Green growth avenues in the cement ecosystem

Collaboration across the value chain is pivotal to decarbonizing the built environment—and it needs to start today.

The construction ecosystem accounts for about 25 percent of global greenhouse-gas emissions (GHG). Concrete—specifically, the cement from which it is made—is the largest contributor, accounting for 4.5 percent of global GHG emissions and 7.0 percent of CO₂ emissions in 2019. 1 Decarbonizing the cement and concrete industry, a cornerstone of the built environment, will play a pivotal role in addressing the climate challenge.

That said, current technologies will allow the cement and concrete industry to reach just 30 percent of the carbon-emissions reduction required to contribute to the global goal of keeping temperatures to an increase of 1.5 degrees Celsius above preindustrial-era levels. That means innovative technologies such as carbon capture, utilization, and storage (CCUS) must be developed and implemented. Many of these technologies are costly and not yet market ready. At the same time, investment in decarbonization competes with other corporate priorities. Decarbonizing the built environment could also eventually lead to lower overall levels of concrete consumption. Therefore, from the perspective of a cement and concrete producer, what began as a sustainability issue could soon become a growth challenge.

Cement and concrete producers can’t go it alone. Improving the odds of success will require a collaborative approach across the cement ecosystem. This article examines the various participants in the cement ecosystem as well as their respective sustainability challenges and needs to meet 2030 targets aligned with a 1.5-degree goal. In doing so, we highlight the building blocks of a winning sustainability-and-growth strategy for cement and concrete producers. We show how producers can engage with various stakeholders to meet sustainability targets, introduce innovative technologies, and pursue new green avenues for top- and bottom-line growth.

Cement producers can engage with various stakeholders to meet sustainability targets, introduce innovative technologies, and pursue new green avenues for top- and bottom-line growth.

The ecosystem from a cement perspective

The cement ecosystem comprises a complex network of stakeholders, from cement and concrete producers to construction companies and developers. Many of these stakeholders are companies working at a local level, each with its own sustainability goals and emissions targets (exhibit).

With decarbonization becoming a major focus, the stakeholder landscape for the cement ecosystem is becoming increasingly complex.
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Regulators, society, and investors set the boundaries for the ecosystem from a legal and financial perspective. Developers and owners make key decisions on projects, design, and materials. These players create demand for buildings and infrastructure as well as for the materials required to construct them, with execution driven by construction companies. Cement and concrete producers and other building-materials companies supply the raw material, with material recyclers and waste users playing an increasingly important role. Technology providers are the latest entrants. They offer innovative solutions for decarbonizing material, such as CCUS and electrified kilns, and technologies to optimize the construction process, such as 3-D printing.

These companies are intertwined and have significant economic impacts on one another. While they all have a stake in the decarbonization of the ecosystem, they face both shared and individual challenges. As sustainability becomes increasingly urgent, regulators are working to establish effective policy instruments that enable competitive production of climate-neutral cements and concretes. Meanwhile, investors are feeling pressure to invest in green projects and are searching for partnerships to help them do so. Developers and owners face enormous demand for sustainable housing but are having trouble sourcing enough green products or solutions from building-material suppliers. Many large construction companies have set ambitious carbon-reduction targets that improved designs and type and quantity of materials could facilitate. Finally, producers of alternative building materials are grappling with regulations and technical constraints, and technology providers still require large amounts of funding.

Decarbonization in the cement ecosystem: How it can work

Despite the challenges each ecosystem player faces, participants can take immediate actions across the value chain to help the industry reach its decarbonization targets. Players should consider three themes in their decarbonization strategies: redesign, reduce, and repurpose.

  • Redesign is propelled by developers and owners and the specifications they set, as well as by different regional policies. It entails optimizing the design of buildings and infrastructure to reduce the material needed in construction, enhancing the material mix, and using new construction methodologies to cut waste and material needs.
  • Reduce includes four ways to minimize emissions of materials beyond cement: using additives, clinker substitutes, and alternative binders; changing concrete recipes; optimizing production processes, including carbon-cured concrete; and recycling building materials.
  • Repurpose aims to find ways to make use of the carbon associated with construction, either by capturing and storing it or using it to produce synthetic fuels.
Sidebar

Although they are led by different stakeholders, all three themes ultimately have an impact on the entire ecosystem. Players should consider acting on all three to tackle their challenges. Also, while decarbonization is a global challenge, there are regional differences in ambition and regulation, so stakeholders should adjust their approaches to local circumstances (see sidebar, “Regional perspectives”).

Redesign

The first theme refers to optimizing the design of buildings and infrastructure to use the least amount of cement. Actions include rethinking structures and shapes (multiunit apartment buildings versus single-family homes), optimizing the material mix and replacing cement with alternative materials, and employing new construction methods such as prefabricated modules and 3-D printing.

Redesign is likely the biggest decarbonization lever in the short term and has the greatest potential to help the cement industry reach net-zero emissions by 2050. However, it also requires the greatest investment and risk and the longest wait until payoff. Success could hinge on government support and investment to reassess safety factors in design codes, giving designers more incentives to take risks to innovate.

Examples of viable alternative materials

Alternative building materials: Cross-laminated timber (CLT) has received the most attention, followed by glue-laminated timber, laminated-veneer lumber, cassettes, and hybrid timber. CLT is a viable and cost-effective alternative for steel and concrete due to its quicker installation and lower emissions. Overall, wood construction materials emit about 20 to 60 percent less carbon than steel and concrete in a typical building. 2 Wood materials have other challenges, though, such as human health hazards due to their treatment with toxic biocides against fungi and termites.

Alternative insulation materials: To meet more stringent energy-efficiency requirements, buildings can use innovative insulation alternatives, such as vacuum-insulation panels, nano coatings, advanced insulation foam, and double-glazed tinted glass.

Revolutionary innovations: Radical technologies such as biocement, which is created from naturally grown materials, are being introduced to the market.

Reduce

The second theme is reducing emissions per unit of building material by using additives to make concrete stronger and to lower the cement concentration in concrete; substituting clinker with fly ash 3 or alternative binders; optimizing production processes using alternative fuels or curing concrete with carbon; and recycling building materials to avoid emitting the carbon required to produce new material. These levers come with constraints, however, including the availability of clinker substitutes and alternative fuels such as biomass and waste. Cement and building-material companies should research the cost and carbon-reduction potential of these approaches so they can understand the required investment and expected results.

Recycling concrete

Recycling technologies can also be used to reduce the carbon footprint of concrete. Recycled concrete paste can be carbonated with CO₂ from flue gas and used as supplementary cementitious material. However, the supply of recycled concrete does not always match demand. While demand might fade, it is unlikely to completely disappear. Developing countries will likely use cement longer than developed countries because many are still in the early phases of infrastructure buildup and will need options to recycle existing concrete more efficiently. Concrete producers could collaborate with companies that handle materials to be recycled (for example, construction companies demolishing existing structures), and include that material in their manufacturing process. Through this approach, concrete producers would become an end-to-end provider for concrete, from providing the raw material to recycling it.

Repurpose

The third theme involves repurposing carbon emitted from cement manufacturing using CCUS technologies. These approaches could reduce up to 48 percent of today’s emissions related to cement production. 4 That said, carbon capture can be costly. And there’s uncertainty about which players will finance, design, and provide carbon-capture solutions to cement plants. Once the carbon is captured, it must be transported to a location where it can either be put to productive use or sequestered in long-term storage.

Several productive uses of CO₂ exist today, including as a feedstock for chemical processes (such as hydrogen production), as a cement curing agent, and as a producer of fertilizers such as biochar. For any of these uses to materialize, local companies must establish a supply chain, often with players in other industries. If there is no opportunity for productive use, companies must permanently store the CO₂ in underground formations. These are abundant but not uniformly distributed around the world. Permanent storage requires appropriate monitoring and verification to ensure the CO₂ does not migrate or come back to the surface. Cement players should try to secure the currently scarce options for carbon offtake or storage. They should also reconsider their geographical footprints, possibly resulting in fewer but larger clinker plants adjacent to productive use of or storage options for captured carbon.

CCUS technologies

There are several CCUS technologies. Some aim to capture or purify CO₂ as part of the combustion process. These are specific to cement and therefore have limited economies of scale. Others capture CO₂ from exhaust after combustion and are not industry specific. Major cement players are investing in industrial-scale CCUS facilities that primarily use amine-solvent technology; these facilities are expected to become operational within the next five years. Purified CO₂ is transported to a storage location or used in a variety of industrial processes, such as concrete curing or enhanced oil recovery. Some processes, such as the growth of microalgae or the recarbonizing of minerals, can use flue gas, which has lower CO₂ purity.

A winning posture for cement and concrete producers

All ecosystem participants should reflect on the three themes discussed above. For cement and concrete producers, now is the time to work these themes into opportunities for sustainable value creation and growth. Four building blocks can help companies determine the best path forward:

For cement and concrete producers, now is the time to work these themes into opportunities for sustainable value creation and growth.

  • Maximize the deployment of available decarbonization approaches and anchor sustainability throughout the organization, including in its vision, priorities, and incentives. This is essential if producers are to achieve their 2030 decarbonization goals while maintaining the relative value proposition of concrete versus other building materials, such as durability and strength at an acceptable carbon footprint. Prioritizing decarbonization and sustainability will require a culture change that will likely be challenging but is the foundation of future decarbonization initiatives.
  • Rethink the ‘cement model.’ Carbon taxes and fast-rising demand for more sustainable building materials will likely lead to significant price increases for those green products. As a result, higher logistics costs could become justifiable, and over time we could see the emergence of increasingly regional cement markets, especially in Europe and other areas with strong regulation. In this scenario, a fundamentally different model for cement could arise, leading to a few larger plants producing the clinker for a broad network of smaller, local cement operations. This evolution, together with the possibility that investments required for decarbonization may be viable only at a certain scale, could spur industry consolidation and increase returns in a less fragmented market.
  • Move from selling concrete to selling sustainable solutions and turn lower concrete consumption volumes into a green growth opportunity. Less concrete required for constructing a building means a smaller carbon footprint and higher value to developers and owners. What at first glance seems counterintuitive—cannibalizing a company’s own demand—could in fact lead to significant top- and bottom-line growth; the higher value from sustainable concrete solutions could offset lower demand. To do this, cement and concrete producers should engage with engineering, construction, and construction-technology companies to develop and scale new designs and methods that allow for less material, ideally in conjunction with new circular business models.
  • Expand into attractive adjacencies or enhance the business model. Sustainability and decarbonization—and energy efficiency in particular—have contributed to the emergence of many adjacencies in the broader building-materials space, such as roofing, waterproofing and insulation, and construction chemicals. In addition, potentially attractive value pools are emerging around new logistics service models and further down the construction value chain in areas such as prefabricated construction. Cement and concrete players should comprehensively assess those value pools with their own ambitions and capabilities in mind. New technologies and materials will be indispensable. While in-house teams can spur some innovation to create novel business opportunities, partnerships with start-ups and other companies in the construction ecosystem, and eventually M&A, could accelerate their introduction. To attract promising partners, cement and concrete producers should highlight their unique knowledge and capabilities in the construction industry. This may require players in the cement ecosystem to rethink their operating models and people strategies, both of which could differ significantly from the traditional setting. As an example, these new models and strategies might include different business cases or finance models to rethink the cement model and move the sales structure and capabilities from selling concrete to selling solutions. Doing so will likely require critical and out-of-the-box thinking to drive innovation or build a new green business.

Reducing the carbon emissions of cement production is no small task. Coupled with changing our approach to the built environment, this task takes on a new level of complexity. Solving the challenges presented here requires taking a comprehensive view of the entire cement ecosystem and creating the right partnerships. Those that take swift and decisive action will not only be better positioned to meet changing supply and demand but will also ensure their contribution to a cleaner, greener future.

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