CEMEX S.A.B de C.V

CEMEX

BUILDING THE 21ST CENTURY SUSTAINABLY

CEMEX

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CEMEX

CEMENTING THE FUTURE

Sustainable Business Magazine speaks to Vicente Saisó, Corporate Director of Sustainability at CEMEX S.A.B. de CV, about emissions reduction, social and inclusive businesses, and the importance of transparency.

CEMEX, a Mexico-based multinational cement company, started out in 1906 as a small cement factory in Northern Mexico called Cementos Hidalgo. In 1920, Cementos Portland Monterrey opened, and when the two companies merged in 1931, they renamed themselves Cementos Mexicanos, or CEMEX. In the 1980s, by acquiring other local manufacturers, CEMEX became the largest cement company in Mexico, and in 1992, the company made its first major international acquisition, purchasing operations in Spain. Today, CEMEX is present in 50 countries, with 41,000 employees globally. They are listed on the New York Stock Exchange, the Bolsa Mexicana de Valores, and some of their regional/local subsidiaries on the stock exchanges in Colombia and the Philippines.

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CEMEX is involved in three main products: Cement, ready-mix concrete, and aggregates. The company’s core business is cement production, for which they have an annual capacity of close to 90 million tons.

They also produce 52 million cubic meters of ready-mix concrete, and 151 million tons of aggregate. In all three categories, CEMEX is among the largest companies in the world.

SUSTAINABILITY MODEL Recently, CEMEX developed a new global model for incorporating sustainability into their business at all levels. “The Sustainability Model is a framework to explain to both our internal and external audiences the way we perceive sustainability, and how we have

organized ourselves to embed sustainable development into the strategy and day to day operations of the company,” explains Vicente Saisó, Corporate Director of Sustainability at CEMEX. “The model has four pillars – economic, environmental, social, and governance – and each pillar has three or four priorities of action which we make sure are being pursued throughout CEMEX, in every country we’re present in.”

The economic pillar of CEMEX’s Sustainability Model refers to providing sustainable solutions to the market. “This means either providing sustainable products and services themselves, or helping construction projects to be sustainable,” says Mr. Saisó. “Then our environmental pillar is about trying to enable a low-carbon, resource-efficient industrial

imately 5% of total global CO2 emissions.

“The industry recognized this many years ago,” says Mr. Saisó. “For close to twenty years, we have been working with other companies in our industry as part of the Cement Sustainability Initiative, which was created within the framework of the World Business Council for Sustainable Development. We know we are in an energy-intensive industry that has an impact on climate change and the environment, and we do several things to reduce that footprint.”

One major way CEMEX is striving to reduce CO2 emissions is by substituting fossil fuels. “To produce cement, we heat limestone in our kilns to 1,400 to 1,500 degrees centigrade,” says Mr. Saisó. “Traditionally, our industry used fossil fuels to do that. We’ve been able to substitute part of those fossil fuels with waste coming out of several processes, including industrial waste, municipal waste, and agricultural waste. In 2016, CEMEX had 23% substitution, and in 2017, we’re on track to reach a higher percentage. We can also use cementitious products to reduce the amount of clinker we produce with each ton of cement. That means using waste from other

industries, like fly ash from thermoelectric power generators and slag from the steel industry, to mix in and be part of our final cement product. This reduces our clinker, and therefore our CO2 emissions.”

ENERGY EFFICIENT Over the last twenty-five years, technology used in the cement industry has evolved to prioritize energy and resource efficiency. “In our industry, we all compare to 1990, when the Kyoto Protocol established a baseline,” says Mr. Saisó. “That allows us to measure all the changes we have undergone to our practices, processes, and technology.

Compared to 1990, CEMEX has been able to reduce our CO2 emissions per ton of product by 20%. We’re on track to reach 25% reduction by 2020.”

As the world’s human population has grown over the last quarter-century, and as markets have expanded, CEMEX has seen a corresponding growth in demand. “The general effort worldwide is to decouple economic growth with the growth in CO2 emissions,” says Mr. Saisó. “All our markets grew from 1990 to the current year, so we have delivered 21% more cement product

process within our operations. The third pillar is about having a close relationship with the communities we interact with, which led us to develop a high-impact social strategy to empower the communities around our factories and help them develop. And the final pillar, which is not very traditional in terms of sustainability, is related to governance. That means how we’re organized internally, what policies and controls we have to make sure our core values are embedded in our actions, and ensuring a strong code of ethics which applies not only to us but also our business partners.”

ENVIRONMENTAL MANAGEMENT Carbon footprint is a key issue for the cement industry, which produces approxCEMEX

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CEMEX

CARBON FOOTPRINT IS A KEY ISSUE FOR THE CEMENT INDUSTRY, WHICH PRODUCES APPROXIMATELY 5% OF TOTAL GLOBAL CO2 EMISSIONS.

to the market. But, as a result of our use of alternative fuels, reducing our clinker factor, and increasing energy efficiency in all our factories, our absolute CO2 emissions in 2016, compared to 1990, has reduced by 4%. We’re very proud of this significant achievement, which demonstrates how we’ve been able to decouple our growth from our carbon footprint.”

CUSTOMER VALUES CEMEX’s Sustainability Model aims to find ways to help customers in the construction

industry operate sustainably. “If you add up all the buildings in the world, and you quantify the energy used to heat them, cool them, and illuminate them, that’s between 30 and 40% of the total energy consumed worldwide,” says Mr. Saisó. “We work proactively to make our customers aware of the different things they can do to develop more efficient construction projects. That can mean building more resilient, low-impact infrastructure that is durable and lasts longer. Or it can mean buildings that are more efficient in resource consumption in the construction

phase and at the use phase. We have a CO2 footprint tool for our products, and environmental product declarations for our products.

We also provide green building services to customers, so if a customer wants to achieve LEED or BREEAM certification, we have the capabilities to help them do that.”

CEMEX has a series of KPIs they use to measure project sustainability. “KPIs make these things easier and clearer to understand,” says Mr. Saisó. “We have categorized our products, identifying those which have specific characteristics which make them more sustainable than others. 33% of our ready-mix product portfolio is products with these characteristics. We currently have 9.7 million square meters of construction happening where our products are part of a solution which will be part of a third-party-certified sustainable building.”

COMMUNITY DEVELOPMENT The cornerstone of CEMEX’s social sustainability efforts is their high-impact social strategy. “One of our main initiatives within that pillar is what we call ‘social and inclusive businesses’,” says Mr. Saisó. “The traditional way companies contribute to communities is the philanthropic effort, where you provide assistance. We do that, but we’ve also created social and inclusive businesses, which is where, whatever the benefit we’re trying to provide to a community, we try to

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CEMEX them become self-employed and self-sustainable. This idea of self-sustainability is important to us. Our social strategy has evolved beyond the traditional philanthropic assistance format because philanthropy is not sustainable if one day the source of the money is not there. We’ve tried to move towards things which will stay there regardless of economic conditions and whether we continue to supply funds.”

make it financially sustainable over time.

This means it can self-finance and become a business which the community takes over and continues.”

CEMEX has several different kinds of social and inclusive businesses which they implement. “One which has been very successful is we set up a small concrete block manufacturing facility,” says Mr. Saisó.

“We provide the materials, and there’s equipment so that concrete blocks can be produced by people in the local community for the improvement of their homes. The blocks can also be sold in the community or neighboring communities to make a profit, which makes the business self-sustainable. We now have more than 150 of these businesses in Mexico, the Caribbean and Central and South America. They’re quickly expanding, because we’ve found a way to make them replicable.”

EMPOWERMENT FOR THE DISADVANTAGED Another program is called Patrimonio Hoy, which provides low-income people with financing, materials, and support to help them build or improve their homes. “This program has the biggest number of beneficiaries of all our social programs,” says Mr. Saisó. “We provide all the materials, some financing, and technical assistance. People 5 | CEMEX

save part of the money, then they classify to get involved in the program, and we deliver the product locally from a CEMEX distributor. This has worked very well, and it has also become a self-funding initiative. We have a very high recovery rate from those loans.”

A third program focuses on women and the young in developing countries. “We have training and development programs and community centers for these groups at many of our cement factories,” says Mr. Saisó. “We help empower these diverse populations, and give them opportunities to gain skills, with the final objective to help

SUSTAINABLE GOVERNANCE The fourth pillar of CEMEX’s sustainability strategy is governance. “We now have a Sustainability Committee at the level of the Board of Directors,” says Mr. Saisó. “Three board members are part of this committee, and we conduct quarterly review meetings.

This means the responsibility for sustainability comes from the highest entity in our management, and they give us the mandate to ensure sustainability is embedded in our business. This has become very relevant in the last two years, when a lot of insightfull things have come out of those meetings.”

CEMEX also has an internal system called ETHOS, which provides ethical guidance, ethics courses, access to global and local policies, advice and tools for employees confronted with ethical dilemmas, and which promotes awareness of the implications of misconduct. “We communicate our code of ethics to all our employees, as well as to our business partners,” says Mr. Saisó. “We also have many ways people can alerts us to possible violations of our code of ethics, and a process to review that information and act on violations. We keep track of all these cases, and we try to make that as transparent as possible in our external reporting. We have a line open where somebody can go directly to our

WE WANT TO ALWAYS IMPROVE OUR PUBLIC COMMUNICATION, SO PERCEPTION ON HOW CEMEX IS DOING IN SUSTAINABILITY MATTERS IS ALWAYS CLEAR TO EVERYBODY.

Board of Directors and complain, to bypass the channel of management. We also do extensive training in anti-corruption and anti-trust, particularly in countries where this is a consideration. All of this reinforces a culture where people are willing to share with us complaints and things which in their view are not right. We’re also currently in the process of doing a self-assessment on our human rights compliance throughout the world, which we will be able to report next year.”

INTEGRATED REPORT In 2016, CEMEX produced their first integrated report, combining in a single document both their traditional annual report focusing on financial results and their sustainable development report, which used to be a separate document. “It’s one document targeted to both financial and general audiences,” says Mr. Saisó. “We tried not to fall into the trap of just cutting and pasting two documents together. Instead, we ran through an exercise of how better to explain our value creation model. There’s no actual difference now between what we do for financial purposes, to achieve profitability, and what we

do in sustainability matters. They’re all part of the same strategy. The integrated report is a framework of how everything works together, and how we create value not only for our shareholders, but also for employees, clients, suppliers, and our communities.”

KEY PRIORITIES Several years ago, CEMEX created and published a series of sustainability targets, and the company uses these targets to monitor progress every year. “Our ready-mix product portfolio has 33% of products with sustainable attributes,” says Saisó. “We’re proud of that, because it wasn’t something the market was demanding, but we’ve been able to create part of the demand. Our alternative fuel rate is at 23%, and will become better this year. We’ve reduced our carbon emissions per ton of cement by 20% from 1990. We also closely monitor three other gases in our air emissions, and compared to 2005 our dust emissions have been reduced by 78%, our NOx emissions are down 26%, and we’ve reduced our SOx emissions 61%.

Since 1998, when we started our high-impact social strategy programs, we estimate we have benefited 12.6 million people, with

a target of 15 million people by 2020. We’ve also been able to reduce our lost time injury rate per million hours’ work to 0.6, which is the lowest rate in our industry.”

CEMEX is shortly to begin an internal exercise to develop long-term targets for 2025 and 2030. “We want to maintain ambitious targets and make sure what we achieve in 2020 doesn’t stay there,” says Mr. Saisó. “We believe we have to try to make our best practice standards as homogenous as possible in all of our operations across different markets. As a part of the Cement Sustainability Initiative, we created performance indicators and committed ourselves to be verified by third parties. So there’s a very intense competition in sustainability matters in our industry, and there’s a lot of transparency.

An analyst can look at everyone’s reports and compare the indicators, and they can make an objective assessment of who is doing a better job. We are committed to maintaining that transparency and to increasing it. We want to always improve our public communication, so perception on how CEMEX is doing in sustainability matters is always clear to everybody. c CEMEX

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CEMEX S.A.B. de CV www.cemex.com/sustainability

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