered is helping us redesign some of our work processes, rethink some of the tools used for certain tasks and create rotation schedules. This will reduce economic risks in our organization, especially in our Sims Lifecycle Services division. In our Metal business, we are piloting a machine learning technology solution to provide early warning of fire by teaching the software to recognize abnormal heat signatures in pilot of metals, while the technology disregards heat signatures for mobile equipment operating nearby. This allows us to keep thresholds at their lowest, so we can respond faster than ever before. We are also looking at technology to help detect potentially dangerous non-conforming materials such as batteries and gas cylinders in inbound loads before they become hazard. We will continue to look at technology to help us manage safety on our sites. Moving now to the Close the Loop pillar where we set our climate targets. In line with our purpose, we acknowledge that climate change is a critical threat to the preservation of our planet and greenhouse gas emissions are a form of waste. As such, in fiscal year '22, we announced new targets for climate action, which are more ambitious than those previously released. I would like to stress that our targets were developed following the science-based target initiative methodology to align with the goals of the Paris Agreement. Despite our small carbon footprint, we are leading the way. In fiscal year '22, we published our inaugural stand-alone climate report, which will be presented to shareholders for an advisory vote at the upcoming AGM. We have been really pleased to see the strong progress we have made against our targets, and I will talk to our approach now. As I said, we have had strong performance in fiscal year '22, decreasing emissions by 21% from our baseline year. This is quite an achievement, particularly if we consider that our metal sales volume increased by [ 17.5% ] over the same period. The main sources of our operational emissions in fiscal year '22 were electricity, accounting for 41% of our emissions; and diesel, for 53%. The core metal business generated the bulk of the group footprint with North America metal contribution at 43%, ANZ metal at 39%, and U.K. metal at 10%. The primary driver of this decrease included the execution of new electricity supply agreements using 100% renewable electricity. In fiscal year '22, we moved new sites to renewable electricity, such as Claremont in New Jersey, which is our largest electricity consumer. Kwinana in West Australia. There were also 10 sites in New Zealand and 5 SLS circular centers across Europe and Asia. This adds to a number of other sites, including all U.K. sites, which are now using 100% renewable electricity. Additionally, we also reduced our diesel consumption as we rolled out a shredder optimization software across all Australia and New Zealand shredders that drive energy efficiencies, and we continue to electrify our equipment across our sites. The results gained from the electrification of equipment are not just lower diesel consumption, but also lower maintenance costs. In our reporting this year, we have gone into [Technical Difficulty] decarbonization pathway. So I will touch on a few key points today. Firstly, a tool we have introduced to help us drive emission reduction throughout our operations is the introduction of a shadow cover price, which we have set at $100 per tonne of CO2 equivalent by 2030. And this is being used as a lens to guide our decision-making. As a leader, we also believe it is important to advocate for an orderly transition and of course, for the role of the circular economy in driving decarbonization solutions. This year, we've assessed our industry associations to ensure their lobbying positions were consistent with our policy and we were pleased that there were no misalignments identified. You can find the full disclosure on our website. Regarding fossil fuel, we are exploring many different solutions and we are engaging closely with OEMs, particularly for mobile plant. In this, we are also including a non-operated joint ventures, so we can leverage the scale of the group and encourage decarbonization in our value chain. Given the currently available commercial technologies for mobile plant and road vehicles, in particular, and of course, the life cycles of our assets, we will not have completed the transition by 2030 or by 2025 for SLS. And so there will be a role for carbon offsets. In our climate report, we have outlined our principles for sourcing offsets, including a commitment to disclose the amount of offsets we use. Of course, we are absolutely prioritizing genuine reductions, which is what our purpose called us to do, and we are holding ourselves accountable to that. At Sims, we believe tackling the climate change challenge requires the cooperation of all supply chain participants. In fiscal year '22, we completed measurement of our Scope 3 emissions for the first time, and this is also covered in our scope of external assurance. Our Scope 3 emissions amount to a total of 3.9 million tonnes of CO2 equivalent. The major sources are from the steel and [indiscernible] sectors relating to the processing and freight of Sims Metals' sold products. The contribution from our joint ventures, including SA Recycling and LMS Energy, was 1%. We have also estimated potential avoided emissions from the use of our products compared to making the same amount of steel from raw materials. And you can see here on Slide 31, that in fiscal year '21, the avoided emissions potential was around 13.4 million tonnes, which is more than 3.4x our combined Scope 1, 2 and 3 footprint, and is a powerful example of how the circular economy is critical to decarbonization. As I mentioned earlier, one of our sustainability pillars is to partner for change. And this is an approach that is essential for addressing scope 3 as these are emissions that are outside of Sims' operational control. This is an action for Sims that is just beginning this year. Our ability to make significant reductions to Scope 3 emissions will depend on the decarbonization of the steel and maritime industries in line with the Paris Agreement, and these are both very challenging sectors. When we talk about Scope 3, I do want to again highlight that an increase in our Scope 3 emissions where it comes from use of our products, does represent a much greater positive impact elsewhere in the value chain compared to making metal from raw materials or indeed a cloud unit in the case of SLS. As I outlined, more than 75% of Sims Scope 3 inventory comes from the processing of the scrap product we sell, particularly steel. Science-based style initiative and the steel sector are working to develop science-based target setting methodologies, tools and guidance for steel companies. This is, as I'm sure you all can appreciate, a very complex and costly transition for the industry to make. In fact, an investor group in a climate change report highlighted that this sector was unlikely to reach net zero by 2050, also noting the key role that scrap plays in the decarbonization of the sector as a whole. So we will look to the industry pathway as released by SBTi for guidance that is both credible and ambitious as to how it will drive our own ambitions. Third-party freight, particularly marine freight is the other major contributor to Scope 3 emission for Sims, and again, not likely to achieve net zero by 2050. The International Maritime Organization has set goals to reduce average GHG emissions intensity across international shipping by at least 40% by 2030 and 70% by 2050. With regard to freight, we will continue to monitor key developments of transport sector guidance. We will also investigate ways we can support transport decarbonization particularly for owner drivers in our supply chain as EV trucks start to become more accessible. As I said, we are at the start of our journey on this. And so this year, we are engaging with customers and suppliers to understand their plans and to be able to improve our data sources, as well as looking to SBTi and others looking at this challenge. These are outlined in some depth in our climate report, which I hope supports the considered and credible approach we are taking with Scope 3. And as we said, in our fiscal year '23 climate report, we will provide an update on our progress in this space. Turning to our last strategic pillar, partner for change. A key pillar of Sims' sustainability strategy is to partner for change. We know that our purpose and goals cannot be achieved alone. And they require respectful, past, current and reciprocal partnerships with the communities where we operate. In fiscal year '22, we have laid some solid foundations to support greater engagement with our local communities. And in fiscal year '23, we have already begun to roll out more of this work, which will be integrated into a group social license framework. We have already piloted this in Australia. And importantly, we have taken an approach where we are integrating this with our measurement, risk frameworks and skills development so that this is done in a way that is complete and consistent and delivered for Sims and for our communities. In fiscal year '22, we continued to strengthen our sustainability credentials. We ranked 11th on the Corporate Knights Global 100 list of Most Sustainable Companies, and #6 in the Sustainability Magazine Top 100 Companies in Sustainability. We were also included in the Clean 200 list of publicly traded companies that are leading the way in building a clean economic future. As I have covered, we have made progress, and we are very proud of that, delivering extremely strong performance. Of course, there is more to do, and this is a landscape which is continuously evolving. So on this slide, I have highlighted some key projects we have started or will be undertaking over fiscal year '23. Many of them I have mentioned already, because we certainly are not standing still. There are some very significant projects here. So looking at our responsible operations, for example, we are expanding our safety critical risk focus, and we will have an important touch point with our people when we conduct the safety culture survey again. We will also be doing our employee engagement survey this year, and keeping ourselves accountable with strong links to remuneration. Relating to closing our own loops in 2023, we will continue to progress against the decarbonization pathway I have outlined today, including articulating further Scope 3 ambitions. In 2023, we also expect to see a central source renewal demonstration plant in Rocklea online, which is a development we are all looking forward to. And there are significant programs already underway to mature our framework for social license. We will make inroads into exciting and promising areas. In the Metals business, we will continue trialing our technology to improve the quality of our shredded material by reducing tramp elements. Other opportunities currently being assessed include working with automotive manufacturers to assist with their sustainability initiatives. There is a lot of enthusiasm over these projects, which are very aligned to our strategic business outcomes, our values and, of course, our purpose to create a world without waste to preserve our planet. Now just before I hand it back, I wanted to mention again that our fiscal year '22 sustainability reporting suite is available on our website, and we do welcome your comments. On this note, I will hand it to my colleague, Gretchen, to answer some questions about [indiscernible].

Thank you, Elise. In advance of the call, we received 4 questions. And I was going to just address those first, and then we can open it up for other questions. The first 2 questions that we received were regarding orders from the California Department of Toxic Substances Control, the DTSC, regarding 2 facilities in California. So the first question involves an order we received at our Richmond facility. And the questioner was asking about the substance of the order. So this past May, the DTSC served our Richmond facility with an order to engage in an investigation of the facility based on what we believe is an incorrect assertion that the facility, our facility, is operating as a hazardous waste site. The order was not issued to determine if there was contamination or if that contamination was spreading beyond Richmond's borders. The DTSC is attempting in California to expand their authority to regulate the metal shredding industry. So we were not alone in receiving this order. Other metal recycling facilities received the same. And as I mentioned earlier in my presentation, shredding is a purely mechanical process. No chemicals are added. We do support the regulation of our industry. It brings up -- we believe it brings up the performance of all. And we are working with the DTSC to try to find the appropriate basis for regulation for their regulation of our industry, something other than the existing hazardous waste regulations where our operations really don't fit. This order is suspended at this time until there's a court hearing on its validity. And that is the same for the other shredders who've received the similar orders. Those orders are all suspended until a court considers their jurisdiction. In March -- moving to the next question, in March at our facility in Redwood City, California, we received an order from the DTSC in connection with a fire. We had had a fire at our end-of-life vehicle [ deputation ] station. As I mentioned earlier, we take a number of steps prior to shredding where we remove oils, gas, anything from the cars. There was a fire at the station, the DTSC issued us a notice of violation for the fire, and we've responded explaining the circumstances. They did not issue an enforcement order to investigate to clean up. That was one of the questions. And prior to receiving their notice of violation, the area -- we had fully cleaned the area, and it had been documented by an environmental consultant per our protocols. The next 2 questions that we received, both deal [Technical Difficulty]. One, and the VOC controls that we're planning to implement. One is with respect to our Chicago Paulina facility, and they ask -- the question is asked that we were sued for failing to show that we have reduced emissions at Paulina. And I think there has been some confusion in the press coverage of the way the process works in the U.S. So as I have said before, rather than retest, we had proposed the installation of the VOC controls. The Illinois EPA agreed -- and in order to receive the court approval of the approach, we have to -- the Illinois Attorney General needs to file a complaint and then we simultaneously file with the Attorney General a settlement agreement, which states that kind of our process for implementing the controls, the time [Technical Difficulty], what it will look like. So the complaint was not for failing to show that we reduced emissions, but rather it was for approving the settlement agreement that we filed jointly with the AG. And then as I mentioned before, the Illinois EPA has now authorized the construction permit. The final question we were asked is with respect to Rhode Island, and asked whether we were fined for operating without proper pollution safeguards. And in this matter, we settled in April of 2020 with the State of Rhode Island. But this was really compliance, a compliance matter. And as I mentioned before, as we've been able to test and as other -- the same with other competitors or other operators in our industry. As we've been able to test, we've had discussions with each of the states, whether we have the correct permit. In Rhode Island, the state [Technical Difficulty] we did not met. This is a case where we disagreed, but we agreed to reach resolution on it. We agreed to file a permit for -- permit application for the appropriate permit to potentially install VOC controls. And again, it's the same type of arrangement. When you reach agreement, that agreement is filed with the court at the same time as the complaint. But that was really a compliance matter whether we have the right operating permit. Those are our responses to the 4 questions we received. And so we'll now open it up for any follow-up or other questions.

[Operator Instructions] Your first question comes from Scott Ryall from Rimor Equity Research.

I just have 2. One, I'll get to -- late in the presentation, which I thought is really helpful. But I just wanted to clarify maybe question just given you were talking just now. Your part of the presentation being Group Council being more compliance driven rather than the GHG driven. Is that a fair characterization?

Scott, it was more compliance driven, did you say? I couldn't hear the end of it. It dropped off.

Yes. Sorry, is it more compliance driven as opposed to ESG? I just -- I've never been on an ESG call where Group Council has gone on before.

So I think, Scott, the reason that we did include some compliance, when we wanted to highlight our governance framework and just how significant this -- our sustainability strategy is, the sense that it is important at the executive level [Audio Gap] level. This is really the foundation. Now the compliance matters, why we covered that? I think we've had a number of questions. And so we wanted to explain. I know the U.S. has a different regulatory environment in a different -- often a different way of handling matters. So we wanted to provide some transparency. So that was our theory in covering it.

Okay. Great. So I'll move to Elise then. Very helpful presentation, as I said, and congratulations for being transparent with your 2030 carbon price. That -- you're certainly a minority company. My question is just on decarbonization because there's a number of other metrics, obviously, there that I'll go through at some other points. And to do with, I guess, your diesel usage in Scope 1, but then also your transportation Scope 3, which you talked about a little bit. Can I just ask that in terms of the Scope 3 transport emissions, how much of it is shipping versus road travel land-based transportation, which I guess could be road on rail?

Thank you, Scott, for that question. So shipping represents 85% of that Scope 3 in the transport -- in transportation that we've disclosed.

Okay. And this is the big one?

Yes. It is one of our bigger one with the steel manufacturing and processing.