Climate Innovation Case Study
Photo credit: Cement - Morocco, Tetouan cement plant wind farm
By improving internal CO2 data management and putting in place a user-friendly tool for monitoring, analysis and simulation of mitigation alternatives, Lafarge facilitated decision-making processes and strengthened the autonomy of operational managers in implementing CO2 reduction projects.
Lafarge's C-O-Tool: Supporting CO2 mitigation decision-making.
PARIS, FRANCE, SUMMER 2009. Vincent Mages and Gaëtan Cadéro, respectively vice president of climate change initiatives and manager of climate change initiatives at Lafarge, presented the latest version of the Lafarge C-OTool at the company's sustainable development committee meeting. Also present were the senior vice president of sustainable development and public affairs, the operational directors of each business line and the directors of research & development and the social policies and communication departments. Mages showed the committee an analysis comparing the CO2 emission levels of a cement production plant in China with global average emissions, followed by a comparison with two other cement plants in Mexico and South Africa. Using a few more mouse clicks, he simulated the effects of different levels of production growth and changes in fuel mix on carbon emissions from the company's Chinese plant.
IMD Research Associate Dr. Tania Braga prepared this case under the supervision of Dr. Aileen Ionescu-Somers and Professor Corey Billington, Deputy Director and Director respectively of the Forum for Corporate Sustainability Management at IMD. This case was commissioned by the WWF Climate Savers Program. It was developed with inputs from the staff of both Lafarge and WWF. The contribution of all parties is gratefully acknowledged.
Background
Lafarge, founded in 1833 as a limestone mining company, is a global leader in the building materials industry. With 15 billion in sales in 2009, the company employs over 78,000 staff. Lafarge operates along three business lines: cement; concrete and aggregates (small rock fragments such as sand or gravel); and gypsum (a construction material with insulation properties). In 2001 Lafarge made a public commitment to reduce its global CO2 emissions and became the first company in a highly intensive emissions and energy industrial sector to join WWF's Climate Savers program. Founded in 1998, Climate Savers enables companies to join forces in committing to more ambitious reductions in their greenhouse gas emissions. The main objective of the initiative is to transform the industry's more customary incremental and/or passive approach toward climate change action and promote strategies that would have a more significant impact. The cement industry is a highly energy intense industry, generating around 5% of the world's greenhouse gas emissions caused by human activities.1 Approximately 60% of the CO2 emitted during cement making occurs during the raw material carbonates calcination stage,2 when the material clinker3 is created. The remaining 40% of emissions occur as a result of fuel combustion to feed cement kilns. (Refer to Exhibit 1 for a graphic representation of how CO2 is emitted during the cement-making process). Cement production is responsible for 98% of the Lafarge Group's greenhouse gas emissions. Collaboration between WWF and Lafarge started with the development of key performance indicators for CO2 emissions and with initiatives to enhance biodiversity and the restoration of forest eco-systems. Activities soon evolved to include the establishment of an agreement defining practical commitments in the areas of climate change, biodiversity, persistent pollutants, water
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World Business Council for Sustainable Development. Cement Sustainability Initiative. wbcsdcement.org (accessed 16 November 2008). Decarbonation of limestone is one of the initial steps in traditional cement production. Clinker, the main ingredient in cement, is a hardened granule obtained by firing a mixture of limestone and clay to a high temperature (1500°C). Cement is obtained by grinding clinker and, in some cases, supplementing it with additives.
Copyright © 2009 by WWF Climate Savers and IMD - International Institute for Management Development.
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consumption and sustainable construction for all companies within Lafarge group. Lafarge's commitment to reduce emissions in relation to 1990 levels by 10% in absolute terms in industrialized countries and by 20% net per ton of cement produced worldwide, by 2010, has been achieved one year ahead through a variety of strategies developed in conjunction with Climate Savers. (Refer to Exhibit 2 for Lafarge emissions and reduction targets).
Mitigating CO2 Emissions
Lafarge and WWF jointly identified a list of areas where ambitious incremental improvements in cement production would substantially reduce CO2 emissions. · Increased energy efficiency of production processes and reduction in overall energy consumption; · Modernization of production plants and constant improvement of industrial processes;4 · Use of alternative fuels5 and renewable energy sources; · Use of industrial waste to manufacture cement.6 To ensure internal support for CO2 reduction goals, Lafarge cascaded the mitigation execution mandate down to operations management at the production plant level. Business units and production plants have total autonomy in determining how to achieve plant-specific CO2 reduction goals. They are supported by technical centers, which drive internal know-how and best practices. CO2 reduction goals were further incorporated into each manager's personal objectives. Achievements in this area are part of the evaluation and reward processes through strategies like the awarding of bonuses. In addition, Lafarge committed to invest in research focused on: · Accelerating carbon emission reduction through modification of the chemical composition of clinker so as to produce less CO2; · Optimization of the composition of concrete; · Improvement of recycling processes. (refer to Exhibit 3 for R&D expenditures7 on carbon mitigation and to Exhibit 4 for reduction in clinker ratio). The life cycle of buildings design, construction, operation and demolition accounts for approximately 40% of energy consumption and 30% of CO2 emissions.8 Therefore, another important aspect of Lafarge's CO2 mitigation strategy is to help to reduce the overall carbon footprint of buildings by working with a variety of stakeholders9 to promote sustainable construction products and systems along the construction chain and to produce a roadmap towards zero net energy buildings.10
Includes constructing a new plant with the best available technologies and upgrading old cement plants. 5 Examples of alternative fuel sources: rice husks in the Philippines; coffee pods in Uganda; shells from palm oil nuts in Malaysia; plastics, solvents and old tires in Germany and Chile; animal food waste in Austria. In 2009 alternative fuels accounted for 10.9% of fuel use across all business lines. 6 For example, certain cement additives, particularly slag, fly ash and pozzolan, can partially replace clinker, which reduces CO2 emissions per ton of cement. 7 In 2009, Lafarge invested 152 million in research and development, the equivalent of 1% of the Group's sales. 8 United Nations Environmental Program (UNEP). "Buildings and Climate Change: Industry call toaction."http://www.unepsbci. org /SBCIRessources/Repor tsStudies/ documents/UNEP_SBCI_Buildings_and_ C l i m a t e _ C h a n g e _ _ I n d u s t r y_ C a l l _ to _ Action_/UNEP_SBCI_Call_to_action_final. pdf (accessed 16 November 2009.) 9 Lafarge participates in a variety of collective initiatives around sustainable building such as the Energy Efficiency in Building project, the Building Energy Foundation, Sustainable Building and Construction Initiative, the "Fondation Bâtiment Energie" and the All Sustainable Construction Partnerships. The company also develops collaborative projects with renowned architects such as Jacques Ferrier (Hypergreen project) and Marc Mimram (Living infrastructure). 10 Zero net energy buildings produce as much energy as they consume
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The Challenge of Monitoring and Analyzing CO2 Data
With approximately 160 cement production sites in 78 countries, the capacity to effectively manage, consolidate and distribute data on CO2 emissions was paramount to the achievement of Lafarge's mitigation goals. Decision-makers at business units and at the corporate level required timely and relevant data at a variety of break-down levels.
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Producing good quality information that could be easily synthesized to support decision-making was not an easy task. In 2000 Lafarge began to use a basic tool to calculate, monitor and report CO2 emissions. However, the tool had limited functionalities and although it adequately met general reporting requirements for the Group, it was not aligned with the operational needs of individual business units. Mages and his team knew that implementing mitigation measures beyond the "low hanging fruit" and effectively translating mitigation goals into operational decisions would increase internal demand for sophisticated CO2 data management. Moreover, external stakeholder pressure in terms of carbon disclosure was mounting. Cadéro, the climate change initiatives manager, explained:
Our team had anticipated future climate change challenges for our company: More carbon regulation implies higher financial incentives to mitigate CO2 emissions and also higher expectations with regard to carbon transparency from investors and stakeholders.
Lafarge's main focus was to help operational people make CO2 mitigation decisions in a fast, informed and consistent manner. The climate change team carried out market research for an analytical CO2 tool that fit the needs of the company and concluded that the market was not mature enough to offer an efficient tailor-made solution. They opted for in-house development of a tool that suited their needs.
Lafarge's C-O-Tool
Lafarge's C-O-Tool is an Excel-based tool providing a user-friendly interface to help operational decision-making with regard to CO2 mitigation. The alpha release was developed in 2008 through an iterative process with the users. The beta release became operational on May 2009. Even though Lafarge's climate change team had the competencies to develop a tool in terms of both the programming and knowledge of CO2 challenges and related operational issues, they faced significant challenges. Developing the tool was time intensive and had to be done in addition to their regular responsibilities. Taking the time to develop the tool was a major challenge, particularly since it was during a very busy period, leading up to the Copenhagen climate change summit and with the new EU regulations for the carbon trade market just coming into play. From a technical standpoint, defining a mathematical model that linked CO2 emissions with particular operational levers required a detailed understanding of the specific contribution of each lever to emissions in a non-linear context. Four levers were included in the model: C/K ratio (cement to clinker ratio)11, cement additives12 and clinker moves; heat consumption and fuel mix. Ensuring tool user-friendliness was another challenging task, since what was needed was a "one size fits four" design that could be used by different levels of management: technical specialists, operational managers, top managers, and the climate change corporate team. The tool was accompanied by a video tutorial explaining how to run analyses and carry out benchmarking and simulation exercises and how different users could make the most of these capabilities.
The decarbonation phase of clinker production is the most emission-intensive phase of cement production. Thus, the higher the C/K, the lower the emission ratio per ton of cement. 12 Cementitious materials or cement additives, are minerals added during the last phase of the cement production process. The use of cement additives reduces CO2 emissions because a) they automatically reduce the proportion of clinker and b) they are produced from industrial waste which would otherwise have been discarded.
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