Climate change response is embedded throughout POSCO's decision-making system. Chaired by the CEO, the Carbon Neutrality Committee serves as the control tower for climate response, reviewing each department's progress on decarbonization measures and coordinating issues that arise during execution. The monthly company operating meeting monitors greenhouse gas emissions performance alongside the impact of climate change response on the company.

The Technology Strategy Office, reporting directly to the CEO, handles decarbonization strategy, technology development, and implementation checks through the five subcommittees under the Carbon Neutrality Committee. To shift effectively to a low-carbon steel production system, we operate the HyREX Project Team, which oversees the hydrogen reduction ironmaking business, and the Electric Arc Furnace Project Team under Gwangyang Works.

POSCO evaluates executives against KPIs alongside key performance outcomes, with executive compensation determined accordingly. Total carbon emissions are incorporated as a key target within our ESG evaluation criteria.

POSCO introduced an internal carbon pricing system in 2024 to manage climate-related risks and opportunities and prepare for the transition to a low-carbon business structure, and has since operated it in a systematic manner. The internal carbon price serves to heighten awareness of climate change among executives and employees and to assess the economic feasibility of investments and project development. The price is periodically updated to ensure timely responses to market changes.

POSCO has established a climate risk response system to minimize the financial impacts of physical and transition risks associated with climate change. Following the TCFD framework, we manage climate-related risks and opportunities through four key pillars: governance, strategy, risk management, and metrics and targets.

POSCO is advancing toward its decarbonization goals under the 2050 Decarbonization Roadmap, a comprehensive mid- to long-term strategy covering technology development, facility investment, raw material sourcing, and energy procurement.

In the short to medium term, we plan to utilize existing facilities to expand the use of carbon-reduced fuels and raw materials, while applying bridge technologies such as hydrogen injection into blast furnaces and low-HMR (Hot Metal Ratio) operations. We will also introduce a new Electric Arc Furnace (EAF) at Gwangyang Works in 2026 to respond to growing customer demand for low-carbon products.

In the long term, we aim to gradually adopt HyREX(Hydrogen Reduction Ironmaking), our proprietary hydrogen reduction ironmaking technology, supported by a stable hydrogen and power infrastructure.

Our carbon emissions target for 2025 was 74.9 million tons, while actual emissions totaled 69.8 million tons (Scope 1 and 2).

A converter is a large vessel-shaped facility that holds molten iron (hot metal) produced in a blast furnace, in which oxygen is blown in to remove impurities and produce molten steel refined to the desired composition. Assuming that the total carbon generated in producing one ton of molten steel is 100% on a Scope 1 and Scope 2 basis, approximately 80% arises during the production of hot metal. therefore, converter-based carbon reduction technology aims to reduce the amount of hot metal used in the converter and increase scrap usage. There are two main ways to reduce the amount of hot metal in the converter.

Molten Scrap Charging Technology

The first is scrap melting and charging technology, which pre-melts scrap for use in the converter to increase the scrap ratio. An Electric Arc Furnace(EAF) steelmaking relies primarily on recycled scrap as its input material, and therefore requires less coal and iron ore compared to blast furnace-based steelmaking. However, EAF steelmaking is limited in producing high-grade products depending on scrap composition and impurity levels; therefore, high-grade steel such as automotive sheet and shipbuilding heavy plate is still mainly produced by refining blast-furnace hot metal in a converter. We plan to develop and apply melted scrap charging technology, which mixes hot metal from the blast furnace with molten steel from the EAF. This technology will use the EAF at Gwangyang Works, which begins operation in 2026.

Oxygen Top & Bottom Blown (OTBB) Converter Technology

Technologies that enable the use of large amounts of scrap in place of hot metal, such as scrap melting and charging technology and top-bottom blowing converter technology, are collectively referred to low Hot Metal Ratio(HMR) operation technologies.

Hydrogen reduction ironmaking is a technology that reduces greenhouse gas emissions by replacing the coking coal used as a reducing agent and heat source in the ironmaking process with hydrogen.

Hydrogen-based ironmaking was designated a national strategic technology in January 2024, in recognition of its strategic importance to national security and its broad impact on the national economy. In May 2024, the Ministry of Science and ICT also selected the “development of iron-ore optimization technology for Korea’s hydrogen-based ironmaking (steel)” as a Global R&D Flagship Project.

POSCO is pursuing the Korean Hydrogen Reduction Ironmaking Demonstration Project in connection with national projects, targeting the completion of HyREX technology development by 2030. We plan to utilize HyREX as a core technology for achieving carbon neutrality in phases by 2050, on the premise of securing an economical and stable hydrogen and power infrastructure.

HyREX, our proprietary hydrogen-based ironmaking technology, is based on the fluidized reduction furnace technology of the already commercialized FINEX process. HyREX differs from the shaft furnace approach used by overseas steelmakers in both raw materials and equipment. In terms of raw materials, the shaft furnace uses iron ore processed into uniform pellets, whereas HyREX can directly use iron-ore fines, and is expected to offer advantages in raw material sourcing and production cost competitiveness. In terms of equipment, as a fluidized-bed reduction furnace method, HyREX has advantages over the shaft furnace in temperature control.

Since 2021, we began the permitting process to develop the site for  hydrogen-based ironmaking at Pohang Works, covering 1.35 million square meters. In March 2026 , we obtained approval from the Ministry of Land, Infrastructure and Transport. In July 2022, we signed a joint engineering agreement with Primetals, a company with FINEX facility design experience, and are jointly designing the main facilities of the HyREX demonstration plant. The demonstration plant under development at  Pohang Works, with an annual production capacity of 300,000 tons, is scheduled to break ground in April 2026, with completion targeted for 2028. Through phased trial operations through 2030, we plan to secure optimal operating conditions and enhance the technical maturity required for transition to commercial facilities. 

In 2023, our Technical Research Laboratories introduced a hydrogen fluidized reduction test furnace with a capacity of 50 kg per batch at the Pohang Technical Research Laboratories and verified hydrogen fluidized reduction technology. In April 2024, the Technical Research Laboratories completed an Electric Smelting Furnace (ESF) test facility with a capacity of one ton per hour at Pohang Works and achieved its first tapping. Through these efforts, POSCO established the foundation for developing the core technologies of the fluidized reduction furnace and the electric smelting furnace and for advancing HyREX technology.

We are also actively engaged in technology development partnerships to accelerate decarbonization across the global steel industry. Working with the World Steel Association and Swedish steelmaker SSAB, we led the International Hydrogen Ironmaking Forum (HyIS Forum) in 2021 and 2022, and from 2023 expanded it into the Breakthrough Technology Conference hosted by the World Steel Association. Separately, since 2023 we have organized and operated the POSCO-led HyREX R&D Partnership to build global consensus on HyREX technology. The HyREX R&D Partnership comprises 19 member companies, including global steelmakers, raw material suppliers, and energy companies, and held its first conference in November 2024. We plan to continue accelerating carbon reduction technology development in the steel industry through cooperation with global steelmakers.

POSCO has disclosed its Scope 3 emissions each year through its sustainability report and has conducted third-party verification of Scope 3 emissions under the ISO 14064-3¹⁾ verification standard.

POSCO is reducing the share of blast furnace operations to transition to a decarbonized system. We are preparing to shift our steelmaking process toward electric arc furnaces and hydrogen reduction ironmaking.

A decline in blast furnace operations also reduces the share of self-generated power that uses byproduct gas as an energy source. At the same time, total power consumption at the steelworks is expected to rise as energy-intensive facilities, such as fluidized reduction furnaces for hydrogen-based ironmaking, are introduced. We are therefore developing an energy transition strategy to meet customer demand for renewable energy-based products. In the short term, we are expanding our use of renewable energy by purchasing Green Premium certificates and Renewable Energy Certificates(RECs) under the K-RE100 scheme, thereby enabling the supply of steel produced with renewable energy in response to customer requirements.

In the long term, to secure the large volumes of carbon-free energy required for decarbonization, we are identifying options to expand investments in on-site renewable energy generation within our steelworks and to enter into long-term Power Purchase Agreements(PPAs) with renewable energy providers. Through these initiatives, we aim to build a stable carbon-free energy supply infrastructure to achieve carbon neutrality by 2050.

POSCO is working to reduce carbon emissions in its steel production by constructing an Electric Arc Furnace at Gwangyang Works as part of its transition away from the existing blast furnaces. This shift to Electric Arc Furnace process is expected to significantly reduce carbon emissions compared with the existing blast-furnace process. POSCO is also investing in demonstration plant to commercialize hydrogen-based reduction ironmaking(HyREX), and plans to pursue a phased decarbonization strategy across the steel industry―leveraging Electric Arc Furnaces for near-term emissions reductions and introducing hydrogen-based ironmaking in the mid to long term.

POSCO is developing low-carbon steel solutions to meet customers’ increasing decarbonization requirements. Scrap is an iron input that has already undergone reduction, meaning it does not require additional carbon-intensive reduction processes compared with iron-ore-based production. POSCO has developed a technology that increases the scrap ratio through a double scrap charging process in steelmaking, targeting approximately a 10%¹⁾ reduction in CO₂ emissions per ton of crude steel compared with existing blast furnaces production. In 2025, we began commercial sales of low-carbon steel using this double scrap charging technology, achieving sales of KRW 520 million.

We are also pursuing further emissions reductions through the construction of a large-scale Electric Arc Furnace, which is expected to deliver up to 75%²⁾ lower CO₂ emissions compared with existing blast furnaces operations. Aligned with our 2050 Decarbonization Roadmap, we plan to expand scrap-based steel production through the operation of the new Gwangyang Works Electric Arc Furnace starting in 2026.

POSCO has participated in the CDP (Carbon Disclosure Project) since 2003, transparently disclosing climate-related information. CDP requires companies to calculate and verify GHG emissions (Scope 1, 2, and 3), analyze climate-related risks and opportunities, and disclose reduction targets and performance results ― all of which POSCO fulfills. In 2025, we achieved a B rating in the Climate Change category.

POSCO conducts life cycle assessments (LCAs) of its major steel products, including hot-rolled steel, cold-rolled steel, heavy plate, and electrical steel. Through the identification of environmental impacts across the full product life cycle, POSCO obtains Korean Environmental Product Declaration (EPD) certification, with the related certification status made available on a dedicated website.

Energy Efficiency Management System

POSCO is shifting its energy management from a plant-level, cost-centered approach to a facility- and efficiency-centered one. We introduced a Factory Energy Management System (FEMS) at the hot-rolling plant and built a system that precisely analyzes energy-loss factors by linking facility-level energy measurement data with existing operating data. Based on the results of operating this energy-efficiency management system, we are expanding it to other plants in phases.
 

Energy Efficiency Improvement Activities

POSCO makes multifaceted efforts to enhance energy efficiency, including increasing power-generation efficiency within steel processes. To this end, we operate a dedicated energy-efficiency team that precisely diagnoses the energy efficiency of individual facilities. Building on these diagnostics, we pursue systematic activities integrating energy diagnostics, facility improvement, and investment planning ― including the introduction of high-efficiency pumps and inverter-controlled equipment, and the rationalization of aging, low-efficiency power generation facilities.

We also reuse by-product gases generated in steel processes ― such as blast furnace gas (BFG) and COG ― as fuel for processes and power plants. In particular, we have developed technology to predict by-product gas generation and utilization in real time, and continue to invest in facility improvements and R&D aimed at minimizing by-product gas venting and increasing recovery rates.

In 2025, we self-generated 88% of the electricity consumed at our steelworks through by-product gas recovery and waste heat reuse. We also hold an annual energy-saving idea contest at each worksite to develop improvement ideas. In 2025, outstanding ideas were discovered ― including optimization of reheating furnace operations and fuel switching for power facilities ― which we plan to further develop and implement in accordance with on-site conditions.
 

Energy Saving Target Management and Identification of Initiatives

POSCO continually identifies energy-saving tasks each year. Through its energy management system, we monitor energy use in real time and analyze usage patterns to find efficient ways to use energy, and we have made it a standard procedure to review rooftop-solar installation when investing in new plants with roof areas of 6,000 m² or more.
 

Completion of the POSCO Fulfillment Center

In April 2024, POSCO completed the POSCO Fulfillment Center in the Gwangyang National Industrial Complex. The center features a 1.4 MW rooftop solar power facility capable of generating enough electricity to power approximately 500 households for a year. As of 2025, this supplies 20% of the center's total operating power from renewable energy. 

We invested KRW 90 billion in the POSCO Fulfillment Center and broke ground in November 2022. The center spans 50,000 m²―roughly the size of seven soccer fields―and is equipped with 34,000 cells capable of storing materials ranging from small to large. Productivity is significantly enhanced through large-scale automated shelving that stores materials via crane, cube-type warehouses with robot-automated storage, and autonomous mobile robots. A Warehouse Management System(WMS) further optimizes efficiency across the entire workflow―from material storage to delivery history management―by leveraging data to forecast material demand and manage inventory.

S&P Global's climate-economics modeling methodology applies the SSP (Shared Socioeconomic Pathways) scenarios. The SSP scenarios are the new greenhouse-gas pathways used in the IPCC¹⁾'s 6th Assessment Report (AR6, Working GroupⅠ), and they consider socioeconomic factors such as future population change, economic development, and urbanization alongside the RCP scenarios.

POSCO derived the following results for Pohang Works, Gwangyang Works, PT.Krakatau POSCO (Indonesia), and POSCO YAMATO VINA (Vietnam). Under the SSP 5-8.5 scenario, the average annual projected loss rate from temperature extremes for the four worksites through 2040-2049 is expected to be between 1% and 5%, and for PT.Krakatau POSCO, drought is expected to cause an annual average loss rate of 1-5%. Projected loss rates from other risk factors were assessed at under 1%.

POSCO focuses on analyzing climate risks and opportunities and strengthening its adaptive capacity. In 2025, we pursued physical-risk response activities centered on the Pohang and Gwangyang works.

POSCO considers climate risks in depth from the earliest stages of developing its business and investment strategies. We focus on strengthening climate resilience across all areas of management, including workforce, infrastructure, and energy. In particular, during the review process for new investments, we carefully assess the vulnerability and exposure of relevant regions and existing facilities to climate-related events. Based on these assessments, we establish measures to address risks associated with process water shortages, power supply disruptions, raw material supply constraints, and potential impacts on sales.

To ensure business continuity in the event of disruptions, we maintain a Business Continuity Plan (BCP), which includes a structured process covering damage assessment, investigation, recovery planning, resource mobilization, alternative production arrangements, information sharing, recovery execution, process management, and settlement.

POSCO calculates its GHG emissions using the operational control approach. The worksites and facilities under POSCO's direct operational control are defined and managed as the organizational boundary for GHG quantification.

POSCO set all its domestic worksites (Pohang Works, Gwangyang Works, Seoul office, etc.) as the scope of environmental-performance disclosure, and the climate change response section and ESG Factbook were prepared to include domestic worksites and 10 overseas subsidiaries.

Under the 2050 Decarbonization Roadmap, POSCO aims to achieve carbon neutrality by 2050, with reductions of 10% by 2030 and 50% by 2040 against the base year.