Swiss company LafargeHolcim, who manufacture building materials around the world, are on a mission to become carbon-neutral, with specific 2030 reduction targets for Scope 1 and 2, validated by SBTi. In addition, they are also committed to address and reduce emissions in the supply chain (Scope 3). This ambition not only requires a monumental effort within the company itself, but also on the part of its partners and suppliers. LafargeHolcim is monitoring and tracking its supply chain emissions across the globe, constantly harnessing the data it collects so as to make smart transport and procurement choices.
A key figure driving forward the company’s responsible sourcing and sustainable procurement programme is Eugenia Ceballos Hunziker, who presented at the recent Alcott Global / B2G Global Sustainable Supply Chain summit.
In order to find out how LafargeHolcim is harnessing its data to cut down its supply chain emissions, we recently got in touch with Eugenia herself, who drilled down the company’s approach to sustainability.
Read on to find out:
- the magnitude of the emissions cuts LafargeHolcim intends to make
- how LafargeHolcim’s forecasting model can predict future opportunities for emission cuts
- how the company mobilized employees and managed to get its suppliers involved in its net-zero pledge
- the wide-ranging possibilities LafargeHolcim’s Transport Analytics Center provides
Sustainable Procurement
Given that sustainable procurement is part and parcel of Eugenia’s work, we naturally started there.
As Eugenia explains, the key for LafargeHolcim is to have a good understanding of the impact the supplier or product creates to the environment and society. The company not only does its best to verify suppliers' green credentials, but also monitors their compliance with international standards:
We have procurement organizations in every country we operate and do purchasing primarily on a local basis. We are a very local business; >90% of our suppliers are from the domestic market, accordingly we buy, produce and sell in the domestic market. We are key contributors to the country’s economy with ~80% of our procurement spent domestically.
With more than 100,000 suppliers across roughly 70 countries, our challenge is to put an efficient due diligence process in place and training our procurement teams to be ambassadors as well as supplier developers and monitors. We check and verify compliance with international standards, embracing the United Nations Global Compact 10 Principles and the OECD Guidelines for multinational enterprises, whether they concern child labour, minimum wages or overall working conditions.
We are progressing on this, working hand on hand with our Group Chief Procurement Officer, Mario Gross.
CO2 emissions
In order to meet its ambitious net-zero pledge, LafargeHolcim has targeted its actions in line with Scopes 1, 2 and 3 as defined by the GHG Protocol.
Scope 1 concerns all direct emissions from the activities of the organization under their control. Scope 2 relates to the Indirect emissions from electricity purchased and used by the organization. Finally, Scope 3 concerns all other indirect emissions from activities of the organization, occurring from sources that they do not own or control.
Eugenia has been doing considerable work in Scope 3, from which three categories represent 75% of the emissions: purchased fuels and energy (24%), purchased clinker & cement (25%) and Transportation (27%). When talking about transportation, the company’s impressive Transport Analytics Center (TAC), which is home to an almost immeasurable amount of data, has been of great assistance.
Last year, I got the mandate to work on Scope 3, and to do so, my first action was to engage our Group Logistics and Group Procurement departments.
Our actions to reduce CO2 from purchased fuels and energy are in line with our company actions toward phasing out fossil fuels and using more renewable energy and energy from waste (see the website of our Geocycle company). These actions are linked to our Net Zero Pledge on Scope 1 and 2 emissions.
When talking about reducing emissions from purchased clinker and cement, our actions are focused on gaining transparency around the sources and specific emissions of those products, to inform sourcing decisions.
But when it comes to CO2 reduction from transportation, a new set of actions was required as it impacts the way we deliver our products. An advantage that we have had is the Transport Analytics Center – a platform that connects our operating systems to a digital dashboard, and this was the starting point.
Ahmed Zeidan, Head of the Transport Analytics Center, was instrumental in this journey:
Since 2017 we have run our Transport Analytics Center to optimize the operation of our Logistics department. The Scope 3 journey helped us accelerate the integration of missing countries and business segments. So now we are able to capture the data from transportation for every single trip that moves our materials. Our vehicles drive ~2 billion kilometres a year, which is massive.” – Ahmed Zeidan
So today, thanks to the TAC dashboard, we know the CO2 emissions for every shipment. The transparency and the accuracy of the system is not just an exercise for disclosing our emissions – we want to manage them and drive CO2 reduction.
The first step on this journey was to gain transparency and accuracy. So, we calculated our Scope 3 very solidly; we also got EY to do an audit on all the calculations of the emissions that we were capturing. Then we knew our 2020 baseline, which is part of the commitments in our pledge.
The second step is what we are doing now, which is for every country, for every business segment, to know the levers we can use for the reduction of CO2 from transportation. Part of that concerns the mode of transport, whether it be by rail or inland waterway. The other part regards the optimization of truck fleets and last but not least, the optimization of the dispatch operation (increasing payloads, optimizing routes to reduce KMs, reducing empty return trips). At the end of this phase, we will know with more accuracy how much CO2 we can reduce per country and how much would it cost for the company to action the reduction levers.
Getting everyone involved
Scope 3 isn’t just about setting tools and processes to manage emissions though. Eugenia was proud to tell us that LafargeHolcim’s Scope 3 launch saw multiple parties openly engaged in the process too.
When we started talking about Scope 3, the reaction of our colleagues around the world was massive. Everybody in the organization felt they were part of this net-zero pledge – from the global category managers to plant buyers and the dispatch centers. So people are connecting the daily work with the big picture and feel they really contribute with the net-zero pledge of the company.
For example, in the US, we utilize Marine as a primary shipping mode, shipping over 53% of product annually on the Great Lakes, along inland waterways and along the coast. In Switzerland, we’re using the first full-electric vehicles for transporting ready mix. Naturally, this type of technology is expensive to scale up but we just started and, as Magali Anderson, our Chief Sustainability and Innovation Officer, says: “This is just the beginning”.
Organisations and partnerships
LafargeHolcim is also working with others in the common fight to reduce CO2 emissions. Eugenia is very much part of this as well, actively participating at several platforms and business initiatives:
We are involved in a number of initiatives. For example, I’m participating in a workshop with MIT today (our company is a founding member of the MIT Climate and Sustainability Consortium) and the topic is around decarbonizing transportation. We are also sharing learning from our Scope 3 journey with the sector through the Global Concrete and Cement Association. In addition, we joined the Transport Decarbonization Alliance (TDA) and we are about to join the Sea Cargo Charter.
With TDA we signed the “call for action” to accelerate “Zero Emission Heavy Duty Vehicles” technology , because Fleet optimization is one of the reduction levers we pursue, but ~95% of our transport is from 3rd parties, so we need that technology available in the market that’s accessible to our suppliers. We want to promote net-zero emission vehicles and help our transportation suppliers get access to them.
With the Sea Cargo Charter, we are committed to precisely measuring the CO2 from sea transportation of our materials and to reduce our emissions.
Road transport measurements
As we’ve already learned from what Eugenia said about the Transport Analytics Center, accurate data is key when it comes to finding opportunities for CO2 emissions. Although there are limitations to how much LafargeHolcim can track the CO2 emissions of its 3rd party fleet, Eugenia explains that they are using one of the GHG methods which bring a good level of accuracy in a more pragmatic way:
Given that we have more than 60,000 3rd party vehicles transporting our materials, it is not practical to precisely monitor the exact amount of fuel used by each and every one. Another precise method in the GHG protocol is the distance-based method.
As part of our Road Safety Program, our transportation suppliers implemented an “In-vehicle management system” so today we monitor more than 70% of the KMs driven with our materials annually. This information is centralized in the Transport Analytics Center, which gives us a good source of data to ensure accuracy. This is one key component of the formula to calculate the emissions from every single trip.
Another important component is the emission factor. To estimate it, you need to know what type of vehicle is transporting your material and what fuel it uses. Our LCA (“Life Cycle Assessment”) Services Manager from our Group R&D Center, Nikolaos Vlasopoulos, modelled the emission factors (“well to wheel”) for every type of vehicle in every region for every country. The database of emission factors has also been audited by EY.
Additionally, we are mobilizing all countries and IT Service Centers to maintain an accurate vehicle database in our operational systems ( ERP) and dispatch tools, so calculations will get even more accurate over time.
Transport Analytics Center
The Transport Analytics Center that Eugenia referred to earlier very much typifies the lengths LafargeHolcim is going to in its bid to cut emissions. An enormous amount of data is hosted on the system, giving the company all the information it needs to make more sustainable choices. The data wasn’t amassed in a completely automated manner either – a lot of hard work was put it in to complete the data pools for each country, as well as having the figures verified by a local expert:
We are calculating per region and business segment, for different transportation modes, the absolute emissions and the intensity per ton transported. When we move materials from the factory to the terminal, we also calculate these kilometers and the CO2 or what we saved when transporting from one factory to the other. So all the entire production transfers are covered in our model. The system can also tell us that if we move a transport from road to rail, how much emissions we will save.
Another useful tool on the Transport Analytics Center dashboard is the heatmap, which shows, for example, which roads are more CO2 intensive in different areas of a particular country. That then allows the team at LafargeHolcim to analyze optimization options, for example, look for alternative modes of transport on that particular route.
A list of the company’s “top 10 CO2 intensity” is also updated on the dashboard (for example, top 10 suppliers, top 10 shipping stations, top 10 CO2 destinations…”) , which gives LafargeHolcim the opportunity to quickly analyze (drilling down to transaction level) and see if they can implement actions to reduce CO2, for example engaging suppliers and customers to implement green solutions themselves, thus lowering the carbon footprint for both parties.
Moreover, LafargeHolcim is deploying dispatch tools to calculate the optimum road routes on the basis of least cost and carbon emissions.
Forecasting
Besides the benefits from its complex Transport Analytics Center, LafargeHolcim is also taking the first steps toward a forecast model to identify future opportunities, as Eugenia explains:
With the instrumental support of Anja Rinn, our Senior Logistics Performance Manager, we developed a forecasting model to help countries build their CO2 reduction roadmap. The model will tell us the potential reduction opportunities, per country and business segment, and the potential cost to achieve it.
Every ton counts. One ton at a time is the spirit. And everybody can contribute. Even regions lagging in net zero technologies. For example the Middle East and Africa region is acting on other levers to reduce emissions: renewing the fleet with newer vehicles that consume less diesel, or improving dispatch operation to reduce kilometres or increasing payload.
So this is the movement we started: one ton at a time.
Eugenia stresses that it’s really the people rather than the data that’s driving the biggest changes, and she was keen to say, LafargeHolcim has a great story to tell:
Analytics tools enable the commitment of all these logistics professionals. However, as Alexander Scheld, our Group Head of Logistics, says “TAC’s digital analytics delivers state-of-the-art logistics, reaching record performances from a safety and effectiveness perspective. TAC is not only good for business, it is also good for people and the planet. It consistently delivers improved driver safety and lower emissions in line with our net zero ambition”.
It is not only providing tools. It is also engaging professionals, training them and most importantly about measuring performance. So, even if you have the operational tool, you still need to have the people to drive the change towards a CO2 reduced supply chain and the commitment from the top. And this is the story we wanted to share.
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