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How building materials company Cemex prioritizes ESG decisions

Chief communications officer Lucy Rodriguez discusses critical issues for the construction industry, materiality assessments and science-based targets.

Cemex plant in Florida

Cemex's U.S. network includes 11 cement plants. Image via Shutterstock/Yes Market Media

This new series illuminates the diverse impact of ESG issues across industries and explores how leading companies are measuring, managing and disclosing these issues.

I spoke with Lucy Rodriguez, executive vice president and chief communications officer at Cemex, a multinational building materials company headquartered in Mexico, about the most critical ESG issues for the construction industry, how materiality assessments inform disclosure and the role of science-based targets.

Neil Stewart: What role do you play in driving and executing ESG strategies at Cemex?

Lucy Rodriguez: My job, as chief communications officer and a member of Cemex’s executive committee, is to understand Cemex’s climate action goals and its roadmap for execution and properly communicate the strategy to external audiences.

This entails synthesizing a technical and engineering-oriented discussion into a clear and succinct message for our stakeholders, which we define as employees, customers, suppliers, analysts, investors and shareholders as well as non-market stakeholders, including community members, NGOs and industry associations. At the same time, I serve as the conduit to capture evolving stakeholders’ concerns around climate action and provide timely feedback to senior management.

ESG topics are a regular subject of discussion with investors, and their focus revolves primarily around climate action.

Another critical responsibility is staying abreast of best ESG disclosure practices. My job is to engage with stakeholders and understand their expectations. I work with senior management and the board to review these practices and identify those that provide value in the context of our industry and geographic footprint.

Finally, I represent Cemex in the communications subcommittee of the Global Cement and Concrete Association. In this forum, we foster industry collaboration and the sharing of best practices between members to standardize measurement and reporting on greenhouse gas emissions on a global level.

Stewart: How has Cemex incorporated ESG concerns into decision-making processes?

Rodriguez: Sustainability is one of Cemex’s five strategic priorities. It permeates all aspects of our business, and its strategic priority starts at the board level and rolls out across the entire organization.

In 2014, Cemex’s board of directors established a sustainability committee that supports the board in setting the company’s sustainability strategy, evaluating the ambition of our targets and monitoring our performance against those targets, notably in areas related to ESG. The sustainability committee provides guidance to our CEO and senior management team regarding our strategic direction on sustainability. The committee consists of four board members who meet quarterly to analyze and discuss the progress on our ESG strategy and actively engage in the related decision-making process.

In addition to the board-level oversight of ESG issues, one member of the Cemex executive committee is responsible for the execution of the sustainability strategy of the company. Reporting directly to him, the global head of sustainability coordinates with the regional and country sustainability representatives to ensure consistency, progress and alignment across our operations.

Stewart: Can you discuss Cemex’s materiality analysis process? What prompted your company to develop such a process? How has it benefitted the business?

Rodriguez: Cemex’s materiality assessment is a regular practice we adopted several years ago that brings together the most relevant financial and non-financial topics for our business that have been identified by the company and our stakeholders, including investors. Using the GRI's framework and materiality principles and the SASB disclosure topics for the construction materials industry, our key stakeholder groups and management team identify and rank the topics to be addressed in our strategic planning and integrated reporting.

Our last materiality assessment was conducted in 2020. We performed an industry-level evaluation and researched economic, environmental and major social trends and challenges. To map the significance of these topics for our stakeholders, we launched a worldwide materiality survey with the participation of employees, customers, suppliers, analysts and investors, as well as non-market stakeholders, including community members, NGOs and industry associations. In total, we received 2,410 responses across all regions where Cemex operates. These responses serve as the "stakeholder concern" axis of our updated matrix.

The materiality assessment exercise helps us to prioritize our efforts and minimize any gaps in our business strategy. Additionally, it provides consistent feedback on the evolution of economic, environmental, social and governance issues in the eyes of our stakeholders.

You can find further details of the last update on Cemex material priorities on page 12 of our 2020 Integrated Report.

Stewart: What are the biggest areas of sustainability risk and opportunity in the building materials industry? How has sustainability disclosure enabled Cemex to measure and manage these risks and opportunities?

Rodriguez: We believe the materiality assessment reflects the most relevant risks and opportunities linked to ESG, especially those ranked as highest and higher materiality. For our industry, the biggest areas of risk are health and safety and climate action.

Consistent and clear disclosure of the most material issues keeps the company and stakeholders focused and leads to more substantive discussion and a better assessment of progress against those goals as well as any gaps that may arise in execution, as well as impact of actions that we should take into consideration as we adjust future plans, etc.

Regarding climate action, in addition to our annual disclosure, we are now reporting our CO2 emissions on a quarterly basis. We believe including this detail provides higher visibility to our stakeholders while connecting the mid-term objectives with our short-term actions.

We aim to lead our industry in climate action disclosure. We report according to the most used investor disclosure standards: the Task Force on Climate-related Financial Disclosures, the SASB Standards, the United Nations Global Compact and CDP, among others.

In 2019, we were recognized by CDP as A list for our disclosure on climate action. Our goal is for continued improvement and alignment against best disclosures practices, recognizing that standards and expectations are evolving very fast. As such, we have committed to seek verification of our new 2030 Climate Action target with the Science Based Targets initiative (SBTi) and believe this will support further upgrades in our rating in the future.

Stewart: What are investors asking about when it comes to sustainability? Has ESG data allowed management to make better decisions and improve investor relationships? Can you share a specific example?

Rodriguez: Interest in sustainability has grown exponentially over the past years. ESG topics are a regular subject of discussion with investors, and their focus revolves primarily around climate action. This discussion includes CO2 reduction goals, relevant levers to achieve objectives and key innovations and investment required to reach both mid-term targets and 2050 net-zero status.

Data and transparency around our goals, levers and progress lead to valuable discussions with our stakeholders. The cement industry is responsible for approximately 7 percent of carbon emissions in the world. But, unlike other heavy industries, there is no substitute for the resiliency and strength attributes of concrete, our end product, and it is an essential keystone of construction.

Engagement with stakeholders that recognize the role of cement in carbon emissions, the essential nature of the product to society and the regulatory changes that would promote the decarbonization of the industry is extremely helpful.

The world cannot simply stop building. So, as an industry, we must find solutions to the carbon that is emitted from the chemical process of heating limestone to make cement. Engagement with stakeholders that recognize the role of cement in carbon emissions, the essential nature of the product to society and the regulatory changes that would promote the decarbonization of the industry is extremely helpful. Ambitious goals with clearly marked mileposts are essential tools to allow stakeholders to monitor our progress.

Conversations regarding ESG always result in valuable feedback for our company. Stakeholder expectations around climate action are evolving rapidly. We do our best to incorporate the latest best practices in our climate action strategy, Future in Action, which we rolled out in February 2020.

The initial program included a target of 35 percent carbon reduction in cement production by 2030 as well as setting out to be net zero in carbon emissions in concrete by 2050. The 2030 target was validated by the Carbon Trust, an internationally recognized consulting company that provides a rigorous third-party assessment of carbon reduction plans and was aligned to a previous 2 degrees Celsius scenario of the SBTi.

With the onset of the pandemic in March 2020, stakeholders were pushing us to become even more aggressive in our efforts as well as more rigorous in our oversight, which led to our new 2030 carbon target of 475 kilograms of CO2/ton of cementitious materials, a reduction of 40 percent, and that we will bring forward our previous 2030 CO2 target by five years to 2025. Our new 2030 goal is the current highest level of commitment in the industry and is aligned to the SBTi well-below 2 degrees C scenario.

Stewart: How important are consistency and comparability in ESG data for management as well as for investors, and what role do standards serve?

Rodriguez: Consistency and comparability in ESG data is extremely important for management and investors. Cemex and our industry has recognized this responsibility for more than two decades. Since 1999 we worked together with other industry peers to form the Cement Sustainability Initiative, the first industry group in the world to work together on sustainability, within the World Business Council for Sustainable Development. Importantly, the cement industry was the first sector to monitor and report carbon emissions, as well to create a global database on CO2 emissions.

Cemex began measuring and monitoring CO2 emissions in 1997. Consistency is critical and so is measurement. In order to improve any indicator, first it needs to be reliable, and Cemex has been doing that. Regarding disclosure, we report on an extensive set of standards available: SASB, TCFD, GRI, CDP, UNGC, to name a few. Investors require ESG data to be measured consistently across companies in order to make an informed decision based on material information. We believe that with time, a consensus will emerge and there will be consolidation.

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