Towards a sustainable cement industry - CiteSeerX

Cover photo in lower left courtesy of Australian Cement Holdings Pty. Ltd.

TOWARD A SUSTAINABLE CEMENT INDUSTRY MARCH 2002

An Independent Study Commissioned by:

( T O W A R D A S U S T A I N A B L E C E M E N T I N D U S T R Y )

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World Business Council for Susta inable Development This study, "Toward a Sustainable Cement Industry" was commissioned by the World Business Council for Sustainable Development as one of a series of member-sponsored projects aimed at converting sustainable development concepts into action. The report represents the independent research efforts of Battelle Memorial Institute and its colleagues to identify critical issues for the cement industry today, and pathways forward toward a more sustainable future. While there has been considerable collaborative effort and exchange of ideas during this project, the opinions and views expressed here are those of Battelle. Eric Derobert, Vice President, Operations Howard Klee, Jr., Program Manager Estelle Geisinger, Program Associate

Assurance Group “We have reviewed this report in detail. We believe ‘Toward a Sustainable Cement Industry’ provides a significant and useful contribution to the implementation of sustainable development. While we agree with the general content, findings and conclusions, this is not an endorsement of each individual recommendation and potential future action.” Mostafa Tolba (chair), President, ICED, Cairo, Egypt; Former Executive Director, United Nations Environment Program

Victor Urquidi, Former President and Professor Emeritus, Colegio de Mexico, Mexico City, Mexico

Istvan Lang, Former Secretary General and Member, Hungarian Academy of Sciences, Budapest, Hungary Corinne Lepage, Huglo-Lepage & Associates, Paris, France; Former Environment Minister, France William K. Reilly, Aqua International Partners, LP, San Francisco, USA; Former Administrator, U.S. EPA

Batte l le Memoria l Insti tute

Battelle endeavors to produce work of the highest quality, consistent with our contract commitments. However, because of the research nature of this work, the recipients of this report shall undertake the sole responsibility for the consequences of their use or misuse of, or inability to use, any information, data or recommendation contained in this report and understand that Battelle makes no warranty or guarantee, express or implied, including without limitation warranties of fitness for a particular purpose or merchant-ability, for the contents of this report. Battelle does not engage in research for advertising, sales promo-tion, or endorsement of our clients' interests including raising investment capital or recommending investment decisions, or other publicity purposes, or for any use in litigation. The recommendations and actions toward sustainable development contained herein are based on the results of research regarding the status and future opportunities for the cement industry as a whole. Battelle has consulted with a number of organizations and individuals within the cement industry to enhance the applicability of the results. Nothing in the recommendations or their potential supportive actions is intended to promote or lead to reduced competition within the industry.


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About the WBCSD The World Business Council for Sustainable Development (WBCSD) is a coalition of 160 international companies united by a shared commitment to sustainable development via the three pillars of economic growth, ecological balance, and social progress. WBCSD members are drawn from more than 30 countries and 20 major industrial sectors. The Business Council also benefits from a Global Network of 35 national and regional business councils and partner organizations involving some 1000 business leaders globally.

The WBCSD mission To provide business leadership as a catalyst for change toward sustainable development, and to promote the role of eco-efficiency, innovation and corporate social responsibility. Our aims The objectives and strategic directions of the WBCSD, based on this dedication, include: Business leadership – to be the leading business advocate on issues connected with sustainable development. Policy development – to participate in policy development in order to create a framework that allows business to contribute effectively to sustainable development. Best practice – to demonstrate business progress in environmental and resource management and corporate social responsibility and to share leading-edge practices among our members. Global outreach – to contribute to a sustainable future for developing nations and nations in transition. "Toward a Sustainable Cement Industry" is one of a number of WBCSD member-led projects undertaken to examine issues unique to a particular business sector. Other examples include research programs in Sustainable Forests, Sustainable Mobility, Mining and Electric Utilities. Each program aims to translate more general issues of sustainable development into practical and actionable terms for a specific industry. The companies involved want to create more stable platforms for future long-term investments and strengthen their business "license to operate."

Next Steps Reports like this one are not always sufficient to achieve real action and results. Following release of Battelle’s study, the sponsoring cement companies will develop and publish an Agenda for Action, detailing how they will pursue the issues and recommendations discussed here. This Agenda will include (1) commit-ments for future actions that the companies plan to take, both jointly and individually, (2) timeframes for achieving results, (3) plans for publicity reporting future progress, and (4) plans for ongoing stakeholder engagement. The Agenda will be widely distributed later this year. Along with all other project documentation it will also be available on the project web site, http://www.wbcsdcement.org/. The WBCSD encourages interested stakeholders to join with these industry leaders in moving toward a sustainable future.

About Batte lle Memorial Insti tute Since opening in 1929, Battelle Memorial Institute has been at the forefront of technical and social research and development. Founded as a not-for-profit organization, Battelle develops and commercializes technol-ogy and provides management and technical solutions for industry and government. Our partnerships with the communities where we live and work provide resources to help our neighbors improve their quality of life. Battelle has grown to include more than 7,500 professionals who contribute products and solutions for clients in nearly 30 countries. Noted for its innovative work in the environmental, social, and economic sciences, Battelle has become a leader in the arena of Sustainable Development. Battelle’s Life Cycle Man-agement Group in Columbus, Ohio, USA has helped craft sustainable pathways for companies in the auto-motive, architectural and building products, cement, chemical, and consumer products industries. Battelle’s Pacific Northwest Division and Battelle Europe, which contributed to this study, also provide business consulting and technical services to a wide variety of government and private sector clients.

http://www.wbcsdcement.org


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Foreword Many companies around the globe are re-examining their business operations and relationships in a fundamental way. They are exploring the concept of Sustainable Development, seeking to integrate their pursuit of profitable growth with the assurance of environmental protection and quality of life for present and future generations. Based on this new perspective, some companies are beginning to make significant changes in their policies, commitments, and business strategies.

This study represents an effort by ten major cement companies to explore how the cement industry as a whole can evolve over time to better meet the need for global sustainable development while enhancing shareholder value. The study findings include a variety of recommendations for the industry and its stakeholders to improve the sustainability of cement production. Undertaking this type of open, self-critical effort carries risks. The participating companies believe that an independent assessment of the cement industry’s current status and future opportunities will yield long-term benefits that justify the risks. The intent of the study is to share information that will help any cement company – regardless of its size, location, or current state of progress – to work constructively toward a sustainable future.

Study Ground Rules

This report was developed as part of a study managed by Battelle, and funded primarily by a group of ten cement companies designated for this collaboration as the Working Group Cement (WGC). By choice, the study boundaries were limited to activities primarily associated with cement production. Downstream activities, such as cement distribution, concrete production, and concrete products, were addressed only in a limited way. Battelle conducted this study as an independent research effort, drawing upon the knowledge and expertise of a large number of organizations and individuals both inside and outside the cement industry. The cement industry provided a large number of case studies to share practical experience. Battelle accepted the information in these case studies and in public information sources used.

The WGC companies provided supporting information and advice to assure that the report would be credible with industry audiences. To assure objectivity, a number of additional steps were taken to obtain external input and feedback. A series of six dialogues was held with stakeholder groups around the world (see Section 1.5).

The World Business Council for Sustainable Development participated in all meetings and monitored all communications between Battelle and the WGC.

An Assurance Group, consisting of distinguished independent experts, reviewed both the quality and objectivity of the study findings.

External experts reviewed advanced drafts of technical substudy reports.

The geographic scope of the study was global, and the future time horizon considered was 20 years. Regional and local implementation of the study recommendations will need to be tailored to the differing states of socioeconomic and technological development.


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Acknowledgements The completion of this study represents an enormous collaborative effort, involving activities around the globe over a two-year time span. Arthur D. Little, Inc. performed the initial scoping and visioning effort for the study. Then, Battelle formed an international project team to carry out the study, working with dozens of collaborating organizations and specialists to provide adequate breadth, depth, and rigor. During the course of the work a number of stakeholders commented on the ambitious scope of the project. Without the dedication of the many individuals and organizations involved, the project could not have succeeded in addressing the range of topics necessary for a comprehensive assessment of sustainable development in the cement industry. While the group as a whole deserves credit for their willingness to seek a common goal, a number of individual contributions need to be acknowledged as well. The project team especially appreciates the review and commentary on an earlier draft of this report from our Chief Financial Officer, Mark Kontos.

Working Group Cement CEMEX, Mexico Cimpor, Portugal Heidelberg Cement, Germany Holcim, Switzerland Italcementi, Italy Lafarge, France RMC, United Kingdom Siam Cement, Thailand Taiheiyo Cement, Japan Votorantim, Brazil

Battelle is pleased and proud to issue this groundbreaking report, which demonstrates our commitment toward realizing business value through sustainable development. We have been impressed with the dedication and thoughtfulness of the cement companies that supported this effort. To our knowledge, there is no precedent for an independent study of this magnitude that was funded by private industry, with the express purpose of critically examining the performance of that same industry. Even more unusual is the fact that the industry’s investment in this study was not prompted by any crisis or visible failure of the industry, but rather by a collective desire to be more responsive to the emerging needs of the marketplace. We sincerely hope that the information in this report will help not only cement companies, but also other enterprises around the globe, to adopt sustainable development as a cornerstone of their business strategy. Joseph Fiksel, Ph.D. Vice President for Life Cycle Management, Battelle


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Sponsors and ContributorsABB, Switzerland Buzzi Unicem, Italy Cementos Chihuahua, Mexico Citigroup Corporate and Investment Bank,

Switzerland Compagnie de Fives (FCB Ciment), France Crédit Commercial de France, France Credit Suisse, Switzerland CRH plc, Ireland Deutsche Bank, Germany EnBW - Energievertriebsgesellschaft mbH,

Germany F.L.Smidth A/S, Denmark IPE - Investimentos e Participações Empresariais,

S.A., Portugal KHD Humboldt Wedag AG, Germany Komatsu Ltd., Japan

Krupp-Polysius, Germany Fundação Luso-Americana para o Desenvolvimento

(FLAD), Portugal Ministério da Ciência e Tecnologia (MCT), Portugal Nesher Israel Cement Enterprises Ltd., Israel PRo Publications International Ltd, United Kingdom RWE Plus, Germany SECIL, Companhia Geral de Cal e Cimento, S.A., Sotécnica, Sociedade Electrotécnica, LDA, Portugal Ssangyong, Korea Teixeira Duarte-Engenharia e Construções,

Portugal Teris/SITA, France Titan Cement Company S.A., Greece United Nations University, Japan WWF International, Switzerland

Communications Partners American Portland Cement Alliance, USA Brazilian Cement Association - ABCP, Brazil British Cement Association (BCA), United

Kingdom CEMBUREAU, Europe

Cement Industry Federation (CIF), Australia Japan Cement Association (JCA), Japan Portland Cement Association, USA South African Cement Producers Association (SACPA) Verein Deutscher Zementwerke E.V. (VDZ), Germany

Batte l le Project Team Battelle: Principal Subcontractors: Bruce Vigon, Project Lead Boston Environmental Group, USA, Tiffany Brunetti Jandi Ho Stephen Poltorzycki Joseph Fiksel Leslie Hughes ERM, UK, Jonathan Samuel, Sarah Selby Kenneth Humphreys Gretchen Hund Five Winds International, Canada, Steven Young Marylynn Placet Charles Lewinsohn Holtec Consulting Pvt. Ltd., India, K.K. Misra Roger Anderson Deborah Martin Independent Consultant, USA, Diane Guyse Fiksel Kathryn Baker Natesan Mahasenan TNO-MEP, The Netherlands, Jan Zeevalkink Jill Engel-Cox Nancy McDaniel Kim Fowler Steve Molnar Regional Advisors: Lewis Garvin Vicki Paddock Sabri Aglan, Egypt (Africa/Middle East) Vinay Gadkari Mason Soule Francisco Barnes, Mexico (Latin America/Caribbean) Donna Gleich Jeff Logan, USA (Asia) Klaus Mueller, Switzerland (Europe)

Additional Subcontractors and Consultants Anataike Information Development Co., China Agesfal Management Institute, Portugal Arthur D. Little, Inc., United Kingdom ASIST Translations Service, Inc., USA BCSD – Brazil, Brazil Caroline Quinn, USA Enfoque, Brazil Florence Ma, China Janet Barber, United Kingdom

Janus-Merritt Strategies, USA Meridian Institute, USA Ökopol Institute, Germany PricewaterhouseCoopers (PwC), The Netherlands Ramboll A/S, Denmark Rethink Consulting P/L (Elery Hamilton-Smith), Australia Thailand Environmental Institute, Thailand The Environment Council, United Kingdom


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List of Acronyms and Formulae AF Alternative Fuels

AFR Alternative Fuels and Raw Materials

ARM Alternative Raw Materials

ATOP After-Tax Operating Profit

CaCO3 Limestone

CaO Calcium oxide

CC Capital Charge

CEO Chief Executive Officer

CKD Cement Kiln Dust

CO Carbon monoxide

CO2 Carbon dioxide

EAF Electric Arc Furnace

EHS Environment, Health & Safety

EMAS Eco-Management and Audit Scheme

EVA Enterprise Value Added / Economic Value Added

GDP Gross Domestic Product

GHG Greenhouse Gas

GJ Gigajoule - 109 (billion) Joules

IE Industrial Ecology

ISO International Organization for Standardization

KPI Key Performance Indicator

LCA Life Cycle Assessment

MJ Megajoule - 106 (million) Joules

NGO Non-Governmental Organization

NOx Nitrogen Oxides

OPC Ordinary Portland Cement

OS&H Occupational Safety and Health

PJ Petajoule - 1015 Joules

PM Particulate Matter

PPMV Parts per million by volume

ROI Return On Investment

RONA Return On Net Assets

SD Sustainable Development

SO2/SOx Sulfur Dioxide/Sulfur Oxides

SVA Shareholder Value Added

TEQ Toxicity Equivalent

VOC Volatile Organic Compound

WACC Weighted Average Cost of Capital

WGC Working Group Cement (ten core cement company sponsors)


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Glossary Aggregate Gravel, sand, crushed stone, and other materials used in making concrete.

Alternative Fuels Energy-containing wastes used as substitutes for conventional thermal energy sources. Alternative Fuels and Raw Materials (AFR) Inputs to cement production derived from industrial, municipal, and agricultural waste streams.

Alternative Raw Materials Cementitious materials used as substitutes for conventional cement raw materials.

Binder Cohesive agent that could include cement, blended cements, and fly ash.

Biomass Plant materials and animal waste used as a source of fuel.

Blast furnace slag A processed waste product of iron production in blast furnaces that is usable as a pozzolan.1

Blended cement2 Cement with a fixed percentage of pozzolans (for example, supplements such as slag and fly ash produced by the steel and electric power industries, respectively) replacing the Portland cement clinker portion of the cement mix. Blended cement is usually understood as cement that is blended by a cement manufacturer rather than a ready-mix supplier (also referred to as composite cement).3

By-Product Secondary product of an industrial process.

Cement Within the cement industry, and especially the technical domain, this term is often understood as Ordinary Portland Cement.

Cementitious Material or Product A substance which when mixed with water forms a paste that subsequently sets and hardens at room temperature.

Clinker Decarbonized, sintered, and rapidly cooled limestone. Clinker is an intermediate product in cement manufacturing.

Concrete A material produced by mixing binder, water, and aggregate. The fluid mass undergoes hydration to produce concrete. (Average cement content in concrete is about 15%.)

Corporate Governance The system of oversight, including a Board of Directors, whereby a corporation maintains accountability for protecting the interests of shareholders and other stakeholders

Eco-efficiency Reduction in the resource intensity of production; i.e., the input of materials, natural resources and energy compared with the output; essentially, “doing more with less.”

Economic Value Added See Enterprise Value Added.

Ecosystem Services The range of supporting functions provided by an ecosystem to its inhabitants, including food, shelter, thermal regulation, and energy.

Employee satisfaction An aggregate measure of the well-being or quality of life that employees indicate they derive from their jobs.

Enterprise Value Added (EVA) Also known as Economic Value Added4, EVA is a widely used financial indicator of the shareholder wealth or the “economic profit” created by a particular activity within an organi-zation. In simple terms, EVA is the difference between After-Tax Operating Profit and Capital Charge. The After-Tax Operating Profit (ATOP) component is a function of revenues, operating costs and taxes while the Capital Charge (CC) is derived from the product of the invested capital and the weighted average cost of capital (WACC). The WACC is the weighted combination of the cost of debt and equity of the invested capital and is influenced by factors such as the financial structure of the company, business risk, current interest levels and investor expectations. A positive EVA is an indicator of wealth created, while a negative EVA means that the company or organization has destroyed wealth.

Fly ash By-product with binding properties typically produced as a residue from coal-fired power plants.

1 The International Council for Local Environmental Initiatives (ICLEI, 2001, Cement Glossary,

http://www.iclei.org/us/cement/glossary.html. 2 The International Council for Local Environmental Initiatives (ICLEI), 2001,http://www.iclei.org/about.htm. 3 W.D. Callister, Materials Science and Engineering: An Introduction, Wiley, NY, 1994. 4 Marc J. Epstein and S. David Young, “Greening with EVA,” Management Accounting, pp. 45-49, January 1999.

http://www.iclei.org/us/cement/glossary.htm

http://www.iclei.org/about.htm


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Fossil fuel A general term for combustible geological deposits of carbon in reduced (organic) form and of biological origin, including coal, oil, natural gas, and oil shale.

Greenhouse gases Gases in the earth’s lower atmosphere that may contribute to global warming, including the major component CO2.

Hazardous waste A material which is potentially harmful to people or the environment because of its toxicity, poisonous, explosive, corrosive, flammable, eco-toxic or infectious characteristics. As defined in the Basel Convention, Article 1, hazardous wastes are those that belong to any category of activity contained in Annex I, unless they do not possess any of the inherent characteristics of explosivity, flammability, etc. Domestic legislation may define additional hazardous wastes beyond those listed internationally.5

Industrial ecology Framework for improvement in the efficiency of industrial systems by imitating aspects of natural ecosystems, including the cyclical transformation of wastes to input materials.

Kiln Large industrial oven for producing clinker used in manufacture of cement.

Option value Economic value of retaining the option to pursue an opportunity in the future.

Ordinary Portland Cement (OPC) Cement that consists of approximately 95 percent ground clinker and 5 percent gypsum.

Pozzolan A mineral admixture that acts as a supplement to standard Portland cement hydration products to create additional binder in a concrete mix.6

Shareholder Value The economic market value that a shareholder would realize from liquidation of their equity.

Social impacts The effects of certain actions and/or activities on society. Areas of social impact include public health and safety, aesthetic surroundings, employee health and safety, etc.

Stakeholder A person or group that has an investment, share, or interest in something, as a business or industry.

Stakeholder value Value directly relating to the stakeholders’ perceptions.

Strategic enterprise value Advantage that is not directly measurable in financial terms, e.g., company image.

Sustainable business A business that is able to anticipate and meet the economic, environmental, and social needs of present and future generations of customers and other stakeholders.

Sustainable development Ability to continually meet the needs of the present without compromising the ability of future generations to meet their own needs.

Triple bottom line A business principle that measures corporate performance along three lines: economic prosperity, environmental stewardship, and social responsibility.

Virgin fossil fuel A hydrocarbon deposit consisting of the remains of animal or vegetable life from past geologic ages and that is now in a combustible form suitable for use as fuel; for example, oil, coal, or natural gas.

Waste A process or activity by-product material having no or minimal economic value.

5 Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and their Disposal, Adopted March 1989,

Entry into Force May 1992, http://www.unep.ch/basel. 6 The International Council for Local Environmental Initiatives (ICLEI, 2001, Cement Glossary,

http://www.iclei.org/us/cement/glossary.html.

http://www.unep.ch/basel

http://www.iclei.org/us/cement/glossary.html


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“Growing the value we bring to society and reducing our environmental footprint are business strategies to grow shareholder value.” Gary M. Pfeiffer, Chief Financial Officer, Dupont “We firmly believe that an approach based on sustainability is not a luxury but rather is a key element in our future success.” Bertrand Collomb, Chairman and CEO, Lafarge Sources: Pfeiffer, G.M., speech given at The Year 2000 Conference on Environmental Innovation: Creating Sustainable Business Assets for Today and Tomorrow, March 2000. Lafarge, “Building a Sustainable World: A First Report on Our Economic, Social, and Environmental Performance,” 2001.

Executive Summary Progressive cement companies are recognizing that to remain competitive in the future, they must combine sound financial performance with a commitment to social responsibility, environmental stewardship, and economic prosperity. These three dimensions are referred to as the “triple bottom line” of Sustainable Development (SD). A number of cement companies have accepted the fundamental goal of SD; namely, to “meet the needs of the present without compromising the ability of future generations to meet their own needs.”7 The purpose of the study is to assess the current status of the industry as a whole with respect to SD, and to provide a vision and recommendations that cement companies and their stakeholders can pursue together in order to contribute to a more sustainable future. This report has two principal audiences: (1) for stakeholders outside the industry, it provides an overview of the cement industry, its potential for becoming more sustainable, and the roles that stakeholders can play in realizing the goal; and (2) for cement companies, it provides an independent assessment of their current status and recommendations for improving their sustainability. Today, many forces of change are influencing the cement industry. Consolidation within the industry is occurring as global cement companies move to enter the growing markets in developing countries. At the same time, regulatory pressures and stakeholder expectations regarding health, safety, and environmental performance are increasing. There are also signs that cement products may evolve from commodities to a greater variety of differentiated products serving changing customer needs. These forces create opportunities for cement companies to seriously consider SD as a model for future growth. However, there are a number of barriers to adoption of more sustainable practices, including the inherent energy and material resource intensity of cement production, the lack of trust between companies and their stakeholders in some areas, and the resistance to change on the part of cement users and within cement companies themselves. Successful adoption of SD by the cement industry will occur only if there is a real synergy between sustainability and profitability. In other industries, companies that have committed to SD have identified important business drivers that translate SD excellence into enterprise value. Likewise, a number of leading cement companies already have begun to demonstrate that they can realize business advantages through integration of SD into their business practices. For example, environmentally friendly practices, such as use of wastes as raw materials and improvement in energy efficiency, can contribute to reduced operating costs and improved asset utilization. In addition to financial advantages, open engagement with local communities and other stakeholders to support better quality of life can lead to improved company image and right to operate, which ultimately lead to strategic advantage.

7 UN World Commission on Environment and Development, “Our Common Future,” Report by the Brundtland Commission 1987.


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This study has identified eight major issues that will shape the cement industry’s path toward SD improvement, as shown in the adjacent figure. As a result of extensive research conducted during the study and a series of six dialogue events with stakeholders around the world, Battelle has developed an assessment of the industry’s current status with regard to these SD issues, including opportunities for progress and potential threats and barriers. For each issue, Battelle has defined the critical challenges and bar-riers facing the industry (see table on next page). Based on this assessment, Battelle has recommended a set of performance goals and indicators for adoption by the industry, and has proposed a vision of potential indus-try progress by the year 2020, shown below.

SD Issue Critical Challenges and Barriers

Resource Productivity

Cement production inherently consumes large amounts of materials and energy. Innovations that could radically reduce resources used are hampered by existing standards and specifications.

Climate Protection

Due to a dependence on fossil energy and the calcination of limestone, the cement industry today generates about 3% of global greenhouse gas emissions. Significant reductions are possible through use of non-limestone-based cementitious materials.

Emission Reduction

Despite significant reductions in airborne emissions, there are still concerns over dust and combustion products from cement operations. To win stakeholder confidence, cement firms need cost-effective ways to upgrade older, capital-intensive operations.

Ecological Stewardship

Cement plants and quarries may have adverse effects on local ecology, biodiversity, and water resources. Community environmental concerns create barriers to siting or expansion of plants and quarries.

Employee Well-being

Health and safety management at many cement plants is not consistent with best industry practices. Employees often believe that their interests are not given high priority.

Community Well-being

Although cement companies make important contributions to their local communities, plants and quarries sometimes create nuisance disturbances. Past efforts at stakeholder engagement have not been adequate to establish ongoing trust.

Regional Development

Cement plants often stimulate the local economy, but plant closures or layoffs can also create economic disturbances. Company inertia may create barriers to greater involvement in exploring partnership solutions.

Vision for 2020:

Cement companies have integrated sustainable development into their global operations, are known as leaders in industrial ecology and innovators in carbon dioxide management, are regarded as attractive employers, and have established relationships of trust with the communities in which they operate.


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The study team developed a set of ten major recommendations for making progress with respect to the eight identified SD issues. These recommendations fall into two categories – those that address specific SD issues and those that will enable the industry to establish internal and external processes that facilitate more sustainable practices. Each cement company will need to select and tailor SD initiatives to their unique culture, beliefs, existing programs, asset base, market, and financial situation. For each recommendation, Battelle has suggested a set of actions that provide a starting point for consideration by cement companies.

Issue-Focused Recommendations

Resource Productivity: Facilitate the practice of industrial ecology and eco-efficiency in the cement industry. Cement companies can build on current practices to reduce their resource consumption and to increase the use of wastes as fuels or raw materials. Improvements will require exploration of industrial ecology partnerships, as well as research to characterize the risks and benefits of alternative fuels and raw materials to workers and the community.

Climate Protection: Establish corporate carbon management programs, set company-specific and industry-wide medium-term CO2 reduction targets, and initiate long-term process and product innovation. The industry can establish a CO2 emissions baseline and develop mechanisms to enable cost-effective reductions, including emission trading or offset schemes. Collaboration will be necessary to help develop government policies, product standards, and market practices that enable CO2 reduction strategies, and to conduct pre-competitive research and development of low-carbon products and processes.

Emission Reduction: Continuously improve and make more widespread use of emission control techniques. Cement companies can work toward uniform worldwide corporate environmental standards, engage with policy makers to ensure consistent enforcement of environmental regulations, apply best practical technology for energy efficiency and pollution control, implement environmental management systems, and develop new technologies to virtually eliminate emissions.

Ecological Stewardship: Improve land-use and landscape management practices by disseminating and applying best practices for plant and quarry management. Cement companies can disseminate and adopt innovative siting, land use, landscape management, and quarrying methods that consider cultural sensitivities and biodiversity, and find productive, environmentally sound, and socially acceptable uses for depleted quarries and retired plants.

Employee Well-Being: Implement programs to enhance worker health, safety, and satis-faction. Cement companies can work more diligently to assure healthy and safe working conditions for employees and contractors, implement management systems for occupational safety and health, and institute programs and practices that promote employee satisfaction and well-being.

Community Well-Being: Contribute to enhancing quality of life through local stakeholder dialogue and community assistance programs. Cement companies can engage in open dialogue with stakeholders to understand their concerns, train cement company personnel in appropriate skills, institute sustainability reporting programs, and provide voluntary assistance to improve community well-being.

Regional Development: Promote regional economic growth and stability, especially in developing countries. Cement companies can work to better anticipate the impacts of facility siting, acquisition and closure decisions; participate with local and regional governments, as well as other interested parties, in regional planning; and support economic development and capacity building for local suppliers and disadvantaged communities.


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Pursuing the above recommendations will contribute to shareholder value creation in a variety of ways, including quantifiable reductions in capital and operating costs as well as strategic advantages such as improved license to operate. In order to enable these types of improvements, cement companies will need to enhance their business processes, as follows.

Enabling Process Recommendations

Business Integration of SD: Integrate SD principles into business strategy and practices in order to increase shareholder value. To make progress with respect to the SD agenda, it is important that cement companies identify the enterprise value of SD and develop a systematic approach for integrating SD into decision-making. Senior management can articulate a corporate commitment to SD, carry out internal alignment programs, and create accountability and incentives for SD performance.

Innovation: Encourage SD-related innovations in product development, process technology, and enterprise management. The rate of innovation in the cement industry historically has been low. To enable SD improvements, cement companies can increase their role in cement production process design, include SD considerations in the new product development process, and encourage creative SD thinking among employees by providing support, incentives and rewards for SD innovation in marketing and operations.

Cooperation: Work with other cement companies and external organizations to foster SD practices and remove barriers. Cooperation within and outside the industry is critical for enabling genuine change. The cement industry can create a Sustainable Development Institute of Cement and Concrete in order to conduct joint research with equipment suppliers, concrete companies, governments, universities, and other research organizations, develop educational programs to foster the sustainable use of cement, and coordinate efforts of cement associations and other groups working with governments to set policy.

Finally, it is important to acknowledge that there is no single pathway toward sustainable development. Given the great diversity of companies across the global cement industry, it is clear that each company must carve out its own pathway, consistent with its business goals and characteristics. But no matter what the chosen pathway, Battelle believes that a key for cement companies to remain competitive in the future is openness to change. Thriving on change will require new strategies based on learning and collaboration. Conversely, resistance to change will heighten the risks of rising costs and business impediments. This report argues that it is possible for cement companies to overcome the barriers to change, improve their eco-efficiency and profitability, and secure their long-term market position by contributing to global sustainable development.


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Table of Contents Foreword .......................................................................................................................................v Glossary ....................................................................................................................................... ix Executive Summary .....................................................................................................................xi Part 1: Introduction – Accepting the Challenge............................................................................ 1

1.1 Origin and Purpose of the Study.............................................................................. 1 1.2 The Business View of Sustainable Development .................................................... 3 1.3 The Cement Industry ............................................................................................... 5 1.4 Forces of Change and Barriers................................................................................ 9 1.5 Importance of Stakeholders................................................................................... 14 1.6 Linking Sustainable Development to Enterprise Value.......................................... 18

Part 2: Seizing the Opportunity – A Sustainable Future............................................................. 21 2.1 Key Sustainable Development Issues for the Cement Industry............................. 21 2.2 Resource Productivity............................................................................................ 25 2.3 Climate Protection ................................................................................................. 32 2.4 Emission Reduction ............................................................................................... 38 2.5 Ecological Stewardship.......................................................................................... 43 2.6 Employee Well-Being ............................................................................................ 46 2.7 Community Well-Being .......................................................................................... 51 2.8 Regional Development .......................................................................................... 53 2.9 Shareholder Value Creation .................................................................................. 55 2.10 Vision for a Sustainable Cement Industry.............................................................. 60 2.11 Establishing Industry SD Goals and Performance Indicators ................................ 60 2.12 The Opportunity ..................................................................................................... 64

Part 3: Embarking on the Path – An Agenda for Change........................................................... 65 3.1 Resource Productivity............................................................................................ 70 3.2 Climate Protection ................................................................................................. 73 3.3 Emission Reduction ............................................................................................... 77 3.4 Ecological Stewardship.......................................................................................... 79 3.5 Employee Well-Being ............................................................................................ 81 3.6 Community Well-Being .......................................................................................... 82 3.7 Regional Development .......................................................................................... 84 3.8 Business Integration of SD .................................................................................... 86 3.9 Innovation .............................................................................................................. 90 3.10 Cooperation ........................................................................................................... 94 3.11 Possible Futures .................................................................................................... 97 3.12 Conclusions ......................................................................................................... 100

Appendix A Sustainable Enterprise Toolkit ...............................................................................A-1 Appendix B Case Studies Directory and Summary...................................................................B-1 Appendix C Cement Industry Facts and Figures.......................................................................C-1 Appendix D Stakeholder Dialogues Synopsis ...........................................................................D-1 Appendix E Key Findings and Recommendations ....................................................................E-1


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List of Tables Table 1-1. Major Sources of Cement Production .......................................................... 7 Table 2-1. Potential Benefits of Progress on Each SD Issue...................................... 24 Table 2-2. Summary of Resource Productivity Status................................................. 31 Table 2-3. Cement Industry Unit-Based Emissions by Region and Sub-Region ........ 34 Table 2-4. Technical Emissions Reduction Potential for CO2 per tonne of

Cement by 2020......................................................................................... 36 Table 2-5. Summary of Climate Protection Status ...................................................... 38 Table 2-6. Comparison of Emission Limits in Several Regions of the World .............. 39 Table 2-7. Evolution of Emissions and Emission Limit Values.................................... 40 Table 2-8. Compilation of Selected Cement Plant Dioxin/Furan and Trace

Metal Emissions......................................................................................... 41 Table 2-9. Summary of Emission Reduction Status.................................................... 43 Table 2-10. Summary of Ecological Stewardship Status .............................................. 46 Table 2-11. Lost Workday Cases for Cement and Other Industries.............................. 47 Table 2-12. Summary of Employee Well-Being Status ................................................. 50 Table 2-13. Summary of Community Well-Being Status............................................... 53 Table 2-14. Summary of Regional Development Status ............................................... 55 Table 2-15. Summary of Shareholder Value Creation Status ....................................... 59 Table 2-16. Recommended SD Goals and Key Performance Indicators ...................... 61 Table 3-1. Major Recommendations ........................................................................... 69 Table 3-2. Potential Actions to Foster Resource Productivity ..................................... 72 Table 3-3. Potential Actions to Foster Climate Protection........................................... 76 Table 3-4. Potential Actions to Foster Emission Reduction ........................................ 79 Table 3-5. Potential Actions to Foster Ecological Stewardship ................................... 81 Table 3-6. Potential Actions to Foster Employee Well-Being...................................... 82 Table 3-7. Potential Actions to Foster Community Well-Being.................................... 84 Table 3-8. Potential Actions to Foster Regional Development.................................... 86 Table 3-9. Potential Actions to Foster Business Integration of SD.............................. 90 Table 3-10. Potential Actions to Foster Innovation........................................................ 94 Table 3-11. Potential Actions to Foster Cooperation..................................................... 97

List of Figures Figure 1-1. Triple Bottom Line of SD.............................................................................. 3 Figure 1-2. Stages in the Manufacture and Use of Cement ........................................... 6 Figure 1-3. Regional Cement Statistics, 1999................................................................ 9 Figure 1-4. Challenges Facing the Cement Industry .................................................... 10 Figure 1-5. Building Mutually Satisfying Stakeholder Relationships............................. 17 Figure 2-1. The Sustainability Compass....................................................................... 23 Figure 2-2. Approximate Material and Energy Flows in Ordinary Portland

Cement Production .................................................................................... 26 Figure 2-3. Alternative Uses of LCA Range from Internal to External, and from

Tactical to Strategic ................................................................................... 29


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Figure 2-4. Improving Resource Productivity Yields Direct Financial Benefits, and also Indirect Strategic Benefits by Creating Value for Society............ 31

Figure 2-5. Year 2000 Greenhouse Gas Emissions from the Cement Industry ........... 33 Figure 2-6. Dioxin Emissions of 45 Cement Kilns in Germany..................................... 42 Figure 2-7. Progress on SD Issues Results in Shareholder Value Creation for

the Company Through Both Direct and Indirect Pathways ........................ 56 Figure 2-8. A Framework for Understanding Enterprise Value..................................... 58 Figure 2-9. The Performance Measurement Process .................................................. 63 Figure 2-10. Tracking Progress Toward SD (Example).................................................. 63 Figure 3-1. An Iterative SD Change Process for Cement Companies ......................... 65 Figure 3-2. Stepwise Approach for Cement Company Participation in Public

Policy Development ................................................................................... 66 Figure 3-3. Different Categories of Actions Result in SD Improvement and

Shareholder Value Creation Through Both Direct and Indirect Pathways ................................................................................................... 68

Figure 3-4. Process for Incorporating IE Into Business Strategy.................................. 73 Figure 3-5. An Organizational Alignment Process Around SD..................................... 87

List of Case Studies Privatization in the Egyptian Cement Industry................................................................ 12 Exshaw Quarry Management Working Group ................................................................ 17 Lampang Project—Creating Enterprise Value................................................................ 20 Expanding and Educating Markets for Slag Cement at ALSEN ..................................... 27 Industrial Symbiosis and Kalundborg, Denmark............................................................. 28 Costs and Benefits of Taiheiyo’s Environmental Conservation Activities....................... 30 An Example of Emerging Climate Policy – The U.K. Climate Change Levy................... 32 Energy Efficiency and CO2 Reductions at Heidelberg Cement’s Lengfurt Plant in

Germany ................................................................................................................... 37 Brazilian Rain Forest Terrestrial Sequestration Project.................................................. 37 Designing for Future Compliance at Nesher Israel Cement ........................................... 39 Quarry Management for Environmental and Cultural Values ......................................... 44 From a Limestone Quarry to an Ecologically Diverse and Economically

Self-sustaining System ............................................................................................. 45 CEMEX’s Safety Management System .......................................................................... 48 Modernization at Rüdersdorf Cement............................................................................. 49 Aboriginal Relations........................................................................................................ 51 Ambassadors to the Community..................................................................................... 52 Meeting Development Needs in China ........................................................................... 54 Business Value of Community Outreach at Artesia Plant............................................... 59 Supporting the Case for Using Waste as Fuel................................................................ 70 Zero Emissions and the Cement Plant of the Future: Taiheiyo’s Philosophy................. 71 Adopting New Kiln Technology for Using Secondary Material at Rüdersdorf................. 77 Voluntary Agreement in Souselas, Alhandra, and Loulé ................................................ 85 CEMEX Ecoefficiency Program...................................................................................... 88


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A Broader Understanding of Sustainable Development The concept of a sustainable industry or a sustainable company is questionable, since the notion that a segment of global society in isolation can be sustainable is not logical in the broadest sense. Envi-ronmental and equity concerns are not something just to be added to investment needs, consumption patterns, governmental activities, and the myriad of private enterprise actions. They must be an integral part of development itself, and thus, must be understood as involving the whole of society, not just individual enterprises or households. Conserving energy, reducing emissions, and engaging in local activities favorable to the environment do not equate to sustainable and equitable development, unless elected governments and international organizations become deeply involved in assisting the process. The Brundtland Commission Report and subsequent discussions provide additional details on the characteristics that contribute to this broader understanding of SD: SD should be pursued under conditions of increasing economic and environmental efficiency,

with scientific and technological knowledge being used both to protect renewable and non-renewable resources, and to promote less polluting material inputs and cleaner outputs, and

SD must be equitable, encompassing the idea that growth and development should contribute to the reduction of gross inequalities among various groups that have arisen in the past century.

Part 1: Introduction – Accepting the Challenge

1.1 Origin and Purpose of the Study

The new millennium brings new challenges to the business community. In addition to continuing competitive and economic pressures, external parties concerned with human rights, environ-mental protection, and social welfare are increasingly scrutinizing companies in all sectors of the economy. Some companies have voluntarily adopted codes of conduct that try to address these issues, and have come to believe that it makes good business sense to understand and incorporate the expectations of stakeholders into their strategic goals.

As in other industries, progressive cement companies are recognizing that to remain competitive in the future, they must combine sound financial performance with a commitment to social responsibility, environmental stewardship, and open and honest interaction with stakeholders.8 A number of cement companies have begun to embrace the goal of sustainable development (SD); namely, to “meet the needs of the present without compromising the ability of future gen-erations to meet their own needs”9 (see box below). This goal implies a commitment to consider both environmental and social impacts as the industry strives for continued profitability and growth. For example, the projected growth for the cement industry is largest in Asia and South America, where developing countries are experiencing rapid industrialization, especially in urban areas. Achieving equitable economic development in developing countries will depend on responsible governance and attention to environmental and social concerns.10 Cement companies that are sensitive to these needs will benefit by solidifying their relationships with key stakeholders in the regions where they operate. Moreover, establishing new capacity in devel-oping countries may offer opportunities to introduce next-generation processes that are environmentally beneficial.

8 T. Schmidheiny, CEO of Holcim, Keynote address at HRH The Prince of Wales Business & Environment Program, Cambridge,

UK, 2000. 9 UN World Commission on Environment and Development, “Our Common Future,” Report by the Brundtland Commission 1987. 10 World Bank, Comprehensive Development Framework, http://www.worldbank.org/cdf/overview.htm.

http://www.worldbank.org/cdf/overview.htm


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WBCSD Working Group Cement

CEMEX (Mexico) Cimpor (Portugal) Heidelberg Cement (Germany) Holcim (Switzerland) Italcementi (Italy) Lafarge (France) RMC (United Kingdom) Siam Cement (Thailand) Taiheiyo Cement (Japan) Votorantim (Brazil)

(Country indicates headquarters)

Adoption of SD principles has exciting implications for the cement industry. In the past, cement companies have been perceived as slow-changing, inherently polluting commodity producers. In some cases, past practice has contributed to this perception. Yet some cement companies have made strides in devising waste recycling technologies, formulating new specialty products, and applying modern technology to achieve operational efficiency. The emergence of SD as a key stakeholder concern provides an opportunity for broader dissemination of these innovative practices and for emphasizing the value that cement production creates for society.

This report, developed under the auspices of the World Business Council for Sustainable Development (WBCSD), is the result of a two-year, $4 million study sponsored by ten major cement companies from around the world, known as the Working Group Cement (WGC). Together, they produce approximately one-third of the world’s cement and operate in most of the world’s cement-producing nations. Additional monetary and in-kind support was provided by many organizations (see Acknowledgements).

The purpose of the study is to assess the current status of the industry with respect to SD practices, and to provide a vision and recommendations for both cement companies and their stakeholders to work together toward a

sustainable cement industry.11 Achieving this vision will challenge cement companies to build SD into all aspects of their businesses, including plant siting, quarrying, plant operation, research and development, employee health and safety programs, product development and utilization, and community interaction. This broad adoption of SD will enable cement companies to meet stakeholder expectations, to assure a positive environment for their employees and surrounding communities, and to find new ways to create value for their shareholders.

The cement industry cannot accomplish changes without the active commitment and participa-tion of other groups. Sustainable development requires sustained teamwork. For example, cooperation will be necessary to develop appropriate policies and regulatory regimes by governmental bodies; to establish constructive and open communication between cement companies, non-governmental organizations (NGOs), and local communities; and to encourage use of SD-based lending and investment criteria by financial institutions.

The intent of this document is to provide both cement companies and their external stakeholders with (1) a clear understanding of the industry’s current status and its potential for becoming more sustainable; and (2) an agenda for change, including actions that companies and stakeholders can take to improve the sustainability of the industry. The following three sections comprise the report:

Part 1. Introduction – Accepting the Challenge: This section introduces the motivation and business case for the study, describes the process of cement manufacturing and the characteristics of the industry today, summarizes the forces and barriers that influence the industry’s ability to address SD, and discusses the importance of external stakeholders in shaping the actions of the industry.

11 Sustainability is not a defined end state; measurement of progress is discussed further in Part 2.


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Part 2. Seizing the Opportunity – A Sustainable Future: This section identifies eight key issues that characterize the overall SD performance of the industry, and analyzes strengths, weaknesses, opportunities and threats to progress. It then recommends a vision for SD in the cement industry, and potential indicators for assessing progress toward that vision.

Part 3. Embarking on the Path – An Agenda for Change: This section presents specific recommendations for moving toward SD, together with potential actions to help achieve each recommendation. Finally, a series of examples is provided of hypothetical cement companies in 2020 that have pursued various pathways to SD.

This report has two principal audiences: (1) for stakeholders outside the industry, it provides an overview of the cement industry, its potential for becoming more sustainable, and the roles that stakeholders can play in realizing that goal; and (2) for cement companies, it provides an independent assessment of their current status and recommendations for improving their sus-tainability. It also presents hypothetical scenarios of future cement companies that have pursued different paths toward SD.

The study developed a variety of practical tools to support SD assessment and implementation. In the text, SD tools and supplementary information are highlighted in boxes and additional detail is provided in Appendix A. In addition, the project included more than 150 case studies. Many of these are described in text boxes and additional information is provided in Appendix B.

1.2 The Business View of Sustainable Development SD represents a vision of industrial progress that respects both human needs and global ecosystems, preserving the foundations upon which human quality of life depends.12 A com-monly used metaphor for corporate sustainability is the “triple bottom line,” which defines three dimensions of a sustainable business (Figure 1-1):13

Economic prosperity and continuity, including creation of wealth and growth opportunities for both the business and its stakeholders.

Environmental stewardship, including emis-sions reduction and resource conservation on both a local and a global scale.

Social responsibility, including quality of life and fair treatment for both company employees and human society as a whole.

Thus, a “sustainable business” can be defined as one that is able to anticipate and meet the eco-nomic, environmental, and social needs of present and future generations of customers and stakeholders.14

12 Hawken, P., A. Lovins, et al., Natural Capitalism, Little, Brown & Company, UK, 1999. 13 Elkington, J., Cannibals with Forks, New Society Publishers, Canada, 1998. 14 J. Fiksel and D. Fiksel, From Here to Sustainability: A Global Perspective, Chemistry Business, April 2001.

SD Tools Case Studies


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“Going beyond compliance to find ways to achieve the triple bottom line is what sustainable development is all about. It’s the next step in corporate accountability...and it’s a step the energy industry must take.” Archie Dunham, Chairman, Conoco, Inc. Source: “The Transformation of the Oil Industry: Strategies for a New Era,” Cambridge Energy Research Associates 19th Annual Executive Conference, Houston, Texas, February 2000.

Companies that voluntarily adopt SD are motivated by a clear linkage to enterprise value. Early adopters of SD have included companies in many different industries, such as chemicals, consumer products, pharmaceuticals, motor vehicles, computers and electronics, forest products, petroleum, and floor-coverings. Their primary drivers include:

Evidence that they can create value by adopting “eco-efficient” production methods to improve both operating efficiency and market positioning

Increasing acceptance among chief executives of the ethical obligations associated with “corporate citizenship”

Emergence of doctrines such as “extended producer responsibility” which broaden corporate accountability and raise public expectations regarding company behavior

Explosive growth of electronic communication, creating global visibility for companies

Recognition by the financial community that sustainably managed companies tend to generate superior economic returns, and

Broadening of the concept of business risk management to include social and economic pressures that may create long-term vulnerability.

The purpose of business SD initiatives is to shift the company operations from a traditional, resource-intensive, and profit-maximizing business model to a more eco-efficient, socially responsible, and value-maximizing model. This shift aligns well with the financial goal of increasing enterprise value. Enterprise value added (EVA), also known as economic value added or shareholder value added, is commonly defined as the difference between after-tax net operating profit and the weighted average cost of capital.15 There are several ways in which SD initiatives can contribute to EVA: Cost reductions due to increased operational efficiency and effectiveness

Revenue increases due to product differentiation and enhanced market acceptance

Reduction in capital employed due to process simplification and improved utilization

Reduction in risk weighting due to improved management practices and reduced liability.

In short, sustainable businesses can compete effectively by raising profits while reducing the cost of capital – i.e., doing more with less.

15 Battelle, “Toward a Sustainable Cement Industry: SD Business Case Substudy Report,”

http://www.wbcsdcement.org/final_reports.asp, 2002.

http://www.wbcsdcement.org/final_reports.asp


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1.3 The Cement Industry Since its origins nearly 4000 years ago, cement has become one of the basic building blocks of society. As a key component in concrete, cement holds together our highways, buildings, dams and other structures. In simple terms cement is an inorganic “glue” formed by mixing together several natural ingredients, heating them to a temperature of 1450°C (2640°F), and grinding the resulting material (clinker) to a powder.16 When mixed with water, the powder creates a substance that is adhesive and durable.

The majority of cement produced worldwide is Ordinary Portland Cement (OPC). Typical materials used in making OPC include limestone, shells, or chalk combined with shale, clay, and slate. About 85% of the mass is typically lime. In addition, fly ash, slag waste from blast furnaces, silica, and iron ore are used in a variety of other blended and specialty cements produced for different applications.17 Additional information on the technical and operational characteristics of the industry may be found in Appendix C.

Many people mistakenly think of cement and concrete as synonymous. Concrete is manufac-tured by mixing cement with sand, small rocks (called aggregate), and water. The resulting chemical reaction, called hydration, binds the materials into a strong, solid, durable mass.

16 W. D. Callister, Materials Science and Engineering: An Introduction, Wiley, NY 1994. 17 Portland Cement Association, Portland, Blended, and other Hydraulic Cement, 11th Edition, 2001.

Early Adopters of Sustainability

Many WBCSD member corporations have established progressive sustainability initiatives, ranging from philanthropy to “ecological footprint” reduction to enhancement of the inherent social value created by their products and services in the marketplace. Creating social value may involve assuring human health and nutrition, improving education, or stimulating growth of new businesses. For example:

DuPont has established an overall mission of “sustainable growth” – improving social and share-holder value while reducing its ecological footprint. Through “green chemistry” innovations the company has created “eco-friendly” products that eliminate waste and are environmentally benign. DuPont has also adopted a sustainability performance indicator (shareholder value added per pound of product) that reflects their overall goal of creating greater value with fewer resources – i.e., doing more with less.

Rio Tinto, a global mining company, has been exploring how it can contribute to sustainability. It focuses on practicing social and environmental responsibility at the local level, including develop-ment of customized sustainability reports for local stakeholders. Rio Tinto emphasizes engaging with stakeholder and government groups to achieve transparency and build consensus around key decisions, such as opening a mine in a new area or closing an existing operation.

Royal Dutch Shell has mounted a program to integrate sustainability into worldwide business practices. The company has introduced a Sustainable Development Management Framework, aimed at continuous improvement in the triple bottom line. Capital investment decisions now take into account environmental and social considerations, and Shell seeks early stakeholder involvement, rather than reacting to concerns at a later point.

These pioneering companies have encountered many barriers, including resistance to change, discom-fort with stakeholder engagement, skepticism about “soft” social objectives, and lack of accepted per-formance standards. However, by approaching sustainability as a basis for business improvement and innovation, they have realized benefits ranging from cost reduction to improved right to operate.


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Although cement is the critical ingredient in concrete, it com-prises only about 15% of its mass.18 Concrete is a versatile construction material used for a wide range of applications, such as building, roads and bridges.

The stages of cement and con-crete production are depicted in Figure 1-2. Note that the focus of this report is restricted to the production of cement. The study boundary encompasses raw materials extraction, quarrying, and cement manufacture, includ-ing pre-processing, burning, final processing, and storage. How-ever, neither distribution of the final cement product nor the addition of aggregates, sand, water and additives to make con-crete are included in the main scope of the study. These latter stages are discussed only to a limited extent in this report.

Cement Production Sources

Cement is a globally produced and ubiquitous bulk material. At

the end of the year 2000, cement plants were operational in more than 150 countries. The largest producing countries along with the capacity of the primary companies involved in this study are listed in Table 1-1. Large cement companies tend to be regionally diversified. For instance, Lafarge and Holcim operate plants in all five regions of the globe (North America, Latin America/Caribbean, Europe, Asia/Pacific, and Africa/Middle East). Most of the other companies

18 Portland Cement Association, Fundamentals of Concrete, 2001.

The History of Cement

Cement has been used in one form or another for millennia. The Egyptians, for example, discovered that a mixture of lime and gypsum (similar to plaster of Paris) could serve as a mortar. The Greeks and Romans made further advances in cement technology. Structures such as the Pantheon have withstood many centuries of time, due in part to the durability of cement.

The modern history of cement dates to the mid-16th century when a British engineer found that cement made from limestone with high clay content would harden underwater. Other experimenters in France and England worked on various cement formulae through the mid-1800s.

In 1824 Joseph Aspdin, an English mason, patented a cement he called “portland” because it resembled stone quarried on the Isle of Portland off the English coast. Aspdin’s recipe was a mixture of limestone and clay, pulverized, burned, and reground into cement. This process is still the basis for more than 90% of the cement manufactured in the world. Source: Castle Cement, http://www.castlecement.co.uk/ and Moore, David, “The Riddle of Ancient Roman Concrete,” http://www.romanconcrete.com/, 1993.

Buildings & Roads

Concrete Plant

Cement Mill

Clinker Kiln

Aggregates, Sand, Water, Additives

Energy

Study Boundary

Concrete may be recycled back in the form of secondary aggregates

Materials: Gypsum

Pozzolana Slags, Fly Ash

Grinding Mill

Quarry

Materials: Limestone

Clay/Additives

Figure 1-2. Stages in the Manufacture and Use of Cement

http://www.castlecement.co.uk/

http://www.romanconcrete.com/


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have a similar worldwide presence, with some exceptions such as Siam Cement and Votorantim, which have some foreign subsidiaries but operate mainly within their respective national boundaries.

Table 1-1. Major Sources of Cement Production

Ten Largest Producing Countries

Production* in year 2000, million tonnes/yr

Primary Companies Funding Study

Sales in year 2000, million tonnes/yr

China (estimated) 576 Holcim (Switzerland) 82

India 108 Lafarge (France) 73

United States (estimated) 90 Cemex (Mexico) 51

Japan 86 Heidelberger (Germany) 47

South Korea 52 Italcementi (Italy) 39

Brazil 40 Taiheiyo (Japan) 30

Italy 39 RMC (UK) * 20

Turkey 39 Votorantim (Brazil) 17

Spain 38 Cimpor (Portugal) 16

Germany 35 Siam (Thailand) ** 14

*Production including exported clinker. *capacity rather than sales

**source : Goldman Sachs

Source: CEMBUREAU 2000, via direct data exchange.


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Cement Manufacturing Process

Manufacture of Ordinary Portland Cement (OPC) begins with extraction of raw materials (limestone and clay) from subsurface geologic deposits. The location of the limestone quarry in relation to the plant is a major consideration in siting a cement plant. Limestone quarries are usually developed by removing the top layers of earth to expose the underlying mineral deposit. Using specialized mining equipment to scrape up the limestone layers, the material is crushed from the size of boulders to that of gravel (1). In many quarries the limestone is in thick beds and requires explosive blasting to break loose large pieces of stone, which can then be transported to the crusher via truck.

Material samples are taken at various points in the process (2) and sent to the laboratory for quality analysis. In some modern plants, these samples are taken automatically and sent directly to the laboratory via pneumatic conveyor. In order to assure continued plant operations and a consistent quality, the limestone is stacked up in a storage pavilion or a silo (3).

Other raw materials, such as clay and silica sand, are similarly transported to the plant via truck or conveyor. These materials are generally found nearer to the surface and are relatively easy to extract. Some plants use different methods to transport the raw materials, such as cable cars and barges.

The next several steps in the process involve pre-processing of the materials to prepare them for thermal processing. The proportioning station (4) delivers the raw material to the grinding mill (5) in the right quantity and composition. The raw meal, as the mixture is now termed, is then ground to the requisite degree of fineness in the raw mill and is dried at the same time. The raw meal is homogenized and stored in large silos (6) from which it is delivered at a controlled rate to the pre-heater (7). Use of a preheater increases overall energy efficiency. The raw meal is then preheated and calcined (carbon dioxide is driven off and the first step in the cement reaction takes place).

Some plants, typically older ones, use a wet process to prepare the raw meal prior to its introduc-tion to the kiln (8). In these plants, after the raw materials are proportioned, they are ground with water to form a slurry (adding enough water to make a suspension of the particles). Otherwise, the two processes are very similar. Modern cement kilns consist of a large cylinder as much as 3.5 meters (12 ft.) in diameter lined with heat resistant brick. The horizontal axis of the kiln is inclined

slightly to allow the materials to slowly move through the kiln at a prede-termined rate. At one end of the kiln is a burner that heats the kiln to about 1800-2000°C to maintain material temperatures of 1450°C. The process can use a wide variety of fuels, ranging from fossil fuels such as coal or natural gas to alternative fuels such as waste solvents, spent motor oil, and used tires. Once the burned product, called clinker, has traversed the kiln, it is cooled (9) and heat is recovered to further improve energy efficiency.

After cooling, the clinker is stored in a stockpile (10). Based on production needs, the clinker is ground to a fine powder and blended with additives (11), such as gypsum. Depending on the required type and grade of cement, the clinker content of the final product may range from about 95% down to about 30%. The finished cement is transferred to storage silos, and then discharged into bulk transporters or bagged (12).

Sources: Krupp Polysius, http://www.krupp-ag.com/polysius/ CEMBUREAU, http://www.cembureau.be/

http://www.krupp-ag.com/polysius/

http://www.cembureau.be/


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Figure 1-3 illustrates the capacity, production, and consumption statistics for the year 1999 and growth trends for the 1990-2000 decade in five geographic regions. The Asia/Pacific region, which contains some of the world’s poorest countries and more than half of the globe’s popula-tion, outpaces the other regions by a wide margin.19 China alone accounts for roughly one-third of global cement production. Appendix C shows that, relative to gross domestic product, cement consumption in developing regions such as Asia/Pacific is growing at a much faster rate than in developed regions such as North America and Western Europe.

It is important to note that there are two different types of markets for cement products. Cement is used in bulk to manufacture concrete for applications in infrastructure development, including buildings, plants, roads, and airports. However, individuals or contractors can purchase bags of cement for small construction projects and for making improvements in their homes and busi-nesses. The portion of cement sold in bags (versus bulk) is much larger in developing countries.

1.4 Forces of Change and Barriers The cement industry is experiencing both structural and market changes. Awareness of SD has grown, especially among governmental and non-governmental organizations that are concerned with balancing economic priorities with environmental and social needs. Figure 1-4 summarizes

19 International Cement Review, “The Global Cement Report: Fourth Edition,” December 2000.

Figure 1-3. Regional Cement Statistics, 1999.


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Since 1950, the world’s urban population has increased nearly four-fold. Today, the urban population – almost 3 billion people – is growing three times faster than the rural population. Source: http://www.unfpa.org/swp/swpmain.htm

the forces of change that are driving the industry toward SD and traditional barriers that can inhibit progress. These forces include:

Stakeholder Demands: Stakeholders increasingly are expressing their views and taking political action. For example, environmental justice activists in the U.S. are expressing opposition to the concentration of large industrial facilities in low-income areas. This very important driver is discussed further in Section 1.5.

Customer Needs: Demand is increasing for specialty cements and concretes that meet particular customer needs. For example, some governments and other institutions have begun specifying the use of “environmentally preferable” products, including cement with lower virgin material content. And, emerging business models – whereby large architectural and engineering firms contract to design, build, operate and eventually transfer facilities – will lead to increased emphasis on life cycle costs and durability of structures, which could increase the demand for high-performance and high-strength concretes.

Emerging Economies: Population in developing nations is growing rapidly, especially in urban areas.20 This trend, combined with emerging affluence, represents a business opportunity for the private sector. However, some groups fear that economic growth might occur at the expense of the environment and social welfare.

Environmental Concerns: At a local level, communities focus on the more obvious environmental issues associ-ated with cement plants – dust, noise, land use impacts, air and water quality. However, some are concerned about

toxic emissions associated with the use of alternative fuels in cement kilns and the health effects of adding waste-derived materials. Although scientific studies indicate that these

20 Note that the definition of “urban,” typically a population of 2500 in a specified area, may not fully capture some of the

infrastructure limitations in developing countries.

http://www.unfpa.org/swp/swpmain.htm


11

alternative fuels and raw materials (AFR) can be used safely, the public is sometimes skeptical, despite the waste recovery and fossil-energy reduction benefits.21 Another major concern is that the cement industry contributes about 3% of global greenhouse gas emis-sions (see Section 2, Figure 2-5).

Regulatory Policies: Around the world, government policies and regulations are placing increasing restrictions on industrial emissions, operating practices, health and safety, and freedom to operate (partly in response to stakeholder pressures). Despite the obstacles encountered in implementing the Kyoto protocol, many national governments will likely adopt carbon management policies. Some countries have already done so, for example the United Kingdom promulgated the “Climate Change Levy”22 in order to reduce greenhouse gas emissions (see box in Section 2.3).

Innovation: Both inside and outside the cement industry, researchers are discovering new technologies, products, and processes for the manufacture and use of cement and compet-ing construction materials. Examples of process improvements range from newly commer-cialized technologies, such as fluidized bed kilns, to developmental concepts such as cement manufacture in electric power plants and solar inputs to kilns. Product innovations range from increased use of certain underused wastes, such as paper mill sludges, to mineral or organic polymers with cement-like properties. Some of these product innovations could be viable substitutes for Ordinary Portland Cement.23

Transparency: Public expectations for corporate behavior are changing. Businesses are increasingly being held accountable for their policies and practices with respect to human rights and environmental stewardship.24 Disclosure has become commonplace, and elec-tronic communication has encouraged demands for global accountability and transparency.

Energy Prices: The economics of cement production are changing due to volatile energy prices. This has already motivated the industry to explore alternatives to conventional fossil fuels. At the same time, low energy prices in some regions, such as North America, may inhibit efficiency improvements and innovations.

Global Consolidation: The cement industry is consolidating (see box on next page), and cement companies are acquiring or building plants in emerging markets such as China, India, and Indonesia.25 Tensions between companies and local communities can occur over issues such as employment practices or disruption of natural resources by private enterprise. Cement companies will need to understand and build upon different regional and cultural characteristics in order to master the complexities of local engagement. Globalization provides the potential for dissemination of good practices and increased availability of resources for environmental and social investment.

Figure 1-4 also depicts the following barriers to sustainability in the cement industry: Mature Material: Ordinary Portland Cement is a mature product that is familiar to

customers. Making changes in cement or concrete recipes or manufacturing processes has proven difficult.26 Some materials and construction specifiers, purchasing agents, and users are resistant to changes in product characteristics.

21 CEMBUREAU, “Environmental Benefits of Using Alternative Fuels in Cement Production: A Life-Cycle Approach”, 1999. 22 The Climate Change Levy is a tax on business energy use in the U.K., effective in April 2001. 23 Battelle, “Toward a Sustainable Cement Industry: SD Innovation Substudy Report,”

http://www.wbcsdcement.org/final_reports.asp, 2002. 24 McIntosh M., et al., Corporate Citizenship: Successful Strategies for Responsible Companies, Times Prentice Hall, New Jersey,

1998. 25 International Cement Review, “The Global Cement Report: Fourth Edition,” December 2000. 26 Sauer, G., “S.W.O.T. Analysis for Cement and Concrete Industries,” Engineering Foundation Conference on Advances in Cement

and Concrete, July 1998.



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Case Study: Privatization in the Egyptian Cement Industry

By the early 1990s, Egypt’s government-owned cement industry had build many of its plants outside urban areas such as Cairo, but these communities had since expanded and surrounded these plants with residential development. Local particulates and dust emissions created significant local health concerns and even crop damage, especially near plants with older technologies such as wet process kilns. Despite their growing mistrust of the industry resulting from these concerns, Egyptians have also greatly valued its role in creating jobs, stimulating economic growth, and supporting the nation’s urbanization and infrastructure development.

Egypt launched its privatization program in 1991, and significant opportunities in this growing economy attracted the attention of foreign investors interested in buying shares in one of the eight state-owned cement companies or in building new plants. In some cases, the sale of government-owned companies has been delayed by concerns regarding potential losses of employment and foreign dominance from multinational companies, by decreases in the companies’ value due to financial losses or foreign exchange fluctuations, and by demands to relocate plants away from urban centers. The government addressed many of these concerns by funding a voluntary Early Retirement Scheme for cement workers, by requiring a 10% allocation of shares to employee shareholder associations, and by obtaining commitments from investors to maintain employment levels.

By 1999, all eight companies were at least partially owned by private investors, with 30% foreign ownership in late 2001. These private investors have furnished the financial capital required to implement new managerial systems and technologies in order to modernize and expand existing plants and improve their financial and environmental performance. A few cement companies have even joined community groups and other stakeholders in lobbying for improved environmental standards. While the Egyptian government is also working to incorporate these types of improvement in the plants it still owns, its longer- term focus is on continuing the privatization process and shifting its investments towards other priorities such as human development projects.

Resource Intensity: Cement production requires large amounts of energy and raw materials. Using existing processes, only incremental reductions can be achieved in the total amount of energy and limestone used to produce a unit of OPC.

Capital Intensity: Cement production is one of the most capital-intensive industries and major plant modifications are expensive. A long time period may be required to recover cement plant investments, leading to a conservative attitude toward change.

Lack of Trust: Stakeholder familiarity with cement companies and the level of mutual trust vary widely, ranging from respect to indifference to suspicion (see Section 1.5). The industry is often associated with dust, traffic, and eyesores such as quarries and tall smokestacks.27 The media seldom portray the positive accomplishments of the cement industry.

Standards and Specifications: Product standards for cement and concrete are intended to ensure the safety and integrity of built structures. In the past, standards required very specific product composition, and innovations such as cements containing waste were difficult to introduce. Although a wider range of standards is now available, some of which are based on product performance rather than composition, designers and engineers still widely specify traditional products. Some argue that these composition standards result in over- specifying the concrete design of structures, which results in more cement consumption than the amount truly required for safety and structural integrity.28 Although these practices bolster OPC sales, they contradict SD principles that encourage lower

27 Chandelle, J.M., “The European Cement Industry: The Challenges Ahead,” CEMBUREAU. 28 Holtec Consulting Pvt. Ltd., “Cement Market Study for Germany,” 2001 (unpublished).


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resource consumption. Product standards also can be misused to protect vested market interests.

Company Inertia: One of the greatest barriers to sustainability is inertia – the tendency for cement companies to continue operating as they have in the past. Resistance to change and skepticism about new ideas are typical of mature industries. In the absence of a crisis, inertia may be difficult to overcome.

Market Pressures: A shift towards usage of higher strength cement, even for non-critical applications like plastering and flooring is occurring in many countries. In a number of cases this material is produced through use of higher quality (higher CaO content) raw material leading to faster resource depletion.

Commodity Product:29 Because cement is a commodity product, prices within a given market are relatively uniform across companies. As a result, cement companies hesitate to make investments in SD not clearly linked to near-term cash flow.

The Role of Governance

Achieving long-term progress in SD requires a commitment to responsible governance on the part of both corporations and governments. Sound corporate governance systems are necessary for companies to attract investment capital and maintain the confidence of their shareholders and other stakeholders. In most of the developed world, the established frameworks of laws, regulations, and management practices encourage corporate responsibility and accountability. In developing and transition economies, and even to some extent in the developed world, there can be instances where the existing public institutions do not provide adequate oversight mechanisms to assure sound corporate governance.30 This creates the potential for abuses that may hamper economic and social development.

There are other societal mechanisms that complement the traditional role of governments in promoting responsible corporate governance. Examples include the following: Voluntary codes of conduct defined by international organizations, e.g., the CERES

Principles or the UN Global Compact

Codes of management practice established by industry associations, e.g., Responsible Care® in the chemical industry

Product standards and codes set by national and international standards bodies

International agreements or treaties such as the Basel convention on transboundary shipment of hazardous waste

Transparency and reporting standards such as the Global Reporting Initiative

Socially responsible investment funds and sustainability rating systems

Local public-private affiliations such as community advisory panels.

These and other mechanisms help to generate an ongoing dialogue between corporations and society at large regarding principles and expectations for corporate behavior. Companies that are responsive to these societal mechanisms will find that a commitment to SD is a fundamental tenet of sound governance.

Cement companies cannot be expected to take sole responsibility for solving the challenging problems of assuring responsible governance in an increasingly globalized economy. However,

29 A commodity product is one for which the primary basis of competition is cost. 30 World Bank, "Corporate Governance: A Framework for Implementation," 2001.


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it is important for cement companies to support transparency and affirm their opposition to corrupt practices. Non-governmental organizations (NGOs) are playing an increasingly important role in influencing government policies and promoting principles of sound governance at both a national and international level.31 Thus, it is in the interest of cement companies to collaborate with public and private institutions, including NGOs, religious leaders, unions, academia, and trade associations, to help design effective governance systems that benefit all stakeholders. At the same time cement companies need to ensure that their internal corporate governance policies and mechanisms are consistent with the goals of sustainable development.

1.5 Importance of Stakeholders One of the most powerful forces driving business adoption of SD practices has been the growing influence of external stakeholders. Consequently, an increasing number of companies in major industries are seeking open engagement and dialogue with external stakeholder groups in order to better understand and manage the environmental and social impacts of their

businesses.32 Historically, the principal stakeholders of concern to the cement indus-try were the shareholders and financial insti-tutions that influenced their market value and access to capital. Within the past 10 years, however, the voices of other groups, such as local communities, NGOs and local govern-ments, have become more clear and force-ful. Reasons for this change include access to better information and education, recognition of stakeholder concerns by governance bodies, and the emergence of NGOs as focal points for dialogue on a variety of issues.

Several cement companies have initiated dialogue efforts in specific countries, and many are involved in local community assistance. However, the cement industry as a whole has not moved effectively toward stakeholder engage-ment.33 In most cases, cement companies do not open a two-way dialogue with stakeholders until a major event (e.g., siting a new plant) requires public involvement. Some companies are learning the importance of ongoing involvement, including listening to and respecting the views of their stakeholders. As stakeholder groups become more informed and empowered, it is important for cement companies to engage with them proactively.

31 Battelle and ERM, “Toward a Sustainable Cement Industry: Public Policy Instruments Substudy Report,”

http://www.wbcsdcement.org/final_reports.asp, 2002. 32 WBCSD, “Stakeholder Dialogue: The WBCSD’s Approach to Engagement,” 2001. 33 Battelle, “Toward a Sustainable Cement Industry: Stakeholder Dialogue Substudy Report,”


Stakeholders: A Definition

Stakeholders for the cement industry are all individuals and groups who see themselves as potentially affected by or who can impact cement operations at the local, national, or international scale. These groups include, but are not limited to, neighbors, community organizations, employees, trade unions, government agencies, the media, non-governmental organizations (NGOs), contractors, academia, and suppliers.




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Events that often trigger engagement of stakeholders include:

New facility siting

Existing plant expansion, upgrade, or modification

Process change

Publication of regulatory information

Plant shutdown.

Cement Study Stakeholder Dialogues

To obtain a perspective on stakeholder issues specific to the cement industry and to help the industry understand stakeholder concerns, this study included two sets of dialogues. The first set of events took place in Curitiba, Brazil; Bangkok, Thailand; Lisbon, Portugal; and Cairo, Egypt, and included local and national government representatives, academia, labor, science, consumers, suppliers, and non-governmental organizations, along with cement industry representatives. The four locations were chosen to provide variety in the relationship between the cement industry and its stakeholders, the level of economic development, and the principal issues of concern. A second set of events, aimed at policy-makers, financial development organizations, and global environmental interest groups, was conducted in Washington, D.C., USA, and Brussels, Belgium. Both sets were facilitated by experts in stakeholder dialogue.

Findings from these dialogues reinforced the fact that stakeholders perceive that the industry interacts only in a limited way with local communities, who feel that there are still environmental and social issues that the industry needs to address. There was an acknowledgement that many of the efforts initiated in the past several years to engage with stakeholders and to improve the environmental aspects of their operations are positive, although not always well communicated. The following are examples of the range of comments received during the discussions:

“The cement industry is important to our economy.” – public interest group representative, Cairo, Egypt

“Local communities around cement plants have high expectations of support from the plants. [I am] particularly concerned with the loss of [our] mountain, which was a treasured part of the landscape.” – community activist, Bangkok, Thailand

“There is a need for earlier and more effective public involvement by the industry regarding waste burning.” – academic and NGO participant, Lisbon, Portugal

“The industry needs to respond to [specific] measures and targets.” – NGO representative, Brussels, Belgium

"The cement industry could be a very significant participant in the Climate Leaders [industry-government] partnership as they work to implement SD." – governmental participant, Washington, DC, USA

Additional commentary from the stakeholder dialogues may be found in Appendix D.

In practice, stakeholder engagement can arouse deep emotions, and is one of the most challenging activities for company representatives and plant managers. One les-son learned from the cement study stakeholder dialogue sessions (see box below) is that stakeholders are con-cerned about a lack of communication and engagement with the cement industry. In many countries, changing living patterns, urban growth and ownership shifts from local to foreign management have weakened the traditional connection between cement plants and their neighbors. As a result, mistrust sometimes exists between the industry and local communities.


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In some countries, public meetings occur as part of the permitting process for a new facility, and are often initiating events for stakeholder engagement with the cement industry. During these public meetings, cement companies have an opportunity to learn about issues that are of con-cern to the local community, and to establish a relationship of trust and openness. Rather than offering technical and scientific explanations, companies need to demonstrate an ability to listen and willingness to explore solutions in terms that are meaningful to stakeholders.

Conversely, if stakeholder concerns are not addressed effectively, then public opposition may interfere with business plans and create costly time delays. In addition, global advocacy organizations may enter the debate and broaden the local controversy to include themes such as use of waste fuels, urban sprawl, climate change mitigation, and natural resource protection.

In order to take meaningful actions with sustained environmental and socioeconomic benefits, the cement industry could strive to move beyond “dialogue” toward partnerships founded on common interests and goals.34 Collaboration with stakeholders may involve ad hoc initiatives or more permanent relationships such as working partnerships with individuals or institutions that have a stake in the cement industry. For example, Lafarge has formed an alliance with the World Wide Fund for Nature (WWF) to jointly pursue environmental improvements.35

Approaches to stakeholder engagement will differ greatly in different regions of the world. In developing countries, cement companies are often viewed as important contributors to society, and typically command respect from local stakeholders. In contrast, in developed countries, cement companies do not generally attract public attention, unless controversies arise regarding possible environmental impacts. Figure 1-5 illustrates how cement companies can use effective engagement to convert challenges into opportunities for win-win collaboration.

Discussions of stakeholder concerns often overlook the fact that company managers and employees are also important stakeholders. As community residents and citizens, they seek the same opportunities and protections for their families and children that others do. Moreover, they want to be proud of their companies, both as successful businesses and as responsible pillars of the community. On a personal level, they share many aspirations of SD with the external stakeholders discussed above. Thus, employees can play a valuable role as ambassadors to the community.

Finally, engagement with shareholders is just as important as engagement with communities and environmental groups. While some shareholders may be sympathetic to environmental and social issues, the majority are concerned about the company’s profitability and long-term stability. By communicating the business value of SD to shareholders (See Section 1.6), management can win their support and confidence.

34 Holliday, C. and J. Pepper, “Sustainability Through the Market: Seven Keys to Success,” World Business Council for Sustainable

Development, 2001. 35 Lafarge, Lafarge and the Environment, March 2000.


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Sustainable Cement Tool: Stakeholder Communication Guidebook

Battelle and ERM have developed a guidebook for cement companies that wish to improve their capabilities for stakeholder dialogue and communication. The guidebook focuses on activities at the plant level and provides a general approach, augmented by specific tools for implementation. Through engaging in dialogue, developing a mutual understanding, identifying win-win propositions and establishing partnerships, facility managers can convert challenges into opportunities that benefit both stakeholders and the enterprise.

CHALLENGES

Community lack of trust

• Dialogue

• MutualUnderstanding

• Win-Win Propositions

• Partnerships

OPPORTUNITIES

Community development

Prescriptive regulations Voluntary programs

Lower regulatory costs with environmental gains

Industry license to operate

Ad hoc planning and lack of co-ordination on long-term strategy

Industrial ecology

Advanced technology

Conservative markets Greener markets

Focus on complaints Synergistic solutions

Short term focus and lack of understanding of sustainability

Contribution to profits

Employee vision & pride

Figure 1-5. Building Mutually Satisfying Stakeholder Relationships

Case Study: Exshaw Quarry Management Working Group

Lafarge’s sandstone quarry – its source of silica for its Exshaw plant near Banff, Alberta, Canada – is in the middle of an area that in the mid-1990s was designated as a Natural Area. The provincial government invited Lafarge to participate in the Yamnuska Natural Area Working Group to discuss the future of the quarry.

During the ensuing negotiations, responding to a suggestion by an environmental group representative, Lafarge agreed to take recycled glass containers from the surrounding region, including Banff National Park. The silica in the recycled glass supplements the silica that Lafarge mines from the quarry in the Natural Area. This arrangement gives the company the opportunity to display its logo on glass recycling containers throughout the region and to provide a public service. Lafarge agreed to reduce the “footprint” of its operating area at the quarry and to progressively reclaim the quarry as mining progressed. It agreed to limit vehicle traffic around the quarry, and to confine its mining to the coldest months of the year when the fewest people are enjoying the Natural Area. The company also helped to develop a management plan for the Natural Area. Lafarge has assumed more of an environmental stewardship role for the area by building trails, avoiding conflicting land uses and reducing the visibility of its fences.

An environmental group representative questioned whether Lafarge could obtain its sandstone from another source. Lafarge responded that the high quality sandstone from the Mt. Yamnuska quarry was necessary for the production of high quality cement used in well casings for the oil and gas industry. To resolve this issue, the negotiating group brought in an expert from the Alberta Geological Society. The consulting geologist concluded that the Mt. Yamnuska quarry was the only economically feasible supply of high quality silica available to Lafarge’s Exshaw plant. The environmental groups accepted this finding. Subsequently, in 1997, the working group reached agreement that Lafarge could continue to operate its quarry in the Natural Area.


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“We’ve found a new way to win in the marketplace...one that doesn’t come at the expense of our grandchildren or the earth, but at the expense of the inefficient competitor.” Ray Anderson, CEO, Interface, Inc. Source: Daviss, B., “Profits from Principle: Five Forces Redefining Business,” The Futurist, March 1999.

1.6 Linking Sustainable Development to Enterprise Value Given the many challenges and stakeholder concerns that confront the cement industry, sustainability may seem like an expensive proposition. For example, the traditional model of environmental management views it as a “necessary cost of doing business.” However, this model is not appropriate for several reasons: Sustainability is not yet mandated by regulations, although issues such as carbon

management are rapidly moving in that direction. Most corporate sustainability initiatives are voluntary, discretionary, and motivated by business logic.

Given their cultural and economic constraints, it is unrealistic to assume that cement companies will be willing or able to incur significant costs in addressing sustainability issues unless there is a clear business case for doing so.

Sustainability is viewed seriously in the marketplace by both customers and shareholders and will continue to grow in importance. Sustainability requires strategic consideration by the Chief Executive Officer and other senior executives who are concerned with the viability

and growth of the company.

In fact, progress toward sustainability will only occur when there is a clear link to enterprise value.36 The key to sustainability for cement companies is discovering those links and finding ways to take advantage of them. The WBCSD recently published a report on “The Business Case for Sustainable Development,” which

argues that leadership in SD is correlated with overall financial performance, and also contributes to greater employee satisfaction and increased competitiveness.37

The financial community has begun to recognize that sustainable companies are generally better managed. In other words, those companies that accept environmental and social responsibility tend to generate superior shareholder returns.38 Using up to 60 criteria to develop its Eco Value21®39 ratings, Innovest has shown that companies with above average ratings have outperformed lower rated companies by 0.3-2.5% per year, depending on the sector.

Cement companies that make a genuine effort to understand stakeholder needs will discover opportunities for increasing enterprise value, which in turn creates shareholder value. There are a number of steps that cement companies can take to capture value: Establish business practices that consider both enterprise value and stakeholder value in all

business decisions

Identify “win-win” initiatives that improve license to operate, market access, and profitability while addressing societal needs

When evaluating investment opportunities, use a comprehensive framework that identifies nontraditional sources of enterprise value (e.g., stakeholder goodwill)

36 SustainAbility, “Buried Treasure: Uncovering the Business Case for Corporate Sustainability,” January 2001. 37 WBCSD, The Business Case for Sustainable Development: Making a Difference Toward the Johannesburg Summit and Beyond,

Geneva, 2001. 38 Repetto, R. and D. Austin, Pure Profit: The Financial Implications of Environmental Performance, World Resources Institute, 2000. 39 http://www.innovestgroup.com/index.html.

http://www.innovestgroup.com/index.html


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Understand how SD contributes to enterprise value: employee motivation, brand loyalty, community trust, corporate reputation, and operating benefits

Develop higher-margin, differentiated, sustainable products that generate greater customer and enterprise value while using fewer resources.

In summary, the enterprise value of SD includes not only direct financial benefits such as operating cost reductions, but also a variety of indirect benefits that stem from creation of value for external stakeholders. This is illustrated by the case of Siam Cement’s Lampang Plant (see next page) The theme of enterprise value creation will be explored further in the subsequent sections of this report.


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Case Study: Lampang Project – Creating Enterprise Value

In 1994, Siam Cement Industry planned to build a new plant in Lampang, a province in northern Thailand. The high transportation costs faced by cement plants in the Central region would give the Lampang plant a competitive cost advantage in local markets, thus increasing its market share and sales margin. Proximity to the country’s largest lignite deposit would give the plant a steady fuel supply with large reserves, ensuring stable returns for the investment over a long life for the plant. However, a state-owned power plant in Lampang had previously faced community concerns about SO2 emissions from burning lignite and demands that it install new pollution control equipment. The community’s negative view of large companies and fear of harm to the surrounding environment and community well-being created a risk of protests against the Lampang plant that could greatly increase project costs, delay completion, and slow sales growth.

To avoid a similar conflict, SCI began the project by identifying and engaging community stake-holders, including local leaders, monks, private businesses, governmental and non-governmental organizations, and the general public. Stakeholders were asked to identify concerns and to propose ideas for addressing those concerns. SCI developed systems to collect, evaluate, and synthesize these suggestions into its planning process and communicate progress back to stakeholders. The community was encouraged to participate in a plant site selection process that would acknowledge the project’s investment costs to SCI as well as local impacts to the local environmental, economy, and society.

SCI responded to suggestions for community development by establishing a community relations budget to provide scholarships, to support health activities at local hospitals, and to participate in local government, social, religious, and cultural activities. The company also ensured that tax revenues from the operation of the new plant would be directed to the local community and committed to hiring 70% of the new plant’s workforce locally during the construction period.

The plant’s highly efficient rotary kiln and use of AFR prolong the life of local raw materials and fuel reserves and also help reduce the plant’s greenhouse gas emissions. Investments in high-efficiency dust collectors and a closed-circuit water cooling system have further reduced air and water emissions. SCI has invented an innovative quarrying method that combines aspects of open pit mining and open cut mining. An inner crust is excavated while the outer inclined shell of the mountain remains intact, preserving the mountain’s outer appearance and enabling prompt rehabilitation.

The Lampang project’s integrated planning process has improved the projected financial returns for the investment by establishing a collaborative relationship with stakeholders based on a shared goal of enhancing the total value created for the plant and the community. Though the achievement of this goal has added new investment costs and operating expenses for the plant, it has also allowed SCI to complete construction while avoiding the many costs faced by its power-plant predecessor. Business benefits that will continue into the future include the transportation cost advantages, access to large fuel reserves, reduced energy and material costs, and positive relationships with a community that has recognized the Lampang plant as a model local company.


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Part 2: Seizing the Opportunity – A Sustainable Future

2.1 Key Sustainable Development Issues for the Cement Industry The cement industry is experiencing new challenges, as described in Part 1. Stakeholders are growing more outspoken, while demand for cement-based products is growing in many emerg-ing economies. Due to the inevitable tension between economic growth and corporate respon-sibility, it is important for the cement industry to understand its current status with respect to SD, including the risks of business impediments, and to articulate its future SD goals. The current SD profile of cement production can be summarized as follows: On the one hand, cement production raises a number of sustainability concerns – it con-

sumes large amounts of energy and resources, emits dust and other pollutants, disturbs large tracts of land during quarrying, and generates greenhouse gases.

On the other hand, the cement industry contributes value to society by (a) providing a key product used in developing the infrastructure to serve social needs such as shelter, mobility, water, and sanitation, and (b) by helping to dispose of unwanted materials.

Some progressive cement companies deserve credit for implementing innovative performance improvements and adopting enlightened policies and practices at individual plants. However, despite such points of excellence, this study has found that the cement industry as a whole is not yet contributing toward sustainability to the extent possible in the regions where it operates. While environmental performance is the area of greatest concern, stakeholders have also expressed concern about social and economic performance. This situation is comparable to that of other industries that rely heavily on resource extraction and energy consumption. At a minimum, cement companies will need to address their vulnerabilities through appropriate stakeholder outreach and risk management efforts. In addition, the cement industry has some unique opportunities to capitalize on its strengths in the area of industrial ecology, which involves exchanging resources with other industries to mutual benefit.

In order for the global cement industry to make genuine progress toward SD, it must address all three dimensions of the triple bottom line in concert. The following summarizes the important issues confronting the cement industry in each of the three dimensions – environmental, social, and economic.

“Our vision is that as society approaches a balance among economic, environmental and social sustainability, markets will become transparent, stimulate innovation, and be catalysts for change toward a better quality of life for everyone…We are convinced that it is in our enlightened self-interest to ensure the realization of an inclusive and effective global market system. Business cannot succeed if the society around us fails. We must fully engage the entrepreneurial spirit of commerce in order to profit from solutions that transcend borders – be they geographic, cultural, or economic. Through responsible entrepreneurship, progress towards sustainability can be won for all.” Source: Holliday, C. and Pepper, J. “Sustainability through the Market: Seven Keys to Success,” World Business Council for Sustainable Development, Geneva, Switzerland, April 2001.


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Environmental issues associated with cement industry operations include Impacts of resource extraction (fossil fuel, limestone, and other minerals) upon

environmental quality, biodiversity, and landscape aesthetics

Depletion of non-renewable or slowly renewable resources (fossil fuels or groundwater)

Dust emissions (from quarrying, cement production, and transport)

Other emissions that can affect air quality: nitrogen oxides (NOX), sulfur dioxide (SO2), carbon monoxide (CO), volatile organic compounds (VOC), dioxins, metals, etc.

Emissions of carbon dioxide (CO2) involved in global climate change

Solid wastes, including cement kiln dust (in some countries where standards restrict recycling back into the production process).

Driven by increasingly stringent regulations, the cement industry has reduced the environmental “footprint” of its production activities. However, as global industrial growth continues, pollution levels in certain regions may eventually exceed the natural capacity of ecosystems. Siting of new cement plants, especially in highly developed areas, may face strict emission controls as well as community opposition. For example, rules in the United States call for “prevention of significant deterioration,” which often implies zero growth in emissions.40 Likewise, the cement industry will be increasingly pressured to reduce global warming emissions.

Finally, although cement applications are beyond the scope of this study, the construction industry generates a significant amount of waste in new construction and in demolition of aged buildings and infrastructures. Methods have been developed to recover demolition wastes and recycle them back into concrete production, thus reducing raw material costs. These types of initiatives hold promise for increasing the eco-efficiency of the overall cement life cycle.41

Social issues affecting the cement industry include impacts on human well-being and the satisfaction of basic needs for both cement industry employees and society in general. Cement

production can have both positive and negative social impacts. Community concerns about plant operation or new facility siting include health effects, worker safety, aesthetics, noise, dust, traffic congestion, and road dam-age. Some cement companies are striving to manage occupational safety and health (OS&H) more effectively, but it is still largely decentralized. In many countries, OS&H performance is not publicly reported, as it is in some other heavy manufacturing industries.

On the positive side, the cement industry has demon-strated that it can offer an environmentally responsible means of productively using certain wastes that would otherwise be a burden to society. In addition, particularly in developing countries where poverty is often a dominant

issue, cement companies can make significant social contributions through voluntary community assistance, training of workers, and improved infrastructures such as roads, sewers, and water supply (see box).

40 U.S. EPA, http://www.epa.gov/. 41 U.S. EPA, “Characterization of Building-Related Construction and Demolition Debris in the U.S.,” Report EPA530-R-98-010, 1998;

and Muller, C. “Requirements on Concrete for Future Recycling,” Aachen University, Institute for Building Materials Research, Germany, 1999.

“I would argue that concrete has had more of an impact on eradicating contagious diseases than the entire domain of medical research, simply through the construction of sewers in cities. You‘ve got to explain to people that concrete isn’t that awful concrete jungle material. It’s actually something that is of incredible value to humanity.”

Source: Dr. John Knapton, Newcastle University, (http://www.newscientist.com/opinion/opinterview.jsp?id=ns23205)

http://www.newscientist.com/opinion/opinterview.jsp?id=ns23205

http://www.epa.gov/


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Economic issues include the financial prosperity of both the cement industry and its stake-holders. The industry’s major contribution to the world’s economy is providing a low-cost pro-duct that is the preferred material for a variety of applications. Creation of enterprise value for cement companies is linked in many ways to their ability to address external stakeholder issues, as described in Section 1.5.

The development or expansion of cement facilities can create jobs and stimulate economic growth, but plant closures can result in adverse economic disruptions. Overall, as productivity improves, cement industry employment per tonne of product will tend to decrease.42 The global consolidation discussed in Part 1 may benefit stakeholders in developing countries if the pro-gressive approaches, such as uniform corporate environmental practices, that have been adopted by some cement companies become more widespread. It is critical that local and regional dialogue be maintained regarding these sensitive issues, and that the socioeconomic impacts of events such as plant closures be addressed responsibly.

The Susta inabil i ty Compass

This study analyzed the triple bottom line performance of the cement industry through the con-duct of 13 substudies (listed in Appendix E). As a result of these efforts, Battelle has identified eight key issues, which represent the main areas in which the cement industry can contribute to SD. These eight issues form the basis for the balance of this report, including assessment of the industry’s current SD status, and recommendations for improvement.

The Sustainability Compass (Figure 2-1) illustrates the relationships of the eight SD issues to the three dimensions of the triple bottom line. Although each of the eight issues addresses all three dimen-sions to some extent, the issues tend to align somewhat more closely to one or two dimensions; hence their placement near the three points of the triangle. These relationships are explained in more detail in Table 2-1, which describes potential benefits of progress that the cement industry can achieve. Note that many of the issues are strongly corre-lated; for example, improving energy efficiency will have positive impacts upon resource productivity, climate protection, emission reduction, and shareholder value.

The following sections assess the current performance of the industry in terms of key issues for which progress is needed. This assessment is followed by a vision statement, measurable goals, and recommended indicators for a more sustainable industry in 2020.

42 ERM, “Toward a Sustainable Cement Industry: Socioeconomic Development Substudy Report,”




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Table 2-1. Potential Benefits of Progress on Each SD Issue

Issue Environmental Social Economic Resource productivity

Decreased burdens upon fossil fuel resources and materials extraction

Conservation of resources for future generations

Waste disposal service to society

Reduced operating costs Potential new revenue

sources

Climate protection

Reduction in greenhouse gas emissions

Improved ability to main-tain current global habi-tation and food produc-tion patterns without disruption from sea level rise, extreme weather events, and other climate change consequences

Minimization of cement company’s financial lia-bility associated with CO2 and creation of new business opportunities

Reduction in climate-related economic dam-age to man-made or natural systems

Emission reduction

Improved air and water quality; protection of pristine environments

Minimization of dust, hazards, and other com-munity disturbances; reduced risk of worker and community health effects; improved quality of life

Reduction of societal economic damages from pollution

More cost-effective pollution prevention

Ecological stewardship

More responsible land use, protection of natural ecosystems and biodiversity

Improved maintenance of natural landscapes and ecosystems for personal enjoyment and aesthetic satisfaction; protection of ecosystems and biodiversity for future generations

Company’s improved right to operate and enhanced image

Protection of ecosystem services that provide food and other economic goods

Employee well-being

Safer and healthier working conditions

Increased safety, health, satisfaction, pride, and motivation

Reduction in lost time, improved productivity, career development

Easier recruitment of staff

Community well-being

Reduction in environ-mental disturbances, including noise, odor, vibrations

Improved public health & safety

Improved access to health care, education, training, sanitation, recreation

Improved quality of life, including aesthetics

Improved availability and affordability of goods and services

Improved quality of local labor force

Regional development

Consideration of long-term environmental impacts associated with regional development

More social stability due to economic prosperity

Increased availability of basic infrastructure (sewers, roads, etc.);

Improved job creation, economic growth, and standard of living

Increased regional capacity building

Shareholder value creation

Increased ability to design and implement state-of-the-art plants with low environmental impact

Increased ability of company to contribute to the well-being of the communities in which it operates

Improved company financial performance and competitive position

Note: Bold-faced items show the primary benefits.


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2.2 Resource Productivity Cement production inherently consumes a significant amount of resources, and represents a fundamental barrier to reducing the environmental “footprint” of the industry. Cement is a low-priced, high-volume material, and therefore the average material and energy throughput (tonnes per dollar of sales) is relatively high. Resource productivity for any manufacturing industry is determined by three basic flows – materials, energy, and waste – which are discussed below.

Materials: The primary raw material for cement production is limestone, but other materials such as marl, clay, bauxite, iron ore or sand are also commonly used. As a rule of thumb, approximately 1.5-1.6 tonnes of dry raw materials are required to produce one tonne of clinker. By substituting pozzolanic materials such as fly ash, blast furnace slag, or natural pozzolans for clinker, the cement industry has reduced the use of limestone and thus has lowered CO2 emissions (see Section 2.3). Reducing clinker volume also contributes to reduced energy use.

Energy: Energy efficiency is an important concern for the cement industry, because of the high temperature requirements in the cement production process – limestone is calcined between 600o and 900oC, and clinker production requires 1450oC. The industry’s energy consumption is estimated to be about 2% of global primary energy consumption and almost 5% of total industrial energy consumption.43 Energy use is directly correlated with CO2 emissions, as discussed in Section 2.3. The industry has reduced energy use considerably through improved technology, including a shift from wet to dry cement processing, introduction of preheaters, precalciners, improved burner design, and process modeling and control.44

In addition, many cement companies are substituting alternative fuels (AF) for fossil fuels, including wastes such as contaminated soil, animal meal, used tires, waste oil, spent solvents, and sewage sludge. This substitution can be considered a service to society, since the wastes would otherwise be disposed without economic benefit and possibly with adverse environmental impacts. However, waste burning has met with mixed stakeholder reactions, due to concerns about potential dioxin releases and dispersion of heavy metals (see Section 2.4). The use of alternative fuels and raw materials to improve resource productivity is discussed further in the box on the next page.

Waste: Significant amounts of waste, or “non-product output,” are generated in cement manu-facturing. For example, it is estimated that approximately 25% of cement kiln dust (CKD) in the United States is disposed as solid waste, totaling about 3 million tonnes annually.45 In contrast, many other countries allow the recycling of cement kiln dust back into cement production. Figure 2-2 depicts the approximate flows of materials and energy associated with dry process production of OPC in the U.S. Blended cements reduce the amounts of primary raw materials, and their environmental consequences, by substitution of secondary materials. (Note that the resource and energy consumption levels can vary greatly depending upon the specific product and process characteristics.) This figure illustrates that there is a direct relationship between material efficiency and waste generation. In other words, lowering the required material inputs will automatically reduce the quantity of waste associated with each tonne of cement produced.

See Appendix C for additional details on these flows.

43 International Energy Agency, The Reduction of Greenhouse Gas Emissions from the Cement Industry, Report number PH3/7,

May 1999. 44 G. Sauer, “S.W.O.T. Analysis for Cement and Concrete Industries,” Engineering Foundation Conference on Advances in Cement

and Concrete, July 1998. 45 U.S. EPA, Office of Solid Waste.


26

Alternative Fuels and Raw Materials (AFR)

The use of wastes as fuels in a cement kiln or as substitutes for clinker is often referred to as Alternative Fuels and Raw Materials (AFR). This practice can benefit both the industry and society, since reduced consumption of fossil fuels and virgin raw materials results in lower operating costs, as well as reduced CO2 emissions. In some cases, cement companies can earn revenues through waste recovery services.

If the scale of waste utilization is sufficiently large, investments in waste treatment or disposition facilities can be avoided. For example, in some countries cement plants have achieved as much as 40% substitution rates for waste fuel. However, if there is already an existing infrastructure for waste management (e.g. with incinerators for household, industrial and hazardous wastes), the cement industry will be confronted with competition for waste and possibly by resistance from governance bodies.

Despite the resource productivity benefits, AFR is a much-debated issue. According to the standard “waste hierarchy,” material re-use is preferred to recycling, and material recovery is generally preferred to energy recovery via combustion. However, there are cases, e.g., with plastics or spent oil, where cement kiln combustion is the most efficient method of recovery. In addition, it is important to distinguish between waste recovery and waste elimination – in the latter case, the waste has no economic value and in the absence of the cement kiln option would impose a cost on society. Life Cycle Assessment (LCA) has been applied to evaluate when it is appropriate to use the cement kiln option.

Source: CEMBUREAU, Alternative Fuels in Cement Manufacture, 1997.


27

“In the new millennium, it will not be enough to try to lessen the global waste burden generated by our existing technologies. We need to develop new technologies to eliminate or reverse the waste burden.”

Jean Davis, Sustainable Development Manager, Conoco, Inc.

Source: “Sustainable Development”, 19th Annual Executive Conference of the Cambridge Energy Research Associates, Houston, Texas, February 2000.

Opportunit ies for Resource Productiv ity Improvement

To improve resource productivity, many cement companies have implemented practices that increase their eco-efficiency. Stated simply, this involves increasing the ratio of cement output to resource input, including both material and energy resources.46 The practice of eco-efficiency is attractive from an economic perspective because, by reducing the resource “footprint” of cement manufacturing, companies can also reduce their material and energy costs.

Materials: In order to reduce material costs, and to assure the continuity and availability of future sources of raw materials, cement companies have taken a number of steps: Maximizing material extraction

efficiencies, e.g., through precision quarrying techniques

Finding alternatives to consump-tion of virgin materials, e.g., mineral substitution

Creating closed-loop, waste-free material cycles, e.g., recycling of cement kiln dust.

These approaches are discussed further in Part 3.

46 “Eco-efficiency – Creating More Value With Less Impact,” http://www.wbcsdcement.org/, 2000.

Case Study: Expanding and Educating Markets for Slag Cement at ALSEN

It is essential that industrial ecology opportunities reduce the environmental impact of cement production. But these benefits alone are insufficient to spur the industry to greater use of the concept. The challenges of producing and marketing slag cements that are competitive in price and quality and of informing customers about the benefits of the new products are equally important for success.

In 1996, ALSEN, a Holcim Group company, invested in a granulation plant at the Salzgitter steelworks. These two companies formally agreed to work together for at least 15 years. ALSEN is responsible for managing the entire granulation process and gets to use the blast-furnace slag. ALSEN developed new types of slag cements, nearly doubling their product range.

During the shift away from Ordinary Portland Cement (OPC) and toward blended cements, ALSEN has been able to maintain its mar-ket share. But the sales force has experienced problems in selling slag cements. Cost-conscious customers in the building sector are not swayed by environmental arguments. This runs contrary to intui-tion in the environmentally conscious German market. ALSEN has developed new marketing strategies in response to these challenges.

Granulated blast furnace slag at the Salzgitter steelworks being moved to the ALSEN-operated plant

Merely optimizing current clinker processes cannot achieve as great a contribution to environmental protection as integrating granulated blast-furnace slag into cement manufacturing. The latter approach is a genuine opportunity to contribute significantly to sustainable development, but requires change along the entire value chain if the effort is to be successful.

http://www.wbcsdcement.org/


28

Energy: Likewise, as energy prices have risen, cement companies have adopted and continue to implement various approaches to improve energy utilization: Increasing energy efficiency through process improvements in cement production

Reducing energy requirements for quarrying, through more efficient extraction methods

Reducing energy requirements in other parts of the life cycle, e.g., barge transportation

Finding safe ways to use secondary (waste) fuels

Using renewable forms of energy such as biomass

Investing in R&D for alternative energy sources

Again, these approaches are discussed further in Part 3.

Industrial Ecology: As the industry moves toward SD and adopts a life cycle view of its product supply chain, the concept of industrial ecology (sometimes called industrial symbiosis) may prove useful. Essentially, this approach involves the exchange of materials or energy by multiple businesses to mutual advantage. An often-cited example is TXI's CemStarSM process, which utilizes slag from electric arc furnaces (EAF) used in steel making to increase cement production and reduce emissions, all at little additional cost.47

A more sophisticated form of industrial ecology is the notion of eco-industrial parks, which benefit from co-location of industrial facilities that can exchange materials or energy. The foremost example is the Kalundborg industrial park in Denmark, which includes a coal-fired electric power generating plant, an oil refinery, a pharmaceutical factory, a gypsum wallboard factory, an environmental remediation contractor, cement producers, and agricultural and horticultural facilities (see box below).48, 49

Industries that provide a large amount of waste heat, or those that can serve as reliable sources or sinks of raw materials appear to have the potential to serve as “anchor” facilities for eco-industrial parks. Cement factories appear to fit these criteria due to their use of fuels and secondary raw materials as well as their ability to provide excess heat from kiln firing and

47 Business Council for Sustainable Development: Gulf of Mexico, 1997. “By-product Synergy: A Strategy for Sustainable

Development.” Note that care must be exercised regarding the trace metal content of the slag used. 48 Ehrenfeld, J. and N. Gertler. “Industrial Ecology in Practice: The Evolution of Interdependence at Kalundborg,” Journal of

Industrial Ecology, Volume 1, Number 1, 67-79, 1997. 49 Kalundborg Center for Industrial Symbiosis, “Industrial Symbiosis: Exchange of Resources,” 1999,http://www.symbiosis.dk/.

Case Study: Industrial Symbiosis in Kalundborg, Denmark

The Kalundborg industrial estate, 80 miles west of Copenhagen, in Denmark has attracted international attention for its pioneering effort in demonstrating how industry could emulate natural ecosystems into its operations and exist in symbiosis through a web of material and energy exchanges. Industrial ecologists believe that the word “waste” should be obsolete and rather be termed as “residual resources” as every waste stream has significant potential value that should be realized.

At Kalundborg, this hypothesis has become a reality over the past 35 years. As of 1995, the Kalundborg companies exchanged 3 million tons per year of materials and energy under 16 negotiated contracts with an estimated investment of $60 million in infrastruc-ture development for materials and energy transport. Through 1999, these investments have generated over $135 million in revenues and cost savings for this “industrial symbiosis.”

http://www.symbiosis.dk/


29

recovered co-products of cement making. The excess heat can be used for other processes or to provide district heating for commercial or residential buildings.50

Carrying the industrial ecology metaphor further leads to the notion of “ecological succession” whereby industrial facilities go through multiple stages of use. An example is the conversion of a defunct cement kiln in Stora Vika, Sweden into a large-scale composting facility,51 by using the kiln as a rotating aerobic composter. The facility demonstrates a number of other eco-industrial linkages, including the use of municipal wastewater to provide additional nutrients and water required for composting, and the use of carbon dioxide and heat generated by the composting operation in adjacent greenhouses. Thus, the useful lifetime of a capital investment can, in some cases, be extended by redirecting its use after its original purpose is no longer served.

Enterprise Value: The above-described opportunities to achieve resource productivity will yield a number of business benefits for cement companies, including Reduction in capital costs due to more effective asset utilization

50 TNO and PricewaterhouseCoopers, “Toward a Sustainable Cement Industry: Environment, Health, and Safety Substudy Report,”

http://www.wbcsdcement.org/final_reports.asp, 2002. 51 Zero Emissions Research and Initiatives web site, http://www.zeri.org/, 2001.

Sustainable Cement Tool: L ife Cycle Assessment Guide

Building specifiers, purchasers of materials, and other downstream customers in the cement industry value chain are increasingly demanding rigorous characterization of life cycle environmental impacts. Life cycle assessment (LCA) methods help in analyzing tradeoffs among alternative processes and products (Figure 2-3). The Users Guide to Understanding an LCA Study, developed by Five Winds International during the course of this study, helps companies understand and interpret LCAs.

external

G. Environmental

Reporting

F. GHG Measurement

E. Industrial Ecology

Assessment D.

Technology Assessment

C. Industry Bench - marking

B. Performance Improvement

J. Sales Support

I. Marketing

A. Generic Data Sets internal

tactical

strategic

H. Labeling

Figure 2-3. Alternative Uses of LCA Range from Internal to External, and from Tactical to Strategic. Darker Shaded Shapes Indicate Higher Value to the Cement Industry.


http://www.zeri.org


30

Reduction in, operating, maintenance, and waste disposal cost

Increased revenues associated with marketing of waste recovery services

Reduction in regulatory delays, business interruption, and non-compliance penalties

Improved employee productivity and job satisfaction

Improved community relationships and right to operate

Improved corporate reputation for business innovation and environmental performance. Some of these benefits are illustrated in Figure 2-4, which shows both the direct and indirect effects of resource productivity initiatives. This approach to representing value creation is developed further in Section 2.9.

Table 2-2 summarizes the current status of the cement industry with regard to resource produc-tivity in terms of strengths, weaknesses, opportunities, and threats. While the opportunities discussed above are promising, there are a number of threats and barriers to be considered. The resistance to change associated with cement markets was discussed in Section 1.4.

Case Study: Costs and Benefits of Taiheiyo’s Environmental Conservation Activities

In 1999, Taiheiyo began studying appropriate ways of reporting the costs and benefits of conservation activities and participated in the “Environmental Accounting Study Group for Administrators” conducted by Japan’s Environment Agency. Taiheiyo developed its own methodology consistent with the Environment Agency Guidelines (2000 edition) and included in its 2000 Environmental Report calculations of the total costs throughout the supply chain and total benefits to society associated with environmental conservation activities at Taiheiyo’s ten plants.

Environmental Conservation Costs and Economic Effects

Type of Costs Costs

(million yen) Comments

Taiheiyo costs to reduce in-house environmental burdens

3,925.6 Includes costs for maintenance of pollution control facilities, energy conservation, and reducing and recycling in-house wastes

Taiheiyo costs - all other 1,109.2 Includes costs associated with management activities, R&D, social activities, and environmental damages

Upstream and downstream costs 3,203.6 Includes costs incurred by supply chain partners for technology development, implementation, and management of AFR usage

Total Costs 8,238.4

Type of Economic Effect (Benefit) Economic Effect

(million yen) Comments Taiheiyo earnings from in-house recycling 21.3

Value to society from reduced environmental burdens

41,455.8

Includes avoided costs from supply chain reductions in greenhouse gas emissions, the use of energy and mineral resources, and the use of landfills; benefits shared by Taiheiyo, supply chain partners, and the broader society

Total Economic Effects 41,477.1


31

Table 2-2. Summary of Resource Productivity Status

TOPICS COVERED Mineral utilization

Energy consumption Waste recovery & re-use

Strengths: Substitution of wastes as alternative fuels

and raw materials conserves natural resources

Weaknesses: Operations require large amounts of

energy and raw materials

Opportunities: Increased application of industrial ecology Products with lower raw material requirements Efficient quarrying Effective waste reduction or elimination Energy efficiency throughout the life cycle Using renewable forms of energy, e.g., biomass

Threats: Resistance to change on the part of the cement

industry and standards bodies Restrictions on use of waste fuels Increased cost of wastes as competition rises Limited supply of alternative materials

In some countries, notably the U.S., there are restrictions on the use of waste fuels in cement kilns (see AFR discussion above). Even where such uses are permitted, there may be compe-tition by incinerators or other disposal methods for waste streams, which could make this prac-tice uneconomical. Ultimately, if society moves toward more sustainable consumption of goods, the quantity of wastes generated should diminish. Therefore, waste substitution may be

Resource Productivity

Reduced Greenhouse

Gases

Reduced Capital & Operating

Costs

Right to Operate

EnhancedImage

NaturalResource

Conservation

Value toSociety

Competitive Advantage

Reduced Fossil Fuel Usage

Reduced Virgin Material Usage

EnergyEfficiency

ReducedWaste &

Emissions

Increased Revenues

Alternative Fuels and Raw

Materials

Figure 2-4. Improving Resource Productivity Yields Direct Financial Benefits, and also Indirect Strategic Benefits by Creating Value for Society.


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appropriate as a transitional approach, until more fundamental innovations are intro-duced to increase the inherent eco-efficiency of cement production.

2.3 Climate Protection Climate change has become a prominent global issue, and many governments are prepared to take significant steps to address the problem. For example, the United Kingdom recently promulgated an energy levy aimed at reducing greenhouse gas emissions (see box).

Carbon dioxide (CO2) is the primary greenhouse gas that drives global climate change and is the main greenhouse gas emitted by the cement industry. When all greenhouse gas emissions generated by human activities are considered, the cement industry is responsible for approxi-mately 3% of the total (see Figure 2-5). Other than CO2, the cement industry does not generate appreciable amounts of greenhouse gases. The cement industry is responsible for approxi-mately 5% of the global anthropogenic CO2 emissions.52

Policies to address climate change may have serious financial consequences for the cement industry. In the absence of action on the part of cement companies, the financial liabilities associated with the industry’s CO2 emissions could exceed current profits or result in large increases in the price of cement. For instance, a carbon tax of $50/tonne would add an average of ~$12/tonne to the manufactured cost of cement. A proactive and well-managed strategy to lower CO2 emissions from cement production could not only reduce the potential liability but also yield financial benefits to the industry, particularly in the near-term.

52 Battelle, “Toward a Sustainable Cement Industry: Climate Change Substudy Report,“


Case Study: An Example of Emerging Climate Policy – The U.K. Climate Change Levy

As part of the Kyoto Protocol, the European Union agreed to cut emissions by 8% from 1990 levels. In the subsequent EU burden sharing, the United Kingdom agreed to reduce total greenhouse gas emissions by 12.5 percent from 1990 levels by 2008-2012. Additionally, the UK has set a goal of cutting CO2 emissions by 20 percent over the same time frame (Reuters 2000).

In an attempt to accomplish the emission reductions, the UK instituted the Climate Change Levy – an energy tax aimed at encouraging the reduction of climate change gas emissions by industry. The levy is charged on all energy supplied to industrial, commercial, agricultural, and service users through their utility bills. The energy tax varies according to the energy source, although it does not strictly take carbon intensity into account. For example, the levy on liquid petroleum gas (LPG) is £0.07/kWh, coal £0.15 kWh, and electricity £0.43/kWh (CCL Website 2001).

The levy is controversial. Some believe that it will decrease industrial competitiveness. However, proponents claim the levy will increase industrial efficiency and stimulate innovation. In the years prior to 2020, the cement industry can expect to see increased use of this type of levy in many countries.

In exchange for voluntary industry emissions reductions, the British cement industry and the UK government negotiated an 80 percent discount on the levy. This negotiated agreement provides the industry with flexibility in its response and helps to reduce its compliance costs. The industry’s ability to continue to negotiate this type of voluntary agreement will be dependent upon its ability to meet its existing voluntary commitments and to convince governments and NGOs that these voluntary reductions make a significant contribution to resolving the climate challenge.



33

Sources: Battelle estimate based upon data from numerous sources, including the following major sources Nakicenovic, N. and R. Swart, eds., “Special Report on Emissions Scenarios,” Cambridge, U.K., Cambridge University Press, 2000;

International Energy Agency, “The Reduction of Greenhouse Gas Emissions From The Cement Industry,” Report PH3/7, Paris, France, 1999; CEMBUREAU, “World Cement Directory,” Cembureau - The European Cement Association, Brussels, Belgium, 1996; CEMBUREAU, “Cement Production, Trade, Consumption Data: World Cement Market in Figures 1913-1995; World Statistical Review No. 18,” Cembureau - The European Cement Association, Brussels, Belgium, 1998; CEMBUREAU, “Cement Production, Trade, Consumption Data 1994-1997, World Statistical Review Nos. 19 and 20,” CEMBUREAU - The European Cement Association, Brussels, Belgium, 1999.

Figure 2-5: Year 2000 Greenhouse Gas Emissions from the Cement Industry53

The largest portion of greenhouse gas emissions from production of cement worldwide (about 50%) originates from the process reaction that converts limestone (CaCO3) to calcium oxide (CaO), the primary precursor to cement. Other cement-related greenhouse gas emissions come from fossil fuel combustion at cement manufacturing operations (about 40% of the industry’s emissions); transport of raw materials (about 5%) and combustion of fossil fuel required to produce the electricity consumed by cement manufacturing operations (about 5%).54

The cement industry currently emits 730 to 990 kilograms of CO2 for every 1000 kilograms of cement55 produced (see Table 2-3). The emissions per tonne differ because the types of equipment, process energy efficiencies, and product compositions vary from country to country.

53 Includes CO2, N2O, CH4, Montreal Protocol Gases, and other greenhouse gases with high radiative forcing functions. Emission

quantities were normalized to CO2 -equivalents and are measured in Gigatons of CO2 (Gt). 54 One of the difficulties associated with estimating cement industry CO2 emissions is that emissions data are not collected on a

systematic basis worldwide. As a result, it is necessary to draw data from a variety of sources and assemble a reasonably consistent set of emission estimates. More information on data collection is contained in: Battelle, “Toward a Sustainable Cement Industry: Climate Change Substudy Report,” http://www.wbcsdcement.org/final_reports.asp, 2002.

55 Includes blended cements.

Other GHGs 14.8 Gt (34%)

Deforestation 3.94 Gt (9%)

Fossil Fuel 23.9 Gt (54%)

Process 0.67 Gt (~50%) Transport 0.07 Gt (<5%) Electricity 0.07 Gt (<5%) Fossil Fuel 0.58 Gt (~40%)

Global Greenhouse Gas

Emissions: 44 Gt of

CO2-Equivalents

Cement Industry Greenhouse Gas

Emissions: 1.4 Gt of

CO2-Equivalents

3%



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Table 2-3. Cement Industry Unit-Based Emissions by Region and Sub-Region56

Region Unit-Based Emissions Sub-Region Unit-Based Emissions

Region Name

1990 kg CO2

Per kg Cement

2000 kg CO2

Per kg Cement

Sub-Region Name

1990 kg CO2

Per kg Cement

2000 kg CO2

Per kg Cement

I. North America 0.99 0.99 1. USA 0.99 0.99

2. Canada 0.94 0.91

II. Western Europe 0.85 0.84 3. W. Europe 0.85 0.84

III. Asia 0.91 0.89 4. Japan 0.73 0.73

5. Australia & NZ. 0.80 0.79

6. China 0.95 0.90

7. SE. Asia 0.96 0.92

8. Rep. of Korea 0.94 0.90

9. India 0.98 0.93

IV. Eastern Europe 0.84 0.83 10. Former Soviet Union 0.81 0.81

11. Other E. Europe 0.94 0.89

V. South & Latin America 0.86 0.82 12. S. & L. America 0.86 0.82

VI. Middle East & Africa 0.87 0.85 13. Africa 0.87 0.85

14. Middle East 0.87 0.85

Global Average 0.89 0.87 0.89 0.87

These estimates are based on data from a variety of sources including: Nakicenovic, N. and R. Swart, eds., “Special Report on Emissions Scenarios,” Cambridge, U.K., Cambridge University Press, 2000; IEA 1999; IPCC 2000; CEMBUREAU, “World Cement Directory,” Cembureau - The European Cement Association, Brussels, Belgium, 1996; CEMBUREAU, “Cement Production, Trade, Consumption Data: World Cement Market in Figures 1913-1995, World Statistical Review No. 18,” Cembureau - The European Cement Association, Brussels, Belgium, 1998; CEMBUREAU, “Cement Production, Trade, Consumption Data 1994-1997, World Statistical Review Nos. 19 and 20,” CEMBUREAU - The European Cement Association, Brussels, Belgium, 1999.

56 The unit-based emission factor includes process, transport, electricity generation, and fuel-related emission per unit of

cementitious material produced. The composition of the cementitious materials varies in OPC and blending constituents by region in the world.


35

Opportunit ies for Climate Protection Improvement

The data shown in Table 2-3 imply that, in many countries with currently high emission rates per tonne, it is technically feasible to reduce CO2 emission levels. The substudy on climate change estimates that the cement industry could achieve reductions57 in CO2 emissions per tonne of cement of approximately 30% (from 1990 levels) by 2020 (see Table 2-4).

57 That is, tonnes of CO2 per tonne of cementituous product produced.

CO2 Impacts of AFR Use

The cement industry would like to be able to utilize greater amounts of alternative fuels and raw materials at least in part because they can use these substitutions to reduce their carbon footprint. In those cases where the waste fuels used in cement plants would alternatively be incinerated, the total global amount of CO2 released to the atmosphere would be lowered. At the cement plant itself, CO2 emissions may decrease or increase by a few percent depending upon the relative carbon content of the waste fuel and displaced fossil fuel.

CO2 CO2 CO2

+

Waste Waste Used As

Fuels

Reduced Fossil Fuels

Fossil Fuels

Incineration Plant

Cement Plant

Co - Combustion In Cement Plant

CO2 CO2 CO2

+

Waste Waste Used As

Fuels

Reduced Fossil Fuels

Fossil Fuels

Incineration Plant

Cement Plant

Co - Combustion In Cement Plant

While there are benefits to the combustion of waste fuels, this should not be interpreted as justification that burning all waste fuels is sustainable. Over the long-term, the acceptability and financial benefits of burning fossil-based waste fuels such as tires is likely to decline significantly. Over the coming decade, it is quite likely that governments will, and should, give companies emission credits for burning all AFR in cement kilns. Beyond 2010, in a climate-constrained world, it is likely that fossil-based alternative fuels (e.g., solvents and tires) will be an increased target for: (1) elimination as fuels, (2) regulation under the same terms as fossil fuels, and (3) ineligibility for offset credit. Biomass-based fuels, waste paper, and sewage sludges due to their recent biological origin (rather than fossil origin) are more likely to retain their status as types of fuels that will be acceptable for emission offsets.

Source: Adapted from CEMBUREAU, Alternative Fuels in Cement Manufacture, 1997.


36

Table 2-4. Technical Emissions Reduction Potential for CO2 per tonne of Cement by 2020

Improvement Area Actions Plant SubRegion/Region Worldwide58

Process Emissions Blended Cements -- <1-35% 7%59

Plant Efficiency -- 5-15% 11%60 Fuel Emissions

Fuel Switching <20% <1-7% 3%

Transport Transport Efficiency & Bio-based Transportation Fuels

<5% <1% <1%

Electricity Generation Energy Efficiency and Low-Carbon Power Generation

<5% <1% <1%

Offsets61 and Other Reductions

AFR -- 6-16% 12%62

Total63 All of Above -- ~20%-50% ~30%

Even at this level of reduction, global cement industry CO2 emissions will likely still be growing by 2020 due to the increased demand for cement.

Reducing process emissions of cement production hinges upon reducing the amount of clinker in cement. Substituting pozzolanic materials, such as blast furnace slag, fly ash and natural pozzolans for clinker substantially reduces process-related CO2 emissions. This represents one of the best, technically proven approaches for reducing process emissions.

Fuel-related emissions are primarily a function of the fuel mix and energy efficiency of the equipment used in the cement manufacturing facility. Changes that could reduce energy-related CO2 emissions from cement kilns include improving energy efficiency (e.g., by switching to different types of kilns or retrofitting more energy efficient equipment in existing kilns), switching to lower carbon fuels, and reducing transportation energy consumption. Retrofitting existing plants or phasing out energy-intensive manufacturing plants (e.g., wet process plants) is one strategy for increasing overall energy efficiency. The challenge is to accomplish the retrofits or closures cost effectively and at an appropriate time.

Many cement plants have already initiated programs to reduce emissions (see box about Heidelberg Cement’s plant). In some countries, such as Japan, concerted efforts have reduced emissions per tonne. From 1973 to the early 1990s, the energy intensity of clinker production

58 All the worldwide reduction potentials in this analysis are derived from a region-by-region analysis of technology, fuel mix, and

product composition. The results should be interpreted as a high-level, consistent analysis. Individual companies and plants will find that site-specific and economic conditions enable lesser or greater reductions. Additional details can be found in Battelle, “Toward a Sustainable Cement Industry: Climate Change Substudy Report, http://www.wbcsdcement.org/final_reports.asp, 2002.

59 A key assumption is that blast furnace slag and fly ash are the principal blending constituents. Natural pozzolans are abundant in the world; although, not always located in convenient locations. Other blending constituents also exist. For this reason, some countries will find increased availability of blending constituents, and therefore, this estimate is most likely conservative.

60 A key assumption underlying this estimate is that the different regions of the world will increase their energy efficiency by 0.5%/yr to 2%/yr. Regions that are already highly efficient, for example Japan, are assumed to have the potential to improve at a lower rate than countries, such as the U.S., which are relatively inefficient. It would take an aggressive energy efficiency initiative in some countries (e.g., the U.S.) for such improvements to be realized.

61 The term offset refers to the fact that while replacing conventional fuels with waste alternative fuels results in only minor changes in direct plant emissions, the CO2 neutrality of many waste alternative fuels results in a net or offsetting decrease in total emissions in the region.

62 This estimate assumes an aggressive effort by the industry to move toward bioderived alternative fuels (e.g., municipal paper wastes, biomass, agricultural waste, etc.) as a substitute for fossil fuels. While this substitution will in some cases increase on-site emissions by several percent, biofuels are essentially CO2 neutral over their life-cycle, and consequently reduce global CO2 emissions.

63 Due to the interactive effects of actions, “Total Worldwide Emissions Reduction Potential by 2020” is less than the direct sum of individual actions.



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was reduced by ~30% in Japan.64 As a result of their efforts Japan is a world leader in energy efficiency in the industry.

However, the Japanese experience also illustrates that there comes a point where additional incremental emission reductions become far more difficult. In the early 1990s, the dra-matic improvement in Japanese emission reductions came to an end, with emissions per tonne remaining essentially flat between 1990 and 2000. This leads to a supposition that in order to stimulate further improvement, fundamental technol-ogy breakthroughs, product break-throughs, or changes in market incentives will be needed. This phenomenon will likely affect the pattern of emissions reductions in other regions of the world as well.

Beyond conventional measures discussed above, research and development efforts could lead to novel manufacturing processes, new products, and new business lines. Examples of innovations that could reduce CO2 emissions from the cement industry in the future include: Non-limestone based

binders

Hybrid plants that pro-duce both energy and cement

Engineered carbon cap-ture and sequestration.

The cement industry may also be able to achieve “offset” credits for CO2 reductions outside the boundaries of the cement plant, for example by implementing reforestation projects (see box) or using waste fuels from other industries.

64 Japan Cement Association. Voluntary Action Plan for Environmental Conservation in the Cement Industry, December 20, 1996.

Case Study: Brazilian Rain Forest Terrestrial Sequestration Project

The Guaraqueçaba Climate Action Project seeks to restore and protect approximately 20,000 acres (8,100 hectares, ha) of partially degraded and/or deforested tropical forest within the Guaraqueçaba Environmental Protection Area in the Atlantic rain forest of southern Brazil. With a total investment of $5.4 million from the Nature Conservancy and private utility companies, the project is expected to reduce or avoid emissions equivalent to approximately one million tonnes of carbon over the next 40 years. At $6/tonne of CO2, these are cost-effective offsets compared to some other options.

International cement companies might find it advantageous to invest in projects such as the Guaraqueçaba Climate Action Project. It could provide a cost-effective approach to address their CO2 liability, while simultaneously enhancing their corporate image and making sustainable improvements.

Case Study: Energy Efficiency and CO2 Reductions at Heidelberg Cement’s Lengfurt Plant in Germany

Reducing CO2 emissions has been a priority at Heidelberg's Lengfurt plant, which has been managed by the company since 1923. In terms of heat consumption, Lengfurt is a world-class example of a highly efficient kiln line. The Organic Rankine Cycle plant – the first power plant of its kind in the German cement industry utilizes the waste heat of clinker cooler exhaust air and also allows alternative fuels to substitute for coal. Substituting by-products, such as blast furnace slag, for clinker also dramatically lowers CO2 emissions per tonne of cement sold.


38

In the face of climate challenge, cement companies that creatively deal with the climate change issue have the potential to emerge as leaders in carbon dioxide management across all indus-tries and remain profitable.

Table 2-5 summarizes the current status of the industry with regard to climate protection.

Table 2-5. Summary of Climate Protection Status

Strengths: Some companies have demonstrated

reduced average CO2 released per ton of cement

A standardized CO2 inventory protocol has been developed by the WGC companies, together with external stakeholders (see Part 3, Section 3.2).

Weaknesses: Heavy dependence on fossil energy Reliance on limestone-based cement Limited attention to the significant CO2

reductions required Inadequate investment in R&D that would

enable future cost-effective CO2 reductions Intermittent engagement in climate policy

activities without a clear long-term agenda

Opportunities: Energy efficiency improvement Use of alternative raw materials (e.g., fly ash

and blast furnace slag) Use of alternative, low-carbon fuels Emission reduction credits CO2 capture and sequestration or possible

resale Trading schemes to reduce costs

Threats: Large financial burdens Possibility of imposed technological controls Early retirement of plants and equipment Potential for the cement industry to be

overlooked in the policy debate and disadvantaged by policies designed for larger polluters

Loss of market share to competing materials that are less GHG intensive

2.4 Emission Reduction Historically, dust emissions (also called particulates) have been the main environmental concern in cement manufacture. In addition to dust from quarrying, particulates are produced during crushing, at the kiln, at the clinker cooler, and at the cement mill. Dispersed particulate emis-sions originate mainly from materials storage and handling (i.e., transport systems, stockpiles, crane driving, bagging) and from traffic movement on unpaved roads. The quantities of cement kiln dust (CKD) generated as a solid waste in cement production are higher for raw materials found in certain regions (e.g., Egypt, USA).

Other historically high emissions that can affect air quality include nitrogen oxides (NOX) and sulfur dioxide (SO2). Emission inventories conducted in Europe show that the contribution of the cement industry is significant relative to other sectors, but not the most important.65 Regulatory limits have been set in many countries for these pollutants, as indicated in Table 2-6. These limits are based on a combination of environmental and health protection, economic, and politi-cal objectives. Limits are regularly amended as the state of knowledge on health and environ-mental impacts increases as well as technological progress of abatement equipment. However, meeting a limit value does not necessarily ensure protection of environmental quality or human health.





39

Table 2-6. Comparison of Emission Limits in Several Regions of the World (in mg/Nm3 10 vol% O2 unless otherwise stated)

EU USA Australia Brazil China dust 30 0.15 [kg/Mg dry feed] 100 77 100

NOx 800(existing plants)

500(new plants) - 940 - -

Hg 0.05 0.12 3 0.04 - Dioxin

[ng TEQ/Nm3] 0.1 0.2 0.11 - -

HCl 10 130 ppmv 200 1.8 kg/h -

Over the last decade, the emission standards in a number of regions have become more strin-gent. Table 2-7 on the next page illustrates for the EU both actual emissions and the directives that have lowered the allowable emission levels. Based on the research conducted, two obser-vations are made with regard to emissions of conventional pollutants. First, there is evidence to suggest that, in some locations, emission measurements are either not made or are incomplete. Second, although the regulatory limits have been established, enforcement may not be uniform, due to either lack of resources or other higher priorities.

Emission measurements show exceedance of standards in some instances, although there is no correlation between the fuels or raw materials that are used and the resulting emissions. The most important piece of equipment for emission control is the dust filter. Many metals, as well as SOx and chloride, strongly adhere to the dust particles. With the latest dust filters, dust concentrations as low as 10 mg/Nm3 are achieved. Lowering the filter temperature can also help in achieving low mercury, thallium, and cadmium levels for some kiln designs.

Over the last 20 years, many cement companies have reduced dust emission levels substan-tially (over 90%) through process refinements and abatement technologies, although dust from dispersed sources has remained difficult to control. Where the open storage or disposal of CKD is allowed, leaching from storage piles and blowing dust can also cause groundwater contami-nation. A number of cement companies have voluntarily reduced dust emissions far below mandated levels (see box below for an example of a company that has pursued this approach).

Case Study: Designing for Future Compliance at Nesher Israel Cement

Nesher Israel Cement built a new clinker line at its Ramla Plant in 1999. When developing plans for a large investment, Nesher performs a financial feasibility analysis for 10-15 years into the future, but the company also considers that the full life span of the investment may be much longer. Nesher expects regulatory standards to increase from year to year over the life of the asset. So, the company designed the Ramla plant clinker lines not only to address the list of improvements suggested by Israel’s Ministry of Environment, but also to address more stringent limits the company set for itself. For example, 50 mg/Nm3 is the regulatory standard for particulate emissions in Israel and much of Europe. Nesher designed its first clinker line to have particulate emissions of 30 mg/Nm3 and its second to have emissions of 20 mg/Nm3. The actual measured particulate emissions at the plants have been 5-12 mg/Nm3, so Nesher is well positioned for any future changes in regulations regarding particulate emissions. With any large capital investment, Nesher believes in “doing it right the first time” by using best available technologies and achieving performance beyond current compliance.


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Table 2-7. Evolution of Emissions and Emission Limit Values (column with actual data is indicative, values in [mg/Nm3 at 10 vol% O2] unless otherwise stated)

Pollutant Actual before 1994 EU Directive 1994 EU Directive 2000 mg/Nm3 mg/Nm3 mg/Nm3

PM (dust) 20-200 50 30 500 (new plants)

NOx 500-3000 800 800 (old plants)

SO2 10-2500 400 5066 TOC 10-500 10 10 CO 500-2000 500 - Chloride 25 30 10 Dioxins 0-10 (ng/Nm3) n.a. 0.1 (ng/Nm3) Heavy metals class 1: Cd, Tl and Hg 0.3 0.2 0.1 Heavy metals class 2: As, Co, Ni, Se, Te 0.3 1 Heavy metals class 3: Sb, Cr, Cu, Mn, Sn, Pb, V, Zn

0.3 5

0.5 (heavy metals 2+3)

Despite the available options for complying with emission limits through proper process and dust control, there is a trend toward application of additional abatement techniques, especially for the control of NOx emissions. Other end-of pipe solutions (e.g., wet SO2 scrubbers and charcoal filters) are increasingly introduced to solve local emission problems that occur due to geographical (mountain terrain) and climatological conditions.

More recently, the growing practice of using alternative fuels has raised concerns over potential emissions of carbon monoxide (CO), volatile organic compounds (VOC), hydrogen chloride (HCl), dioxins/furans (PCDD/PCDF), and trace metals. To an even greater extent than for con-ventional pollutants, the emissions measurements and environmental or health impact assess-ments for these pollutants are not comprehensive. Regulatory authorities have tended to address these emissions on a case-by-case basis.

Table 2-8 and Figure 2-6 summarize some of the literature available on monitoring dioxin and heavy metal emissions from operating cement plants. Measurements by the VDZ67 show that none of the 45 reporting kilns exceeds the emission limit value of 0.1 ng TEQ/Nm3.

Figure 2-6 shows the resulting average values, most of them far below the emission limit; in 4 cases no dioxins could be detected. There is no apparent difference between kilns that burn waste and those that do not (see box on the next page). Taiheiyo Cement Corporation68 reports average dioxin/furan emissions measured in 18 kilns below the limit value of 0.1 ng TEQ/Nm3. The average value is 0.0066 ng TEQ/Nm3, with a deviation of 0.083 ng TEQ/ Nm3; total annual emission amounts to 0.5 g TEQ/year. These results indicate that dioxin emissions can be managed without additional measures through proper process control and that high dioxin concentrations measured in the past can be avoided.

66 The competent authority in cases may authorize exemptions when TOC and SO2 do not result from the incineration of waste fuels.

The competent authority can set emission limit values for CO. 67 VDZ, “Umweltdaten der deutschen Zementindustrie”, Vereindeutscher Zementwerkee.V. (VDZ), September 2000, Düsseldorf (in

german). 68Taiheiyo Cement Corporation, Annual Environmental Report, 2000.


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Table 2-8. Compilation of Selected Cement Plant Dioxin/Furan and Trace Metal Emissions69

Emission Emission Range,

mg/Nm3 Standard or

Limit, mg/Nm3 Comments

Polychlorinated dibenzodioxins/-furans (PCDD/PCDF)

0.1-0.5 ng70 0.1 ng European kilns71


0.003-47 ng 0.2 ng USA kilns72


Below detection to 0.08 ng

0.1 ng Japanese kilns73

Mercury, Cadmium, Thallium (Hg, Cd, Tl) 0.01-0.3 (primarily Hg)

0.05/0.0574 European kilns75

Arsenic, Cobalt, Nickel, Selenium, Tellurium (As, Co, Ni, Se, Te)

0.001-0.1 European kilns

Antimony, Lead, Chromium, Copper, Manganese, Vanadium, Tin, Zinc (Sb, Pb, Cr, Cu, Mn, V, Sn, Zn)

0.005-0.3

0.576

European kilns

In general, new cement plants exhibit environmental performance within the applicable limits, and many older plants have been upgraded. Emission levels depend for the most part on operating practices and controls in place, not on whether primary or alternative fuels and raw materials are used. Nevertheless, environmental concerns continue to affect the image of the cement industry.

69 Note: Additional monitoring data and descriptions of the operations may be found in Appendix C. 70 Values are in toxicity equivalents – TEQ; TEQ adjusts concentrations of various individual compounds to a reference equivalent

so the values can be summed. 71 CEMBUREAU, “Best Available Techniques for the Cement Industry”, A contribution from the European Cement Industry to the

exchange of information and preparation of the IPPC BAT reference Document for the Cement Industry, November 1997. 72 Schreiber, “2,3,7,8 TCDD Equivalent Emissions from Long Wet or Long Dry Cement Kilns Burning Hazardous Waste in the United

States During Trial Burns”, Dioxin ’93, 13th International Symposium on Chlorinated Dioxins and Related Compounds, Vienna, Organohalogen Compounds, Volumes 11-14, September 1993.

73 Sutoh K., Sakae K., Hirose T., Takahashi H., and Miyakoshi T., “Destruction of CFC’s in Cement Kilns,” World Cement, p. 64-73, May 1996.

74 The first value is for Hg and the second is the sum of Cd+Tl. 75 Cembureau, “Best Available Techniques for the Cement Industry”, A contribution from the European Cement Industry to the

exchange of information and preparation of the IPPC BAT reference Document for the Cement Industry, November 1997. 76 The sum of Sb+As+Pb+Cr+Co+Cu+Mn+Ni+V.

Waste Combustion and Cement Plant Emissions

The cement industry has experienced considerable controversy regarding the combustion of haz-ardous wastes, including concerns from local communities, regulatory bodies, and NGOs over releases of heavy metals and dioxins. Measurements under defined operating conditions show that the combustion of waste does not necessarily result in higher emissions. In fact, recent studies show that average kiln dioxin emissions are typically far below their regulated limits, and in most cases, emissions can be easily controlled. It is believed that problems only occur in spe-cific situations, i.e., in wet kilns with high organic content in the raw materials combined with pro-duction of low alkali cements. In that case specific technological measures would be necessary. Proposals for waste burning have not always been accompanied by evidence to demonstrate no adverse impacts to environmental or human health, thus encouraging opposition to this practice.


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The regulatory limit value is 0.1 ng TEQ/Nm3. In four cases no PCDD/F was detectable.

PC

DD

/F C

on

ce

ntr

ati

on

, n

g T

EQ

/m3

Measurement

Figure 2-6. Dioxin Emissions of 45 Cement Kilns in Germany

Opportunit ies for Emission Reduction Improvement

Emission reduction opportunities for cement companies are closely linked to the previous issues – Climate Protection and Resource Productivity – combining stakeholder communication, process improvement, and technological innovation. Opportunities include: Environmental research and more comprehensive characterization of the human health and

environmental impacts of conventional and toxic emissions

Development of improved pollution control or pollution prevention technology

Improved monitoring systems, e.g., real-time (continuous) emissions monitoring

Implementation of environmental management systems and information systems linked to corporate planning and control

Benchmarking and internal (self-) assessment

Communication of best practices to community and media

Engagement with standard setting bodies (and other stakeholders) to support changes allowing increased use of by-products such as CKD and consequent reduced emissions.

Pollution prevention process improvements and end-of-pipe technologies are available for a number of emissions. Selection and justification of specific approaches needs to be done on a unit-specific basis. Details regarding the operational characteristics and experiences with the various technologies may be found in the EHS substudy report.77





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Enterprise Value: The above-described opportunities to achieve emission reduction will yield a number of business benefits for cement companies, including Reduction in operating, maintenance, and waste disposal cost


Improved access to capital due to reduced risk factors

Improved employee health, safety, and job satisfaction

Improved community relationships and right to operate.

Table 2-9 summarizes the status of the cement industry with regard to emission reduction.

Table 2-9. Summary of Emission Reduction Status

TOPICS COVERED

Dust from quarrying, milling, storage, and other cement operations

NOx, SOx, and other airborne pollutants

Emissions from alternative fuels (e.g., waste

tires) Contamination of groundwater Solid waste from cement kiln dust

Strengths: Historically high levels of dust have been

sharply reduced (over 90%) in many areas NOx and other airborne pollutants have also

been reduced in new and upgraded plants Process conditions are conducive to

emissions management Technology exists that can reduce emissions

significantly

Weaknesses: Concerns about formation of toxic pollutants

from waste combustion Lack of comprehensive assessment of public

health impacts of emissions Limited data on ecological consequences of

releases CKD disposition is not fully addressed Large stock of older-vintage plants in some

regions

Opportunities: Management systems (e.g., ISO 14000, EMAS)

to support monitoring of emissions Communication with communities & regulators Research on public health effects of alternative

fuels to allay concerns New quarrying techniques that minimize dust Publication of emissions at all plants

Threats: Loss of license to operate Delays in siting and plant start up Public opposition to waste combustion

2.5 Ecological Stewardship The earth is endowed with a limited supply of primary resources for fulfilling the needs of humanity and other living organisms. For large cement manufacturing plants (3000 tonnes or more per day), limestone reserves on the order of 100-150 million tonnes are required.78 Although on a global scale limestone is abundant, commitment to SD requires consideration of resource utilization. Ecological stewardship involves acceptance by cement companies of their responsibility to ensure that these resources are used wisely and efficiently and that the envi-ronmental and life supporting services of earth’s ecosystems are not diminished.

78 Holtec, et.al., “Toward a Sustainable Cement Industry: Land Use and Biodiversity Substudy Report,”




44

The industry currently practices many techniques that minimize impacts on natural resources, including following common legislative safeguards that have been widely adopted, such as Maximizing the distance of

plants from large cities and towns

Minimizing the location of plants near wetlands, parks, sanctuaries, archeological monuments, heritage sites, and other locations with special social significance

Avoiding siting plants near high tide regions

Restricting projects in protected forest areas.

While enforcement of siting regulations is strict in many developed countries, developing countries are often more flexible in cases where other pressing social needs could be met (such as job creation, industrial develop-ment, and infrastructure construction).

In addition to siting, thorough planning and effective operation are crucial to preserving the local ecology. Site design typically involves detailed planning, public hearings, and environmental impact assessments. However, it is the actual operation of plants that typically stimulates the concerns of community stakeholders. Extraction of materials from the earth through quarrying is the most visible aspect of cement production. The adverse visual impacts created by mining include large craters, degraded hill faces, and land with no vegetation or habitation. Mining may also adversely affect the water resources of the region by drawing down ground water during excavation and through seepage of excavated materials into water sources. Additionally, streams passing through the mining area are sometimes diverted in order to excavate the lime-stone below. Mining operations leading to ground water depletion or source contamination threaten biodiversity by changing the oxygen content and nutrient supply of water bodies as well as physically altering surrounding landscapes and habitats.79

Other factors that have partial or indirect impact on ecological and social systems include noise pollution, dust pollution, and ground vibrations. Blasting and drilling operations and large indus-trial machinery are prominent sources of noise in mining operations. Continuous noise may disrupt acoustic communication and lead to changes in the behavior of faunal species by impacting food gathering, mating, warning signals and brood care. Intermittent noises can give rise to panic reactions resulting in habitats being permanently abandoned or reproduction endangered.80

79 Holtec, et.al., “Toward a Sustainable Cement Industry: Land Use and Biodiversity Substudy Report,”

http://www.wbcsdcement.org/final_reports.asp, 2002. 80 Environmental Handbook, Volume III, Compendium of Environmental Standards (GTZ/BMZ), 1995.

Case Study: Quarry Management for Environmental and Cultural Values

Parts of the Matozinhos quarry (Minas Gerais, Brazil, a unit of Lafarge) present many geological and archeological points of interest. Among the unique treasures hidden within the quarry are caves decorated with petroglyphs and a number of underground streams.

A balance has been struck between economic activity, environ-mental protection and preservation of archeological resources. Based on a detailed impact study involving botanists, ornitholo-gists, geologists, forestry engineers, speleologists and hydrolo-gists, the entire quarry is now considered a protected area and quarry operations are confined to 56% of its total area. Special care is being taken to control water drainage to protect the underground streams and safeguard the 30 underground galler-ies and the archeological site. The hundreds of plant species and myriad animal populations (27 species of mammals and 102 species of birds) identified in the area will also be able to grow and reproduce relatively undisturbed.



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Case Study: From a Limestone Quarry to an Ecologically Diverse and Economically Self- sustaining System

Bamburi Cement’s (a unit of Lafarge located in Mombasa, Kenya) disused limestone quarries have been rehabilitated over the last 30 years and transformed into an ecologically diverse and economically self-sustaining system. The project has received worldwide acclaim for its best practices.

In the former quarry, forest ecosystems have been and continue to be created with hundreds of species of indigenous forest plants and dozens of species of mammals, birds and butterflies. The most widely known and appreciated outcome is the world famous “Haller Park”, where visitors can walk through lush forests, grasslands and wetlands watching a variety of wildlife. The Bamburi Forest Trails, another attraction of the rehabilitated quarries, consist of a network of walking, cycling and jogging routes in addition to a well-developed butterfly house.

Baobab Trust, an offshoot of this project is working as a charitable conservation trust devoted to carrying out non-commercial activities in the field of conser-vation and conservation education.

To deal with these issues, many cement companies in various regions are applying advanced land use manage-ment techniques, including Minimizing the amount of

development area needed for quarrying at any given time

Utilizing industrial wastes to replace natural resources when possible

Implementing ongoing restoration programs to minimize overall visual impacts.

In addition to management techniques, remediation or restoration usually varies between regions and usually occurs only when it is enforced by regulations or has been found to be economically rewarding. Some potential and anticipated future uses for quarry rehabilitation include agriculture and forestry, tourism and leisure facilities, and biodiversity enhancement or replacement.

Opportunit ies for Ecological Stewardship Improvement

As described above, the cement industry has already taken steps to improve quarrying and quarry restoration techniques, and to partially replace limestone with alternative materials, mostly derived from wastes. Examples of beneficial approaches include:

Optimizing Land Use Minimizing the area of land use through adoption of computer-aided analysis tools, such as

remote sensing and GIS, which offer opportunities to monitor habitats, erosion patterns, land stability, and other important factors

Creating landscaping in the form of green meadows, lakes and recreation areas on formerly mined areas

Conserving Water Resources Closed loop water recovery systems

Collection and use of rainwater

Process modifications to reduce water use.


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Preserving and Enhancing Ecosystems Minimizing or eliminating adverse landscape impacts

Preserving and enhancing the ecological services of natural and restored habitats

Engaging the community

Engaging citizen groups to address external stakeholders’ concerns related to land use and biodiversity

Defining shared goals for the community.

Enterprise Value: The above-described opportunities to improve ecological stewardship as part of an overall SD strategy will most likely yield business benefits for cement companies, although several of the following are difficult to measure. Increased employee loyalty and pride

Right to continue operating at existing sites

Access to new markets with strict environmental constraints

Improved community respect and trust.

Table 2-10 summarizes the current status of the cement industry with regard to ecological stewardship.

Table 2-10. Summary of Ecological Stewardship Status

TOPICS COVERED Natural resource conservation

Ecosystem and habitat protection Prevention of contaminated runoff and infiltration

Strengths: Many examples of advanced practices

in quarry restoration and management

Weaknesses: Potential adverse impacts on ecology,

biodiversity, and water quality and availability

Potential for mobilization of heavy metals

Potential groundwater contamination or depletion

Opportunities: Reduction in water use Minimizing or eliminating adverse landscape impacts Preserving and enhancing ecological services of natural

& restored habitats Easier acquisition of construction and operating permits

Threats: Public opposition to quarrying Loss of license to operate Delays in plant siting and startup

2.6 Employee Well-Being Employee well-being can be separated into two main categories: employee safety and health, and employee satisfaction.

Employee Safety and Health: Because of the high temperatures and large volumes of material involved in cement production, there are a number of workplace hazards to be considered, including exposure to dust and contact reactions such as burns and allergies. A study in 1998 reported that maximum dust levels ranging from 26-114 mg/m3 have been recorded in U.S. quarries and cement works, whereas the U.S. Federal dust standard limits exposure to 2.0 mg/m3 for an 8-hour working shift.81 Other concerns include the potential for contact with

81 TNO and PricewaterhouseCoopers, “Toward a Sustainable Cement Industry: Environmental, Health, and Safety Substudy

Report,” http://www.wbcsdcement.org/final_reports.asp, 2002.



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toxic substances, burns, and contact with allergens.82 As an example, chromate components have potential toxicity and known carcinogenic effects. Table 2-11 shows occupational safety and health performance for the U.S. cement industry in comparison to other selected industries. These data indicate that the industry has among the highest incidence of lost workday cases and by far the highest days away from work.

Table 2-11. Lost Workday Cases for Cement and Other Industries83

Industry Annual Lost Workday

Cases per 100 Workers84 Days Away from Work

(average per case)

Oil & Gas Extraction 0.43 3

Coal Mining 0.73 12

Chemical & Allied Products 0.87 5

Textile Mill Products 1.49 7

Concrete, gypsum and plaster products 1.64 35

Paper & Allied Products 2.19 26

Lumber & Wood Products 2.48 19

Metal Mining 2.70 58

Cement85 2.86 69

General Building Contractors 3.49 21

Rubber & Miscellaneous Plastic Products

5.19 30

A number of cement companies are making efforts to manage the safety and health of their employees more effectively. However, such efforts remain largely decentralized, driven mainly by the regulatory framework within each host country.86 For example, in both the U.S. and Japan, all industries are required to report health and safety statistics. In Europe, the incidence of accidents appears to be declining.87 However, there is potential for much improvement worldwide in safety and health surveillance, training, and management systems.

Employee Satisfaction: It is impossible to generalize about the range of employment practices that exist in cement plants around the world. Depending upon company policy and the priorities of plant management, the attention to employee satisfaction can vary tremendously. This includes not only wages and benefits, but also a variety of other working conditions including Workplace comfort and amenities

Freedom of association and right to collective bargaining

Avoidance of forced or compulsory labor and physical abuse

Encouragement of work-life balance, including flexible time policies, dependent care services, and wellness programs

Encouragement of workforce diversity and elimination of discrimination and harassment.

82 Goh and Gan, in Contact Dermatitis, 1996; Zenz, 1994; CEMBUREAU Statistics (Substudy 10). 83 Database query from the Bureau of Labor Statistics, U.S. Dept of Labor, http://data.bls.gov/cgi-bin/dsrv, 1999. 84 Based on 100 full time equivalent workers working 40 hours per week, 50 weeks per year. 85 SIC code 3241, cement, hydraulic, Portland, natural, masonry, and pozzalana-mfg. 86 TNO and PricewaterhouseCoopers, “Toward a Sustainable Cement Industry: Environmental, Health, and Safety Substudy

Report,” http://www.wbcsdcement.org/final_reports.asp, 2002. 87 Ibid.


http://data.bls.gov/cgi-bin/dsrv


48

Opportunit ies for Employee Well-Being Improvement

There are many opportunities for cement companies to improve employee-well being, including improvements to the management of occupational, safety and health (OS&H). Improved moni-toring of potential hazards and adoption of proactive management schemes may in turn promote employee satisfaction. In addition, as cement companies continue their global consolidation, they have an opportunity to bring progressive labor practices to areas where employee rights are not well established. One common approach toward understanding employee’s perceptions of well-being is to undertake a periodic survey of employee satisfaction.

Specific opportunities to improve cement industry OS&H performance include88 Improvements in OS&H management systems

Adoption of inherently safe design methods89

Enhanced EH&S training to reduce behavior-based problems

88 TNO and PricewaterhouseCoopers, “Toward a Sustainable Cement Industry: Environmental, Health, and Safety Substudy

Report,” http://www.wbcsdcement.org/final_reports.asp, 2002. 89 To achieve an inherently safe design, existing processes would be optimized based on existing knowledge in all fields of operation

to minimize safety risks. Principles for inherently safe design may be found in the EH&S substudy, TNO, “Toward a Sustainable Cement Industry: Environment, Health and Safety Substudy Report,” http://www.wbcsdcement.org/final_reports.asp, 2002.

Case Study: CEMEX’s Safety Management System

In 1997, CEMEX began implementing its Safety Management System, which it has used to establish corporate guidelines, share practices and experiences among the company’s business units, and rapidly integrate new acquisitions into its safety culture. In four years, CEMEX has decreased the accident rate in its cement operations by 63%, representing about 492 lost time injuries avoided and cost savings of approximately US$5 million (http://www2.cemex.com/cc/cc.hs.asp).

The components of CEMEX’s Safety Management System include the following: Safety Manual, Monitoring and Tracking Electronic System (SISTER) is an intranet system used to

track common safety indicators and accident reports throughout CEMEX’s operations. A Quarterly Safety Indicators Report is used to provide top management with timely safety performance information.

Communications and synergy networks help spread knowledge of best practices throughout the company. Examples include an intranet EHS conversation network, EHS coordinators assigned to each country with CEMEX operations, periodic working meetings via videoconference, and the EHS annual meeting and report.

In addition to ongoing safety training and certification of personnel, CEMEX works to emphasize the importance of safety in everyday work to create a strong “safety culture” among all employees.

An annual safety award is presented by the CEO to recognize progress.

Management commitment and guidance takes the form of an integrated EHS Corporate Policy, an EHS steering committee, and direct involvement by the CEO.

Corporate standards are implemented through the Safety and Health Corporate Manual and through defined criteria for internal safety audits.

CEMEX has also initiated the formation of the Cement Safety Team involving other large cement producers such as Holcim, Italcementi, Lafarge, and Siam Cement. This group applies the basic model of the Safety Management System to extend across multiple companies, thus further expanding the benefits of sharing best practices and performance information.

http://www2.cemex.com/cc/cc.hs.asp




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Adoption of key performance indicators tied to OS&H results

Monitoring of contractor safety as well as that of employees.

Specific opportunities to improve employee well-being and loyalty include Establishment of voluntary programs to provide benefits and resources that support

employee health, education, and personal satisfaction

Organization-wide change initiatives to improve employee commitment to sustainable business practices

Employee involvement in external relations with stakeholders

Adoption of proactive OS&H management practices that strive for continuous improvement.

Battelle suggests that the Responsible Care® program adopted by the chemical industry pro-vides a set of employee health and safety practices that offer a good model for cement industry improvement.90 The model used within Responsible Care utilizes continuous improvement measurement systems and voluntary third party verification. Many comparable models exist and are described in further detail in the Policy substudy.91

90 International Council of Chemical Associations, http://www.icca-chem.org/. 91 Battelle, “Toward a Sustainable Cement Industry: Policy Substudy Report,” http://www.wbcsdcement.org/final_reports.asp, 2002.

Case Study: Modernization at Rüdersdorf Cement

RMC acquired the Rüdersdorf cement business in the former East Germany in 1990 under the German government’s privatization program. Before being acquired, the plant had one of the worst environmental records in the GDR and operated inefficiently with a workforce of 3,000 people. Over the past decade, RMC has invested more than 250 million Euro (U.S. $215 million) in the plant. An intensive modernization program has transformed it from an unprofitable state-run enterprise into a profitable commercial company. In addition to directing about one fifth of the investment toward environmental protection, this program has emphasized the need to mitigate the impacts of workforce reduction and to enhance the plant’s ongoing relationship with employees.

A workforce reduction from 3,000 down to 700 was carried out as a partnership with the workers council. Older workers were retired and other employees were given settlements and assistance with finding jobs with the company’s contractors and West German companies. The role of the remaining workforce has changed, with responsibility for innovation now shared throughout the company. Workers are encouraged to suggest continuous improvements, and about 300 are acted upon each year. Bonuses are paid based on the value of savings to the company, and range from 200-300 DM to several thousand DM. The plant also runs 3½ year-long apprenticeship programs for industry mechanics and electricians. Employees also benefited from the appointment of new officers for environmental management and plant safety and the introduction of a formal environmental management system.

Rüdersdorf remains the largest employer in the area and continues to play an active role in supporting the community. Employees and local residents have been able to address their concerns in discussions with plant management. Noticeable improvements have been felt by local residents in air quality, noise pollution levels and the appearance of the landscape around the plant. Employees have benefited from improved safety and working conditions, new training and apprenticeship programs, and more opportunities to participate in the management of the plant and to share in its financial performance.


http://www.icca-chem.org/


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Enterprise Value: The above-described opportunities to improve employee safety, health and will most likely yield business benefits for cement companies. There is ample evidence that safety and health improvement translates into cost savings.92 Although some of the following benefits are more difficult to measure, it is important for companies to take them into account: Reduced costs associated with OS&H incident management

Attraction and retention of talented personnel

Reduced turnover and absenteeism

Increased employee productivity

Increased employee loyalty and pride

Improved community respect and trust.

Table 2-12 summarizes the current status of the cement industry with regard to employee well-being.

Table 2-12. Summary of Employee Well-Being Status

TOPICS COVERED Occupational safety & health (OS&H)

for workers & contractors

Workplace conditions, including wages, benefits,

security, rights, and growth opportunities Job satisfaction, loyalty, and pride

Strengths: Examples of progressive employment

practices in many parts of the world

Weaknesses: Potential for respiratory diseases, burns,

allergens OS&H incidents often not managed carefully

or publicly reported Great variations in employee well-being

programs across countries

Opportunities: Improvements in OS&H management systems &

training programs Adoption of inherently safe plant design methods Key performance indicators tied to OS&H results Well-being programs Employee involvement in sustainable practices

Threats: Operations are impeded by poor image Difficulty in attracting talented employees Increased labor productivity leading to reduced

employment levels

2.7 Community Well-Being Although cement plants obviously provide jobs and tax revenue, plant facilities are often per-ceived as unsightly or polluting. Community concerns and expectations regarding siting of a new plant (expressed during stakeholder engagements and in literature) include children’s health, literacy, community infrastructure, worker safety, and the environment. Stakeholders are also concerned with the societal impacts of quarrying, such as blasting noise, dust, road dam-age and landslides. However, in developing countries, poverty is often an over-riding issue and the public highly values job creation. These issues are explored in greater depth below.

Public Safety and Health: Among the concerns expressed by some local stakeholders are the potential health risks associated with air pollution, including dust, metals, dioxins and other by-products of waste fuel combustion. Issues of public health and safety are often associated with the perceptions of the local community and may result from anxiety associated with unsightly

92 For example, in the U.S. a consortium of 15 companies has worked with several consulting firms to develop a system for

quantifying their “return on health and safety investment.”


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Case Study: Aboriginal Relations

Rio Tinto, one of the largest private mining companies in the world (although not in the cement sector) recognizes that Aboriginal people in Australia have a special connection to their land and have native title rights recognized by law. Rio Tinto respects aboriginal and Torres Strait Islands peoples’ cultural diversity, aspirations for self-sufficiency and interest in land management. The company sends its managers on courses in the bush with local communities so they can familiarize themselves with aboriginal customs.

Economic independence, sustainable enterprise and employment are key issues for indigenous communities around the world. The relationship between Rio Tinto and the aborigines shows how aboriginal people are developing businesses, creating employ-ment, caring for their land, improving their health, preserving their heritage, bringing income to communities and deciding their own future. Improved education and health for aboriginal people is the focus of the Rio Tinto Aboriginal Foundation, an independent body launched in 1996. As a part of Rio Tinto’s policy, strong support is to be given to activities that are sustainable after Rio Tinto has left the area.

operations of plants or quarries in the vicinity of neighborhoods. Since standards and emission limits often drive the level of pollution, some regions may experience elevated levels because their national standards are lower. However, many national emission standards for cement production are becoming more stringent and improved abatement technologies are enabling cement companies to stay well below national limits.93

Community disturbances: The process of using heavy machinery to remove and refine large amounts of limestone, clay and other mineral deposits is a constant reminder of these impacts to the local community. Quarrying does not consume a significant area of available land in any given region, and limestone resources within the earth’s crust far exceed the amount needed to supply any foreseeable demand for cement (see Section 2.5). However, neighboring communities frequently oppose quarrying because it can affect natural habitats and biodiversity, deplete and degrade surface water and groundwater resources, mobilize metals and other materials, create blasting noise and other nuisances, alter scenic vistas, intrude on green spaces or recreational areas, and produce dust.94

Cement industry critics cite a number of community concerns caused by the presence of cement quarrying and manufacturing operations:95 Vibrations due to blasting, which may damage houses and other structures

Adverse effects of dust deposition on crops in surrounding areas

Increased noise levels and traffic associated with plant and mine operation

Increased congestion and risk of accidents due to increased traffic

Deterioration in the aesthetic qualities of the landscape, e.g., abandoned quarries

Disturbance of important cultural, sites, such as archaeological or religious monuments.

Opportunit ies for Improving Community Well-Being

Reduction in environmental pollution, especially dust, will be perceived as beneficial to the well-being of a community. In addition, disturbances to the surrounding community can be mitigated 93 TNO and PricewaterhouseCoopers, “Toward a Sustainable Cement Industry: Environment, Health, and Safety Substudy Report,”

http://www.wbcsdcement.org/final_reports.asp, 2002. 94 TNO, Ibid. 95 Holtec, et. al., “Toward a Sustainable Cement Industry: Land Use and Biodiversity Substudy Report,”





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through noise reduction practices such as muffling and sound minimization. When designing a new plant, careful and innovative selection and layout of the machinery can reduce noise. Like-wise, aesthetic concerns can be alleviated by more careful quarrying and restoration efforts.96 Finally, the cement industry can enhance well-being by promoting aesthetic uses of concrete.

Many cement companies are already involved with providing assistance to their local commu-nities in a variety of ways. These contributions include sponsorship of education and training for disadvantaged groups to improve job skills, provision of financial assistance and in-kind support to community projects, and sharing of company facilities. For example, in Colombia, Holcim’s Cementos Boyaca SA has built a youth training center to enable local youths to nurture their talent. Another example is the training of co-operative workers and construction workers from disadvantaged backgrounds in the use of cement products. The main challenges in community assistance are to assign priority to projects that have the greatest benefit, and to ensure that stakeholders are made aware of the cement company accomplishments. Community support tends to be a more important issue in needy areas of the developing world, but there are rural areas in the developed world as well that are equally needy.

Enterprise Value: The above-described efforts to provide social and community assistance as part of an overall SD strategy will most likely yield business benefits for cement companies, although several of the following are intangible and difficult to measure: Increased employee loyalty and pride

Right to continue operating at existing sites

Access to new markets with strict environmental constraints

Improved community respect and trust. 96 See Siam Cement case study in Section 3.4.

Case Study: Ambassadors to the Community

Cimpor encourages its employees and retirees to serve as emissaries for the company with local communities and councils. The fact that some Cimpor employees serve on these councils facilitates discussion. When the community has concerns about plant operations or other issues, elected representatives speak directly and informally with plant managers. These pathways of communication are in turn open to plant managers. The company also encourages the participation of its employees in presentations, conferences, and seminars concerning the cement industry.

Locally, managers of Cimpor plants meet regularly with elected officials, unions, and associations to address community issues and concerns and to talk about plant activities. As the need arises, managers respond punctually to municipalities and councils concerning issues such as small emission accidents and quarry exploitation that are raised by citizens and public interest groups. These meetings also often address urban air quality, noise, labor issues, and traffic near company plants.

To strengthen relationships with the communities in which it operates plants, Cimpor builds and maintains social service facilities for public use. In addition, for example in Brazil, the company provided land for construction, and cement to help employees build their own houses. The company also sponsored a financing program for home construction, and constructed several public roads near company plants in Brazil. The company invests in infrastructure to reduce the impact of transportation and traffic associated with its plants.

Regionally plant managers meet every two months with executives from other industries in the regions where Cimpor operates to discuss job training, worker safety and health, performance appraisal, housing and employment, outsourcing, environmental issues, pollution prevention, and regulation.


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The cement industry can be either a positive or negative force in shaping the quality of life of people in both developing and developed countries. The choice to make a positive contribution can yield mutual benefits to both the public and the industry.

Table 2-13 summarizes the current status of the cement industry with regard to community well-being.

Table 2-13. Summary of Community Well-Being Status

TOPICS COVERED Public safety and health Pleasant living environment

Satisfaction of basic needs Access to public services Landscape aesthetics

Strengths: Some cement companies provide financial and

in-kind support to local communities and disadvantaged groups

Weaknesses: Cement operations may create disturbances,

e.g., congestion, noise, dust Quarry sites may damage recreational,

agricultural, and other forms of land use and compromise aesthetics

Opportunities: Understand community needs through dialogue Work with communities to help them meet their

expressed needs (e.g., infrastructure, job training, health care, nutrition)

Promote aesthetic uses of concrete Restore quarry sites to provide public amenities

Threats: Community resistance to permitting expansion or

construction of quarries and plants

2.8 Regional Development The cement industry is often a contributor to local and regional economies, and can use this role as a basis for strengthening relationships with communities and governments. The following summarizes the major economic impacts of cement plant operations.

Cost-effective product: The industry’s major contribution to a regional economy is the provi-sion of a cost-effective product. As described in Part 1, concrete’s durability, versatility, and low cost make it the preferred material for many important applications, including transportation infrastructure, residential and commercial buildings, and water collection and distribution. Globally, approximately twice as much concrete (by mass) is used in construction than the total of all other building materials including wood, steel, plastic and aluminum.97

Creation or Loss of Jobs: The cement industry provides direct employment for an estimated 850,000 workers worldwide.98 Cement companies are viewed as important contributors to developing economies, where new plants are often welcomed as a source of employment. However, cement companies that acquire aging plants in less developed nations often achieve significant productivity gains through modernization, resulting in layoffs. Moreover, cement plant closures can have adverse impacts upon the economies of smaller municipalities or villages. Due to increasing globalization of the industry and the use of more efficient technologies and management practices, employment in the cement industry is believed to have declined over the past decade, by nearly half of the number of workers per unit of output.99 In the Chinese cement industry the threat of unemployment has created barriers to the closure of many small,

97 Cement Association of Canada, http://www.cement.ca/cement.nsf. 98 ERM, “Toward a Sustainable Cement Industry: Socioeconomic Development Substudy Report,”

http://www.wbcsdcement.org/final_reports.asp, 2002. 99 Ibid.


http://www.cement.ca/cement.nsf


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inefficient plants. Laying off workers adds to potential political instability and is opposed by local leaders who have economic interests in the plants.100

Economic Stimulus: In addition to creating tax revenue, cement companies often benefit the local economy through procurement from local suppliers, support for local entrepreneurship, and development of public services. Indirect employment resulting from the cement industry pro-vides an additional estimated 150,000 jobs worldwide.101 Moreover, there is an economic “multiplier” effect associated with the presence of a cement plant in a community, so that the total number of jobs attributable to the industry is likely over a million worldwide, both at cement plants and suppliers. In addition, the indirect regional economic benefits include the develop-ment of an infrastructure for continued growth, skill enhancement, capacity building, and diversity of the community.

Economic Disruptions: Despite the economic benefits discussed above, cement industry stakeholders cite a number of disruptions caused by the presence of cement quarrying and manufacturing operations:102 Displacement or dislocation of local population, and loss of agricultural and other livelihoods.

This may create an economic burden for local governments.

Changes in occupational and cultural patterns that may lead to disintegration of the original community, e.g., immigration of outside workers

Increased load on existing local infrastructure, including sewage, water supply, power, transport, and housing.

100 Battelle, “Toward a Sustainable Cement Industry: China Study,” http://www.wbcsdcement.org/final_reports.asp, 2002. 101 ERM, “Toward a Sustainable Cement Industry: Socioeconomic Development Substudy Report,”

http://www.wbcsdcement.org/final_reports.asp, 2002. 102 Holtec, et. al., “Toward a Sustainable Cement Industry: Land Use and Biodiversity Substudy Report,”


Case Study: Meeting Development Needs in China

China’s high GDP growth rates have created a construction boom that drives much of the country’s growing demand for cement. Forty percent of China’s cement is now used for basic infrastructure construction such as highways, with about one-third of that used in rural areas. Only rotary kiln cement can be used legally to build high-rise buildings in China, and demand for the higher grade #425 and #525 cements is projected at 250 million tonnes by 2005. Meeting this demand will be difficult, as high quality cement is rare and expensive compared with low quality cement, which is oversupplied and cheap.

The central government plans to meet this challenge through increased investments in infrastructure, encouragement for foreign investment in the industry, and the closure of smaller plants that are less efficient and produce lower quality cement. The poorer western provinces have investment priority in the short term to help alleviate regional income differentials that result in migration to the more crowded east. With slowly increasing production capacity, improvements in cement quality will occur more rapidly as older, less efficient facilities are closed or upgraded and newer, more modern facilities are built. From current production of around 576 million tonnes, China anticipates producing 660 million tons by 2005, 750 million tonnes by 2010, and 800 million tonnes by 2015. Despite ongoing progress, achieving the 2005 goal remains uncertain as thousands of small plants are closed and foreign companies continue to face difficulties in bringing investments to closure.





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Opportunit ies for Improving Regional Development

The existing contributions of cement companies to regional development and capacity building tend to be under-recognized. This represents an important aspect of SD that should be stressed in the future. Other opportunities for regional development improvement include Continued support for related industries, including small business enterprises such as

concrete manufacturers

Continued support for education and skill enhancement of the local community and disadvantaged suppliers

Proactive involvement in community enhancement.

Enterprise Value: The above-described efforts to enhance regional development as part of an overall SD strategy will most likely yield business benefits for cement companies, including Stimulation of local and regional economic growth, creating more demand for cement

Improved relationships with community groups and other stakeholders

Improved access to development financing.

Table 2-14 summarizes the current status of the cement industry with regard to regional development.

Table 2-14. Summary of Regional Development Status

TOPICS COVERED

Job creation

Economic growth and stability Infrastructure development Capacity building

Strengths: Cement is a key ingredient in a low-

cost, versatile construction material – concrete

Cement plants provide jobs, tax revenue, and local economic stimulus

Weaknesses: Plant openings or closures disrupt

existing local economic patterns Employment declines due to higher

productivity

Opportunities: Seek recognition for community development and capacity

building Support growth of local business enterprises Provide assistance for displaced workers Create novel cement-based products for developing

markets

Threats: Dynamic economic and political situations in some

emerging economies make it risky for cement companies to enter markets

Cement industry offers to help with social issues can be perceived as “bribes” or conversely, governments could come to expect industries to provide considerable funds in order to operate in a country

2.9 Shareholder Value Creation As stated in Part 1, progress toward sustainability will only occur when there is a clear link to enterprise value. Based on a number of empirical studies that correlate company practices with shareholder value, the financial community has begun to recognize that sustainable companies tend to be better managed.103 In other words, those companies that embrace environmental and social responsibility will generate superior economic returns. This new awareness has led

103 Repetto, R. and D. Austin, Pure Profit: The Financial Implications of Environmental Performance, World Resources Institute,

2000.


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to the rise of pooled investment initiatives such as Sustainability Investment Partners, and the emergence of indicators such as the EV 21® index devised by Innovest Strategic Advisers, the FTSE4Good Indices, and the Dow-Jones Sustainability Index.

Shareholder value creation can result from several different sources of value: Quantifiable enterprise value (measurable in financial terms)

Strategic enterprise value (e.g., image) measurable in non-financial terms

Future potential value (e.g., option value) over a long time horizon.

Some sustainability initiatives contribute directly to enterprise value, e.g., revenue from utiliza-tion of wastes as alternative fuels. In addition, creating value for external stakeholders will indirectly lead to enterprise value creation for the cement industry (e.g., customer loyalty, employee satisfaction, right to operate). Thus, there is an important linkage between environ-mental and social sustainability achievements and the company’s ability to sustain growth and profits.

In particular, each of the SD issues covered in the previous sections is linked to enterprise value creation. These linkages, based on Battelle’s ValuWeb™ methodology,104 are illustrated in Figure 2-7. The arrows in the diagram show how specific improvements on the part of a cement

104 ValuWeb™ is a methodology developed by Battelle’s Life Cycle Management group for visual mapping of value contributions

associated with products, processes, or systems.


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company can generate value for society as well as enterprise value for the company. While it would be impossible to show clearly all of the potential linkages to value in a single diagram, Figure 2-7 attempts to capture a number of the important pathways for value creation. For example, Resource Productivity will be enhanced through reductions in virgin material usage and fossil fuel usage, which results in several important direct benefits to society – natural resource conservation, emission reduction, and climate protection.105 At the same time, improved resource productivity will contribute to reduced operating costs, since material acqui-sition costs will be lower, as well as reduced capital costs, since the required throughput per tonne of cement will be lower, effectively increasing plant capacity. Finally, the above-mentioned societal benefits will generate indirect strategic value for the company by enhancing the company image and right to operate, which ultimately translate into competitive advantage and improved financial returns.

In a similar way, it is possible to trace a path from each of the key SD issues to the important direct and indirect benefits for both the cement company and its stakeholders. Some of these linkages can be quantified mathematically, while other linkages represent known correlations that are difficult to quantify precisely (e.g., the connection between employee well-being and employee productivity). Individual cement companies can use this approach to develop more detailed, customized representations of their beliefs about how key SD issues relate to their business objectives. In effect, ValuWeb™ provides a graphical view of the business case for SD.

Opportunit ies for Shareholder Value Creation

There are three main types of opportunities for cement companies to create quantifiable enterprise value through sustainability:

1. Reduce costs through improving efficiency, reducing resource requirements, or stream-lining siting of new plants. This can be achieved through initiatives such as AFR, indus-trial ecology, waste minimization, accelerated development, etc.

2. Increase revenue through expanded market share or development of new markets. Waste recovery is one example of new revenue sources. Alternative applications of cement, e.g., specialty materials, could provide new markets. Products might be developed for high-volume, low-income markets in developing countries.106 In each case, the sustainability consequences need to be examined.

3. Reduce cost of capital through more effective utilization or leveraging of capital assets. This can be achieved through economies of scale in production and distribution or through innovative technologies that lead to simpler, less costly processes for making cement. Cement companies known for SD excellence may be in a position to receive lower cost loans due to lower risk.

Table 2-15 summarizes the current status of the cement industry with regard to shareholder value creation. While prospects are good for growth in developing countries, there are a num-ber of intrinsic factors that limit the ability of cement companies to generate high shareholder returns. Due to the commodity nature of the business and the maturity of the product, there is relatively little investment in innovation or differentiation. Nevertheless, a number of specialty cement products have been developed, and further business opportunities may appear as sustainable construction principles become more widespread.

105 Taiheiyo Cement’s Environmental Report 2000, p. 21, provides an example of the quantification of social benefits. 106 C. K. Prahalad and S.L. Hart, “The Fortune at the Bottom of the Pyramid,” Strategy and Business, Issue 26, January 2002.


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The largest potential gains for cement companies appear to be the opportunities for expansion into new markets including waste recovery, the reduction of operating and capital costs through more efficient process design, and the establishment of an enhanced image and right to operate through improved stakeholder relationships. If cement companies fail to pursue these opportun-ities, they may face competition from substitute cement products and from other construction materials. There is a potential, already evident, for value migration to concrete or construction companies that develop the capability to formulate their own waste-based cements. Finally, the poor public image of most cement companies in the developed world may be aggravated by a perception that they are not responsive to SD issues, leading to dissatisfaction on the part of the financial community.

Sustainable Cement Tool: Sustainable Business Decis ion Framework

Battelle has developed a conceptual framework for understanding both direct and indirect value creation in the cement industry. Indirect value creation (or destruction) is a consequence of the beneficial (or adverse) impacts of cement company operations upon different stakeholder groups. Figure 2-8 illustrates how triple bottom line impacts can be explicitly identified, and how stakeholder reactions can create indirect strategic or financial benefits for a cement company. This decision-making tool provides a much broader set of criteria than the traditional financial analysis tools that address only the top left cell of the matrix.

Beneficial uses of cement products

Access to education & health care

Social equity and fairness

Waste recovery as a service to society

Emission reduction Natural

resource protection

Job creation and poverty alleviation Taxation revenues Economic growth and prosperity

Stakeholder value

Employee well - being Company reputation

Risk management

Resource efficiency

Financial performance

Enterprise value

Social Environ - mental

Economic

Financial Benefits: Improved asset utilization Operating cost reduction

Liability avoidance Revenue growth

Strategic Benefits: Right to operate

Relationships Public Image

Figure 2-8. A Framework for Understanding Enterprise Value


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Table 2-15. Summary of Shareholder Value Creation Status

TOPICS COVERED Quantifiable financial value

(e.g., return on investment) Strategic enterprise value (e.g., company image) Future potential value (e.g., option value) over long time horizon

Strengths: Solid outlook for long-term growth in

some regions of the globe, e.g., Asia

Weaknesses: Rate of innovation and R&D

investment is low Process R&D often left to vendors Public image of most cement

companies is not an asset Long capital investment recovery

periods No control over waste markets

Opportunities: Development of high-margin products Reduced operating costs via eco-efficiency Faster permitting, improved right to operate Increased revenue through expanded markets Reduced capital costs via process simplification

Threats: Competition from substitute cement products and from

other building materials Financial and market share value migration to concrete or

construction companies that develop the capability to formulate their own waste-based cements

Difficulty in raising capital due to perceived environmental problems

Competition from low-cost providers that take advantage of less stringent policies

Case Study: Business Value of Community Outreach at Artesia Plant

In the early 1980s, the future of the Holcim (U.S.) Inc.’s Artesia plant in Mississippi was highly uncertain. Although it was graced with a copious supply of high quality raw material, the plant was located in an isolated area that did not allow for cheap water transport. The plant was also at an economic disadvantage due to its outmoded process and relatively small size. With lower-cost imports threatening the survival of the plant, Artesia management focused on reducing energy costs through the use of waste fuels.

In their first attempt at permitting for such fuels, plant management took a technical approach to the project and paid little attention to stakeholder concerns. Plans for the project were not shared with the community or employees until an official public hearing, and as a result, there was little understanding of the project by these groups. Opposition to the project was great, and while the permit was issued, its parameters made it virtually impossible to utilize significant amounts of waste fuel.

The plant embarked on a second effort in 1992 to come up with a more flexible permit. It was clear that the lack of stakeholder engagement during the first round was ultimately responsible for the plant not being able to utilize waste fuels. This time, Artesia plant management reached out to the community and was very transparent with its intentions. The aura of misunderstanding dissipated with Artesia’s educa-tional efforts, and the community became comfortable with the project. As a result, the project faced little opposition, and Artesia obtained a permit that has allowed reduced energy costs.

Building upon the success of the second permitting effort, Artesia has continued to include its stake-holders in its business decision-making processes. The trust that has been developed has allowed the plant to navigate several more recent permitting efforts much faster than they could have been without stakeholder support. Regulators have also recognized Artesia’s approach as a model for effective community outreach.


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2.10 Vision for a Sustainable Cement Industry The cement industry can ensure its continuity and prosperity by acknowledging its short-comings, focusing on win-win opportunities to create value for society, and working with its stakeholders toward a long-term vision of sustainability. Battelle believes that the industry should define a SD vision for the future that expresses the aspirations of cement companies, and guides the development of principles, goals and objectives, business strategies, and specific actions. Based on the results of this study and prior input by Arthur D. Little, Inc., Battelle suggests the following vision of a desirable state for the cement industry in 2020:

Battelle’s vision: By 2020, cement companies have integrated sustainable development into their global operations, are known as innovators in industrial ecology and carbon dioxide management, are regarded as attractive employers, and have established relationships of trust with the communities in which they operate.

1) Resource productivity – The industry makes productive use of materials that otherwise would be discarded as waste, and applies state-of-the-art technologies and operating practices to cost-effectively improve its efficiency in energy and material consumption.

2) Climate protection – The industry has implemented practical technological, operational, and market-based strategies to significantly reduce emissions of CO2 and is technologically positioned for even greater reductions in the future.

3) Emission reduction – The industry has continuously improved its environmental practices and controls to achieve a minimal release of wastes or emissions that could adversely affect human health, ecosystems, and aesthetics.

4) Ecological stewardship – The industry develops, operates, and retires its plants and quarries in a manner that minimizes adverse impacts on the environment, including biodiversity and aesthetics, and protects and restores potentially impacted ecosystems. In doing so, it has earned support and recognition in the eyes of the community and regulators.

5) Employee well being – The industry builds and operates its facilities in a way that fosters employee satisfaction and productivity, provides fair wages and benefits, and is a safe, clean, healthy, and desirable place to work.

6) Community well being – The industry is well understood and respected by the communities in which it operates because companies and plants make efforts to understand community needs and to help find ways to meet those needs. The industry has implemented measures to address nuisance disturbances associated with quarrying, transportation, and plant operations.

7) Regional development – The industry and its associated value chain are viewed as positive contribu-tors to local and regional economies, and countries welcome the growth and prosperity of the industry because it is considered a critical component of infrastructure development and maintenance.

8) Shareholder value creation – The industry provides competitive returns to investors and is able to readily secure capital resources. Cement companies that have adopted SD practices are desirable investments for sustainable development index funds, and have increased their profitability and market share.

2.11 Establishing Industry SD Goals and Performance Indicators To pursue the vision of the future, cement companies will need to adopt strategic goals that are consistent with the triple bottom line. Battelle has developed a set of eight sustainability goals for consideration by the cement industry as a whole, which we believe address most of the stakeholder concerns identified during this study. Note that the eight goals, presented in Table 2-16, correspond to the eight key SD issues assessed in the previous section.


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Table 2-16. Recommended SD Goals and Key Performance Indicators

Issue Goal KPIs

Resource productivity

Conserve resources by using less energy and recycling wastes

Energy efficiency: Tonnes of cement per megajoule (quarry and plant)

Fuel material substitution rate (%)

Raw material substitution rate (%)

Climate protection

Reduce greenhouse gas emissions

Net CO2 (kg) emissions per tonne of cement

Emission reduction

Reduce environmental waste streams

Waste (non-product output) produced (kg) per tonne of cement (can include airborne emissions, waterborne effluents, dust, solid wastes)

Ecological stewardship

Reduce adverse impacts of quarrying

Potential KPIs: investments in quarry restoration, overburden waste reduction, water use efficiency, biodiversity action plans, etc.

Employee well-being

Assure worker health and safety

Incident rate (injury, work-related illness) per 200,000 hours (can include both employees and contractors)


Respect the needs of local communities

Potential KPIs: frequency of community meetings, hours of volunteer community service, public health initiatives, community opinion surveys, etc.

Regional development

Support host region economies

Potential KPIs: job creation, local investment, technology transfer, contribution to GDP, etc.

Shareholder value creation

Create superior value for shareholders

Potential KPIs: return on investment (ROI), return on assets (ROA), return on net assets (RONA), return on capital employed (ROCE), economic value added (EVA), etc.

Bold = Bold items designate KPIs that Battelle has recommended for use by the cement industry.

Key performance indicators: Associated with each of the goals are corresponding key per-formance indicators (KPIs) whereby progress can be measured. Battelle was able to reco-mmend general indicators for only four of the goals; the other goals will require further develop-ment of consensus regarding the most meaningful indicators.107 Several of the goals are relatively new for the cement industry – e.g., “Respect the needs of local communities” and “Support host region economies” – so that common indicators have not yet been established. We anticipate that individual cement companies will select the key performance indicators that are most appropriate for their business needs. For example, instead of tonnes of cement as a normalizing unit, some companies may prefer tonnes of cementitious material.

Note that the first recommended KPI, Tonnes of cement per megajoule, is the inverse of a more familiar measure of energy intensity, megajoules per tonne. The purpose of this KPI is to reflect the increasing eco-efficiency of cement production in terms of output per resource unit, as discussed in Section 2.2.

107 Battelle, “Toward a Sustainable Cement Industry: Key Performance Indicators Substudy Report,”




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Another of the KPIs that may be challenging to implement is non-product output, i.e., waste per tonne of cement. Most cement companies measure specific waste streams that they consider important, such as airborne NOx emissions, but do not attempt to calculate the total amount of waste generated by their operations. Battelle believes that it is important for cement companies to move toward a system-level understanding of eco-efficiency, and that the recom-mended KPI encourages this type of thinking. Otherwise, reduction in one type of waste stream may simply be achieved by shifting the waste to a different medium. Non-product output is theoretically equal to the difference between total materials consumed and total cement pro-duced, which can be deduced through a mass-balance calculation. Therefore, in addition to reducing environmental impacts, reduction in non-product output will tend to reduce the cost of material procurement. At the same time, use of this KPI at an aggregate level does not pre-clude companies from implementing more focused indicators that track the releases of specific substances such as NOx, heavy metals, or CO2 from individual plants.

Finally, it should be noted that there is partial overlap among several of the recommended KPIs. For example, one way to reduce CO2 emissions is to reduce the use of fossil energy sources, which can in turn be accomplished through increased substitution of wastes as alternative fuels. However, each KPI represents an important goal that stands on its own, and it is satisfying for company personnel to have goals that are mutually reinforcing. If cement companies can implement initiatives that improve performance for multiple KPIs, they deserve full credit for their accomplishments.

Implementation challenges: Assuming that cement companies are able to establish strategic goals and high-level performance indicators similar to those in Table 2-16, they will then face the challenge of deploying these indicators throughout their operations. In order to make genu-ine progress, each company will need to establish corresponding plant-level and business unit performance indicators, targets for improvement, accountabilities, and programs of action. Battelle has developed a process that supports establishment of a SD performance measure-ment program (see Figure 2-9). However, it should be noted that implementation of such pro-grams may require significant organizational alignment efforts to build understanding and commitment among the workforce.108

Finally, assuming that cement companies are able to implement SD performance measurement programs, they will need to develop effective methods for communicating their results on an ongoing basis to internal management and external stakeholders. A number of companies in other industries have invested considerable energy in developing “sustainability reports”. How-ever, there are a number of alternative methods of disclosing performance results and receiving feedback from stakeholders, such as community meetings, World Wide Web pages, or pub-lished journal articles. Each company will need to decide on an appropriate communication strategy that fulfills its business objectives. Figure 2-10 illustrates one possible approach toward using the Sustainability Compass as a communication tool.

108 Boston Environmental Group, “Toward a Sustainable Cement Industry: SD Alignment Substudy Report,”




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Sustainable Cement Tool: Sustainabil i ty Compass Profi le

Cement companies can use the Sustainability Compass, introduced in Part 1, as a means for visualizing their progress with respect to performance improvement goals. Each spoke of the compass can correspond to a selected KPI, and the inner polygon then shows the degree of progress that has been achieved toward the chosen targets. This approach is useful for individual cement companies, but not effective for representing industry averages.

Shareho lder v alue

Re gional de velopment

Community quality of lif e

Worker hea lth & saf ety

Ecological s tew ardship

Emis sion reduc tion

Climate protection

Resource productiv ity

Figure 2-10. Tracking Progress Toward SD (Example)


Employee well-being

Sustainable Cement Tool: Sustainabil i ty Performance Measurement

Battelle has developed a systematic, step-by-step performance measurement process for the cement industry, based on current best practices. The process, illustrated in Figure 2-9, enables cement companies to identify key company-wide SD aspects, develop corresponding objectives and performance indicators, and flow these down to the business unit and facility level. A comprehensive set of candidate performance indicators for cement industry operations is also provided.

1. Consider Stakeholder Needs

5. Set Targets

Review Company Goals and KPIs

4. Select Indicators & Metrics

TrackPerformance

2. Identify Important Aspects

3. Establish Company Goals & KPIs

CONTINUOUSIMPROVEMENT

Revise Indicators & Targets

Source: Battelle, “Toward a Sustainable Cement Industry: Key Performance Indicators Substudy Report,” http://www.wbcsdcement.org/final_reports.asp, 2002.

Figure 2-9. The Performance Measurement Process



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2.12 The Opportunity The theme of SD keeps recurring in many of the challenges confronting the industry as well as the corresponding business opportunities. Very simply, SD is about addressing stakeholder needs in the context of business strategy. Most of the challenges that confront the cement industry are a consequence of changes in stakeholder expectations – customers, investors, regulators, communities, and business partners. Effective management of cement companies in the face of these dynamics will require both an understanding of external forces and adapt-ability to respond to change. Static business models are no longer adequate.

The challenges faced by the cement industry are complex, but not insurmountable. As demon-strated above, some cement companies have already achieved significant successes in enhancing their resource productivity, environmental performance, and social contributions at specific sites. However, this record of achievement has not been broadly communicated, and one obstacle that the industry will face is skepticism among stakeholder groups as to whether these practices create value for society and can be disseminated more broadly. If cement companies respond to stakeholder needs with understanding and enlightened self-interest, they can chart a course that leads to mutual benefits and relationships of trust. This approach will require acceptance of shortcomings and openness to change and innovation, but there is a potential for substantial rewards in terms of profitability, growth, and shareholder value added. Conversely, if cement companies fail to respond to the SD issues outlined in the above sections, there is a risk that they will encounter increasing financial burdens and stakeholder opposition that may diminish their competitiveness.

Part 3 of this report provides a set of high-level recommendations for moving toward a sustainable future, as well as a set of potential action initiatives that can be considered by the industry, individual companies, and external stakeholder groups.


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Part 3: Embarking on the Path – An Agenda for Change The vision of a sustainable cement industry in 2020 can only be realized if cement companies and their stakeholders take concerted actions that lead to meaningful changes. While some leading cement companies have already begun to integrate SD principles into their operations, the majority of them have not considered the full range of possible actions that can contribute to SD. For the industry to move beyond incremental improvements, new strategies are needed that promote fundamental change.

This section of the report recommends a strategic agenda for change over a twenty-year time frame, including potential actions by both the cement industry and its stakeholders. As illus-trated in Figure 3-1, the recommendations of this study, combined with the influences of stake-holder perspectives, will help a cement company to spe-cify its SD strategy and goals. Then, progress along the path toward SD will involve a gradual and iterative process, including communication with stake-holders, goal-setting, appli-cation of knowledge and tools, initiation of actions, evaluation of performance results, and redefinition of strategy and goals over time. Each cement company will need to manage this process and implement actions in a way that fits with its own business priorities and capa-bilities. Although there can be a set of indicators com-mon to the industry, some performance indicators will need to be tailored to the particular characteristics of the company.

Public Policy Part icipation

The ability of the cement industry to work effectively toward SD will be greatly influenced by the evolution of public governance frameworks in different parts of the world. The major public policy and regulatory issues areas that are relevant to the industry’s SD agenda include109 New regulations to reduce emissions, particularly CO2 and other climate change gases

Regulations and local policies restricting the use of hazardous waste or other materials as fuels

109 Battelle and ERM, “Toward a Sustainable Cement Industry: Public Policy Instruments Substudy Report,”




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Policies governing zoning, urban sprawl, and biodiversity conservation that impact opera-tions, restrict expansion, or limit siting of new facilities

Evolving product stewardship policies that may require producers to accept long-term responsibility for the end-of-life disposition of their products

Regulations and standards that hinder the use of alternative materials in the production process or in the product.

These policies and regulations will challenge cement companies and plants to respond with alternative production processes, emissions control technologies, or more effective and complex siting, permitting and mitigation strategies. In order to assure that the opportunities described in Part 2 can be realized, it is important that the cement industry collaborates with its stakeholders to promote a policy framework for sustainable development that is clear, stable, flexible, predic-table, and effective. This is a recurrent theme in the recommendations that follow.

The cement industry can participate more effectively in public policy development

by adopting a systematic process of policy analysis and engagement. A process model has been designed to help cement companies take a deliberate and strategic approach toward influencing public policy development. Key elements, such as stakeholder input and networking among organizations regarding policy options, ensure that a wide range of views are reflected in the process.

Source: Battelle and ERM, “Toward a Sustainable Cement Industry: Public Policy Instruments Substudy Report,”


Summary of Recommendations

Ten high-level recommendations are summarized in Table 3-1, representing a portfolio of poten-tial initiatives that can be undertaken by cement companies and their stakeholders. Most of these recommendations are derived from the substudies listed in Appendix E. The recommen-dations are grouped into two categories:

Initiatives that focus on the specific issues relevant to the cement industry

Initiatives that focus primarily on the enabling processes necessary for organizations to work toward achievement of SD goals.

Sustainable Cement Tool: Policy Development Process Model

Figure 3-2. Stepwise Approach for Cement Company Participation in Public Policy Development



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The first category is directly related to the vision and goals for key SD issues defined in Part 2 of this report. The second category (called “enabling processes”), recommends key actions needed to ensure the success of the focused environmental and socio-economic initiatives, including alignment of cement companies around SD principles, innovation, and cooperation with stakeholders.

In the future, companies may compete on the basis of SD by developing improved processes and novel products that give them a competitive edge. In addition, cement companies can take cooperative actions, working jointly with each other and with external stakeholders, to make progress on sustainability. Therefore, the recommendations include both company-specific initiatives and cooperative initiatives that will promote the adoption of SD. Enterprise value: The realization of shareholder value by increasing enterprise value is not

included among the issue-specific recommendations. The reason is simple – enterprise value is woven into virtually all of the recommended initiatives. Certain SD initiatives will contribute directly to enterprise value (e.g., cost savings through eco-efficiency), while other initiatives that generate environmental or socio-economic value will lead indirectly to enter-prise value creation (e.g., through increased customer loyalty, employee satisfaction, and community right to operate). Thus, there is an important linkage between environmental and socioeconomic SD results and the company’s ability to sustain growth and profits.

Examples of enterprise value creation opportunities were presented in connection with each of the eight SD issues in Part 2. These include Reduction in capital costs due to more effective asset utilization

Reduction in operating, maintenance, and waste disposal cost

Increased revenues associated with marketing of waste recovery services

Minimization of potential financial penalties associated with CO2 emissions


Improved corporate reputation for business innovation and environmental performance

Improved employee health, safety, loyalty, productivity, and job satisfaction

Stimulation of local and regional economic growth, creating more demand for cement

Improved access to new markets with strict environmental constraints

Improved relationships with community groups and other stakeholders

Improved license to operate existing facilities and develop new sites

Improved access to capital due to reduced risk factors.

Case studies that illustrate the above opportunities include the following: CEMEX Ecoefficiency Program

An Example of Emerging Climate Policy—The U.K. Climate Change Levy

Business Value of Community Outreach at Artesia Plant

Modernization at Rüdersdorfer Cement

Exshaw Quarry Management Working Group

Lampang Project—Creating Enterprise Value.

Figure 3-3 illustrates how the recommended types of actions on the part of the cement industry and its stakeholders can result in accelerated progress toward SD. This diagram builds upon


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the business logic for shareholder value creation that was introduced in Figure 2-4. For exam-ple, actions related to Process Innovation and Improvement can lead to a variety of improve-ments in efficiency and safety that in turn have a positive impact upon a number of SD issues – Resource Productivity, Climate Protection, Emission Reduction, Ecological Stewardship, and Employee Well-being. As indicated in Part 2, these improvements create value for stake-holders, including employees, communities, and other interested parties, while also generating financial and strategic value for the company. It would be impossible to show clearly all of the potential actions and linkages to value in a single diagram, but Figure 3-3 displays a number of the important recommendations in this report.

The following sections provide additional details on suggested initiatives and actions corresponding to each of the high-level recommendations in Table 3-1. Actions in support of each recommendation are arranged with the critical ones at the top of each listing, indicated with an asterisk.(*)

The last section describes alternative pathways that cement companies might take toward the goal of sustainability by focusing on selected areas of performance. The path chosen by each cement company will be different, because each must work within the context of its unique culture, beliefs, asset base, market, and financial situation.


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Table 3-1. Major Recommendations

Recommendation Responsibility Issue-Specific Initiatives

1. Resource Productivity

Facilitate the practice of industrial ecology and eco-efficiency in the cement industry

Cement companies NGOs and Academia Local and national government Suppliers, including waste suppliers

2. Climate Protection

Establish corporate carbon manage-ment programs, set company-specific and industry-wide medium-term CO2 reduction targets, and initiate long-term process and product innovation

Cement companies working individually and collaboratively

Industry associations Standard setting bodies Government regulatory agencies NGOs Academia

3. Emission Reduction

Continuously improve and make more widespread use of emission control techniques

Cement companies Industry associations Suppliers Local and regional governments

4. Ecological Stewardship

Improve land-use practices by disseminating and applying best practices for plant and quarry management

Cement companies Local/national governments Industry associations Environmental NGOs Local and national governments Community stakeholder groups Academia

5. Employee Well-Being

Implement programs to enhance worker health, safety and satisfaction

Cement companies Regulatory agencies Suppliers Employees Industry associations

6. Community Well-Being

Contribute to enhancing quality of life through local stakeholder dialogue and community assistance programs

Cement companies Community stakeholder groups

7. Regional Development

Promote regional economic growth and stability, by participating in long term planning and capacity building, especially in developing countries

Cement companies Local & regional governments Waste brokers

Enabling Process Initiatives 8. Business

Integration of SD

Integrate SD principles into business strategy and practices in order to create shareholder value

Cement companies Stakeholder groups

9. Innovation Encourage SD-related innovations in product development, process technol-ogy, and enterprise management

Cement industry consortia Equipment suppliers Academia

10. Cooperation Work with other cement companies and external organizations to foster SD practices and remove barriers

Cement companies Concrete companies Specifiers and other users Industry associations NGOs Academic and private research

organizations Equipment suppliers Governments


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3.1 Resource Productivity Conservation of natural resources is a key theme of sustainability.110 Limestone and even fossil fuels are likely to remain in plentiful supply for the foreseeable future, although prices may increase over time. Nevertheless, a decrease in extraction of virgin (natural) materials and the productive use of waste materials are important societal goals, because these actions will preserve undisturbed land and minerals for future generations

decrease negative impacts on natural habitats

lower the volume of wastes in landfills

reduce waste disposal costs, and

lower net CO2 emissions.

The recommendation related to resource productivity calls for an increased cement industry application of industrial ecology (IE) to reduce cement industry consumption of fossil fuels, limestone, and other minerals. As discussed in Section 2.2, the cement industry has already begun using AFR. Steps can be taken to increase the use of AFR and continue the assessment of the benefits and costs of using wastes.

110 Proponents of sustainability argue that resource consumption in all industries should decrease by a minimum of a factor of four or

ten, and some organizations call for even more aggressive goals of factor 20 or factor 50.

Case Study: Supporting the Case for Using Waste as Fuel

The Obourg plant of Holcim (Belgium) has been using alternative fuels and raw materials for over 10 years and now uses about 1 million tonnes per year, of which 120,000 tonnes are hazardous combustible waste. During the same period, the Dutch government, with support of the chemical industry, erected an incinerator for hazardous waste in the Netherlands, with incineration costs in the range of 200 to 400 €/tonne. Holcim (Belgium) saw an opportunity to provide the same waste processing at much lower cost. Fierce competition including protectionist measures from the Dutch government arose. (Note that the hazardous nature of waste can be associated with characteristics other than toxicity, such as flammability.)

Holcim (Belgium) understood the potential concerns regarding using hazardous wastes in a cement kiln, so they commissioned several independent studies to address the issue. This research included LCA studies that compared the environmental impact of waste processing in the cement industry with the impact of incineration in a dedicated plant. The LCA studies showed an environmental balance in favor of using waste as a fuel in the cement industry because, amongst other reasons, landfilling of combustion residues was avoided, energy and minerals were recovered in the cement process and global emissions were reduced. The studies developed a quantitative method to distinguish between waste recovery and waste disposal activity that demonstrated that wastes used in this way can be effectively considered as alternative fuels or raw materials. Holcim (Belgium) also issued comparative emission measurement studies that showed that with proper operation, the emissions of the cement kiln do not increase when hazardous waste substitutes fossil fuels. Holcim (Belgium) publishes these results in annual environmental reports and regularly communicates with the Belgian and Dutch authorities, with the surrounding communities and with waste producers.

Based on these studies and stakeholder engagement, the cement industry was able to defend its position in public discussions and legal procedures, and gain an acceptance of the value of waste processing in cement kilns. Currently in the Netherlands, waste processing in the cement industry is accepted as a sound way to treat hazardous waste.


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As a first step, companies should develop an IE component of their business strategy, including better understanding the financial and performance incentives. Some NGOs and cement industry neighbors have expressed concern over the possibility that using wastes as fuels can result in dioxin and furan emissions and have adverse health effects. Although tests show these emissions can be controlled, companies committed to an IE approach to business should continue to conduct or support the research necessary to characterize both the risks and benefits of AFR.

Cement companies can also explain the IE concept and its benefits to stakeholders, potential partners and customers, and seek IE partnerships and collaborations. As a general rule, cement companies should develop relationships with several waste-supply partners. Securing

Case Study: Zero Emissions and the Cement Plant of the Future: Taiheiyo’s Philosophy

Continuous development of innovative technologies for the pre-treatment, refining, utilization, recycling and disposal of a wide range of wastes, both industrial and domestic, is essential if the concept of zero emissions is to be realized. However, in a world of ever-diminishing natural resources and an ever-increasing volume of waste, the speed of the development and implementation of these technologies is critical. The cement industry is unique in its suitability to process waste and will play a very significant role in this evolution.

In the future it will be possible to produce cement using less and less virgin fossil fuels or virgin raw materials. It is extremely unlikely however, from a chemistry perspective, that a cement produced using only ‘wastes’ will comply with existing international cement standards or building materials regulations. Nevertheless, it could be a functional cement with the necessary performance characteristics to fulfill modern construction requirements. Cement produced in this way will not be ‘manufactured’ but ‘eco-factured’, recovering valuable materials during cement production. This is already happening in the Taiheiyo Ecocement plant in Japan, where chlorides of lead, copper and zinc etc. are collected and sent for further refining.

Toward a Zero Emissions Society: Taiheiyo’s Vision of the Cement Plant Resource Recycling System


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multiple sources of wastes not only makes the overall level of supply more reliable, but also gives cement companies flexibility to choose waste sources that prove safest and most environ-mentally and economically sound.

Those companies that intend to implement a proactive IE program must have the technical cap-ability to evaluate the full range of IE opportunities, including both financial and environmental implications of choices over the lifecycle. They can research the full lifecycle effects of using wastes as fuel in cement plants versus other uses, and they can analyze the compatibility of various waste streams with their individual plant characteristics. They can also investigate ways to make changes in their plants or in waste suppliers’ operations that would increase the feasibility or effectiveness of industrial ecology approaches.

The potential actions related to resource productivity and industrial ecology are summarized in Table 3-2, below:

Table 3-2. Potential Actions to Foster Resource Productivity

Recommendation 1: Facilitate the practice of industrial ecology and eco-efficiency in the cement industry

Potential Actions Responsibility References 1.1 Develop a business strategy toward use of AFR and

industrial ecology. Companies should understand the financial, environmental and social incentives and disincentives of using AFR and develop a position on its use. *

Cement companies Substudy 9: Industrial Ecology

1.2 Conduct or support research to characterize the risks and benefits of alternative fuels and raw materials to workers and the community. To fully evaluate alternatives, research must be conducted on health and environmental impacts and other aspects of AFR use.*

Cement companies NGOs and Universities Government

Substudy 7: Innovation; Substudy 9: Industrial Ecology; Substudy 10: EHS

1.3 Seek engagement with multiple industrial ecology partners. Waste management infrastructure development in cooperation with other partners will help establish a stable industrial ecosystem. Multiple feedstock sources help secure supply and ensure environmentally and economically sound options.

Cement companies Suppliers Local and national government

Substudy 9: Industrial Ecology; Substudy 7: Innovation

1.4 Enhance technical capabilities to evaluate industrial ecology opportunities. If AFR is an important component of the business strategy, the company should develop competencies to evaluate a range of AFRs from cost and environmental/social perspectives.

Cement companies Waste suppliers

Substudy 9: Industrial Ecology

* Indicates a critical action


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Battelle has developed a process that cement companies can use to incorporate IE into their

business strategy. This process supports those companies establishing an IE component for the first time as well as those evaluating their current strategy. The process consists of evaluation of the current strategy for contribution to corporate SD activities, assessment of performance with respect to a baseline, and development and refinement of an investment strategy to explore potential opportunities.

Source: Battelle, “Toward a Sustainable Cement Industry: Industrial Ecology Substudy Report,”


3.2 Climate Protection The primary public policy instrument driving action to reduce CO2 emissions is the United Nations Framework Convention on Climate Change (UNFCCC), which has been ratified by more than 180 countries. This Convention makes clear that the ultimate climate protection goal is “the stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system.”111 If the cement industry supports an ultimate environmental goal of stabilizing atmospheric concentrations of greenhouse gases (e.g., twice pre-industrial levels), the industry may need to reduce its global-average CO2 emissions per tonne of product produced by ~30%112 (from 1990 levels) by 2020. Depending upon the individual company and country of operation, some companies will likely face somewhat higher or lower targets. However, in a carbon-constrained world, all cement companies are likely to face significant reductions.

111 United Nations Framework Convention on Climate Change, 1992; http://www.unfccc.int/ 112 Key assumptions include: 1) social commitment to stabilize greenhouse gases, 2) moderate economic and population growth

nearly doubles demand by 2020, 3) all industries use minimum cost approach to reduce CO2, 4) cement industry CO2 emissions are never higher than today. Other potential factors affecting demand were not covered. Additional details are included in Battelle, “Toward a Sustainable Cement Industry: Climate Change Substudy Report,“ http://www.wbcsdcement.org/final_reports.asp, 2002.

A s s e s s

A s s e s s th e s t a tu s o f IE r e la t e d a c t i v i t i e s

E v a lu a t e

E v a lu a t e d r iv e r s , b a r r i e r s , & p o te n t ia l im p a c ts o f c u r r e n t a n d f u tu r e a c t io n s

P r i o r i t iz e & S e t G o a ls

U n d e r s t a n d p r io r i t i e s f o r a n IE s t r a te g y & s e t g o a ls

D e v e lo p & I m p l e m e n t

D e v e lo p a n IE s t r a t e g y w i t h

s p e c i f i c a c t io n p la n s to m e e t

y o u r g o a ls

I E S t r a t e g yF r a m e w o r k

A s s e s s


E v a lu a t e







y o u r g o a ls


A s s e s s


A s s e s s


E v a lu a t e


E v a lu a t e









y o u r g o a ls




y o u r g o a ls


Sustainable Cement Tool: Process for Incorporating IE Into Business Strategy

Figure 3-4. Process for Incorporating IE Into Business Strategy


http://www.unfccc.int/


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Cement Industry CO2 Inventory Protocol

The WGC partnered to develop a standardized CO2 Inventory Protocol. Such a standardized protocol is unprecedented across all industries. The challenge from the perspective of these companies is to seek its adoption around the globe at small and large cement companies alike.

The Protocol was designed to meet the following criteria: 1. Be consistent, transparent, credible, and honest; 2. Cover all relevant emission sources; 3. Be applicable at different levels (plant, company, group,

industry); 4. Avoid double-counting emissions (or failure to count) at

plant, company, group, national, and international levels; 5. Allow to distinguish between different drivers of emissions

(technological improvement, internal and external growth); 6. Be compatible with IPCC guidelines; 7. Allow to report emissions in absolute as well as specific

(unit-based) terms; 8. Allow to credit the full range of CO2 abatement potentials; 9. Not distort the markets for cement and cementitious

products and not endanger fair trading; 10. Provide a flexible tool suiting the needs of different

monitoring and reporting purposes, such as: internal management of environmental performance, public corpo-rate environmental reporting, reporting under CO2 taxation schemes, reporting under CO2 compliance schemes (voluntary or negotiated agreements, emissions trading), industry benchmarking, and product life-cycle analysis.

Furthermore, even with a global-average reduction of 30% per tonne by 2020, the cement industry’s CO2 emissions would continue to grow over the century due to the increased demand for cement. The recommendation related to climate protection is that all companies (1) establish an internal carbon management program, (2) set industry-wide and company-specific medium-term goals for emission reduction based on currently-available tech-niques, and (3) conduct longer-term research on more radical ways to reduce CO2 emissions from cement production.

One of the first actions the cement industry must take to manage its climate-related emis-sions is to document current and historical corporate-level CO2 emission levels. A stand-ard emission accounting protocol has been developed for the cement industry (see box). It should be thoroughly reviewed by outside parties so it can be deemed fair and accurate. Its

widespread adoption by all cement companies would facilitate a rigorous and consistent accounting of emissions across cement companies and an accurate tracking of emission trends. Cement industry leaders should undertake efforts to ensure the protocol is adopted in all cement companies of the world, not just the major companies.

Another important step would be for cement companies to set and publicly announce CO2

reduction targets. In the short term, they should actively pursue cost-effective CO2 reductions by:

(1) expanding marketing and sales of cement with lower clinker content (e.g., cement blended with fly ash or blast furnace slag),

(2) increasing the use of alternative fuels (bio-based, low-carbon, or waste fuels that provide a net carbon dioxide emissions reduction), and

(3) initiating energy efficiency enhancements (improving equipment or phasing out inefficient plants).

Companies committed to CO2 emissions stabilization can best achieve their targets by routinely considering the CO2 reduction implications of all their decisions related to operations, product development, facility upgrades, acquisitions, plant retirements, etc. As technology advances, companies can modify their targets and set more aggressive goals.


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In some cases, rules, standards, or market practices present obstacles to achieving CO2 reduc-tions in the ways described above. For example, some methods to reduce clinker content of cement may be discouraged by specification of product standards based on cement composi-tion rather than performance. The cement industry, working in conjunction with other parties dedicated to improving sustainability of cement production and use, should promote increased use of blended cements, develop ways to enhance the performance of blended cements, and attempt to break down market barriers to their use. Market barriers may diminish through education of customers (such as architect/engineering firms, construction firms, and other speci-fiers), governments, and standard setting bodies, and through increased testing and demonstra-tion of blended cements.

Use of wastes as fuels is also discouraged in some regions, and the cement industry should support research to better understand the full range of health and environmental impacts of waste use and encourage governments and the public to accept use of waste mater-ials deemed safe. In the long-term, fossil-based waste fuels (e.g., tires, waste oil, and sol-vents) will likely be subject to carbon-constraints. Therefore, when the industry uses waste fuels, it should plan on a gradual transition to bio-based waste fuels, such as municipal solid waste, biomass waste, or sewage sludge.

In addition, the cement industry should also consider developing and testing concepts for “emission trading” and “offset” programs that are compatible with cement industry opera-tions. Under some conceivable regulatory schemes, one company would be allowed to buy emission reduction credits accrued by another company (when the company took extra action to reduce CO2 emissions beyond a required level). This type of scheme is called “emission trad-ing.” Such trading schemes could be implemented either within industries or across industries (perhaps by allowing trading among industries within a particular country). Cement companies should explore the benefits of such a scheme, and prepare information about their potential CO2 control costs so they can proactively pursue this option to reduce short-term CO2 reduction costs.

Another concept that could prove beneficial to the cement industry is an offset program, which would allow CO2 emissions from an industrial process to be “offset” by some action the company takes to reduce greenhouse gas emissions or concentrations outside its corporate boundary (e.g., by helping a developing country upgrade its cement facilities or by undertaking forest sequestration projects similar to those pursued by electric utility companies – see Section 2.3). Under the terms of the Kyoto Protocol, these offsets are called Clean Development Mechanism (CDM) credits.113 Individual governments may create additional offset programs. Such offset schemes could reduce costs of emissions management (because these actions could be less expensive than reducing emissions from the company’s own cement kilns). If well conceived, they could also provide ancillary benefits to cement companies. For example, in the first exam-ple above, the cement company could make an arrangement that would give it partial ownership of the cement facilities in developing countries that they upgrade. In the second example—forest sequestration, a cement company headquartered in the developing world might protect rain forests in their home country and transfer the earned offsets to a developed country where they operate cement plants. This would allow the company to bring a new benefit to its home country while continuing its international expansion. Offset programs designed by the cement industry could provide a viable means to both lower the cost of reducing its CO2 emissions liability and pursue new business opportunities.

113 The specific implementation approaches for offsets under the Kyoto Protocol are still evolving. Although it is very likely that some

type of offset program will be implemented, its exact nature may not fully correspond to CDM.


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To achieve the higher level of emissions reduction needed in the long-term, the cement industry must increase R&D that focuses on development of highly innovative low-CO2 products and processes. (Variations of this suggested action are also included in Recommendation 9: Innovation – see below). Dramatically reduced emissions may only be achieved through the development of innovations such as cost-effective carbon capture and sequestration, lower-temperature clinker production, or new cementitious products produced in novel ways. In some cases, these innovations may lead to new business opportunities for the cement industry. (e.g., selling carbon capture services to other industries or selling a completely new product). Further, it is unlikely that equipment suppliers are going to carry this R&D burden. The industry must increase its internal R&D funding and leverage this funding with government programs that invest in high risk, long-term R&D.114

The potential actions related to climate change are summarized in Table 3-3, below:

Table 3-3. Potential Actions to Foster Climate Protection Recommendation 2: Establish corporate carbon management programs, set company-specific and

industry-wide medium-term CO2 reduction targets, and initiate long-term process and product innovation

Potential Actions Responsibility References 2.1 Establish a CO2 emissions baseline and mechanisms to enable

cost-effective emission reductions. Develop and implement a standardized cement industry CO2 accounting protocol, which allows companies to establish emissions baselines and track/report future progress.*

Cement companies working collaboratively Independent review by NGOs, governments

Substudy 8: Climate Change

2.2 Set challenging emission reduction targets and state them publicly. Establish goals and adjust them over time as technology and management techniques advance.*

Cement companies (Note: Industry-wide and company-specific targets should be set.)

Substudy 3: Business Case Substudy 5: KPIs Substudy 8: Climate Change

2.3 Cooperate with stakeholders to develop government policies and product standards, encourage market acceptance of and remove barriers to: 1) the sale of innovative (but safe) cement products with lower embodied CO2 emissions, and 2) the use of appropriate waste fuels that reduce lifecycle CO2 emissions. Encourage industry associations to support such policies. Develop government liaison function related specifically to climate issues within individual companies.

Cement companies Cement Associations Standard Setting bodies Government regulatory agencies NGOs

Substudy 3: Business Case Substudy 6: LCA Substudy 7: Innovation Substudy 8: Climate Change Substudy 13: Public Policy

2.4 Explore prospects of lowering CO2 emission reduction costs through emission trading or offset schemes. Investigate cost of controlling CO2 using various options, and compare control costs among plants and between cement industry and non-cement emission sources.

Cement companies Governments Other industries

Substudy 8: Climate Change

114 Note that chemical and pharmaceutical companies are among the industries most heavily invested in R&D, accounting for about

11% of total U.S. industrial R&D, Long, Wilkinson, and Zurer, “Facts & Figures for Chemical R&D”, Chemical & Engineering News, October 29, 2001.


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Table 3-3. Potential Actions to Foster Climate Protection Recommendation 2: Establish corporate carbon management programs, set company-specific and

industry-wide medium-term CO2 reduction targets, and initiate long-term process and product innovation

Potential Actions Responsibility References 2.5 Cooperate with governments, customers, suppliers, and

competitors on pre-competitive R&D projects that develop low-carbon products and processes. Initiate a major R&D effort focused on long-term, cost-effective CO2 reductions. Work collaboratively to lower the risk and hasten the development of breakthrough innovations.

Cement companies Government agencies Customers Suppliers Academia

Substudy 7: Innovation Substudy 8: Climate Change Substudy 9: Industrial Ecology


3.3 Emission Reduction

In addition to emissions of the greenhouse gas, CO2, the cement industry emits air pollutants such as nitrogen oxides (NOx), sulfur oxides (SOx), hydrocarbons, and particulates, and can also create discharges to water bodies. Although the overall level of environmental control in the cement industry has increased considerably over the last few decades (see Section 2.4), the use of state-of-the-art controls is not universal. In addition, as population and economic activity

Case Study: Adopting New Kiln Technology for Using Secondary Material at Rüdersdorf

The new kiln 5 at Rüdersdorf cement works, part of the RMC Group in Germany, was the first in the world to be equipped with a circulating fluid bed gasifier for the utilization of secondary material. The produced gas is burnt in the calciner. The burnt-out ash is processed in the raw mill as a component in the production of raw meal. Thus the problem is solved elegantly of alternative raw materials with a high organic content that prohibits feeding at the cold end of the kiln with other raw materials.

Secondary materials used are oil-contaminated soils, scrap wood and a “lightweight” fraction consisting of waste paper and plastic not suited for reuse. The “lightweight” fractions used as secondary fuels are specific lightweight production wastes, residues from the sorting process and wastes from collection systems which, because of their size and impurities, are no longer suitable for material utilization. The main constituents of these fractions are paper, cardboard, plastics, film and wood. A certification procedure and a monitoring system assure the quality of the secondary fuels.

At the entrance of the kiln a bypass is installed to remove chlorides and SO3, enabling the use of secondary fuels with

1.5 % by mass Cl and keeping any coating formation under control. Extensive emission measurements with 25 % substitute fuels showed no significant effect compared to a situation without secondary fuels. If a sudden malfunction occurs and the gas can be no longer discharged, the air supply is interrupted and CO2 is introduced at several points from a high pressure storage tank to the gasifier and coal silos to stop further gasification and prevent fire or explosion.


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grow over the century, air and water resources will be increasingly strained. The recommenda-tion related to emission reduction calls for additional process improvement and more wide-spread use and continuous improvement of pollution control techniques.

Currently, environmental management standards in the cement industry vary considerably from country to country. For example, the deployment of management systems based on ISO 14001 or the Eco-management and Audit Scheme (EMAS) is still limited in many countries. At a mini-mum, a company should be sure that all operations are in compliance with applicable regula-tions. But some cement companies operate in many countries that have different levels of both regulatory stringency and enforcement. To ensure they are adequately protecting the public and the company’s employees regardless of the local regulatory regime, cement companies committed to sustainability should establish corporate standards for environmental per-formance that they apply uniformly to all operations. Once standards are set, the company should evaluate and deploy the best energy-efficient and emission-control technology pos-sible, within cost constraints, to all existing plants. And, companies committed to SD should work with governments to ensure that environmental regulations are enforced at all cement plants.

As air and water resources become more strained over time, the cement industry should con-tinuously improve its environmental performance to the point that new plants are designed to utilize wastes as new resources, thus producing nearly zero net emissions. The concept of zero emissions was proposed by the United Nations University (UNU) in April 1995 at the First World Conference on Zero Emissions. Since that time Taiheiyo Cement has been parti-cipating and cooperating in the research theme of “Zero Emissions” under a UNU initiative for cooperation among industry, government and academia.115 Zero net emissions could be achieved by applying advanced technology, closed loop systems, and waste/water recycling.

In addition to use of new technology, environmental quality can be enhanced through use of well-tested management techniques. Implementation of environmental management systems would include setting and communicating environmental performance goals

introducing corporate environmental manuals

conducting environmental training of workers.

Formal environmental management systems help companies to consider environmental aspects in their policies and decisions, and to improve performance. To be effective, these programs should set specific goals for aspects that are targeted for improvement.

According to reporting systems, such as the Global Reporting Initiative, stakeholders are start-ing to expect transparency and consistent, open reporting. For most companies, this could lead to upgrading or implementation and integration of their environmental management informa-tion systems. This will be challenging due to regional differences in the perceived usefulness of management systems and legacy system incompatibilities. Companies should assess the cost effectiveness of such systems for each plant.

115 Battelle, “Toward a Sustainable Cement Industry: Industrial Ecology Substudy Report,”




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The potential actions related to emission reduction are summarized in Table 3-4 below:

Table 3-4. Potential Actions to Foster Emission Reduction

Recommendation 3: Continuously improve and make more widespread use of emission control techniques

Potential Actions Responsibility References 3.1 Establish and apply uniform corporate standards of

environmental practice. Develop standards that apply uniformly in all operations to ensure adequate protection for the public and employees wherever the company operates, even if the local regulatory regime is less strict.*

Cement companies Industry Associations

Substudy 10: EHS

3.2 Apply best practical technology for energy efficiency and pollution control to existing plants. Evaluate options for lowering energy consumption and environmental impacts, and choose cost-effective options to meet corporate standards.*

Cement companies Suppliers

Substudy 10: EHS Substudy 7: Innovation

3.3 Engage with policy makers to ensure consistent enforcement of environmental regulations. The uniform application of existing regulations will help bring all facilities up to at least a currently required level of performance.

Cement companies Local and regional governments

Substudy 11: Land Use & Biodiversity Substudy 13: Public Policy

3.4 Design an almost-zero net emission plant. By continuously improving pollution control and process technology, cement plants can eventually be designed to minimize emissions. Net emissions can be further reduced through industrial ecology.


Substudy 7: Innovation

3.5 Implement environmental management systems (e.g., ISO 14001, EMAS, or a company-specific system). Management systems can help to consider environmental aspects in operating decisions, and to set specific goals for emission reduction.

Cement companies

Substudy 10: EHS

3.6 Implement integrated environmental management information systems, where cost-effective. Software or new information systems could help track and report progress toward emission goals.

Cement companies

Substudy 10: EHS


3.4 Ecological Stewardship

As discussed in Section 3.1. a key recommendation for the cement industry is to reduce natural resource extraction by implementing the concept of industrial ecology. More widespread industrial ecology efforts, however, will not put a stop to limestone mining in the cement industry during the foreseeable future. Techniques are available to better plan and operate quarries and plants to minimize public disturbance, reduce damage to habitats, and make better use of facilities after operation is finished. The recommendation related to ecological stewardship is to apply these techniques in a more widespread manner.

Geographic Information Systems (GIS) and other computer-aided simulations can be used to improve operations; for example, to improve mineral extraction efficiency, and to initiate progressive quarry reclamation as a part of ongoing operations (see box). New cement plants should also be sited in areas that foster industrial ecology (e.g., industrial parks) and that


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support environmentally preferred transpor-tation and energy sources. Guidelines to minimize effects of natural ecosystems and biodiversity should be further developed and applied.

However, cement company personnel, especially in smaller companies, often have insufficient information about siting, land management, and biodiversity-preservation techniques. Cement industry leaders should formulate ways to disseminate information about best practices so that knowledge can be applied more broadly throughout the industry.

In addition, the industry should continuously improve and develop new quarrying

techniques. One recent development was the invention of semi-open-cut mining, a technique that preserves the much of the natural landscape by “scooping out” the limestone while leaving the outside of the mountain intact (see photos). Improved methods like semi-open pit mining should be more widely used.

Finally, as demographics change and the cement industry improves the efficiency of its opera-tions, cement plants and quarries will be retired from use. Cement companies can deal with the “end of life” portion of the lifecycle in a more sustainable way by putting these unneeded assets to productive use. Obsolete kilns can be used for productive purposes, such as waste processing or other innovative uses, and used quarries can be restored to a natural state, pro-viding habitats for native species.

Computer-Aided Resource Analysis

A large number of cement plants in all regions have adopted computer-aided techniques for determination of quality and quantities of different types of material existing in the deposit, and to plan optimal exploitation with the utilization of the blending ability of different quality materials. This has helped in creating a reasonable inventory of raw material resources and in planning for maximizing deposit life and minimizing the cost of operation.

Source: Holtec, et.al., “Toward a Sustainable Cement Industry: Land Use and Biodiversity Substudy Report,” http://www.wbcsdcement.org/final_reports.asp, 2002.

Semi-Open Cut Mine—Before Operation (Photos of Models Courtesy of Siam Cement)

Semi-Open Cut Mine - After Operation (Photos of Models Courtesy of Siam Cement)



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A summary of the suggested actions related to ecological stewardship are provided in Table 3-5, below:

Table 3-5. Potential Actions to Foster Ecological Stewardship

Recommendation 4: Improve land-use practices by disseminating and applying best practices for plant and quarry management

Potential Actions Responsibility References 4.1 Disseminate and adopt innovative siting and land use

planning methods that consider cultural sensitivities and biodiversity. Identify and use best practices during siting, planning, and operation to assess, monitor and manage development and reduce impacts. *

Cement companies Local/national governments Trade Associations

Substudy 11: Land Use & Biodiversity Substudy 7: Innovation

4.2 Develop and apply innovative quarrying methods. Explore the use of alternative quarrying methods that reduce adverse environmental and social impacts (e.g., semi-open-cut mining).

Cement companies Suppliers Trade Associations

Substudy 7: Innovation Substudy 11: Land Use & Biodiversity

4.3 Find productive, environmentally sound, and socially acceptable uses for depleted quarries and retired plants. Depleted quarries could be converted to a variety of habitats. Using restoration funds created for this purpose during the extraction stage would avoid later problems. Converting retired cement plants and equipment to alternative uses could extend the value of these assets.

Cement companies Environmental NGOs Local and national governments Community stakeholder groups

Substudy 7: Innovation Substudy 11: Land Use & Biodiversity Substudy 9: Industrial Ecology Stakeholder Dialogue Report

*- Indicates a critical action

3.5 Employee Well-Being Developing a sustainable approach to cement operations also includes improving the quality of work life for employees. The most important priority for cement companies with regard to employee well-being is the assurance of occupational health and safety (OH&S), both for workers and contractor personnel. The cement industry is not nearly as advanced as some other heavy manufacturing industries in the implementation of occupational health and safety management systems. Currently, significant differences exist among OH&S practices in cement companies operating in different countries. This is mainly driven by differing national regulations. Cement companies should make concerted efforts to not only comply with existing OH&S requirements, but also set universal standards. They should also train employees to identify and eliminate unsafe conditions. Implementation of systematic OH&S management systems (usually in conjunction with environmental management systems – see Section 3.3) can help companies apply a comprehensive approach and make continuous improvements in


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this dimension of their performance. Such systems could include written procedures, incident tracking, near-miss investigation results, and public reporting.

In addition, consistent with SD principles, there are a number of other employee well-being issues that a company can support, including training, career development, and professional growth; respect for employee rights, such as freedom of communication and association; promotion of balance between commitment to work and personal or family life; promotion of diversity; and prohibition of discrimination and harassment. Such measures will contribute to employee productivity and safety-consciousness, as well as loyalty and pride.

Another recommended action is the development and implementation of an inherently safer and healthier cement plant. Inherently safe and healthy plant design is a systems engineering practice that incorporates these considerations at the time of new plant design rather than as part of incremental upgrades. Among the elements that could contribute to better design is asking employees to help identify existing risks and problems and to help determine methods that can be used in developing safer designs. Also, to achieve an inherently safer and healthier process, companies could exchange best practices to reduce operational risks. Because of the required level of information sharing, it might be best to starting with a design effort on the most prominent risk areas involved, e.g., preventing worker accidents and burns.

The potential actions related to employee well-being are summarized in Table 3-6, below:

Table 3-6. Potential Actions to Foster Employee Well-Being

Recommendation 5: Implement programs to enhance worker health, safety and satisfaction Potential Actions Responsibility References

5.1 Ensure healthy and safe working conditions for employees and contractors. This includes compliance with occupational health and safety requirements; identification and elimination of health and safety hazards in the workplace; and employee training.*

Cement companies Regulatory agencies Suppliers

Substudy 10: EHS

5.2 Implement management systems for occupational safety and health. These systems enable continuous improvement in health and safety performance.

Cement companies Employees Industry associations

Substudy 10: EHS

5.3 Institute programs and practices that promote employee satisfaction and well-being. This can include career counseling and training, fairness policies, and benefit programs such as flex-time, dependent care services, time-off policies, or health and wellness.

Cement companies Employees

Substudy 12: Socio-economic Development

5.4 Design inherently safe plants. Plants should be designed cost-effectively in a way that minimizes the potential for accidents, employee injuries, or chronic illnesses.


Substudy 10: EHS


3.6 Community Well-Being Both cement companies and the communities surrounding them can benefit from more commu-nication, understanding, and mutual support. An important first step in fostering community well-being is learning about local stakeholder perceptions and needs through ongoing dialogue.


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Local communities and NGOs, such as environmental activist groups, have become quite vocal in expressing concerns about cement plants in some regions of the world. Open and construc-tive engagement with such groups can help cement companies avoid conflict and build a spirit of trust and collaboration. Communication and stakeholder involvement should occur on an on-going basis, not just when there is a crisis or major event. For instance, companies should involve stakeholders in decisions about plant operations both before and after they have been made. When problems or concerns do arise, companies should deal with the public in an open manner.

Methods for stakeholder engagement include: Creating citizen advisory or liaison groups

Conducting surveys and interviews with community representatives

Arranging for informal dialogue during “open plant” days or other events.

Many elements could be included in a stakeholder dialogue and collaboration plan (see box). If cement companies choose to create citizen advisory groups or deploy other mechanisms to foster two-way communication, they should train plant managers or other company repre-sentatives to sensitively and effectively deal with local stakeholders. Employees can serve as ambassadors of the SD program, provided that they have been adequately prepared for this

Actions that Could Be Taken within Stakeholder Communication Programs

Communicating openly and honestly about operations and emissions through public events and publications

Providing regular opportunities for unstructured information sharing (e.g., open plant days)

Engaging the services of a neutral facilitator to interview and conduct meetings with stakeholders both with and without the participation of company staff

Providing regular opportunities to listen to stakeholder concerns/interests (e.g., surveys, interviews, focus groups) and share information with stakeholders (e.g., public meetings, workshops, site tours)

Hiring third-party professionals to conduct a survey of community residents, for example to identify their concerns and issues, and determine how a company can be a good corporate citizen in the community

Determining the communications needs of different groups and tailoring the communications accordingly

Identifying influential members of the community and conducting one-on-one interviews with them at their offices/homes to understand their concerns and to provide answers to questions they may have

Creating a citizen advisory or liaison group that includes members with a broad range of views who are representative of and credible to the community. These groups include residents, regulators, government officials, unions, environmental and other public interest groups, and academics

Signing a Voluntary Agreement with the host community, which includes stipulations for meaningful public participation and partnership and commitment to implement a model of sustainable development

Source: Battelle and ERM “Toward a Sustainable Cement Industry: Stakeholder Communication and Dialogue Substudy Report,” http://www.wbcsdcement.org/final_reports.asp, 2002.



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role. To demonstrate that their operations are safe and environmentally sound, companies can monitor and publicly report environmental, health and safety data (e.g., air pollutant emis-sions). To provide additional assurance to the public, cement companies would provide third party monitoring and report verification.

When resources allow, cement plants should play a positive role in the communities’ financial success by helping (financially or by support from company personnel) with social issues identi-fied through dialogue. For instance, in countries where the government does not provide ade-quate social services, some cement companies voluntarily contribute to community well-being through a variety of assistance programs aimed at improving quality of life, e.g., supporting education, construction of facilities, health care, nutrition, sanitation, or poverty relief initiatives. Cement companies can also work with government authorities and other industries to encour-age a more institutionalized approach to social welfare (see Action 7.2 in Table 3-8).

Table 3-7. Potential Actions to Foster Community Well-Being

Recommendation 6: Contribute to enhancing quality of life through local stakeholder dialogue and community assistance programs.

Potential Actions Responsibility References 6.1 Engage in open dialogue with stakeholders, and train

cement company personnel in appropriate skills. Managers and employees can learn to engage in two-way dialogue, deal sensitively with community needs and concerns, and build long-term trust. *


Substudies 1 & 2: Stakeholder Dialogue and Communications Strategy

6.2 Institute a sustainability reporting program based on feedback from stakeholders. With guidance from stakeholders about their information needs, companies can initiate a program to monitor and report on their environmental and social performance.


Substudies 1 & 2: Stakeholder Dialogue and Communications Strategy

6.3 Voluntarily provide assistance to local communities. Companies can respond to community needs through social investment programs and support for employee volunteer efforts.

Cement companies



3.7 Regional Development In addition to directly affecting communities surrounding cement plants, the cement industry plays a role in regional development by providing a critical product needed for infrastructure growth – cement – and by making contributions to tax revenue, employment, and procurement of supplies and services. And, as discussed in Section 3.6 above, the cement industry often provides support for local social development near cement plants. But as the cement industry becomes increasingly international, companies may wish to develop a more coordinated approach to managing socio-economic issues, including, for example:

Deciding at a corporate level on the amount of resources to develop to social investments and the types of projects the company will support

Profiling investment locations and conducting strategic assessment of socio-economic opportunities and threats


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Case Study: Voluntary Agreement in Souselas, Alhandra, and Loulé

In 1999, Cimpor, as part of the Portuguese Cement Sector, entered into an agreement with the government of Portugal titled “Continuous Environmental Performance Improvement for the Cement Sector.” The goal of this agreement is to reduce dust emissions and improve other aspects of environmental performance.

CIMPOR agreed to take a number of measures in its plants in Alhandra, Souselas, and Loulé. The company is also analyzing new technologies for quarrying, specifically alternatives to blasting.

In return, the Portuguese government (Ministry of the Environment and Ministry of the Economy) and local municipalities and councils have com-mitted themselves to a three-year environmental and social rehabilitation program in the regions where the plants operate.

Conducting project-specific assess-ments that include stakeholder consultation

Monitoring and evaluating impacts of social investments through use of KPIs and refining the choice of future activities based on the findings.

Although these actions are applicable to any geographic location, the actual detail of how socio-economic issues are addressed will be location specific.

To enhance its positive contributions in the countries in which it operates, the cement industry should also work closely with governments and other regional organi-zations in planning regional growth. Especially in developing countries, a focused effort to understand, improve, and communicate their role in the regional economy could help cement companies solidify their market position and ensure their right to operate in emerging economies.

One additional step cement companies can take is to conduct rigorous socio-economic impact analyses of all siting, acquisition and closure decisions. In many cases, impact assessments are required by law, but if not, they should be conducted voluntarily by cement companies. Cement companies should pay close attention to socio-economic issues such as employment patterns and potential economic disruptions, and deal with those issues in a way that helps each region develop on a smooth path.

Participation in regional planning of economic development may also provide a constructive forum for cement companies. There are many ways that cement companies can use their economic leverage to encourage entrepreneurship, capacity-building, and local economic growth. For instance, cement companies could establish formal relationships with regional suppliers (e.g., equipment suppliers, transportation industry, waste disposal companies, etc.) to support development of domestic industries in developing countries.

Potential actions related to regional development are summarized in Table 3-8, on next page:


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Cement company executive interviewed during the course of this study

“We all too often jump to the solution and try to jam it down the throats of our organization. It’s better to first take stock of where everybody is in the stages of the model… we have to convince each key individual it is in their personal interest and in the corporate interest to realign themselves.”

Table 3-8. Potential Actions to Foster Regional Development Recommendation 7: Promote regional economic growth and stability by participating in long-term planning

and capacity-building, especially in developing countries. Potential Actions Responsibility References

7.1 Conduct socio-economic impact analysis for siting, acquisition and closure decisions. Companies should explore impacts on employment and potential economic disruptions. *

Cement companies


7.2 Participate with local and regional governments and other interested parties in regional planning. The industry can both secure its future and assure a more sustainable regional economy by participating in long-term analysis and planning of economic development initiatives.

Local & regional governments Cement companies


7.3 Contribute to the establishment of industrial ecosystems. Work with local and regional organizations to identify and implement opportunities for exchange of materials and energy.

Cement companies Waste brokers Local & regional governments

Substudies 1&2: Stakeholder Dialogue and Communication Strategy Substudy 9: Industrial Ecology

7.4 Support economic development and capacity building for local suppliers and disadvantaged communities. Seek opportunities to use local suppliers, provide training and technology transfer, and encourage entrepreneurship, especially in lower-income or disadvantaged communities.

Cement companies



3.8 Business Integration of SD In order to put SD into practice, cement companies will need to consider SD issues systemat-ically as part of their internal analysis and decision-making processes. This will enable deci-sions about capital investment or deployment of resources to consider both environmental and social consequences together with economic considerations. Although many companies have stated that integrating SD into their day-to-day business practices is a high priority, few have achieved what they would consider a satisfactory approach, and virtually none have fully imple-mented such a framework.116 However, based on the considerable efforts that are currently under way, many of the companies surveyed during the course of this study likely will be imple-

menting new SD decision frameworks over the next few years. Accordingly, an SD decision sup-port tool called the Sustainable Business Decision Framework was developed by Battelle specifically for the cement industry (see Section 2.9).

One major component of business integration of SD is fully understanding the business case for SD by conducting an assessment and quantifica-tion of how company initiatives aimed at achieving SD can also reduce costs, increase profits, and build competitive advantage (see box on next page). Thus, through a better understanding of

116 Battelle, “Toward a Sustainable Cement Industry: SD Business Case Substudy Report,”




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Sustainable Cement Tool: Process for Alignment

Boston Environmental Group has recommended a process for internal alignment around SD. This process recognizes that different audiences in the company will require different levels of understanding, engagement, and participation to set and implement a SD strategy and goals. The recommended process has five successive phases of activity, each focused on a different audience. The phased approach illustrated in Figure 3-5 is designed to build organizational commitment to SD goals first with individuals in top management, who have significant leverage to effect change.

the change

Maintain momentum of

initiative

commitment Turn the

into action

Create a commitment by individuals and teams to take action

Develop an understanding of the need for action around SD

Gain awareness of SD context and potential importance to the company

Awareness Understanding Commitment Action Maintaining Momentum

Source: Boston Environmental Group, “Toward a Sustainable Cement Industry: SD Alignment Substudy Report,” http://www.wbcsdcement.org/final_reports.asp, 2002.

SD-related financial and strategic benefits, cement companies can create both external confi-dence and internal alignment regarding the value of their SD efforts. They will be able to chart a course that not only assures profitability, but also respects the needs of all of their stakeholders. The rationale used to justify business decisions should combine an evaluation of SD outcomes with application of traditional financial tools such as return on investment (ROI) analysis.

Because of the importance of stakeholder perspectives, the framework for business case development should explicitly consider relevant stakeholder groups. Ultimately, business deci-sions are concerned with enterprise value creation, and addressing stakeholder expectations represents an indirect pathway toward creating long-term enterprise value by encouraging external cooperation and partnership. Likewise, failure to appreciate the potential obstacles or negative impacts from a stakeholder perspective can undermine a business decision that appears financially sound. Ideally, cement industry decision-makers can identify a mutually beneficial course of action that both assures adequate financial performance and respects the needs of key stakeholders. Moreover, the business case framework can serve as a tool for achieving greater “transparency” by communicating stakeholder benefits and decision rationales to external parties.

Developing a business case for integrating SD principles is not a final step. Because many decisions affecting environmental, social and economic performance are made at the middle and lower levels of the organization, SD principles must be widely understood and adopted throughout the firm. A first step in this process is likely to be a public commitment to SD princi-ples by the CEO and his direct reports. The CEO should articulate a SD strategy that is clearly aligned with and part of the corporate business strategy. To increase effectiveness, the CEO

Figure 3-5. An Organizational Alignment Process Around SD



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should articulate his SD commitment both inside the company and externally. Public comments demonstrate management’s commitment, and the CEO can expect the public to track the com-pany’s progress on publicly stated goals. Within the company, communications about the SD commitment should be tailored for different internal audiences so those audiences can hear the message in a manner that fits the context in which they work. The message should clarify the business reasons for and the impacts of the commitment on the organization.

To further accomplish alignment from the top to the bottom of the organization, companies can encourage employee involvement in sustainability oriented programs and can train employees in SD principles. Employees need to see a personal connection between high-level goals and what they do every day. Sometimes this process takes a long time. To accomplish alignment, the company can develop a tangible, visible initiative related to sustainability goals and follow up with both individual and team action plans, especially for mid-level managers. It is important to maintain momentum.

Case Study: CEMEX Ecoefficiency Program

CEMEX defines ecoefficiency as “efforts to optimize energy and raw material efficiency to produce an economic and ecological benefit derived from a reduction of environmental impact.” The CEMEX Ecoefficiency Program (CEP), formally launched in 1994, applies this principle to the company’s operations by systematically pursuing continued improvements in ecoefficiency and by sharing best practices between operational facilities. CEMEX has expanded rapidly throughout the 1990s and is now the third largest cement producer in the world. By rapidly applying CEP at newly acquired plants, CEMEX has been able to expand the environmental and economic benefits of the program alongside the growth of the company. Since 1994, the estimated economic benefits total more than US$60 million, and CO2 emissions have been reduced by approximately 2.5 million metric tons.

Innovations included in the CEP have included the following: technology development and implementation for production processes and new cement plant

design, selective mining techniques and optimal quarry exploitation, recycling and reuse of materials, use of alternative fuels and raw materials, and use of natural cementing materials.

In 2000 the CEP helped CEMEX reduce its use of electricity by 160,000 MG, which is equivalent to the electrical consumption of a metropolitan area with approximately 100,000 inhabitants for one year. The company has also saved 723,050 MM BTU in thermal energy, which is the equivalent of 130,000 barrels of petroleum. Through these reductions in energy consumption and other process improvements, CEMEX reduced CO2 emissions by 263,000 tons, which is equivalent to the CO2 sequestered in one year by 33,000 hectares of pine forest.

The following summarizes the financial impact of the CEP during 2000: US $ million Optimized use of energy 9.2 Optimized use of materials and natural resources (including water) 5.6 Use of alternative fuels and wastes 2.5 Reduction of emissions and wastes 1.4 Office paper recycling 0.05

Total: $18.75 million


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A Five-Step Process for Developing Key Performance Indicators

1. Consider stakeholder needs 2. Identify key SD aspects 3. Specify company SD objectives 4. Develop corresponding indicators 5. Set targets and flow down to business units

and facilities

A list of potential KPIs that could be considered for use can be found in the reference below.

Source: Battelle, “Toward a Sustainable Cement Industry: Key Performance Indicators Substudy Report”, http://www.wbcsdcement.org/final_reports.asp, 2002.

It is also important for companies to develop specific SD-related goals and metrics by which they can measure their SD progress. Some leading cement companies are beginning to develop ways to measure “triple bottom line” performance. However, there are no uniform standards for key performance indicators (KPIs). Good SD performance indicators measure resource conservation and/or value creation over the full product life cycle and are linked to strategic goals. Both quantitative and qualitative, and finan-cial and non-financial metrics should be considered. Cement companies can implement a step-wise process to develop KPIs (see box). Companies should track the effectiveness of the KPIs over time to ensure benefits of this tool are realized and that the metrics remain relevant as time passes.

Accountability for SD performance should be clearly delineated. Companies can use a specific stepwise process, phased over a period of 3-5 years, to build and maintain momentum, and can institute incentives, as well as measurable goals for business units and individuals. Rewards for SD performance can include intra-company recognition for SD accomplishment, personal compensation, increased access to internal funding, or other rewards designed to motivate particular types of employees (such as plant workers, middle managers, senior executives, etc.). Rewards for managers can be tied to achievement of KPIs. A number of leading companies in the SD arena have begun to recognize and reward individual and group achievements. For example, DuPont has established the Sustainable Growth Excellence Awards. Each award winning team is feted at a recognition ceremony and given a cash grant. TransAlta of Canada also has introduced incentives to encourage buy-in and commitment to SD. SD objectives built into an individual’s performance objectives can lead to salary bonuses at the time of annual performance reviews.117

The potential actions cement companies can take to achieve business integration of SD are summarized in Table 3-9, on next page:






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Table 3-9. Potential Actions to Foster Business Integration of SD

Recommendation 8: Integrate SD principles into business strategy and practices in order to create shareholder value.

Potential Actions Responsibility References 8.1 Identify the business value of SD and develop a

systematic approach for integrating SD into decision-making. The senior management team should make the business case for SD and determine how processes must change to incorporate SD thinking into internal management and decision processes.*

Cement companies

Substudy 3: SD Business Case Substudy 4: SD Alignment

8.2 Articulate corporate commitment to SD. The CEO should publicly articulate – both inside and outside the company – how SD principles integrate with business strategy.*

Cement companies

Substudy 4: SD Alignment

8.3 Develop and carry out an internal alignment program. Companies should assess their current status, and design an approach to achieve alignment with SD, including visible, short-term initiatives.

Cement companies


8.4 Develop goals and performance indicators that are responsive to stakeholder interests. SD goals and indicators should consider stakeholder concerns, as well as shareholder value creation, over the full product life cycle.

Cement companies Stakeholder groups

Substudy 5: KPIs

8.5 Openly communicate SD goals and targets, as well as performance, to internal and external stakeholders. Companies should create a reporting process and mechanisms to ensure that stakeholders are informed on a regular basis regarding SD initiatives and achievements.

Cement companies

Substudies 1&2 Stakeholder Dialogue and Communications Strategy

8.6 Create accountability and incentives for SD performance. Accountability for SD performance should be clearly delineated, and incentives or rewards can be linked to achievement of SD goals.

Cement companies



3.9 Innovation Some cement companies have made considerable progress in environmental performance and resource conservation by making incremental improvements in operations and by initiating the use of AFR. But introduction of radically different products, processes, and management concepts could hasten progress on resource conservation and environmental protection. Innovation will be especially important as the industry addresses the challenge of climate change mitigation. Innovations might also Improve the use of wastes in cement kilns and cement products

More effectively manage the cement lifecycle (e.g., recycle or reuse concrete demolition waste)

Improve the ambient environment in regions near cement plants (this may become increasingly important in the future as more and more human activities place burdens on the carrying capacity of the natural environment)

Open markets in developing countries for new cement-based products, fostering economic development and improved quality of life in emerging economies

Lead to use of cement in more sustainable ways (e.g., longer lasting concrete, concrete with lower virgin material content, increased recycling of concrete, new cement-based products for developing economies).


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Innovation could conceivably lead to lower costs, increased sales, higher-value products, reduced competition from current or future competitors, and higher returns to shareholders.

The cement industry is sometimes not considered to be very innovative. Due to relatively low levels of profitability, cement companies typically spend very little R&D funding on process design and improvement but, instead, depend on vendors and suppliers for most of the process innovation.118 Cement companies committed to SD could take a renewed interest in and become more heavily involved in developing SD-oriented process changes. As a first step,

118 Battelle, “Toward a Sustainable Cement Industry: SD Innovation Substudy Report,”


Potential Areas For Process-Related R&D

Integrated waste management/cement production. Use of wastes can reduce net fossil fuel consumption and CO2 emissions, as well as land use for waste disposal. It can also aid in economic development by providing waste management service to communities. On the other hand, it can leave cement companies insecure about fuel supplies and sometimes raises public concerns due to fear of dioxin/furan emissions. The cement industry should continue conducting research on improved ways to use wastes in cement production and on health and environmental effects of using wastes in both the process and products.

Advanced kiln concepts. The current process for producing cement uses very high tempera-tures. Alternative ways of producing cement, such as in solar kilns or by using additives to reduce temperatures have not proven practical. However, research on ways to produce clinker using less heat or fuel should be pursued, especially in light of pressures to lower carbon dioxide emissions.

Co-production of electricity and cement. Cement and coal combustion ash have some similar properties, so some investigators have found innovative ways to either use more ash in cement production or produce cement while making electricity from coal. These innovations offer interesting prospects for lowering energy and limestone use and CO2 emissions from cement production, as well as decreasing waste disposal and emissions from power plants. Reliability of new processes on a large scale and product acceptance are the main issues.

New carbon management techniques. Use of low-carbon, hydrogen-rich fuels could decrease emissions from combustion, but could increase operating costs. CO2 separation, capture, trans-port, and engineered sequestration would almost eliminate CO2 emissions from all gas exhaust streams, but such processes use large amounts of electricity and are currently expensive (how-ever, the cost is decreasing). Capture systems have been primarily configured for chemical plant operations and power plants at a small-scale, so capture systems optimized to the cement indus-try’s needs would be required. Capture of CO2 is only possible if the plant is located close to a disposal or sales point as CO2 transport is expensive. CO2 disposal options might not be accept-able to the public. However, there are demonstrated examples of companies in other industries capturing CO2 from flue gases and selling the CO2 for a profit. Other research on methods to remove CO2 from gas streams and the atmosphere should be pursued.

Advanced combustion processes and air pollution control (e.g., selective non-catalytic reduction for NOx control, regenerative thermal oxidation with flue gas desulfurization for control of hydrocarbon and hazardous emissions). Techniques to drastically lower air pollu-tion are relatively expensive, and some require further R&D and testing. But they should be pur-sued, especially for use in areas where air quality is poor or in very pristine natural areas the value of which could be damaged by air quality degradation. As population grows and development increases, air resources are likely to become increasingly strained and increased control from cement kilns may be required. Cement companies interested in sustainability should conduct research on new methods for reducing emissions such as NOx and hydrocarbons from cement kilns, including those that burn waste fuels.



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advanced technologies already available could be combined into state-of-the-art designs for new plants. Cement companies should also increase R&D budgets directed at more radical process improvements and experiment with more novel concepts than the ones on the market today. For research on pre-competitive technologies or underlying scientific principles, com-panies should consider collaborative efforts, jointly conducted and funded by equipment suppli-ers, other cement companies, governments, universities, and other research institutions (see the “Cooperate” section below). Some of the radical process-related innovations that might be explored are shown in the box on the previous page, but those are just a starting place; cement companies are in the best position to work with suppliers, university researchers, and others to develop novel concepts not yet considered.

As a general rule, cement companies spend most of their limited R&D funding on new product development efforts. However, few companies proactively pursue new products aimed specific-ally at improving environmental or social conditions. Promising avenues exist for advanced product research (see box below). For example, cement products with lower clinker content are needed to meet the challenge of CO2 reductions. (The first four bullets in the box are potentially related to CO2 reductions.) Cement products can also aid in environmental cleanup efforts. In addition, low-cost, cement-based building materials that take advantage of local construction materials and labor in developing countries could help with socio-economic development. Of

Potential Avenues Toward Sustainable Product Development

Use of renewable and waste materials in cement and concrete. In addition to fly ash, slag and other traditionally used additives, innovative additives include use of rice-hull ash, recycled concrete, kaolin formed from pulp sludge, waste wood, etc.

Concretes with longer life and/or higher strength lead to less clinker use (such as pozzolanic additives), lower energy consumption, decreased CO2 and other emissions.

Cement with increased reactivity and less calcium. Only a portion of the potential binding capacity of cement is currently realized. Increasing reactivity through intensive grinding or production of cement with higher belite content would result in use of less limestone, potentially lowering CO2 emissions.

Cement-like products. Some radical ways to produce substances with properties like cement use considerably less energy. Some of the products would have other benefits, e.g., better higher strength. Effects of these processes are not well known. Sometimes cost of constituents is high, and there are market acceptance issues.

Use of cement in environmental cleanup. Mixing cement with contaminated soil or for other similar uses can make cleanup faster and cheaper and hence reduce environmental risks to the public. In addition, some cement-based products are being designed to produce environmental benefits, such as pollution absorption. Novel applications of cement for solutions to a wide range of problems could open new markets for cement, while helping the environment. The industry could actively seek R&D opportunities related to environmental cleanup or protection.

New products for the developing world. Given the growth expected in emerging economies, the demands for infrastructure and housing will drastically increase. Cement is expected to play a big role in this growth, but its use in traditional concrete products is not necessarily the only way it can support growth. In some cases, concrete will remain too expensive for some portions of the population. Housing and other infrastructure for these segments of society could require new building concepts that rely more on indigenous, low-cost resources and local labor. Examples include combining cement with earth, bamboo, or agricultural by-products to make building materials. SD goals of cement industry should not ignore the needs of the developing world nor assume traditional products are the best way to serve those needs.


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course, the safety, health impacts, longevity, and other characteristics of all new products would have to be tested. Cement companies should consider developing a wide range of products that not only reduce environmental effects of cement production and help with social welfare, but also open new markets for cement and increase cement sales.

Cement companies can undertake measures to increase sustainability-oriented innovation (see box below). A wide range of management innovations are possible in many dimensions, including the way environmental impacts (sometimes called “externalities”) and societal effects are included in decision making, the way R&D projects are chosen, and the way employees are rewarded. With increased pressure to reduce externalities, such as CO2 emissions, manage-ment innovations will be needed to support the process.

While SD-related innovations developed by individual companies may give them a competitive edge, cooperative long-term research of new process or product concepts, funded by a consor-tium of cement companies and other stakeholders (e.g., governments, equipment suppliers, downstream users of cement), could help the industry as a whole move toward sustainability (see Recommendation 10 below).

As the driver for innovation becomes more acute (e.g., as pressure increases to reduce CO2 emissions), the cement industry must become more willing to try new approaches and experi-ment with new concepts. Cement companies can take steps to encourage innovation. Consid-eration of environmental and societal impacts must be more fully considered in the choice of which R&D projects the firm initiates. Innovation must occur not only in the R&D department, but in business models and management concepts as well. In the future, SD pathways might lead cement companies to transform into waste management companies that use waste for fuel and extract minerals from waste-for-

sale

Some Ways to Foster Sustainability-Oriented Innovation within Cement Companies

Solicit cement sustainability-oriented product, process and management innovation ideas from employees

Encourage team thinking and brainstorming about sustainable cement production, product, and management improvements

Reward and recognize staff for sustainability-oriented cement ideas and innovations

Develop a corporate approach for conceptualizing, formulating and analyzing new sustainable cement product and process ideas

Effectively manage sustainable cement innovation projects using multi-disciplinary, well-trained project teams

Conduct competitive intelligence and knowledge management on cement products and technologies

Re-orient cement company management systems towards sustainability and innovation; explicitly consider environmental impacts (externalities) and social effects in decision making processes

Manage a full gamut of sustainable cement innovation ideas (the innovation portfolio)

For high-potential, radical innovations, create separate internal organizations or cement-company-owned spinoffs

Form partnerships with cement industry suppliers and customers directed at sustainability-focused innovation (see the “Cooperation” section below)


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cement companies that operate in a cement trading environment, i.e., a company that produces cement in some locations but purchases cement from other cement manufacturers in other locations to avoid transportation costs and the associated fuel use

combined cement, energy and CO2 management companies

companies that sell structural services, rather than cement, and offer long-term guarantees on these structures

companies that work in local communities in emerging economies to build housing and infrastructure using different product delivery mechanisms.

The recommended actions related to innovation are summarized in Table 3-10 below:

Table 3-10. Potential Actions to Foster Innovation

Recommendation 9: Encourage SD-related innovations in product development, process technology, and enterprise management.

Potential Actions Responsibility References 9.1 Increase cement company role in cement production

process design. Help equipment suppliers set an R&D agenda for SD-oriented cement process change. Provide financial support for SD-oriented process R&D. Work cooperatively with other companies, suppliers, and universities on long-term, higher-risk projects leading to improved cement production processes and products. *

Cement industry consortia Equipment suppliers Universities

Substudy 7: Innovation

9.2 Include SD considerations in the new product development process. Include environmental or societal benefit criteria in R&D project selection. Create novel products for developing economies that safely meet construction needs. Experiment with marketing new SD products to gain more experience and overcome barriers. *

Cement companies

Substudy 7: Innovation Substudy 12: Socio-economic Development

9.3 Encourage creative SD thinking among employees by providing support, incentives and rewards for SD innovation. For example: Use knowledge management systems and cross-company meetings to share innovative ideas. Expand personnel reward schemes to encompass SD. Support development of new business concepts.

Cement companies

Substudy 7: Innovation Substudy 4: SD Alignment


3.10 Cooperation Cement companies can undertake joint activities with each other and or with stakeholder groups, which may be more effective than working alone, because joint efforts can leverage research resources, share and learn from best practices, benefit all parties, reach a broader set of stakeholders, and create a common agenda for change.

A suggested action is to create an industry-wide Sustainable Development Institute of Cement and Concrete. This international institute would provide cement companies and their suppliers and customers with a common platform for developing sustainable business practices and working toward shared goals. It would build on existing programs of research, education


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and policy development, broadening them to include a global perspective and providing an SD focus. The Institute would work in three areas: Product and process research – Conducting collaborative research and technical studies

related to SD

Education and training – both within the industry and of stakeholders (e.g., communicating technical information)

Promotion of SD through responsible governance (e.g., research support to help governments assess the consequences of alternative environmental policies, such as financial instruments to address climate change).

There are a number of existing regional and country-specific cement industry and trade associ-ations that could contribute to the formation and operation of such an Institute, including CEMBUREAU in Europe, the Cement Industry Federation in Australia, and the Portland Cement Association in the U.S. However, the intended role of the Institute is distinct from that of other existing bodies, in that it would be focused specifically on enabling effective pursuit of the SD agenda for cement laid out in this study. Thus, it could integrate contributions from cement companies, associations, universities, NGOs, governments and other stakeholders that wish to contribute their own perspectives and resources. A regional component for the institute’s organ-izational structure would support a more focused scope for those issues where it is appropriate. As described in the beginning of Part 3, the Institute could serve as a catalyst and focal point for carrying out a systematic process of public policy participation, coordinating the diversity of cement industry issues that arise in different regions of the world.


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A Potential Charter for a Sustainable Development Institute of Cement and Concrete

The Institute would support technical research, establish relationships with external stake-holders, and initiate communications programs aimed at describing and promoting sustain-able practices in the global cement industry. Three principal purposes for the institute are described below:

1. Develop Industry-Wide Codes of Practice and Influence Government Policy

Examples of potential activities: Develop industry-wide code of practice for sustainability

Develop award programs to recognize companies and plants for outstanding achievements in applying the code of practice

Support benchmarking of SD performance

Work with international governmental bodies to research climate change and assess the consequences of carbon management policies

Participate in public policy forums and advisory groups, conduct technical reviews of international and regional regulations, etc

Evaluate and support financial incentives and voluntary programs for innovations to promote SD

2. Conduct SD-Related Studies and Coordinate/Sponsor Research Examples of potential activities: Support pre-competitive product research

Provide studies, tools and data for use in evaluating alternative fuels and technology options, including risks and benefits to workers and communities

Adopt a life cycle perspective, seeking insights about the impacts of business decisions upon both upstream suppliers of equipment or materials and upon downstream users of cement products.

Identify “win-win” sustainable solutions that improve license to operate, market access, and profitability for cement companies while creating societal value from the perspective of external stakeholders.

3. Communicate with Stakeholders Examples of potential activities: Develop industry-wide communication program

Educate and condition the marketplace to accept and welcome innovative cement and concrete products that increase sustainability


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Table 3-11 below summarizes the potential actions related to collaboration:

Table 3-11. Potential Actions to Foster Cooperation

Recommendation 10: Work with cement companies and external organizations to foster SD practices and remove barriers.

Potential Actions Responsibility References 10.1 Create the Sustainable Development Institute of

Cement and Concrete. The charter would be to promote worldwide progress toward sustainable production and use of cement and concrete. The organizational structure should allow for either global or regional analysis depending on the scope of a given issue.

Several substudies and stakeholder dialogues

10.2 Conduct joint research with equipment suppliers, concrete companies, government, universities and other research organizations. Leverage resources with other institutions to conduct early-stage research to develop new process and product technologies. Conduct research on EHS aspects of cement products. Study lifecycle impacts of using wastes and other cement supplements. (See related potential actions 3.4 and 9.1.)

Several substudies and stakeholder dialogues Substudy 6: LCA

10.3 Develop educational and outreach programs to foster sustainable use of cement. Work with concrete manufacturers, construction companies, specifiers and other groups to develop SD guidelines for cement and concrete use. Widely distribute research results on environmental, safety, health and societal aspects of cement products.

Substudy 12: Socio-economic SS11: Land Use and Biodiversity

10.4 Coordinate efforts of cement associations and other groups working with governments to set policy. Apply research results to aid in the development of sound policies related to the sustainability aspects of cement (e.g., on global issues such as climate change policy). Conduct policy analysis to understand the SD implications of policy.

Cement companies Concrete companies Industry associations NGOs Universities Equipment Suppliers Specifiers Research organizations Governments

Substudy 13: Public Policy

3.11 Possible Futures Carrying out the agenda and achieving the vision presented in this report will be challenging for both industry and its stakeholders. Each cement company will need to prioritize from among the numerous suggested actions, and choose a set of SD actions that fits well with its business strategy and corporate philosophy. Stakeholders will need to be productive participants in the move toward a sustainable cement industry, not just voices on the sidelines.

Because of the diversity of companies, operating environments, and customer requirements, there is no single path to cement industry sustainability and no single destination. As time progresses, it will become easier to identify the “unsustainable” companies than it will be to identify truly sustainable ones as the SD journey is long and the pathways many. Even the best


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companies will not immediately meet with success on all sustainability issues. They will likely excel on some and struggle with others. This is part of the challenge. However, with persistent efforts and a diversity of approaches, the industry can succeed over time. With this in mind, this section looks ahead to the year 2020 and beyond to imagine how cement companies that have adopted a vision of sustainability may be similar to and different from cement companies of today. The alternatives are based on different assumptions about corporate commitment to sus-tainability and which recommendations are most strongly emphasized. Considering the ramifications of these alternatives could benefit companies seeking to determine what sustain-ability means to them and the potential implications of failing to deal with it effectively.

“Rock Bottom Cement, Inc.”

Rock Bottom Cement focused narrowly on minimizing the production cost of Ordinary Portland Cement. Costs associated with environmental compliance and safety, whenever prescribed by law, were considered reasonable expenditures. Extra costs for going beyond compliance were not. Stakeholder interactions were pursued on a case-by-case basis, such as when new plants required siting. Rock

Bottom Cement focused on keeping old plants operating as long as it could in order to avoid capital expenditures. As time went on, environmental regulations became more stringent and the capital expenditures were required anyway. As the need for new quarries emerged, Rock Bottom’s relations with regulators and communities were not strong, and it found it difficult to site new quarries. It still generated profits, but its competitors and most stakeholders viewed it as the industry laggard. Developing nations, where the largest new demand for cement emerged, chose to deal largely with Rock Bottom’s competitors.

“Progressive Cement, Pty”

Progressive Cement developed a strong social component to its business strategy. The company developed stringent environmental guidelines that it applied to all plants in its global operations, but also chose to devote considerable resources to regional and community development programs. For instance, the company developed a philosophy of providing a fraction of its annual cement production, at no charge, to special community and regional projects. It also initiated a dedicated program of dialogue and

communication with local communities surrounding its plants through which it identified needs and helped with financial and in-kind assistance programs. It uses advanced techniques to minimize negative impacts of plant siting. It worked with local construction companies to develop new products and construction techniques amenable to local conditions. Regional development, and community and employee well-being are considered company hallmarks. Having not placed much effort on climate protection, it finds itself under increasing pressure from ever-tightening CO2 regulations, but has been a top industry performer in reducing other emissions. Overall, it is well positioned to gain market share of cement sales in developing countries, because it has a good reputation and finds it easy to work with governments and other institutions to site new plants. In these ways it provides good shareholder value.


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“High-Efficiency Cement Corporation”

High-Efficiency Cement chose to continue to pursue its core compe-tency of manufacturing and selling cement, but chose an aggressive strategy to reduce resource consumption. Blended cements and significantly different product formulations enabled it to avoid carbon taxes and other environmental liabilities associated with the kinds of cement used in the last century. With limited opportunity for plant expansion, in the year 2002, the company created a new corporate initiative called “Extreme Efficiency” where their management and employees drove production and energy efficiencies to the highest levels of the industry by adopting state-of-the-art technology and very aggressive industrial ecology approaches. Now, in the year 2020, the company is profitably selling a wide variety of cements using a fairly limited number of Portland cement plants. They enjoy a reputation as industry leaders in resource productivity, climate protection, and emissions reduction. They are not particularly well known for their regional or community efforts and wish they had started addressing these issues earlier. Sometimes they are criticized for squeezing out more efficiency gains at the expense of employee well-being, so they have recently initiated a new employee involvement program. However, overall, financial experts rate the company a good value for shareholders.

“CemEnergy, Ltd.”

A highly agile company, CemEnergy Ltd. is an energy and eco-materials production company that uses wastes for fuel and feed-stocks. It produces cement as well as metals, minerals, and other byproducts. Its state-of-the-art EcoPlex 21 facility burns coal with special additives that yield high quality clinker and large amounts of electricity. It supplies water to a local town. It captures and sequesters CO2 in un-mineable coal seams, co-producing natural gas. It has earned substantial CO2 credits, which it sells for profit. This creative company is well known for ecological stewardship, emission reduction, climate protection, and resource stewardship. It is not well known for its stakeholder involvement efforts and at times communities and regions perceive it negatively for its use of “wastes” for fuel and feedstocks. As a result, CemEnergy is initiating a bold stakeholder involvement program. As a result of their efforts, they are known for providing excellent shareholder value and are well positioned for the future.

• “Super-Tech Cement, S.p.A.”

Super-Tech Cement partnered with suppliers and focused on process technology development. They developed several new processes for pollution control, efficiency improvement, as well as a novel process for making a new form of cement using lower temperatures. At first, they found they sometimes over-emphasized technology and forget the social dimension of sustainability. This caused difficulties with regional, community, and employee stakeholders, so they have begun to carefully pay attention to these issues also. In 2020, they now profitably produce cement in almost zero-net emissions plants. The company also has a substantial income from the licensing of its process technologies to other cement companies and other industries. Emission reductions, climate protection, and resource productivity are hallmarks of the company. As a reward for their efforts, financial markets view them as providing excellent shareholder value and are very receptive to providing venture capital for the bold new technology ideas Super-Tech pursues.


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• “Structural Products, S.A.” Structural Products no longer views itself as a “cement company,” but instead views itself as a “structural materials company.” An emphasis on business efficiency, strategic partnerships, and innovation has enabled them to dramatically increase their annual turnover, in spite of slow growth in traditional cement markets. They have reduced the magnitude of their environmental risks through diversification. Through their diverse set of products, the value of

their brand image has skyrocketed. Their “homes for families” program is world renowned for its work in developing countries to train communities to use low-cost cement-based building materi-als, while simultaneously generating corporate profits. Five percent of their annual revenue comes from their “finance and construction division” which using eco-efficient binders creates structures with increased longevity and hence higher value, sells structures with a long-term guarantee. It is only through highly refined management techniques that Structural Products has been able to prosper while diversifying from its original core competency of making cement. In exchange for their efforts in pursuing an SD path, Structural Products is viewed by share-holders as a good investment and seldom do they have problem raising venture capital for their new enterprises.

3.12 Conclusions This report began with the assertion that the cement industry could assure continued growth and profitability by adopting SD. Rather than imposing a burden on the industry, SD offers a path toward shareholder value creation by improvement in operating efficiency and stakeholder relationships. Put another way, the needs of society can be served in ways that benefit the cement industry.

At the same time, maintaining the status quo does not appear to be tenable, because of the risks of rising costs and adverse business impacts. The outlook for economic growth in the cement industry is threatened by increased sensitivities over environmental and social impacts of cement production. In the future, the market for cement could potentially be influenced by the emergence of “preferred” alternative construction methods and materials that are significantly less energy intensive, at least in their production phase.119

With the growing influence of NGOs, stakeholder expectations regarding industry SD performance are increasing. Instead of responding defensively, the cement industry has an opportunity to engage proactively with stakeholders, demonstrate its understanding of their concerns, and offer thoughtful and innovative solutions. Instead of merely react-ing to demands for change, the cement industry can adopt a leadership role and become an agent of change – thus better controlling its destiny.

The Sustainable Development Agenda

It appears that continued incremental improvements in eco-efficiency will not be adequate to respond to the pressures of urbanization, climate change and fuel scarcity. The cement industry will be challenged to produce step-change improvements that involve new technologies and business models. A variety of approaches are already being explored, ranging from industrial ecology to advanced materials, which promise to make such step-changes feasible. However, 119 Battelle, “Toward a Sustainable Cement Industry: SD Innovation Substudy Report,”




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cement companies will need to overcome their traditional conservatism and be open to taking calculated risks with an expanded awareness of what risks must be managed.

In developing a vision of a more sustainable cement industry in 2020, this report has described many areas in which progress toward sustainability can contribute to both stakeholder satisfac-tion and shareholder value. For example:

Careful management, rehabilitation, and stewardship of quarries will protect ecological resources while satisfying the expectations of communities and regulatory agencies.

Continued reduction of waste and emissions, including CO2, will maintain the industry’s right to operate and reduce environmental expenses and liabilities.

Safely utilizing materials that otherwise would be discarded as waste will provide a valuable service to society while decreasing costs of material and energy and reducing CO2 emissions.

Especially in developing countries, contributions to economic growth and community well-being will enhance regional development and quality of life.

Attention to employee health, safety and well being will increase productivity and make cement companies more desirable employers.

The eight major issues of the Sustainability Compass defined by Battelle provide a starting point for working toward the SD vision. This strategic perspective is supported by additional tools and knowledge contained in the supporting substudies (Appendix E).

Overcoming the Obstacles

Realistically, even the most powerful vision will encounter obstacles. Achievement of genuine change is always difficult, and the magnitude of change required for the entire cement industry is especially challenging. To pursue the recommended path, the cement industry will need the cooperation and trust of many stakeholder groups including government agencies, local com-munities, standards bodies, NGOs and financial institutions.

Cement industry managers must anticipate several hurdles on the road to SD: The first and most critical obstacle will be achieving alignment around SD throughout a

cement company’s organizational units and facilities.120

Developing a balanced approach toward meeting the expectations of a variety of stakeholders will be difficult, and some dissatisfaction will be inevitable.

Public policy debates will challenge the industry to participate effectively, and to demonstrate its commitment to responsible corporate governance.

Some of the costs and benefits associated with sustainable business strategies will be more difficult to quantify, so that judgment will be required. However, it will be important to evaluate qualitative issues such as social impacts, to compare financial to non-financial outcomes, and to make trade-offs among SD issues, e.g., land use vs. energy use.

Multinational companies will be challenged to apply SD policies and principles consistently on a global basis, while allowing for regional differences. Gaining in-depth understanding of local community issues will be particularly challenging in a diverse, worldwide company.





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Due to the interconnectedness of global financial markets and the global scale of industrial logistics, regional issues can no longer be viewed in isolation. Large multinational cement com-panies need to understand the local markets, stakeholders, governance systems, and social values of the communities in which they operate, while striving for consistency in their global policies. Smaller, regional cement firms will need to understand emerging sustainability standards, practices, and technologies in order to remain competitive.

The Path Forward

To support the SD agenda, this study has identified a number of constructive steps that cement companies can take to align SD with their corporate goals and strategies: Understand specific ways in which SD contributes to enterprise value, including both

financial benefits and less easily measured benefits such as employee motivation, brand loyalty, community trust, and corporate reputation.

Evaluate business opportunities using a comprehensive triple bottom line framework that identifies nontraditional sources of enterprise value, capturing both the benefits and the risks associated with sustainability issues.

Adopt a life cycle perspective, seeking insights about the impacts of business decisions upon both upstream suppliers of equipment or materials and upon downstream users of cement products. (These considerations extend beyond the boundaries of this report.)

Identify “win-win” sustainable solutions that improve license to operate, market access, and profitability for the enterprise while creating societal value from the perspective of external stakeholders.

Invest in more radical research and development efforts, including innovative production processes that are less energy and material intensive, and new product formulations that address emerging market needs.

Consider the specialized local needs of stakeholders in developed and developing economies, and develop appropriate products, technologies and management practices.

Adopt modern supply chain management techniques to streamline manufacturing and logistical operations, including partnering with suppliers and customers.

Collaborate with NGOs, governments, local communities, and other stakeholders to promote effective public policies and develop common SD objectives.

By incorporating environmental and social concerns into their business strategy, and exploring opportunities for innovation and improvement, Battelle believes that cement companies can help to secure their market position and economic future.

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