UPDATE: Mercedes-Benz officials announced that the company plans to use 200.000 tons of sustainably-manufactured steel per year from European suppliers by 2030.

Salzgitter, thyssenkrupp Steel and H2 Green Steel are among those who will supply the German carmaker with the required materials. Using electric furnaces and scrap steel for production, the companies say that this will reduce the overall carbon footprint of the material by 60%.

ESG Today reports that H2 Green Steel is currently building the world's first fossil-free plant in its home country Sweden, which will include a proprietary green hydrogen production hub with a capacity of one gigawatt. Production at the new facility could begin sometime in 2025 and by the end of the decade, company officials hope the factory will output 5 million tons of clean steel per year.

Under the agreement, H2 Green Steel is set to supply Mercedes-Benz with about 50.000 tons of nearly CO2-free steel per year and Volvo and Ford already announced plans to switch to renewable energy-made steel for their cars and trucks.

Dr. Gunnar Güthenke, Head of Procurement and Supplier Quality, Mercedes-Benz Cars, said that "based on our initial investment into H2 Green Steel we now have a finalized relevant supply agreement for Europe and are looking at establishing a sustainable steel supply with H2 Green Steel in North America."

At the beginning of the year, Mercedes officials said that they want the company to have a completely carbon neutral supply chain for steel by 2039.