Cemex: Ecoefficiency Program

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This case was written by Vamsi Krishna Thota, ICFAI Knowledge Center. It is intended to be used as the basis for class discussion rather than to illustrate either effective or ineffective handling of a management situation.

The case was compiled from published sources.

Cemex:

Ecoefficiency Program

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Cemex: Ecoefficiency Program

Introduction

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In 2003, Mexico based Cemex was the third largest cement company in the world. For the year 2002, the company’s net income stood at $510 million on sales of $6.53 billion. It had an annual production capacity of 81 million tons and employed 26,500 people in 30 countries. Over 75% of Cemex’s sales came from cement. The company also made ready-mix concrete, aggregates, and clinker (an intermediate product used to make portland cement). Cemex was the second largest cement producer in the US and the top cement producer in Egypt, Mexico, Philippines, Spain, and a host of Latin American countries (Colombia, Costa Rica, the Dominican Republic, Panama, and Venezuela).

The Cement Industry

Cement was first produced in the early 1800s. The industry had changed considerably since then, although the basic nature of the product had not. Cement was a global commodity, manufactured at thousands of local plants. There were only a few types of cement. This made price the most important sale parameter. Because of its weight, land transportation was expensive, and generally limited to an area within 300 km of the plant site. Consumption of cement was driven primarily by the construction industry, and was closely linked to the economic cycle. In many developed countries, market growth was slow or nil. In developing markets, growth rates were higher, and a large fraction was sold as a bagged product to individual customers.

Cement was a highly capital intensive industry. The cost of a new cement plant was equivalent to about three years of revenue. Many cement plants had capacities well in excess of one million tons per year and a lifespan of over 50 years. Making cement required large-scale mineral extraction operations and highly energy-intensive production plants, which resulted in a substantial impact on the environment. An equivalent of 60 to 130 kilograms of fuel oil and 110 kWh of electricity was needed to produce one ton of cement. Fuel costs accounted for one-quarter to one-third of cement manufacturing expenses.

The cement industry was estimated to produce 5% of global man-made Carbon Dioxide (CO2), a major gas contributing to climate change. The cement industry carried an image of being

involved in a limited way with local communities2_{. In the mature markets of Europe and North}

America, cement plants were often seen as an unavoidable intrusion, and environmental issues such as dust, noise, use of alternative fuels and pollution were major concerns for stakeholders. But in less developed countries, most governments encouraged cement industries as they played a key role in developing the infrastructure.

In the late 1990s, the cement industry was consolidating globally as cement majors entered the growing markets in developing countries. In 2002, 38% of the world cement market was controlled by six major companies, 56% by local firms and the remaining by multi regional companies. The regulatory pressures and stakeholder expectations regarding health, safety, and environmental performance were also increasing. These forces made cement companies seriously consider sustainable development as a model for future growth. Beyond the cost savings, companies were finding that an eco-friendly approach reduced the time to get required permits from governments for new plants.

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Figure (i)

Cement Industry: Environmental, Social and Economic aspects

Source: World Business Council for Sustainable Development

Another environmental opportunity for cement plants was to take on a larger role in managing waste by functioning as incinerators. The kiln of a cement plant was often a more efficient incinerator than the typical waste incinerator. Hazardous waste, which could not be disposed of easily, was used as fuel in the incinerators. The producers paid the cement companies a fee for the disposal service.

Cemex Ecoefficiency Program

Cemex was guided by the philosophy and operational goal referred to as “En Armonia con la Naturaleza”, a Spanish phrase meaning “In Harmony with Nature”. In the early 1990s, Cemex started the Cemex Eco-efficiency Program (CEP), international environmental education, and numerous socially responsible outreach efforts. The company applied a global approach to setting and meeting strong company-wide environmental standards. Cemex had adopted internal standards to ensure ongoing improvement, even in locations where laws and regulations were in the developmental stage. Cemex actively participated in environmental protection regulatory programs and maintained a close relationship with the various environmental agencies and ministries.

Cemex’s environmental policy, established in 1993, and updated in 1997 and 2000, defined clear corporate guidelines to make the company’s shareholders aware of the importance and value of protecting natural resources. CEP employed cutting-edge technology in its operational processes

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to assure energy and materials-efficiency and to promote an environmental culture with all constituencies. It also used the most effective equipment and systems to protect its employees, neighboring communities, facilities and the environment. In 1997, Cemex became the first multinational cement company to publish an environment, health and safety report.

Empowerment and training of personnel was a basic component of Cemex’s environmental policy. In 2000, Cemex started its ecoefficiency initiative through the internal and external distribution of the ecoefficiency brochure, as well as with seven informative capsules on Cemex’s TV channel in Mexico, Panama, and Dominican Republic.

Cemex took up the following initiatives under CEP:

• Developing technology for production processes, mining, and new plant design.

• Recycling and reusing materials

• Using natural cementing materials

• Using alternative and waste fuels

• Promoting a culture of ecoefficiency

Cemex created a global monitoring and tracking database system for all its facilities. The system provided indications and relevant environmental, health and safety facts online from every Cemex plant. Newly constructed facilities were designed and built to provide state-of-the-art capabilities in energy efficiency and emissions control. In 2000, Cemex became the first cement

company to achieve ISO 140013_{certification at its facilities in the Americas and Spain. By 2002,}

more than half of its plants were ISO 14001 certified, including many in the developing world. Cemex’s community outreach program extended well beyond environmental initiatives. In Asia, Europe, the Americas and the Caribbean, Cemex had initiated and contributed to numerous and far reaching social programs, including disaster relief, solid waste disposal, infrastructure improvements, environmental awareness, and a variety of community health projects.

Global Roll Out of CEP

Mexico

In 1997, Cemex introduced calcination technology in the Torreon plant. The technology enhanced clinker production by 11% and reduced thermal and electric energy consumption by 14% and Carbon Dioxide emissions by 6%. The company also increased the use of natural

cementing materials like pozzolana4_{. These materials reduced energy consumption because they}

did not require calcination. Cemex’s use of high-efficiency ventilators, improved technology, automation and systematized operations practices also reduced consumption of electric energy. The Guadalajara plant started using the residual heat of process gases’ to dry pozzolana. This method of drying was developed using in-house technology and saved 12.4% in thermal energy and 4.5% in electric energy consumption. In late 1997, Cemex completed the Mexican government’s voluntary environmental audits program for six cement plants.

In 1998, three Cemex plants received ISO 14001 certification. The Torreon plant using the calcination process recorded a further drop of 4% in energy consumption. The same year, Cemex

3_{ISO 14001 (published in 1996) specified the actual requirements for an environmental management}

system. It applied to those environmental aspects, which the organization had control and over, which it could be, expected to have an influence.

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extended its ecoefficiency programs to the administrative offices, focusing on paper recycling and water and energy saving initiatives.

In 2000, the Ensenada, Torreon, Hidalgo, Merida, Atotonilco, and Barrientos cement plants received ISO 14001 certification. Cemex also initiated the Zero Water Discharge Program, which promoted water conservation through optimization. The CPN, Yaqui, Torreon, Guadalajara, Merida, and Huichapan cement plants were provided with wastewater treatment systems to reuse treated water for irrigation.

Mexico provided few options to reuse and dispose of byproducts and wastes from different industries. So Cemex became a participant in PAAM (Environmental Management System in Monterrey Project), which sought to enhance cooperation between large companies and their suppliers to develop environmental management systems. Cemex started equipping the cement plants to reuse materials in the production process. The operational conditions especially the high kiln temperatures allowed these byproducts to be utilized in an environmentally safe manner while maintaining quality standards. The company co-ordinated with generator industries to guarantee constant quality and steady supply of these byproducts. As a result of these efforts, utilization of byproducts increased by 15.3%. This reduced Carbon Dioxide emissions by 296,000 metric tons. Thermal energy consumption came down by 2,033 Giga Calories per year, reducing Carbon Dioxide emissions by 720 tonnes. Annual cost savings amounted to $2.4 million.

Cemex supported a wide range of wildlife conservation projects with universities, conservation organizations, and other institutions. Almost 40 projects concerning highly biodiverse ecosystems

in ten countries around the world had been established. These efforts included reforestation,

wildlife management, scientific research, reintroduction and preservation of native species, and quarry restoration. The El Carmen Project in Northern Mexico along the Mexico-US border was established to conserve a unique bio-diverse ecosystem.

Spain

In 1998, Cemex started developing a system for the prediction and control of emissions in its cement plants. In 1999, Cemex was honored with the Environmental Award from the Association of Valencia Industrialists in Construction for building the first ecological concrete unit in Spain at Albuixech, Valencia.

In 2000, Cemex’s Alcanar cement plant implemented a process control system that facilitated data collection and management, optimized production processes, and reduced the standard deviation in the kilns’ feed. The new system reduced Carbon Dioxide emissions by 16,000 metric tonnes. Average thermal energy consumption was reduced by 18 kilocalories per kilogram of clinker. Annual cost savings were $165,000.

In 2001, Cemex joined the Spanish cement industry organization, OFICEMEN5_{. The company}

signed a voluntary agreement with the National Environment Ministry for applying improved techniques by 2005 to control emissions of particles, Carbon Dioxide, Nitrogen Oxide (NOx), and Sulphur Dioxide (SO2). The Alicante and Lloseta plants implemented special techniques that reduced emissions to a level even below that mandated by regulations.

US

In 1999, together with other cement manufacturers, Cemex participated in the development of new regulations for emission of Nitrogen Oxide. In 2000, Cemex constructed a storm and

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wastewater treatment facility (investing $190,000) to reduce water consumption in the Navigation Plant, Cemex’s largest ready-mix concrete facility in Houston, Texas. The treated wastewater was reused in the company’s operations instead of being discharged into nearby water supplies. Recycling the water conserved more than 68,000 cubic meters of supplied water (50% of the company’s annual water requirements). The annual savings were $60,000.

In 2001, at Knoxville, Tennessee, a highly automated system was installed for energy creation employing used tires as a supplementary fuel. The system was safer and more efficient. By the end of 2001, around 11,350 tonnes of tires had been used as fuel. Cemex also joined 42 other members of APCA (American Portland Cement Alliance) in agreeing to a voluntary goal of reducing Carbon Dioxide emissions by 10% per ton by 2020.

In 2002, the Victorville, California plant completed an expansion project (costing $190 million), which made it the largest cement production facility in the US. The plant lowered allowable air emissions by 84 metric tons per year of particulate matter and 3,270 metric tons per year of gaseous emissions. State-of-the-art combustion controls were chosen to reduce Nitrogen Oxide, Carbon Monoxide (CO), Sulphur Dioxide and Volatile Organic Compound (VOC) emissions. In late 2002, this project was honored with an Exemplar Award from the Mojave Desert Air Quality Management District.

Venezuela

In 1997, Cemex initiated CEP in Venezuela by optimizing its dust collection systems in the loading area of Venezuela’s Pertigalete plant, increasing productivity and minimizing environmental impact. In 1999, a high-efficiency separator was installed in the milling area of plant. The separator increased the mill’s capacity by 30% and reduced its energy consumption by more than 10%. It decreased atmospheric emissions and the consumption of non-renewable resources from the electrical generation process. Wastewater treatment systems began operating at the Pertigalete, Lara, and Mara cement plants, allowing Cemex to reuse 336,000 liters of treated water per day for irrigation.

Dolomite, a material containing 16% of Magnesium Oxide, found in the limestone reserves was traditionally considered a residue and was thus removed as waste. But Cemex explored the use of dolomite as a limestone substitute and created a new market for 260,000 metric tons of dolomite. Though the quantity of Magnesium Oxide in the raw material increased from 1 to 2.5%, the cement quality was not affected. This initiative eliminated the need to dispose off 1,600,000 metric tons of dolomite per year. It also reduced the extraction of minerals from the quarry, increasing the life of the limestone reserves by four years. The annual cost savings amounted to more than $ 1.1 million.

In 2002, oily water treatment systems for Pertigalete, Mara and Guayana plants were set up. This allowed the reuse of water in the operation of the mills saving 2,800 cubic meters of water per year. Cemex also used 1,135 cubic meters of waste oil in two of its plants as alternate fuel. In some cases, the existing equipment was modified to use the waste oil fuel.

Colombia

In 1998, Cemex began to use pozzolana in Colombia. The next year, the company implemented industrial water recycling in three concrete manufacturing units, saving 30% of water destined for industrial use. In Colombia, recycling of coal industry wastes was not considered because of the characteristics of the waste and lack of an available market. In 2000, Cemex performed several tests in kiln 2 of the Caracolito plant to determine the feasibility of coal dust utilization. Cemex was able to replace up to 40% of the coal fed into the kiln with coal dust. As a result, six metric tons/hour of coal was preserved. By using this byproduct, Cemex reduced annual Carbon Dioxide

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emission by 2,800 metric tons. The company also saved electricity in the grinding process due to the physical characteristics of the waste coal. The annual cost savings from the initiative amounted to $240,000. In 2001, coal fines amounted to 50% of the fuel in kiln 2. Waste oils were also used as a mixed fuel for the kiln.

Other Countries

In 1998, Cemex introduced pozzolana in Panama. The inefficient packing system generated particle emissions in the workplace, and required manual labor for stacking. In 2000, the CEP program introduced a new packing and pallet system, which allowed control and reduction of particle emissions. The scheme improved efficiency in the truck loading process and minimized the trucks’ waiting time. Bag wastage was also eliminated, as the new machine did not tear bags. Cement bag shipping could be programmed during the night to avoid the heavy truck circulation during the day when traffic in the access ways was high. The $650,000 investment increased sales due to better dispatch service and product presentation. In 2001, wastewater recycling from

the aggregates plant operation was improved by a new hydrocyclone6_{technology. The reuse of}

the water saved 7,500 cubic meters of water per month.

At its plant in the Dominican Republic, the fan used to ventilate the clinker cooler had a 200-HP motor and consumed 124 KWH, costing $71,153 per year. The cooler’s hot gases were also not being used. So in 2000, Cemex installed a frequency speed drive in the fan (investing $30,000). The drive controlled the fan speed and reduced electricity consumption. The gases were used to heat the secondary raw material crusher.

The frequency speed drive allowed the fan to work with a 150-HP motor and a 34% utilization rate. This saved 83 KWH and $23,564 in energy costs annually. The utilization of hot gases in the secondary crusher reduced fuel consumption by 17 gallons per hour, generating annual cost savings of $73,182 and reducing Carbon Dioxide emissions by 1,620 tons per year. The utilization of 226 million cubic meters of hot gases in the secondary crusher eliminated their direct release into the environment.

Figure (ii)

Cemex: Use Of Alternate Fuels (in tonnes)

27730 33532 0 10000 20000 30000 40000 2000 2001

Source: Cemex EHS Report, 2001

In Costa Rica, the water consumed by the cement plant’s cooling processes, human needs, and the residential area next to the plant was taken from the wastewater treatment system (investment $200,000). The treated wastewater was reused in the plant and for irrigation. As a result, 14,600 cubic meters of water was preserved annually. The annual cost savings amounted to $24,400. In 2001, a new system allowed petcoke (petroleum coke) to substitute traditional fuel oil (about 50%) in the production of clinker. Petcoke was not only safer to handle than fuel oil but also less

6_{Control equipment consisting of an inverted cone. The spinning effect forces solids to the wall of the}

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expensive. Another project planned to use tires, plastics, and discarded coffee beans as alternative fuels.

Figure (iii)

Cemex: Thermal Energy Consumption 945 937 933 925 930 935 940 945 950 2000 2001 2002 Kilo Ca lorie /Kg Clink e r

In the Philippines, the design of the burner of kiln 3 at the Solid plant made flame regulation very difficult, affecting the life of the refractory bricks in the kiln’s burning zone. So in 2000, Cemex installed a new technology burner in the kiln (investing $430,000). The kiln’s burner was designed to use 100% petcoke. The Nitrogen Oxide emissions were reduced by 13%. The burner’s operations also became easier to control, the life of the refractory bricks increased, and the cost of maintenance came down. The annual savings were $340,000. In 2001, Cemex installed a cleaning system in APO Cement’s bagging operation and mills along with dust collectors, and a wastewater and raw material recovery system.

Concluding Notes

The economic impact of CEP was substantial. By 2000, Cemex had saved more than $60 million, while cutting Carbon Dioxide emissions by approximately 2.5 million metric tons. Electricity usage was reduced by 160,000 megawatts (roughly the same amount used by a city of 100,000 people in the course of a year). In 2001, the total use of alternative fuels increased by 21% to 33,532 annual tons. The company saved $18.75 million and $15.1 million in 2000 and 2001 respectively through CEP.

In 2001, Cemex joined the World Business Council for Sustainable Development (WBCSD), an effort by ten multinational cement companies to promote sustainable development while enhancing shareholder value.

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Exhibit: I

WBCSD: Recommendations

Issue Recommendation

Resource Productivity Increase industrial ecology and eco-efficiency in the cement

industry.

Climate Protection Establish corporate carbon management programs, set

company-specific and industry-wide medium-term carbon dioxide reduction targets, and initiate long-term process and product innovation.

Emission Reduction Continuously improve and make more widespread use of

emission control techniques.

Ecological Stewardship Improve land-use practices by disseminating and applying

best practices for plant and quarry management.

Employee Well-Being Implement programs to enhance worker health, safety and

satisfaction.

Community Well-Being Contribute to enhancing quality of life through local

stakeholder dialogue and community assistance programs.

Regional Development Promote regional economic growth and stability, especially

in developing countries. Business Integration of

Sustainable Development (SD)

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

Innovation Encourage SD-related innovations in product development,

process technology, and enterprise management.

Cooperation Work with other cement companies and external

organizations to foster SD practices and remove barriers.

In 2002, Cemex received the World Environment Center Gold Medal Award. The award was given to international manufacturing companies with outstanding performance in environmental, health and safety areas.

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Bibliography

1. Joel Millman, “Cementing Latin America”, Forbes, 26th_{February 1996.}

2. Larry Luxner, “Taking the plunge,” Pit & Quarry, February 1996.

3. Maja Wallengren, “Mixing Salsa with Islam,” Latin Trade (English), June 2000.

4. Darren Constantin, “Training through technology,” Pit & Quarry, March 2002.

5. James L Nash, “Cemex ties growth to concrete environmental solutions,” Occupational

Hazards, June 2002.

6. Arun Subramaniam, “The Mexican Wave,” Far Eastern Economic Review, 31st_October

2002.

7. Miles Moore, “Texas grant to cement kilns draws ire,” Tire Business, 6th_{January 2003.}

8. Miles Moore, “Tires-for-fuel grant burns environmental group,” Rubber & Plastics

News, 13th_{January 2003.}

9. Michelle Guevara, “Tomorrow’s leaders today,” Latin Trade (English), February 2003.

10. Sudip Roy, “Cementing global success,” Strategic Direct Investor, March 2003.

11. Cemex Environmental, Health and Safety Reports-1997, 1998, 1999, 2000, 2001, 2002. 12. www.cemex.com

13. World Business Council for Sustainable Development, www.wbcsd.org 14. World Environment Center, www.wec.org