Sustainable Development

I have provided a free comment on a part of the Lafarge sustainability report for the 7th time, and Care has monitored the group's progress for the 7th consecutive year. Reviewing the road travelled so far as regards partnerships, one has to acknowledge the growing recognition of 2 core issues that are crucial to Care's expectations and Lafarge's societal challenges in emerging countries:

• relationships with surrounding communities,
• access to decent housing for low-income populations (bottom of the pyramid markets).

Lafarge's current comprehensive geographical presence obviously leads to further significant investments (as they have already done safety wise) in long-term socio-economic development towards local communities. The answer is therefore to allocate human and financial means reflecting these challenges in order for operational teams to be in a position to integrate such principles in their roadmap. Now that a first phase - linked to definition of principles and partnering intentions - is over and behind them, Lafarge has entered a methodical and reasoned action phase. The group will then have to explore further how to systematically embed impact measurement and demonstration based on evidence into business practice.

Over 30,000 workers sub-contracted for Lafarge are not covered by the sustainability report 2009. This includes workers on Lafarge sites and transporters, who are outsourced.

The stakeholder panel is concerned with the situation of outsourced employees and would appreciate Lafarge to provide more evidence on its reporting on the issue as well as to develop, as soon as possible, a best practice policy on outsourcing.

Outsourcing very often means cost savings. In India for example the cement industry has seen a tremendous growth and good profits. On the other side in past few years, the workforce pattern in cement companies including Lafarge witnessed a dramatic change. Contract workers are taking over more and more physical jobs such as cleaning, maintenance work, loading and unloading and similar. In general a contract worker in the Indian cement industry receives a lower wage than a permanent worker, some have no health and safety equipments and no job security further worsens the situation for these workers.

We welcome that Lafarge is trying to address these issues in the "supply chain and sub-contractors" section of the sustainability report.

As stated on page 27 of the sustainable development report, after the Lorient sand-dredging proposal was rejected on account of the French navy, I met with Lafarge staff to discuss "communication and engagement around sensitive applications."

My interest here is the question of how extractive industries can optimize their relationships with local communities. This matters because, unlike other industries that might be here today and gone tomorrow, modern quarrying is typically planned over a fifty-year time horizon. This raises questions such as seeking "prior informed consent" with local communities and seeking to create win-win scenarios.

These questions have become pivotal in the mining industry worldwide. I see it as an emerging one for quarrying too. I would therefore welcome Lafarge building on its strengths to become an industry leader in developing best practice for community relations.

Lafarge has made health and safety its top priority. Although results are encouraging, we still have to improve further, walking the line that separates goodness from excellence. This challenge, that the group has to take up, lies the commitment of all employees to the health and safety approach. In this regard, addressing hierarchic relationship issues will be key in the further strengthening of our health and safety policy.

Lafarge has succeeded in solving more complex issues than the one it faces here. I am convinced that it will dedicate all necessary means to overcome remaining obstacles.

I continue to value the meaningful discussions we have and the receptive and trusting manner in which Lafarge listens to and responds to the panel input.

In 2009 overall environment performance continued good improvement against existing targets. In particular targets for climate change impact, NOx and SOx emissions have been achieved well ahead of schedule.

Reduction of dust emissions in cement plants is on track to achieve the target by the 2012 commitment. Lafarge has shown that it can perform on emission reductions and should now proceed with its commitment to set further challenging targets for the period after 2010. The panel welcome this commitment and look forward to contributing to this process. Progress against existing commitments on persistent pollutants is on track and the renewed partnership agreement with WWF, which has a particular focus in this area is welcomed and endorsed by the panel.

The panel look forward to further updates as this program is implemented and, as last year, emphasize the importance of stakeholder engagement, particularly local communities at cement kiln sites. Lafarge has shown leadership in reducing emissions, particularly in the current economic climate, and is strongly encouraged to maintain this.

Overall, Lafarge is progressing very well during this 3rd phase of the partnership and work of the stakeholder panel. There are several achievements on some of the workstreams worth highlighting, such as persistent pollutants, where we now have a framework to address the highest emitters and a list of first kilns to be treated. Meanwhile, Lafarge continues to progress towards having a measurement of persistent pollutants from all kilns.

Also worth noting that Lafarge has successfully reached its objective of reducing CO2 emissions per ton of cement produced by 20.7% versus 1990 levels.

The new workstream on water management is also off to a very good start. The action plan is ambitious but we are confident that Lafarge has the capacity to deliver it successfully. We are also delighted to see the partnership taking shape at the local level in various regions across the globe.

For the future, we would like to see Lafarge continue to take more commitments to bring them to the forefront of the construction material sector and signal a new area of leadership for the company. Defining the future CO2 emissions reduction target and implementing strong plans in the emerging markets to reduce CO2, persistent pollutants emissions and water usage will be a way of reinforcing this leadership and lead the path to a more sustainable construction material industry.

As incredible as it may seem, most of the built environment's failure to satisfy expected function and falling short of achieving required levels of energy environmental performance, are due to the fact that the relevant actors (promoter, design team, solution suppliers, contractors and even the end user) don't have the required know-how.

In cities, concrete is an important ingredient of sustainable construction and is a product that requires being an integral part of the holistic construction solutions, adapted to every cultural, geophysical and climatic context. Lafarge can be instrumental in defining these solutions, in quantifying their energy and environmental performance and in communicating this important information, including the intrinsic benefits, to the relevant actors, giving special attention to the end user.

One of the continuous challenges Lafarge takes on is the development of new materials that help resolve the many needs of our urban contexts. I look forward to robust sustainable construction solutions:

• for well performing green roofs, which will be an important contribution for increasing biodiversity in our cities,
• for pervious urban surfaces, which will reduce run off and increase absorption of rainwater, among others.

Both professional and non-professional actors welcome these developments and the image of concrete will solidly improve.

In the last year the TEEB (The Economics of Ecosystems and Biodiversity) report warned that our annual loss of natural capital is greater in monetary value than the losses suffered due to the global financial crisis.

Businesses of all sectors need to pay closer attention to measuring and valuing their impacts and dependencies on biodiversity and ecosystem services. This includes resource use associated with mining and other phases of the building materials value chain.

I welcome the commitment of Lafarge to addressing biodiversity in a strategic manner, and undertaking work to review their broader use of ecosystem services.

It is also good to see their new collaborative work on emerging water foot printing methodologies with a focus on plants in areas that face water scarcity.

The next step may very well be an integrated strategy on ecosystems services, signalling a new look on how they approach environmental management, efficient resource use and industrial ecology. It would be important to accompany this with use of relevant indicators from the GRI guidelines, ones related to biodiversity (en11-en15), ecosystem provisioning and other services that are material from a short and longer term sustainability point of view.

*UNEP: United Nations Environment Program

With cement production generating up to 900 kg of carbon dioxide for every ton of output, the fact that Lafarge has invested successfully in squeezing this ratio down by a third is impressive. Further rolling out best-available technologies group-wide will bring yet more such efficiencies.

But faced with the collective imperative of meeting the 2°C cap and the opportunity to capitalize on galloping growth in Asia's fast-urbanising markets, will these incremental improvements be enough to transform cement production and enable Lafarge to deliver both growth and climate stability?

The answer lies in 2 areas where Lafarge must deliver massive technological breakthroughs:

• By developing advanced building materials that enable building occupants to achieve dramatic improvements in energy efficiency; this will rightly shift attention to the 85% of building emissions that occur post-the construction phase, curbing emissions from the built environment, the world's number 2 source of GHGs.
• By shifting to alternative materials - possibly non-cement-based - that are not constrained by the chemistry of limestone. If Lafarge doesn't invent a better, cleaner alternative to cement, someone else will, and its traditional product, and ultimate business survival, will risk going the way of the buggy whip.