Cement firms warned on climate change targets

17 April 2018

Cement companies have been warned that they must more than double their emissions reductions or they risk missing out on climate goals.

A new report Building Pressure by the CDP analyses 13 of the world’s largest publicly-listed cement companies.

It is warning that tightening building regulations and the rise in low-carbon cities could lead to major changes in the sector.

If cement companies are to play their part in eliminate limiting global warming to below 2C, as agreed in the Paris climate deal, they will be required to make significant investments in innovation in technology, it said.

Companies analysed in the report have a total market capitalisation of $150bn and represent 16% of global cement production, while the sector itself accounts for 6% of global CO2 emissions.

Cement, which is used in the production of concrete, is the second most polluting industrial sector and is ranked after water as the most consumed product in the world.

The report singled out Indian companies as taking the lead when it came to reducing emissions.

Indian producers Dalmia Bharat and Ambuja Cement, followed by Colombia’s Cementos Argos, are the best performing companies on climate-related metrics.

Japan’s Taiheiyo Cement, Malaysia’s Cementir Holding and Taiwan’s Asia Cement Corporation brought up the bottom of the table.

Indian companies’ success in this field was partly attributed to better access to alternative materials from other carbon intensive sectors, including fly ash sourced from thermal power generation.

India also benefits from newer, more efficient cement plants driven by high market growth in the region.

This is in contrast to European peers that rely on older cement plants, said the report.

The CDP said regulation of the cement sector has so far been light but this is likely to change as cities adopt a low-carbon model.

It said there were opportunities for companies who act early on climate risk as they could reduce costs by making their cement plants more energy efficient.

They could also secure their position in future sustainable cement markets by investing in low-carbon products.

The report highlighted other potential risks and opportunities for the sector.

These include carbon capture and storage (CCS), a technique which prevents CO2 entering the atmosphere, though most CCS projects are still largely at pilot stage in the sector.

It said European players benefited from alternative fuels sourced from organised waste collection, while emerging market producers are behind in this area, due to limited infrastructure.  

With the exception of Cementos Argos cement companies are not incentivising long-term climate risk management through executive level remuneration.

CDP CEO Paul Simpson said: “With potential pressure coming from multiple sources, including down the value chain in the form of building and city regulation, cement companies need to invest and innovate in order to avoid impending risks to their operations and the wider world.

“This may seem challenging at first, but every year it is delayed, the cost becomes greater, so management teams, regulators and investors need to think long term. There is a solution – cement companies just need to invest properly in finding it.”

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