Episode 31: Achieving zero freshwater use featuring Cemex

The transcript highlights below have been edited for clarity. 

Mark Lee

Today's conversation fits nicely in the spirit of Sustainable Connections. We're going to be talking about fresh water, its scarcity, its industrial use. How the private sector and the public sector and communities need to share access to fresh water. From Cemex we have Vicente Saiso Alva, who is the Global Vice President of Sustainability at Cemex, based in Monterrey, Mexico. Vicente, can you tell us how did you end up with that sustainability title? Why are you doing this work? And what is Cemex?

Vicente Saiso Alva

Cemex is a global building materials company which manufacturers cement, ready mix and aggregates. We serve the construction industry. I have been in the company 28 years and in the last 10 years I have been in this role, developing and growing the sustainability function within Cemex.

At Cemex, many years ago we recognized that we have some environmental and social impacts when we conduct our activities. And conscious about those impacts, we entered into an effort to try to minimize them, to optimize them and to do things differently in our industry, to try to be a better citizen, a better neighbor, a better partner. As well, we align ourselves with the trends of the big impacts that climate change is having on our society. We truly believe it is one of the biggest challenges that humanity is facing, and we want to make sure that as an industry, we do as best as we can to minimize that big challenge, and that we can contribute to making it better and having less impact.

Mark Lee

Cemex is one of the 5 biggest companies in its industry in the world. In an industry that we think of as being quite heavy impact, it's received lots of plaudits over the last few years for its work on energy and climate and water from the World Benchmarking Alliance and others. We're going to dig into some of that story today.

Before we go further on that, I want to introduce our other panelist today, Greg Koch, who is an ERM technical director and is one of our organizations’ lead experts on water. He's also been a part of the Cemex story. Greg, welcome and please introduce yourself, tell us a little bit about what you do.

Greg Koch

I had a great career with the Coca-Cola Company and came back into consulting. Now I’m working with ERM and helping clients like Cemex innovate in this space but really understand water in a holistic fashion and align it with a business strategy to mitigate any potential business risk from water-related issues. And that's my focus here and I have been very proud to work with Cemex on this leading initiative.

Cemex’s zero freshwater use achievement

Mark Lee

Vicente, we could of course talk about a huge range of things with your company's global operations and different environmental impacts, but we really want to key in on freshwater. I know you just made a new zero freshwater use announcement. I think it was published in your annual report in the last couple of months. Can you tell us what the detail is there and maybe we can use that as the context for the rest of our conversation.

Vicente Saiso Alva

We consider this to be a very relevant initiative. We chose to partner with ERM to do it. We realized water is a key input for our production process. In the cement process it helps us to cool down our equipment, in the ready-mix business it’s how we produce concrete. It's a basic input together with cement, the sand and gravel and it goes to the job site. And then in aggregates, which is the sand and gravel that is used as a construction material, we use it to wash the material. So, it's a key element in our production process and it has always been there. What we didn't realize many years ago is the evolution of water availability and the different types of water that could be used in our production process. The dynamics are changing, climate change is contributing a lot to that, water is becoming scarcer in some regions of the world, and it impacted us directly.

I want to highlight one very direct experience that we had in our headquarters in Monterrey in the North of Mexico, the place where water became very scarce between 2020 and 2022. There was no rain for two or three years. All the superficial sources of water emptied completely, and the city was left without enough water to feed all the population. We started to see water cuts to people and it became a big crisis for the city. At that point in time, we realized that we had to do something different. And specifically with fresh water, so that we could continue to run our business, not compete in the use of water that is suitable for human consumption, and also for agricultural consumption. So we focused our efforts in fresh water, we realized that we could do things in our production process to try to look for alternative sources of water and leave freshwater to be used by the population. We made partnerships with the local utility that has some water treatment plants across the city,we also contacted food companies and beverage companies that we have in our city. Together with all these different sources, we were able in one year (starting in January 2022 to December 2022) to go to one hundred per cent zero freshwater use in our ready-mix operations, which is 15 ready-mix plants that serve the Monterrey metropolitan area of around 6 million people.

We realized how big of an impact we could make and how big of a difference we could make. Then from there on, we started to develop this into a global initiative. We partnered with ERM to help us validate the way that we are measuring the use of freshwater in our facilities, and how we can convey to the general public and to the authorities that we are not using freshwater. So ERM comes in as a validator that we are not using freshwater in our operation, and gives us a seal of approval of making sure that we are following a protocol in which we can measure the use of water and make sure that we are between 90 to 100 per cent non-freshwater use. And that's how we made this partnership.

Mark Lee

Greg, there's a protocol that goes with this announcement and you had something to do with setting that up. So, can you break it down a bit for us? What is the freshwater protocol and how has it accomplished what it's set out to do?

Greg Koch

Before I answer specifically about the Protocol, what it is and what it can help you accomplish. I want to go back to when Vicente and Cemex first contacted ERM and the first call that I was a part of, where they were describing that they had this ambition, they had manifested it in reality, and they wanted to formalize this. And yes, right away, we started thinking about, well, how do you define it? What do you mean by freshwater? How would you assure yourself? But before any of that, I stepped back and I said, whoa, well, this is huge.

When you look at industry around the world, there's two big factors that come in. It's how much water they are taking into their facility and who are they sharing that water source with, and is there enough for everyone to go around? And then there's the same on wastewater discharge. You bring in some wastewater, you might have some wastewater, and then that gets discharged. My whole life, my whole career, if you will, whether it's focused on the four walls of the plant or at the watershed level, it has always been about how to get business to reduce its impact on fresh water. Could you be more efficient? Could you reuse water? Are you taking from sustainable sources of water? That's my bread and butter. That's what I do. And here Cemex comes and says no, we're taking that out of the equation. We're not going to bring any freshwater into the plant. Well, what are you making? How can you do this? I can’t understate how important this initiative and the progress that Cemex has made is, because of that very obvious fact that I talked about, that the demand of industry on fresh water is a factor. And where you have water scarcity, whether that's Monterrey or Atlanta, that's something you try to reduce and Cemex just took that out of the equation with this ambition and how they manifested it.

Mark Lee

And that's the word that was in my head, we're hearing here a whole different level of ambition. We're not going to improve our freshwater use, we're going to eliminate it, but please keep going.

Greg Koch

Exactly. It was Carl Sagan that said extraordinary claims require extraordinary evidence. And, in that vein, a bold ambition of zero freshwater use, had better have some rigor behind a claim like that. And so yes, our collaboration with Cemex was, number one to define what we mean by freshwater use and then how do you define zero freshwater use? So, this involves being able to document all sources of water incoming to a plant and characterize that water as either treated wastewater, such as what Cemex uses in Monterrey or rainwater, seawater, whatever the case may be. But have a clear protocol for defining what water sources that you have, and then develop a protocol that is basically a checklist of what an auditor or anyone who wants to assure themselves of zero freshwater use, what would they have to be able to prove. And so developing that protocol so that there's no question when someone says they are zero freshwater use, we had to have a protocol developed that would be very sound, that could be replicated not just by Cemex but others in the construction industry and even beyond. So, once we developed that protocol, we then piloted that at several of Cemex’s plants to fine tune the protocol and are now using it to assure themselves of individual sites where they want to make that claim. The future benefit of this protocol is how it can be adopted by others in the construction industry. Perhaps starting with the concrete and cement industry but really expanding beyond. I think what Cemex has done is develop a protocol that is really agnostic to the type of work that you're doing with a given industry and can be scaled and replicated across a wide range of industries.

Responding to increasing water scarcity

Mark Lee

Vincente, so this began with the crisis in Monterrey, zero freshwater is now part of your overall sustainability strategy. I'm curious what milestones you've set for that going forward and how this becomes part of your global operations, not just what you do in the Monterrey region?

Vicente Saiso Alva

Back in 2013, we did a water footprint study of our operations. We wanted to know the expected availability of water in the future for our operations. We knew that it was going to become a hot topic and something relevant for the business continuity of our production processes. And at that point in time, we realized that this is a very key element of our production process. We got some results from that initial study, we updated them in 2020 and we found that in 2020 when we mapped all of our production sites (cement, ready mix and aggregates) throughout the world, it is more than 1500 sites in different locations. We used the water tool called Aqueduct from the World Resources Institute. It measures the level of stress of water availability in a certain region, is it low water stress or high water stress. In that exercise we were able to identify at that present time in 2020, we had 16 per cent of our production sites around the world in high water stress areas. Those sites were going to face, at some point in time, scarcity. The alarming thing is that this tool allows you to do projection of how water stress is going to look in the future. 16 per cent becomes 43 per cent of our sites by 2030 in the projection that these tools allow you to make.

Mark Lee

2030 feels increasingly like tomorrow. You must have felt the pressure at the moment you realized that.

Vicente Saiso Alva

Exactly, and geographically speaking, 16 per cent of that picture at that time was focused a lot on the north of Mexico and the southwest of the US, and a few other places in the Middle East in our operations. But by 2030, the 43 per cent starts to become an issue in Europe and in other places. So, it starts to become a generalized problem and by 2040 even a little bit more than that, it was going to become a global issue for us and we better get on to it. And that opened our eyes to really start to manage water in a different way. We were not very conscious about water because we are not a large consumer of water compared to other industries, but it's a key element. So, for business continuity we had to do it.

This eye-opening study gave relevance to many different initiatives that we started to launch to optimize our use of water. How many liters per ton of product that we use - obviously, that's the first one that we want to manage. But then we realized that freshwater was also going to become a relevant topic. And then the crisis demonstrated to us that zooming in freshwater is also very relevant. So, we are doing both, optimizing our use of water, how we consume water, how we discharge water as Greg was explaining, and then we are also zooming into freshwater. So, it's multifaceted, multi-element type of situation where we have different pieces of strategy to put together to have a really comprehensive approach towards water management.

Mark Lee

Greg, if I come to you and I don't mean to minimize at all how simple, because it won't be, to address the climate challenge or to preserve biodiversity. But for those things we've kind of got clear global frameworks. What does ‘good’ look like for water, and particularly in the context of this, what does ‘good’ look like for freshwater. How do we define that?

Greg Koch

What does ‘good’ look like with water? Well, we have that, the Sustainable Development Goal 6 outlines really to a country and you could extend that to a business, what does good look like. And that includes keeping your house in order, understanding where your water comes from. Being efficient with that water use in the four walls of the plant. And making sure the water you return to the environment is of high quality, so that you don't add to the pollution problem. Well, that's table stakes, that's within the four walls of the plant. This is a great quote by Peter Gleick, “Water's not rocket science. It's harder.” And what I mean by that is not the hyper locality of water, and you having to address it there. The fact is, water is tangible, it is immediate, it is something you interact with every day. But importantly, water is something you share, everywhere you are, where you're using water, you're sharing that water. First of all with nature, but also with other water users, other industry, the general public and certainly agriculture.

And so, what does ‘good’ look like? What ‘good’ looks like is all about relationships. It's understanding your water use in the context of the watershed that you're a part of and who else needs that water and the issues that they're facing. That's a great description of how Cemex went from being more efficient in the four walls of their operations in Monterrey to understanding a broader context of the community that they are a part of not having sufficient water and adopting the principle of zero freshwater use. I think at its heart is the concepts of contacts and principles in a shared resource such as water.

Collaborating with stakeholders to manage water

Mark Lee

Vicente, if it's about relationships, then there's a suggestion here that you've got to know what the local community needs. You've got to understand what other stakeholders’ water needs are. How does Cemex go about literally having those conversations and engaging those stakeholders, coming to agreement with them when it's probably not always easy. How do you avoid the fighting and instead be able to comfortably meet everybody's needs so that things can continue.

Vicente Saiso Alva

That's a very good question. I would like to explain and give two examples on that relationship, for example with an authority, that is taking care of home metropolitan area and how do you deal with the challenges that they have and the public utility that supplies the water for that. But also at the very local level, when we started to implement the ERM protocol, you have to go to the watershed and then you have to go to the local community on how they are using water. We faced a very interesting example in one of our production sites, where we were withdrawing water, the quality of that water was technically non-freshwater and we started to calculate that we were not really competing with anybody for that water. But what we realized when we talked to the community about this source of water is that they were actually using that source of water for human consumption. But at that specific community, that water, that technically was non-fresh, for them it was freshwater, and we were actually competing for human use. So, we couldn't incorporate that into our calculation and we couldn't consider that really as non-freshwater that we could add up to this 100 per cent non freshwater target, so we had to do some adaptation of our calculations and figures. We had to figure out what other sources of water we could tap into that would not compete with the local community. That conversation only took place after we went through the ERM protocol and we realized that there was a conflicting definition there, we had to agree with the community on how we should consider their immediate source of water.

With an authority that has a bigger responsibility for addressing millions of people. We had to go into some type of agreement. While we were starting to use less freshwater, the authority was making industry commit to how we are going to contribute freshwater that we were taking for our production process, and give it for human consumption because there were real people without water for several weeks in their houses. We came to an agreement to donate on a temporary basis, part of our concession of freshwater, for that to be used for human consumption while we started to consume more available water from the water treatment plants from the government utility. So, while we were switching to that, we started to immediately make available part of that concession for the authority to take it to the neighborhoods where they were missing some water. That happened at the metropolitan area and a few years after that, we have already made a commitment on a national basis with the federal authority of Mexico to give away three million cubic meters of our water concessions for public use. So, these are the types of tradeoffs that you have to make, both with authorities and communities, or authorities representing communities on how we are going to split the use of water.

Mark Lee

Greg, taking this outside of Cemex and outside of the industry, how normal is this? Are companies broadly beginning to see the risks and opportunities inherent to water, and are they taking the whole value chain approach the way Cemex has embraced in these last few years?

Greg Koch

I would answer that question saying that increasingly more and more companies are taking a more holistic, risk-based and collaborative-based approach to water stewardship and water use. I think the industries that are leading that, starting with the food and beverage industry because they are so close and immediately tied to water. But the farm industry, the tech sector, particularly given the high water demands of things like data centers and AI and the construction industry, are some of those that are leading in the water space. I think Cemex’s zero freshwater protocol is a great example of that. However, I use the word increasingly because a lot of companies get stuck when they look at water stress. There's lots of tools out there that help you compute water stress. Some people consider that stress a reflection of business risk. A common response by most companies is to stop at that assessment of current water stress and future water stress, just as Vicente mentioned earlier. They stop and they say, okay, wherever water is stressed, I have to double down on efficiency and be more efficient. OK, that's good. But that misses two things. One, you being more efficient is not going to solve the problem because you're still bringing in freshwater, and so a principled approach, such as you see with Cemex on zero freshwater, is a great way of precluding that whole discussion. I don't have to be more efficient, even though they are, if I'm not bringing in freshwater that's competing with other users, that's one approach, and that's what Cemex has done.

What is also required, as we've been talking about, is relationships. Relationships with all those that you're sharing water with and so the other innovative approach that I see corporations taking is building on those relationships towards collaboration and collective action at scale. So, you have a principled approach, like we have with Cemex, be efficient and where necessary don't bring in freshwater and compete with people. That's a very strong, principled approach. The other is, while I'm stuck in this place, and I have to use water, and water is becoming scarcer or stressed in other ways. I can't do it alone, so yes, I have to contact the regulators and the authorities and advocate for their management of water. But I also have to partner with other uses of water in that area and maybe some of those users are my competitors, but I need to look at this as a precompetitive space and if I want to achieve solutions at scale, I'm going to have to collaborate. And so you see initiatives like the CEO Water Mandate’s water resilience initiative. Or the Alliance for Water Stewardship’s accelerator program. Both of those aim to pull numerous water users across industry, agriculture and government, in a given stress location and pool all their resources, pool all of their ideas towards collective action at scale.

So that's where we're headed, and Cemex is perfectly positioned, rather I should say that the zero freshwater protocol is perfectly positioned to bridge that principled approach with collective action. Because showing people that zero freshwater use is achievable, having solid protocol that could assure someone before they make a claim of that, is a way of bringing solutions to a collective action effort. And I think the wider adoption of a zero freshwater use protocol is a great way to contribute to collective action.

Mark Lee

Vicente, I'm curious in the context of what Greg just said, can you share an example of one of the partnerships you've really relied upon along the way, as you know, beyond ERM’s work on the protocol, that has let you drive this freshwater strategy forward.

Vicente Saiso Alva

This is going to be a good example of how an integral approach looks like when you're dealing with water. For example, when people talk a lot about water, normally they talk about efficiency, freshwater use, etc. And for example, the cost element into water is normally left aside because historically, I don't know why, but humankind has given a small value to water compared to the value of other relevant inputs, basic inputs for life and normally it's not an element. When we did this water stress study, we also did one on what was the water cost also identifying in which places we have a concession for which we pay a small amount, and then we use unlimited amount of water. So it's doesn’t have a cost per liter of use or very minimal, and we actually quantify how much water that we're using is costing us and how much water that we are using is not costing us. And we started to develop this notion that at some point in time and when there is going to be water stress, there's going to be a higher cost of doing business related to water. We engaged with a Spanish university that helped us do this study through our operations. We standardized to a cost of dollar per liter, and we had very surprising elements in doing that analysis.

We have locations in Europe, in the US and very well-developed countries, you would imagine that the cost of water is more relevant than in emerging countries. And what we have found out from this study was that Mexico is the place where we have the highest cost of water. The operator and the President of Cemex Mexico at that time was eyeballed by how many millions of dollars he was spending on water. In the total revenues of the operation it was non-material, but nevertheless it was several million dollars that we were spending on water. And at that point in time, the Mexico operation started to put attention on water because we were tapping for batching plants, for ready mix plants, we are tapping municipal water and that has a cost, and they normally cost it higher for industries than for domestic use.

So, when you put another element into the equation you realize that although it's not material, it makes a difference, and if you are at the cost element, then the risk becomes not only business continuity, but at some point in time, it’s going to hurt your economics and the margin of your product. And we started to pay more attention to that and we still do an annual review of using water. We're still finding places where there's a very small cost of water, like the US for example. But nevertheless, if it's not for cost, we are doing it for water stress or for other reasons. But at some point in time, for sure cost will catch up as the water become more scarce, it will become a much costlier and valuable input into our production process.

Investment and innovation in water

Mark Lee

Vicente maybe makes sense to jump from what you were just saying about cost to water as an investment. How does Cemex as a private sector company, look at what it is spending on freshwater, your access to it and the relationships you need to maintain around it and everything else, can you actually calculate an ROI on this or is that a future ambition that goes with the strategy?

Vicente Saiso Alva

No, I think you can calculate an ROI for water and actually we had to do that implicitly when we faced this crisis in Monterrey. When we started to look at what the cost of the water was from the water treatment plant and what were the investments that we were required to do to make an adjustment in their installation and in our installation to be able to transport and receive that water. There was going to be some cost related to transportation, if the source was near, there was going to be a cost for the piping to have that water access. And what we found is that we had to make a business case for those investments. Although we were in a hurry due to facing a crisis, we did the exercise of how much money we had to put into this. This was a very good investment with high ROI because the water coming from water treatment plants was cheaper than the municipal freshwater than we were tapping into. From that, it paid for the investment of substituting 100 per cent, so we have the business case documented of that investment becoming ROI positive.

It may not be the case in all places where you don't have a relevant cost of water, you will have to do it for other reasons, e.g. for availability, for business continuity etc. But in some places, it does have return on investment and it's certainly a very relevant one. Not only from the cost perspective, but from your standing in the society, your standing with authorities, you are able to quantify that for sure, in many places you will see a return on investment in water.

There's one facility in the Dominican Republic, where we were having a big loss of water and we realized it was all due to piping. We substituted all the piping in the cement plant for visible piping, where we can very quickly check for any problems etc., and we cut 50 per cent of the amount of water that we were using before doing the whole refurbishment of the piping system in that one facility. All the wastewater that we did not realize was hidden somewhere and we were not even aware of where it was.

Mark Lee

I want to close by asking both of you just one last question, which will sound simple, but it's one of those ones that's not. What's next? Given what we've learned in the last few years, maybe the last couple of decades about freshwater use, especially in the private sector, in a corporate setting, what should companies be anticipating as the next challenges of the next few years?

Greg Koch

I see three challenges, the first and it's not just companies, we're all dealing with emerging contaminants, PFAS, pharmaceuticals in the environment. No one quite yet knows what the long-term effects are of ingesting water with these compounds in them, because the concentrations are so small. But I see a lot of innovation, and I see a lot of focus on water quality. This whole concept of zero freshwater use is predicated on there being freshwater out there in the environment, and it's not fresh, it's highly contaminated with all the land-made pollutants. And so one place that I think you're going to see a lot of people heading to is innovations and a greater focus on water quality and water quality protection.

The second challenge and how it will manifest itself is aligning your business strategy with water supplies. So far in this conversation, we've been talking about how to adapt to a water stressed environment, we have the great case study of Cemex and the zero freshwater protocol. But before that, I think you're going to see a lot of companies make decisions around where do I site plants? Where do I build new plants? If I'm going to merge or acquire another business, where are they located? And am I inheriting or creating a water stress situation? And then also the long-term studies of water availability. You know, before someone drops tens of millions, if not hundreds of millions of dollars on a new capital asset like a manufacturing plant, I think you're going to see a lot of focus on assured water supplies, looking at supply dynamics and details to look 50 years out, not five years out and take in more than just climate change. So that's two, water quality and assured long-term water supplies aligned with your business growth strategy.

The last is water reuse. Cemex started that, you heard Vicente say we focused on being as efficient as we can and reusing water within our direct operations. I think that's a growing area for all of business. Of course, Cemex took it further to say, well, how about zero freshwater use in addition to being efficient, but that internal reuse and use of alternate water supplies is going to have to grow because the population growth, economic development and the challenges of climate change are putting a lot of stress on water supplies and it's going to force businesses to look for alternatives. Now there is no alternative to water. There's an alternative to fossil fuels, wind, solar, and what have you. But there's no alternative water. These concepts of water reuse in the context of water stress are part of the corporate change that's coming.

Mark Lee

No alternatives on the substance, but alternatives on approaches. Vicente if you think about this question, what's coming in your mind for the next few years, you might double down on some of what Greg said or you might have a different perspective from Cemex.

Vicente Saiso Alva

No, I think we are pretty aligned with that. I would say for us, it is ensuring business continuity given that water is a key element in our production process and being able to have access to water. I think innovation in being able to tap different sources of water is going to become very relevant. If we want to go to zero non-fresh, the more that we have of other sources of water is going to be very relevant. As a member of society or watershed, we have to go beyond our fence and look at what's happening in that society.

For example, in Monterrey there's a 2050 water plan for the whole city. There are many projects and infrastructure projects associated with making sure that the city doesn't run out of water again. We are contributing to that because we provide building materials for all that infrastructure. It's going beyond your fence to go to the watershed and understanding better the watershed and how you can contribute, not only by using less water but in your business, how you can contribute to those plans that can ensure water availability for the long term. As I said, reducing our risk business continuity and of course, profitability always will be there and I'm sure that water will have a bigger cost in the future. If we have already optimized everything that we can in our facilities, we will have the lowest cost possible for this key element.

Mark Lee

Water is never going to cease to be important. It's probably going to become more pressed and scarcer, and we just need to be better at managing it. I think it's to me to say thanks to both of you for illuminating some of the ways that companies generally, but Cemex in particular, are tackling the freshwater problem.

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