Rio Tinto and BHP are being warned to prepare for demands to assess the greenhouse gas emissions they pass on to steel customers through Australian iron ore and coal.
A report released by the independent Institute for Energy Economics and Financial Analysis (IEEFA) on Thursday found neither company had a measurable target for what are called Scope 3 emissions.
Existing emissions reduction targets under climate frameworks cover the companies' operations when extracting iron ore and coal, which are known as Scope 1 and 2 emissions.
But combining the raw materials in blast furnaces to make steel means the indirect emissions far exceed those operational tallies.
IEEFA examined the emissions reduction ambitions of five diversified mining giants - Rio Tinto, BHP, Fortescue Metals Group, Brazil's Vale and Anglo American.
Fortescue clearly leads in ambition with a target to reach net-zero Scope 3 emissions by 2040, and the other major iron ore producers need to increase their intent to avoid investor pushback, report author Simon Nicholas said.
"Recently, companies including TotalEnergies, Woodside, Glencore, ExxonMobil and Chevron have been pressured by investors to do more on their Scope 3 emissions," Mr Nicholas said.
BHP, Rio Tinto and Fortescue are examining steelmaking technology that can use Pilbara iron ore without metallurgical coal.
Rio Tinto's Simandou iron ore project in Guinea, West Africa will increase the production of high-grade ore that is suitable for low-emissions steelmaking, which would reduce the carbon intensity.
Mr Nicholas said resources companies and governments often describe the emissions-intensive steel industry as hard-to-abate, and use this excuse to do little.
"Alternatives to coal-based steelmaking are now clearly viable and are attracting substantial investment," he added.
"There is therefore no longer any excuse for suppliers of raw materials to the steel industry not to have a measurable Scope 3 emissions reduction target."
Ahead of international climate talks in the United Arab Emirates, pressure is growing for companies to do more on supply chain emissions.
The COP28 meeting will confront a milestone with the first global stocktake of progress since adopting the Paris Agreement.
Sultan Al Jaber, oil boss and president-designate of COP28, has said companies must act to reduce all greenhouse gas emissions, including Scope 3.
