Nordic materials industry: Enabling the green transition while managing global competition

The Nordic materials sector enjoys access to clean electricity, extensive experience with recycling and material efficiency as well as innovation in fossil-free production. However, the sector also faces high energy costs and the CAPEX burden from investing in fossil-free and recycling assets and processes. Moreover, strong global competition from regions with lower costs and weaker climate ambitions, combined with dependence on political framework conditions, raises the risk of production capacity shifting outside Europe. Such a shift could have implications for regional job markets and tax revenues.

In response to the growing emphasis on environmental, social and governance (ESG) criteria, Nordic materials companies are intensifying efforts to address regulation, cut emissions, improve circularity and mitigate physical climate risks.

Regulatory changes driving sustainability action

The Nordic materials sector is facing a wave of regulations and policies that will reshape costs, risks, competitiveness and transparency:

• The EU Emissions Trading System (ETS) and EU Innovation Fund impact processes and asset investments by increasing pressure on energy-intensive processes and rewarding low-carbon producers. 
   
• The EU Circular Economy Action Plan, EU Ecodesign for Sustainable Products Regulation (ESPR), EU Water Framework Directive and EU Waste Framework Directive accelerate the shift towards closed-loop systems and improved material recovery rates by tightening requirements on durability, recyclability and material recovery.
   
• The Corporate Sustainability Reporting Directive (CSRD), Corporate Sustainability Due Diligence Directive (CSDDD) and EU Classification, Labelling and Packaging Regulation (CLP)enhance sustainability performance by raising expectations for disclosure, supply chain oversight and chemicals safety.

These regulatory changes are some of the key drivers supporting sustainability efforts in the Nordic materials sector.

Technological development opportunities

Emerging technologies are paving the way for sector decarbonisation and securing its role in the EU’s green transition. Key areas include:

Electrification of processes

Large-scale electrification of heat and production processes, such as electric smelters powered by renewable energy, can significantly reduce emissions, improve energy efficiency and enhance value creation. This transition requires long-term commitments and investments in production infrastructure, machinery and electricity supplies. 

Low-carbon and bio-based materials

Investments in research and development (R&D), new assets and strategic partnerships are essential for developing lower-carbon alternatives. These include fossil-free steel, bio-based composites, carbon capture and storage (CCS) and advanced recycling technologies, which can provide competitive advantages and new revenue streams.

Enhanced circularity

Building circular business models and closed-loop ecosystems can lower costs, ensure raw material security and strengthen compliance with tightening EU regulations. 

Resilience: Adapting to physical climate and supply chain risks

The materials sector faces significant operational risks due to physical climate impacts. Extreme winds can damage electricity infrastructure critical to energy-intensive, low-carbon processing operations. Drought conditions can impede water-dependent material processing, while flooding can damage production and processing equipment and disrupt transportation.

Supply chain challenges are also prevalent. Virgin material restrictions and limited availability of feedstock can constrain production capacities and increase operational costs. China’s substantial overcapacity with newer, more efficient assets enables highly competitive pricing and large supply capability. This dynamic has led to a market situation characterised by trade risks, supply concentration towards China, and heightened geopolitical concerns.

However, these challenges also present opportunities for innovation, spurring the development of new materials that meet evolving market demands and ensure long-term supplies.

Forward-looking companies are mitigating these risks by implementing advanced monitoring systems to track supply flows and production volumes, and demonstrate circularity progress. They are also assessing trade dependencies to ensure supply chain resilience, while maintaining regulatory compliance across jurisdictions and seizing business opportunities.

At Nordea, we work with companies across the Nordics to finance transitions, from supporting large-scale electrification projects to enabling circular-economy partnerships. We look forward to supporting the sector’s next chapter by offering a range of solutions and products to our large    as well as small- and medium-sized   corporate customers.