Strategy

Why conducting a materiality analysis in CEMEX?

"A strong materiality analysis process helps a company choose the issues and indicators to report on. It can be the key to ensuring the right balance between detail and breadth in reporting." – GRI

• To support sustainability strategic planning and:
  • Identify issues of highest importance to CEMEX and its stakeholders
  • Define risks and opportunities; help set goals and targets
  • Flag areas requiring immediate attention ("urgent" issues)
• To guide sustainability reporting:

Methodology: Characteristics of the performed analysis

To select the assessment topics, we considered internal and external stakeholder views, carried out an industry-level evaluation, and researched economic, environmental, and social major trends and challenges.

The identified topics were later prioritized and ranked based on their potential to impact our organization and our stakeholders according to their level of concern reflected on the assessment and the execution of CEMEX management risks and opportunities analysis.

To map the significance these material topics have for our stakeholders, we launched a worldwide materiality survey with the participation of employees, customers, suppliers, analysts, investors, shareholders as well as non-market stakeholders, including community members, NGOs, and industry associations. Together, the 2410 responses received across all regions where CEMEX operates make up the "stakeholder concern" axis of our updated matrix.

CEMEX strategic business functions worked together to carry out a deep-dive exercise that graphed the "impact on CEMEX" axis of the matrix. These functions include Sustainability, Health and Safety, Human Resources, Social Impact, Corporate Communications and Public Affairs, Enterprise Risk Management, Planning, Procurement, Supply Chain, Logistics, Legal Compliance, Investor Relations, Customer Experience, Commercial and Urbanization Solutions.

Results

NOTE: Objectives and goals described above are based on CEMEX's current business model and are subject to change as a result of different factors.

To know more about our KPI’s progress, please consult our 2020 Integrated Report.

THE RATIONALE BEHIND OUR NEW AMBITIONS

We conceive of sustainability as the only safe way to do business. This implies managing risks and opportunities and coordinating environmental, social, and financial demands relying on a solid governance framework. Sustainability is embedded in CEMEX’s strategy, and thus, it is linked to all functions across our business lines.

Coordinated by the Sustainability team, the process to define CEMEX 2030 Sustainability Ambitions involved collaboration of more than 10 corporate functions. Representatives from all countries and regions were also active participants in this effort, given our bottom-up approach to define our commitments with all of our business units accountable for contributing to the global goals’ achievement.

Some of the key inputs that fed our internal discussions and analysis to define these new objectives include:

• 2030 Agenda based on the UN Sustainable Development Goals
• The Paris Agreement on Climate Change
• Milestones in carbon regulated markets
• WBCSD-IEA Low-Carbon Transition in the Cement Industry Roadmap
• Global trends, risks, challenges, and opportunities
• Materiality Matrix
• CEMEX Top Management perspectives
• Key stakeholders’ concerns and interests (e.g., governments, NGOs, universities, ESG analysts, industry associations, etc.)

HEALTH & SAFETY

We are confident that ZERO fatalities are possible, and 2018 evidenced our strong effort to achieve this goal. For the first time, we achieved zero employee fatalities. This new milestone clearly shows that we can make a difference. Health and Safety remains our top priority, and to that end, we are endorsing our determination to avoid any human losses.

Additionally, we have reached a continued low level of Employee Lost-Time Injuries (LTIs) in the sector, which confirms that, although we still have much to do, our strategy is producing positive results. For this reason, we have reinforced our former public goal and aspire to reach zero Employee LTIs by 2030.

SUSTAINABLE CONSTRUCTION

CEMEX acknowledges that the build ing materials industry plays a key role in addressing some of the most rele vant societal challenges—from build ing the cities of the future to enabling the construction of bridges, airports, schools, hospitals, houses, and roads to minimizing the environmental foot print of our products during their pro duction, application, use, and end-life.

Concrete and cement are natural choices for sustainable construction. On top of this, there is an important share of our products’ portfolio that offers performance characteristics beyond the traditional options. This special set of our ready-mix concrete solutions have demonstrated unique sustainability attributes that include saving water and other resources, energy efficiency, resilience, and health and safety benefits. In addition, we are working hard to not only develop novel types of cements such as low-carbon solutions, but also produce them in a more sustainable manner, increasing alternative fuels and raw materials and reducing clinker content. For 2030, we are committed to ensuring that at least half our ready-mix concrete and cement sales is linked to solutions with superior sustainability performance.

CIRCULAR ECONOMY

Progress toward a more sustainable future requires embedding waste management into the framework of a circular economy. Making this transition is essential to reach a truly sus- tainable, low-carbon, resource-efficient, and competitive economy. Here again, the building materials sector has plenty to offer.

CEMEX has certainly become one of the industry leaders in alternative fuels consumption. However, to achieve our full potential in actively participating in the solution to many cities’ waste management problem, we go beyond co-processing residues as a cleaner energy option. In addition to converting non-recyclable waste as alternative fuels and alternative raw materials in our cement process, we also seize residues and by-products in our ready-mix concrete production either as a substitute for cement or as a substitute for natural aggregates. Moreover, concrete itself can be recycled after its main use, becoming an alternative aggregate after its demolition.

CEMEX has become a “waste eater” and this year we consumed 32 times more residues from other sectors than the amount of waste we generated and sent for disposal. This is precisely the rationale behind our 2030 vision as an active contributor to a global circular economy.

CLIMATE CHANGE

According to the International Energy Agency, cement is responsible for about 7% of global CO₂ emissions. For several decades, CEMEX has embraced CO₂ emissions mitigation as a priority within our sustainability strategy, and this battle has become one our biggest responsibilities and challenges given the rising global population and urbanization phenomenon.

This year, we are taking further steps  by customizing a CO₂ reduction roadmap by cement installation considering five main levers:

1. Energy Sourcing and Efficiency
2. Fuel Mix and Raw Meal Composition
3. Clinker Substitutes
4. Novel Cements
5. Carbon Capture, Storage and Utilization Technologies

Beyond this detailed plan, our stronger ambition for continued progress in Climate Change mitigation is reflected in our rigorous 2030 carbon-reduction target, calculated using Science-Based Targets (SBTs) methodology. SBTs are aligned with the reduction pathways for limiting a long-term global temperature increase within 2°C. SBTs are grounded in an objective, scientific evaluation of the actual contribution needed from a company, and CEMEX is committed to this global goal, consistent with the Paris Agreement.

Moreover, we are also determined to reducing our indirect CO₂ emissions through our new aggressive target of covering 40% of our cement operations’ power energy needs with renewable sources.

AIR EMISSIONS

Even though this is not mandatory environmental regulation in all of the geographies where we operate, CEMEX decided to make a public commitment to install Continuous Emissions Monitoring Systems in 100% of our kilns. We are about to complete this task as part of our 2020 targets. For 2030, we are raising the bar again. Our ambition is to reach international environmental excellence levels for major air emissions in all of our cement installations beyond local requirements.

BIODIVERSITY AND WATER

We seek to generate a net positive impact from our mining operations. To this end, CEMEX has a long his tory of rehabilitating extracted zones and implementing Biodiversity Action Plans (BAPs) in our quarries. For this latter purpose, we have worked in partnership with BirdLife International for more than a decade. As part of our 2030 ambitions, we are committed to achieving 100% rehabilitation plans for all of our active quarries (more than 280 sites), continuing with the imple mentation of BAPs in those quarries classified as sites with high-biodiver sity value, and extending our objective to obtain third-party certification for our conservation efforts in those quar ries identified as high-risk sites based on a recent updated detailed environ mental and social assessment.

In addition, although the building materials sector is responsible for less than 1% of industrial water consump tion, CEMEX is aware of the invaluable importance of this precious natural resource, especially in geographies where its availability is threatened. For this reason, we are committed to pursue 100% implementation of Water Man agement Plans in all of our operations located in water-scarce areas. During 2019, we expect to update our former Water Stress Assessment to prioritize our plans in those sites where major risk is identified.

COMMUNITIES

Our Social Impact strategy directly contributes to our vision of building a better future and aims to understand and address our stakeholders’ expectations and needs. After surpassing our 2020 goal of positively impacting at least 15 million individuals, we are now doubling the ambition and aspire to benefit 30 million individuals by 2030.

Additionally, as part of our 2030 sustainability ambitions, we are also working towards establishing Community Engagement Plans in all priority sites across our three business lines and implementing stakeholder dialogues through formal Corporate Sustainability and Social Impact multi-stakeholder committees.

EMPLOYEE EXPERIENCE

One of the pillars of our business strat egy is to Value Our People as Our Main Competitive Advantage. Accordingly, we hire the best, and we take care of them. When we support our employ ees, our entire company flourishes. For some, that means offering opportuni ties for growth and leadership devel opment. For others, it’s fostering an open environment where dialogue is encouraged. Whatever their needs, we want our employees to feel supported and engaged.

Although we will keep monitoring and reporting our Employee Engagement Index while doing our best to achieve our challenging 2020 objective, we propose to focus our new target on the advocacy element of the engagement equation. Our 2030 objective is to reach and maintain a specific KPI that references the percentage of employ ees that would recommend CEMEX as a good place to work. We believe this is a more robust and straightforward statistic that ultimately reflects the positive net balance resulting from a holistic employee experience.

Moreover, a key priority of our talent attraction and retention strategy is to strengthen diversity and inclusion. In 2018, we launched CEMEX Global Diversity and Inclusion Policy. With this in mind, we plan to complement and support its implementation with a 2030 deployment plan among all of our busi ness units through a set of key efforts, including the following:

• 50/50 Gender Balance in all entry level programs
• Perform bi-annual review of com pensation parity in Global Audience
• Deploy unconscious bias training for “on-line” managers at all levels

CUSTOMER CENTRICITY

Our customer focus is one of our company’s core values. We put our customers at the center of every action we take and every decision we make. Accordingly, we have organized our company and redesigned our pro cesses to ensure that we create the best possible experience for them.

For several years, CEMEX has worked to implement and standardize across all of our operations and different business lines an integral and fully reliable methodology to measure and monitor customer satisfaction. As a result, Net Promoter Score (NPS) has become the most relevant indicator for this purpose. As of this year, CEMEX is not only publicly reporting our annual NPS figure, but also engaging with a very ambitious NPS objective for 2030. Our plan is consistent with our strong commitment to become the most cus tomer-centric company in the building materials industry.

SUPPLIERS

Since 2010, we have been rolling out CEMEX Supplier Sustainability Program, an effort that extends our commitment to sustainable practices and policies to our business partners through an evaluation executed by a specialized independent firm, includ ing criteria such as Health & Safety, Community Relations, Human Rights, Employee Development and Diver sity, and Environmental Compliance, among others.

Although we have made progress toward our 2020 goal, considering feed back from our stakeholders we have decided to strategically redirect our efforts and adjust the focus to critical suppliers as the priority target group for evaluation. As a result, our new 2030 objective will transpose our former goal beyond volume to a way in which our resources are more dedicated to man aging suppliers’ impact and risk.

ETHICS AND COMPLIANCE

Our new ambition refers to the imple mentation of a global program to continuously strengthen Ethics and Compliance throughout our organiza tion. This effort includes:

1. Active management of our Code of Ethics, which includes updating, disseminating, and promoting adherence, while managing our system of complaints, investigations, and conclusions
2. Reinforced compliance efforts with strategic action plans covering training and legal audits related to internal policies such as antitrust, anticorruption, insider trading, and conflict of interest.

A multitude of risks can affect CEMEX, its assets and employees, as well as our neighbors. Accordingly, we use risk management systems and tools to gather information from a range of sources, analyze the data, identify and assess potential risks, and then respond to them. These processes include an evaluation of environmental, health, and safety risks.

We have several processes that test the robustness of our systems, evaluate compliance across all business units, and encourage continuous improvements. These processes include compliance training for employees, periodic reviews of our policies and procedures, and regular internal audits.

Our operations are subject to a broad range of environmental and health and safety laws and regulations in each of the jurisdictions in which we operate. These laws and regulations impose increasingly stringent environmental protection standards regarding, among other things, air emissions, wastewater discharges, the use and handling of hazardous waste or materials, waste disposal practices, the remediation of environmental damage or contamination and health and safety of employees and contractors. These standards expose us to the risk of substantial environmental, health and safety costs and liabilities, including liabilities associated with divested assets and past activities, even conducted by prior owners or operators and, in some jurisdictions, without regard to fault or the lawfulness of the original activity.

Efforts to address climate change through domestic federal, state and regional laws and regulations, as well as through international agreements and the laws and regulations of other countries, to reduce the emissions of greenhouse gases (GHGs) can create risks and uncertainties for our business. This is because the cement manufacturing process requires the combustion of large amounts of fuel and creates carbon dioxide (CO2) as a byproduct of the calcination process. Such risks could include costs to purchase allowances or credits to meet GHG emission caps, costs required to provide equipment to reduce emissions to comply with GHG limits or required technological standards, or decreased profits or losses arising from decreased demand for goods or higher production costs resulting directly or indirectly from the imposition of legislative or regulatory controls.

In addition to the risks identified above arising from actual or potential statutory and regulatory controls, severe weather, rising seas, higher temperatures and other effects that may be attributable to climate change may impact any manufacturing sector in terms of direct costs (e.g., property damage and disruption to operations) and indirect costs (e.g., disruption to customers and suppliers, higher insurance premiums). We do not believe that any such impacts on our operations would significantly differ from those to other sectors and the public at large.

Our operations consume significant amounts of energy and fuel, the cost of which has significantly increased worldwide in recent years. To mitigate high energy and fuel costs and volatility, we have implemented the use of alternative fuels such as tires, biomass, and household waste, which has resulted in less vulnerability to price spikes. We have also implemented technical improvements in several facilities and entered into long-term supply contracts of petcoke and electricity to mitigate price volatility. Despite these measures, our operations would be materially adversely affected in the future if energy and fuel costs increase.

Due to the nature of our business, we have a high degree of integration into the mining and sourcing of the key raw materials required in our production processes. Failure to maintain the land and mining rights in our sites could have a materially adverse effect on the continuity of our operations and potentially increase the cost of some of those raw materials.

Antitrust laws seek to prevent monopolies, collusions, and other anti-competitive behaviors, based on the principle that competition benefits consumers and promotes economic growth. Governments across the world are increasingly active in enforcing antitrust and competition laws, and are cooperating with each other to prevent anti-competitive behavior. Furthermore, local laws are converging on basic antitrust principles and concepts. CEMEX as a global company operating in many different countries is exposed to different civil and/or criminal penalties that can have a significant impact on our profitability.

Under applicable laws in the United States, Europe, and other places where CEMEX does business, it is a crime for CEMEX directly, or through an intermediary, to offer, pay, or promise to pay, a bribe or anything of value to a government official (including employees of state-owned enterprises and officers of public international organizations) for the purpose of obtaining or retaining business. The term “anything of value” includes both monetary and nonmonetary gifts and bribes, and can include favors and other types of consideration. The civil and/or criminal penalties for violating the different local and international anti-bribery laws can be severe.

The main ERM duties are:

• Identify and clarify threats
• Provide strategic intelligence
• Ensure top management discussions
• Coordinate mitigation strategies
• Fostering a risk aware culture

The ERM function at CEMEX is structured into global, regional and local levels, and is composed of a network of more than 50 risk management professionals across the company.

An enterprise risk agenda is developed semi-annually considering a combination of a bottom-up and a top down approach. Internal and external risks are identified and classified according to a specific taxonomy that considers all types of risks that could impact the company, including but not limited to:

• Strategic risks
• Economic, political and social risks
• Operational risks
• Compliance risks
• Financial and reporting risks

All business units are individually responsible for identifying all potential risks and creating their own risk agenda. The ERM process employs different tools and methodologies to gather information from a range of sources, analyzes data, identifies, assesses and develop strategies to mitigate potential risks.

As part of the risk management process, risk owners who have the authority to mitigate the risk and ERM representatives, continuously monitor key risk indicators that could impact the development of main risks. In case a change in the risk level is identified, the Risk Management Committee is informed to take the necessary actions.