Aggressive innovation needed as tipping point looms for cement industry

The CPD report released today (9 June), warns of looming tipping point for an industry that is responsible for 5% of global emissions. Analysing 12 of the largest global cement companies, the report highlighted that “forward-looking” companies will see emission targets expire within the next few years, with some companies facing an earnings hit of 144% before interest and tax.

“This is the first piece of major research to break down how major players in the cement industry are meeting the challenge of reducing emissions in line with the science called for by the Paris Agreement,” CDP’s senior analyst of investor research Tarek Soliman said. “The results couldn’t be clearer for companies and investors: a tipping point for cement companies is not far away.

“As carbon-related regulatory measures inevitably tighten and the carbon price signal strengthens, investors will expect both strategic and rapid changes from cement companies, including better use of currently available options as well as investment in longer–term ones, whether this be in areas such as low-carbon product development or the deployment of carbon capture, use and storage.”

The 12 cement companies – collectively worth $120bn – have been warned that “significant innovation” is necessary in order to drive efficiency beyond current standards and to comply with net-zero emission goals set for 2050 by the Paris Accord.

Of the 12 companies analysed, only Switzerland’s Holcim and LafargeHolcim, India’s Shree Cement and Lafarge in France scored A and B grades for emissions performance and energy and material management – the two categories which account for the bulk of CDP’s ranked scoring system. Italy’s Cementir and Italcementi firms, which scored E grades across the board, could be at risk of an earnings hit of 114%, even if a low $10 carbon price was introduced.

Quick-dry solutions

While Italcementi could be aided once it is purchased by Heidelberg Cement later this year, the other companies have been urged to increase their use of alternative fuel sources, while CPD has also called for the implementation of thermal energy efficiency measures and decarbonised “substitute” materials.

With only three companies in the report outlining emission reduction plans to coincide with science-based targets, CDP has warned that overall ambitions in the industry are “not aggressive enough”. The report calls on the poor performing companies to become more involved with the legislative process, with the expected EU emissions trading system (EU ETS) reform highlighted as prime example for companies to shape future operational blueprints.

With more than 50% of cement facilities currently located in water-stressed areas, CDP has called on the companies – especially Ultratech and Shree Cement – to turn to efficiency measures and innovation in an attempt to mitigate restricted growth caused by climate change.

Four firms collectively worth $60bn – including Vulcan Materials – failed to respond to CDP’s questionnaire and were emitted from the report, with CDP calling on investors to scrutinise the lack of climate reporting.

With the cement industry in “urgent need” of innovative carbon capture and storage (CCS) technologies, a new CCS LEILAC project – which captures carbon with no additional energy costs – has just received a €12m backing from the European Union.

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Matt Mace