How building materials company Cemex prioritizes ESG decisions | Greenbiz GreenBizHow building materials company Cemex prioritizes ESG decisions | Greenbiz GreenBizHow building materials company Cemex prioritizes ESG decisions | Greenbiz GreenBiz
Impact Investing Forum 2023
London. Dec 05-06, 2023.
This series focuses on the many ESG issues that affect different industries. It also examines how disclosure is informed by materiality assessments and the role science-based targets.
Neil Stewart: What is your role in driving and executing ESG strategies for Cemex?
Lucy Rodriguez: As chief communications officer and member of Cemex’s executive committee, my job is to understand Cemex’s climate action goals, its roadmap for execution, and to properly communicate the strategy with external audiences.
This involves converting technical and engineering-oriented discussions into a clear message for our stakeholders. We define these as employees, customers suppliers, analysts, shareholders, analysts, investors, shareholders and non-market stakeholders. These include community members and industry associations. As a conduit, I capture the concerns of evolving stakeholders around climate action and provide timely feedback for senior management.
Investors are familiar with ESG topics, which focus primarily on climate action.
A second important responsibility is to keep abreast on the best ESG disclosure practices. My job is to communicate with stakeholders and understand their expectations. I work with senior management, the board, and other stakeholders to review these practices and determine which ones are most valuable in the context of our industry.
Finally, Cemex is represented in the communications subcommittee at the Global Cement and Concrete Association. This forum encourages industry collaboration and the sharing best practices among members to standardize measurement of greenhouse gas emissions at a global level.
Stewart: How has Cemex integrated ESG concerns into its decision-making processes
Rodriguez: Sustainability is one Cemex’s five strategic priorities. It is a strategic priority that permeates all areas of our business. It starts at the top and then spreads across the entire organization.
Cemex’s board established a sustainability committee in 2014. This committee assists the board in setting the company’s sustainability strategy, evaluating our ambitions, and monitoring our performance against these targets, particularly in ESG areas. The sustainability committee provides guidance for our CEO and senior management team on our sustainability strategy. The board consists of four members who meet quarterly to discuss and analyze the progress on the ESG strategy and engage in decision-making.
Cemex’s executive committee has one member responsible for the implementation of the company’s sustainability strategy. This includes the oversight of ESG issues at the board level. The global head of sustainability reports directly to him. He coordinates with the country and regional sustainability representatives to ensure consistency, progress, and alignment across all our operations.
Stewart: Could you please discuss Cemex’s process for materiality analysis? What motivated your company to create such a process. What has the process brought to your company?
Rodriguez: Cemex’s Materiality Assessment is a practice that we have used for many years. It brings together the most important financial and non-financial topics that are relevant to our business, as identified by our stakeholders and investors. Our key stakeholder groups and management team use the GRI framework and materiality principles, as well as the SASB disclosure topics for construction materials industry, to identify and rank the topics that should be addressed in our integrated reporting and strategic planning.
Our last materiality assessment was done in 2020. We conducted an industry-level assessment and studied major social and environmental trends. We launched a worldwide materiality survey to map the importance of these topics for our stakeholders. This survey was open to employees, customers, suppliers and analysts, as well as other stakeholders such as community members and industry associations. We received 2,410 responses from all regions where Cemex is present. These responses are the “stakeholder concern axis” of our updated matrix.
The materiality assessment helps us prioritize our efforts and minimize gaps in our business strategy. It also provides continuous feedback to our stakeholders on the evolution and impact of economic, environmental, and governance issues.
Further details regarding the latest update on Cemex material priority can be found on page 12 of our 2020 Integrated Report.
Stewart: What are the most significant areas of sustainability risk in the building materials industry and what opportunities do they present? How has sustainability disclosure allowed Cemex to manage these risks?
Rodriguez: We believe that the materiality assessment accurately reflects the most relevant risk and opportunities associated with ESG, particularly those ranked as higher or lower materiality. Our industry’s biggest areas of risk include climate action and health and safety.
Clear and consistent disclosure of the most important issues keeps the company and its stakeholders focused. This allows for more substantive discussion and better assessment of progress towards those goals, as well any gaps in execution. We can also consider the impact of actions we should take into account when we adjust future plans.
We now report our CO2 emissions quarterly to climate action. This is in addition to our annual disclosure. This detail allows us to provide greater visibility to our stakeholders and connect our mid-term goals with our short-term actions.
Our goal is to be the industry leader in climate action disclosure. We report using the most widely used investor disclosure standards, including the Task Force on Climate Related Financial Disclosures, SASB Standards, and the United Nations Global Compact, among others.
We were A-listed by CDP in 2019 for our disclosures on climate action. We aim to improve and align our disclosures with best practices. We recognize that standards and expectations change rapidly. We have therefore committed to seeking verification of our 2030 Climate Action target using the Science Based Targets Initiative (SBTi). This will allow us to improve our rating in the future.
Stewart: What questions are investors asking when it comes sustainability? ESG data has allowed management to make better decisions, and improved investor relations. Can you give us a specific example?
Rodriguez: Sustainability has been a hot topic over the past few years. Investors are interested in ESG topics, which primarily revolve around climate action. This includes discussion on CO2 reduction goals, relevant levers for achieving objectives, key innovations and investments required to reach both the mid-term targets as well as 2050 net zero status.
Transparency and data around our goals, levers, and progress leads to valuable discussions between our stakeholders. About 7 percent of the world’s carbon emissions are caused by the cement industry. Concrete is our end product and is a keystone of construction. However, concrete is not like other heavy industries.
It is very helpful to engage with stakeholders who recognize the importance of cement in carbon emissions, its essential nature to society, and the regulatory changes that would encourage the decarbonization.
The world can’t stop growing. As an industry, we need to find solutions for the carbon emitted by the chemical process of heating limestone to create cement. It is essential to engage with stakeholders who recognize the importance of cement in carbon emissions, its essential nature to society, and the regulatory changes that would encourage the decarbonization. To allow stakeholders to track our progress, it is important to set ambitious goals and provide clear milestones.
Our company always gets valuable feedback from conversations about ESG. Climate action expectations are changing rapidly. We try to incorporate the most current best practices in our climate action strategy Future in Action, which was launched in February 2020.
The initial program set a goal to reduce carbon in cement production by 35 percent by 2030 and zero carbon emissions in concrete by 2050. The Carbon Trust, an internationally renowned consulting company that provides a rigorous third party assessment of carbon reduction plans, validated the 2030 target. It was also aligned with the SBTi’s previous 2 degrees Celsius scenario.
Stakeholders pushed us to be more aggressive in our efforts and more stringent in our oversight. This resulted in our 2030 carbon target of 475 kg of CO2/ton cementitious materials, a decrease of 40%, and we will move our 2030 CO2 target forward by five years to 2025. Our 2030 goal represents the highest level of industry commitment and is aligned with the SBTi well below 2 degrees Celsius scenario.
Stewart: What is the importance of consistency and comparability in ESG information for investors and management? And what role does standardization play?
Rodriguez: It is crucial for investors and managers to have consistent and comparable ESG data. Cemex and the industry have been recognizing this responsibility for over two decades. We have been working together with industry peers to create the Cement Sustainability Initiative, which was the first industry group to collaborate on sustainability within the World Business Council for Sustainable Development. Importantly, the cement sector was the first to monitor and report carbon emissions, and also to create a global CO2 emissions database.
Cemex began monitoring and measuring CO2 emissions in 1997. Measurement is crucial and consistency is key. Cemex has been providing reliable data for over a decade to help improve any indicator. We report on a wide range of disclosure standards, including SASB, TCFD and GRI, CDP, UNGC and UNGC. Investors need consistent ESG data across companies to make informed decisions based on material information. We believe that there will be a consensus and consolidation over time.