GRI [305-1/305-2] DIRECT AND INDIRECT GHG EMISSIONS OF CEMENT tco 2

Transcription

1 2 CLIMATE CHANGE GRI [305-1/305-2] DIRECT AND INDIRECT GHG EMISSIONS OF CEMENT tco 2 Measurement baseline year Direct Emissions in Colombia 1 4,222,233 4,591,981 3,972,698 3,708,683 Caribbean Direct Emissions 2 616, , , ,029 USA Direct Emissions 3 3,070,970 3,129,755 2,998,647 3,176,833 Direct GHG emissions tco 2 7,909,980 8,355,001 7,610,118 7,475,544 Indirect Emissions in Colombia 4 (704,709) 33,038 29,661 8,095 Caribbean Indirect Emissions 5 1,197,969 66,228 63,881 69,741 USA Indirect Emissions 6 140, , , ,022 Indirect GHG Emissions tco 2 634, , , ,858 Direct and Indirect GHG Emissions from Cement tco 2 8,544,051 8,670,722 7,930,364 7,893,403 GRI [102-48] RECALCULATION OF CO 2 EMISSIONS The direct CO 2 emissions of the cement operations of the three regional branches (Colombia, Central America & the Caribbean, and the United States) were recalculated for the years 2014, 2015 and 2016 in order to comply with the guideline established in the CO 2 and Energy Accounting and Reporting Standard for the Cement Industry Cement CO 2 and Energy Protocol (WBCSD - CSI, 2011) in section 7.5 Baselines, Acquisitions and Divestitures, which specifies the process to be used for the recalculation of the CO 2 emissions for the base year and the historical data. The criteria used to perform the recalculation were as follows: 1. Structural changes were identified within the company, brought on specifically by the acquisition of cement assets in the Central America & Caribbean and the United States regions. Therefore, with this recalculation, the emissions generated by cement plants acquired by Argos that were in operation during 2014, 2015 and 2016 were added to the company s CO 2 inventory. 2. We determined that the data for the calculation variables 12a-17a of the WBCSD-CSI Cement CO 2 and Energy Protocol (2011) were made on a wet basis and were then corrected to a dry basis, as established by the protocol. 3. Some CO 2 emission calculation variables were corrected for two cement plants in Colombia (Sogamoso and Yumbo) for the year 2014 based on the WBCSD-CSI Cement CO 2 and Energy Protocol (2011).

2 appendix 3 CLARIFICATION OF STANDARDS, METHODOLOGIES AND ASSUMPTIONS USED FOR THE CALCULATION GREENHOUSE GASES INCLUDED IN THE CALCULATION: This indicator includes CO 2 emissions only because emissions of other greenhouse gases are not significant in the cement-making process. Also, the CO 2 and Energy Accounting and Reporting Standard for the Cement Industry is limited to the CO 2 inventory only (please see: The Cement CO 2 and Energy Protocol - CO 2 and Energy Accounting and Reporting Standard for the Cement Industry). World Business Council for Sustainable Development (WBCSD) - Cement Sustainability Initiative (CSI), Available at: co-accounting-and-reporting-standard-for-the-cement-industry APPROACH TO THE CONSOLIDATION OF EMISSIONS: We considered an operational control approach to calculate the emissions, including all cement operations contemplated in the Integrated Report. REGULATIONS, METHODOLOGIES, AND ASSUMPTIONS USED FOR THE CALCULATION AND SOURCE USED FOR EMISSION FACTORS: The methodology used to calculate the direct and indirect emissions is the one established by the Cement Sustainability Initiative (CSI) of the World Business Council for Sustainable Development (WBCSD): The Cement CO 2 and Energy Protocol CO 2 and Energy Accounting and Reporting Standard for the Cement Industry (2011). Direct emissions (Scope 1) occur from sources that are owned orcontrolled by the reporting company. In cement plants, direct CO 2 emissions are generated by the following sources: 1. Calcination of carbonates and combustion of organic carbons contained in raw materials. 2. Combustion of kiln fuels related to clinker production. 3. Combustion of non-kiln fuels. 4. Combustion of fuels for on-site power generation. Indirect emissions (Scope 2) are caused by the consumption of electricity purchased from the national grid. Gross direct emissions are reported for cement operations and correspond to the total direct emissions generated by raw materials, kiln fuels related to clinker production, and non-kiln fuels. CO 2 generated by on-site power generation is not included. Biogenic emissions (from the combustion of biomass) are not included because they are considered neutral. Source of the CO 2 emission factors for each type of fuel: The Cement CO 2 and Energy Protocol CO 2 and Energy Accounting and Reporting Standard for the Cement Industry WBCSD CSI (2011). Available at: Source of the CO emission factors from the generation of electricity in each country, except Colombia and the United States CO emissions from fuel 2 2 combustion Highlights International Energy Agency - IEA, 2013 edition.

3 4 CLIMATE CHANGE Source of the CO 2 emission factors from the generation of electricity in Colombia: We used the average of the factors reported by the Mining Energy Planning Unit (UPME, for its Spanish acronym) in their monthly report on generation variables and the Colombian electricity market. Available at: Source of the CO2 emission factors from the generation of electricity in the United States: We used the emission factors reported by the EPA (Environmental Protection Agency) in its Emissions & Generation Resource Integrated Database (egrid) for each of the states in the country, and in its revised version of February Available at: emissions-generation-resource-integrated-database-egrid Selection of the Base Year The baseline year is 2006, due to the fact that the merger of the different cement companies was completed that year, thus creating Cementos Argos. Therefore, the consolidated information regarding the production and flow of materials and energy to calculate the emissions is available as of that year. COMMENTS DIRECT GHG EMISSIONS tco 2 1 Colombia: There was a decrease of direct emissions due to the reduced production of clinker and the increased consumption of natural gas instead of coal. 2 The Caribbean and Central America (CCA): There was a decrease of direct emissions proportional to the reduced clinker production. 3 United States (USA): There was an increase of direct emissions proportional to the increased clinker production. INDIRECT GHG EMISSIONS tco 2 4 Colombia: There was a reduction of indirect emissions due to the significant decrease of electricity purchased from the grid (due to the operational transformation of the company) and the reduced CO 2 e emission factor from the national grid of Colombia, which went from 219 to 135 kg CO 2 /MWh. 5 CCA: The increase of indirect emissions during 2017 is due to the inclusion of the San Lorenzo (Honduras) and San Juan (Puerto Rico) plants in the calculation of the indicator. 6 USA: In 2017, indirect emissions increased in proportion to the increase in electricity purchased and the inclusion of the Martinsburg plant in the calculation of the indicator. The variation was consistent with the change in the CO 2 e emission factors of the electric grid. In 2016, we used a country emission factor (503 kgco 2 /MWh) that was published by the IEA in 2013 and it was applied equally to all operations in the USA. In 2017, we used a different emission factor for each plant based on the state where each one is located: Harleyville plant (South Carolina: 391 kgco2/mwh), Roberta and Atlanta plants (Georgia 522 kgco 2 /MWh), Newberry and Tampa plants (Florida: 490 kgco 2 /MWh), and Martinsburg plant (West Virginia: 631 kgco 2 /MWh). Until 2014, indirect emissions from the net movement of clinker input and output (due to the purchase and sale of clinker) were reported within Scope 2, as specified by the WBCSD-CSI (2011) CO 2 and Energy Protocol. However, for comparability purposes with national GHG reports and GHG reports from other industries, in 2015 we started to report only indirect emissions generated by the purchase of electricity from the national grid of each country. The negative value for operations in Colombia in 2014 is due to the emissions of plants that were net exporters of clinker, that is, those in which the amount of clinker that left the plant was greater than the amount that came in.

4 appendix 5 GRI [305-1/305-2] DIRECT AND INDIRECT GHG EMISSIONS OF CONCRETE tco Direct Emissions in Colombia 1 36,239 39,353 35,640 32,964 Caribbean Direct Emissions 2 6,049 5,438 5,716 5,412 USA Direct Emissions 3 30, ,155 26,774 97,545 Direct GHG emissions tco2 72, ,946 68, ,921 Indirect Emissions in Colombia ,458 1,626 1,021 Caribbean Indirect Emissions , USA Indirect Emissions 6 21,201 17,090 18,118 16,098 Indirect GHG Emissions tco 2 22,957 19,794 20,610 17,900 Direct and Indirect GHG Emissions from Concrete tco 2 95, ,740 88, ,821 CLARIFICATION OF STANDARDS, METHODOLOGIES AND ASSUMPTIONS USED FOR THE CALCULATION GREENHOUSE GASES INCLUDED IN THE CALCULATION: Only CO 2 emissions were included in this indicator. APPROACH TO THE CONSOLIDATION OF EMISSIONS: We considered an operational control approach to calculate the emissions, including all concrete operations contemplated in the Integrated Report. REGULATIONS, METHODOLOGIES, AND ASSUMPTIONS USED FOR THE CALCULATION AND SOURCE USED FOR EMISSION FACTORS: The methodology used to calculate the direct and indirect emissions is the one established by the Corporate Accounting and Reporting Standard - The Greenhouse Gas Protocol of the World Business Council for Sustainable Development (WBCSD) and the World Resources Institute (2004). Direct emissions (Scope 1) occur from sources that are owned orcontrolled by the reporting company. We took into account the following equation in order to calculate the direct emissions of the concrete operations: Direct concrete emissions = Fuel consumption * Lower heating value of the fuel * Emission factor of the CO 2 associated with the fuel. Indirect emissions (Scope 2) are caused by the consumption of electricity purchased from the national grid. We took into account the following equation in order to calculate the indirect emissions of the concrete operations: Indirect concrete emissions = Consumption of electricity purchased from the national grid of each country * CO 2 emission factor of the national grid of each country Source of the CO 2 emission factors for each type of fuel: The Cement CO 2 and Energy Protocol CO 2 and Energy Accounting and Reporting Standard for the Cement Industry WBCSD CSI (2011). Available at: Source of the CO 2 emission factors from the generation of electricity in each country, except Colombia: CO 2 emissions from fuel combustion Highlights International Energy Agency - IEA, 2013 edition. For Colombia we used the average of the factors reported by the Mining Energy Planning Unit (UPME, for its Spanish acronym) in their monthly report on generation variables and the Colombian electricity market. Available at:

5 6 CAMBIO CLIMÁTICO_INDICADORES WEB COMMENTS DIRECT GHG EMISSIONS tco 2 1 Colombia: The decrease of direct emissions was proportional to the decrease in concrete production. 2 CCA: There was a decrease of direct emissions proportional to the decrease of concrete production. 3 USA: There was a significant increase of direct emissions due to the facts that in 2017 the Southeast Zone (SEZ) started reporting the fuel consumption of mixer trucks and the Gulf Zone (SCZ) reported the actual fuel consumptions generated by the information system, whereas in 2016 said consumption was merely estimated because the information was not available in the system. INDIRECT GHG EMISSIONS tco 2 Colombia: The decrease of direct emissions was proportional to the decrease in concrete production. CCA: There was a decrease of direct emissions proportional to the decrease of concrete production. USA: There was a significant increase of direct emissions due to the facts that in 2017 the Southeast Zone (SEZ) started reporting the fuel consumption of mixer trucks and the Gulf Zone (SCZ) reported the actual fuel consumptions generated by the information system, whereas in 2016 said consumption was merely estimated because the information was not available in the system.

6 Anexos 7 GRI [305-1/305-2] DIRECT GHG EMISSIONS FROM THE GENERATION OF ELECTRICITY tco Direct Emissions in Colombia 1 621, , , ,932 Caribbean Direct Emissions 2 21,501 17,275 16,758 16,347 USA Direct Emissions NA NA NA NA Direct GHG emissions tco 2 642, , , ,278 CLARIFICATION OF STANDARDS, METHODOLOGIES AND ASSUMPTIONS USED FOR THE CALCULATION GREENHOUSE GASES INCLUDED IN THE CALCULATION: Only CO 2 emissions were included in this indicator. APPROACH TO THE CONSOLIDATION OF EMISSIONS: We considered an operational control approach to calculate the emissions, including all electricity generating operations contemplated in the Integrated Report. REGULATIONS, METHODOLOGIES, AND ASSUMPTIONS USED FOR THE CALCULATION AND SOURCE USED FOR EMISSION FACTORS: The methodology used to calculate the direct emissions is the one established by the Cement Sustainability Initiative (CSI) of the World Business Council for Sustainable Development (WBCSD): The Cement CO 2 and Energy Protocol CO 2 and Energy Accounting and Reporting Standard for the Cement Industry (2011). Direct emissions (Scope 1) occur from sources that are owned orcontrolled by the reporting company. We took into account the following equation in order to calculate the direct emissions of on-site electricity generating operations: Direct emissions from on-site electricity generating operations = Fuel consumption * Lower heating value of the fuel * Emission factor of the CO 2 associated with the fuel. Source of the CO 2 emission factors for each type of fuel: The Cement CO 2 and Energy Protocol CO 2 and Energy Accounting and Reporting Standard for the Cement Industry WBCSD CSI (2011). Available at: COMMENTS 1 Colombia: two of the plants where electricity is generated (the Cairo and Nare plants), which represents 26% of the total production of energy, are hydroelectric plants whose direct emissions are zero. Direct emissions from other on-site electricity generating plants increased in proportion to the increased production of electricity. 2 CCA: The decrease of direct emissions was proportional to the reduced production of electricity.

7 8 CLIMATE CHANGE GRI [305-1/305-2] DIRECT AND INDIRECT GHG EMISSIONS OF AGGREGATES tco Direct Emissions in Colombia 1 1,404 1,548 1,851 2,597 Caribbean Direct Emissions 2 NA NA Direct GHG emissions tco2 - Aggregates 1,404 1,548 2,554 3,143 Indirect Emissions in Colombia , Caribbean Indirect Emissions 4 NA NA Indirect GHG Emissions tco , Direct and Indirect GHG Emissions from aggregates tco 2 1,950 2,515 3,969 4,019 CLARIFICATION OF STANDARDS, METHODOLOGIES AND ASSUMPTIONS USED FOR THE CALCULATION GREENHOUSE GASES INCLUDED IN THE CALCULATION: Only CO 2 emissions were included in this indicator. APPROACH TO THE CONSOLIDATION OF EMISSIONS: We considered an operational control approach to calculate the emissions, including all aggregate operations contemplated in the Integrated Report. REGULATIONS, METHODOLOGIES, AND ASSUMPTIONS USED FOR THE CALCULATION AND SOURCE USED FOR EMISSION FACTORS: The methodology used to calculate the direct and indirect emissions is the one established by the Corporate Accounting and Reporting Standard - The Greenhouse Gas Protocol of the World Business Council for Sustainable Development (WBCSD) and the World Resources Institute (2004). Direct emissions (Scope 1) occur from sources that are owned orcontrolled by the reporting company. We took into account the following equation in order to calculate the direct emissions of the aggregate operations: Direct aggregate emissions = Fuel consumption * Lower heating value of the fuel * Emission factor of the CO 2 associated with the fuel. Indirect emissions (Scope 2) are caused by the consumption of electricity purchased from the national grid. We took into account the following equation in order to calculate the indirect emissions of the aggregate operations: Indirect aggregate emissions = Consumption of electricity purchased from the national grid of each country * CO 2 emission factor of the national grid of each country

8 appendix 9 Source of the CO 2 emission factors for each type of fuel: The Cement CO 2 and Energy Protocol CO2 and Energy Accounting and Reporting Standard for the Cement Industry WBCSD CSI (2011). Available at: Source of the CO 2 emission factors from the generation of electricity in each country, except Colombia: CO 2 emissions from fuel combustion Highlights International Energy Agency - IEA, 2013 edition. For Colombia, we used the average of the factors reported by the Mining Energy Planning Unit (UPME, for its Spanish acronym) in their monthly report on generation variables and the Colombian electricity market. Available at: COMMENTS DIRECT GHG EMISSIONS tco 2 1 Colombia: emissions increased due to the fact the one of the mines started having fuel combustion information available and thus started reporting it in CCA: emissions decreased due to the transfer of a large part of the equipment and vehicles from the mine with the highest production of aggregates to a mine with a smaller production. INDIRECT GHG EMISSIONS tco 2 3 Colombia: Indirect emissions decreased due to the reduced CO 2 emission factor of the Colombian national grid, which went from 19 to 135 kgco 2 /MWh. 4 CCA: indirect emissions decreased due to the suspension of operations at the largest aggregate production mine. DIRECT, INDIRECT AND TOTAL GHG EMISSIONS OF CEMENTOS ARGOS tco Total direct emissions tco 2 8,626,983 9,073,027 8,186,365 8,167,887 Total Indirect emissions tco 2 657, , , ,634 Total Emissions tco 2 9,284,557 9,409,509 8,528,636 8,604,521

9 10 CLIMATE CHANGE GRI [305-4] GHG EMISSIONS INTENSITY CCA COL USA TOTAL CCA COL USA TOTAL CCA COL USA TOTAL Intensity of the GHG emissions in cement production (kg CO 2 /t cementitious products) Intensity of the GHG emissions in the production of concrete (kg CO2/m3 concrete) Intensity of the GHG emissions in the production of aggregates (kgco2/t product) NA 0.70 NA NA NA 1 Intensity of the GHG emissions in electricity generation (kg CO2/kWh) 4 1, NA NA NA 781 COMMENTS 1 (102-48) Recalculation of direct CO 2 emissions: The direct CO 2 emissions of the cement operations of the three regional branches (Colombia, Central America & the Caribbean, and the United States) were recalculated for the years 2014, 2015 and 2016 in order to comply with the guideline established in the CO 2 and Energy Accounting and Reporting Standard for the Cement Industry Cement CO 2 and Energy Protocol (WBCSD - CSI, 2011) in section 7.5 Baselines, Acquisitions and Divestitures, which specifies the process to be used for the recalculation of the CO 2 emissions for the base year and the historical data. The criteria used to perform the recalculation were as follows: 1. Structural changes were identified within the company, brought on specifically by the acquisition of cement assets in the Central America & Caribbean and the United States regions. Therefore, with this recalculation, the emissions generated by cement plants acquired by Argos that were in operation during 2014, 2015 and 2016 were added to the company s CO 2 inventory. 2. We determined that the data for the calculation variables 12 a-17a of the WBCSD-CSI Cement CO 2 and Energy Protocol (2011) were made on a wet basis and were then corrected to a dry basis, as established by the protocol. 3. Some CO 2 emission calculation variables were corrected for two cement plants in Colombia (Sogamoso and Yumbo) for the year 2014 based on the WBCSD-CSI Cement CO 2 and Energy Protocol (2011). 1 Numerator: Direct gross emissions (corresponding to GRI 305-1) Denominator: Production of cementitious material Coverage: Cement operations in the Colombia, Caribbean & Central America, and United States regional branches. 2 Numerator: Direct emissions GRI Denominator: Concrete production. Coverage: Concrete operations in the Colombia, Caribbean & Central America, and United States regional branches.

10 appendix 11 3 Numerator: Direct emissions GRI Denominator: Aggregate production Coverage: Aggregate operations in the Colombia, Caribbean & Central America, and United States regional branches. 4 Numerator: Direct emissions GRI Denominator: Electricity production Coverage: On-site electricity generating operations in the Colombia, Caribbean & Central America, and United States regional branches. [A-EC1] NET SPECIFIC CO 2 EMISSIONS (KG/T CEMENTITIOUS MATERIAL) Environmental Policy Indicator Specific Net CO 2 Emissions Baseline year 2006 Year for which the goal is set 2025 Reduction goal of cement GHG emissions 544 Reduction compared to baseline year % GRI [102-48] NOTE RECALCULATION OF CO 2 EMISSIONS The direct CO 2 emissions of the cement operations of the three regional branches (Colombia, Central America & the Caribbean, and the United States) were recalculated for the years 2014, 2015 and 2016 in order to comply with the guideline established in the CO 2 and Energy Accounting and Reporting Standard for the Cement Industry Cement CO 2 and Energy Protocol (WBCSD - CSI, 2011) in section 7.5 Baselines, Acquisitions and Divestitures, which specifies the process to be used for the recalculation of the CO 2 emissions for the base year and the historical data. The criteria used to perform the recalculation were as follows: 1. Structural changes were identified within the company, brought on specifically by the acquisition of cement assets in the Central America & Caribbean and the United States regions. Therefore, with this recalculation, the emissions generated by cement plants acquired by Argos that were in operation during 2014, 2015 and 2016 were added to the company s CO 2 inventory. 2. We determined that the data for the calculation variables 12 a-17a of the WBCSD-CSI Cement CO 2 and Energy Protocol (2011) were made on a wet basis and were then corrected to a dry basis, as established by the protocol. 3. Some CO 2 emission calculation variables were corrected for two cement plants in Colombia (Sogamoso and Yumbo) for the year 2014 based on the WBCSD-CSI Cement CO 2 and Energy Protocol (2011).

11 12 CLIMATE CHANGE COMMENTS For cement operations, there was a 2% reduction of the net specific CO 2 emissions per ton of cementitious material. While the production of cementitious material increased by 1%, net CO 2 emissions dropped by 1% due to a decreased specific heat consumption per ton of clinker (which corresponds to 2.1%) and to a 9-percentage point increase in the use of natural gas in the mix of kiln fuels. This indicator was calculated using the methodology established by the Cement Sustainability Initiative (CSI) of the World Business Council for Sustainable Development (WBCSD): The Cement CO 2 and Energy Protocol CO 2 and Energy Accounting and Reporting Standard for the Cement Industry (2011). The variable of the methodology used to calculate this indicator is the number 74. Numerator: Net direct CO 2 emissions (Total CO 2 emissions excluding CO 2 emissions from on-site power generation and the CO 2 emissions generated by the consumption of alternative fuels). This corresponds to calculation variable 71 of The Cement CO 2 and Energy Protocol CO 2 and Energy Accounting and Reporting Standard for the Cement Industry Denominator: Production of cementitious material. This corresponds to calculation variable 21a of The Cement CO 2 and Energy Protocol CO2 and Energy Accounting and Reporting Standard for the Cement Industry Coverage: Cement operations in the Colombia, Caribbean & Central America, and United States regional branches.

12 appendix 13 GRI [305-3] OTHER INDIRECT GHG EMISSIONS (SCOPE 3) Emission sources Scope 3 Purchased goods and services Category 1 Evaluation status Relevant, calculated % Percentage of emissions calculated using data obtained from suppliers or value chain partners Capital goods 2 Not relevant NA NA NA NA NA NA Fuel and energy related activities 3 Relevant, calculated % Standards, methodologies and assumptions in the calculation, gases included in the calculation, as well as the source of emission factors and GWP The calculation for this category was performed using Quantis Enterprise s Quantis SUITE 2.0 software, which works based on the methodology of the GHG Protocol Corporate Accounting and Reporting Standard (Scope 3) Corporate Value Chain (Scope 3) World Business Council for Sustainable Development (WBCSD), World Resources Institute (WRI) (2011).Coverage: Cement, concrete, and aggregate operations in the Colombia, Caribbean & Central America, and United States regional branches. The calculation for this category was performed using Quantis Enterprise s Quantis SUITE 2.0 software, which works based on the methodology of the GHG Protocol Corporate Accounting and Reporting Standard (Scope 3) Corporate Value Chain (Scope 3) World Business Council for Sustainable Development (WBCSD), World Resources Institute (WRI) (2011).Coverage: Cement, concrete, and aggregate operations in the Colombia, Caribbean & Central America, and United States regional branches. Comments Out of the 15 categories that make up Scope 3, Argos prioritized 5 categories as Relevant. The prioritization process was based on the results of the study carried out by Quantis for Argos titled Calculation of Cementos Argos GHG Emissions from Priority Sources of Scope 3 Emissions and on the guidelines set out in the Cement Sector Scope 3 GHG Accounting and Reporting Guidance developed by the Cement Sustainability Initiative (CSI). Among the 5 relevant categories is Category 1 (Purchased goods and services). This category is not considered relevant to the company s Scope 3 emissions. Out of the 15 categories that make up Scope 3, Argos prioritized 5 categories as Relevant. The prioritization process was based on the results of the study carried out by Quantis for Argos titled Calculation of Cementos Argos GHG Emissions from Priority Sources of Scope 3 Emissions and on the guidelines set out in the Cement Sector Scope 3 GHG Accounting and Reporting Guidance developed by the Cement Sustainability Initiative (CSI). Among the 5 relevant categories is Category 3 (Fuel and energy-related activities).

13 14 CLIMATE CHANGE Upstream transportation and distribution Waste generated in operation Business travels 6 4 Relevant, calculated 66, , , , % 5 Not relevant NA NA NA NA NA NA Relevant, calculated 1,274 5,128 4,820 2,596 81% At the Colombia regional branch, information was collected from Logitrans, one of the most representative companies among transporters of raw materials and products in process. We also included information provided by the company Geodis.In order to calculate emissions of the other two regional branches, we used Quantis SUITE 2.0 software, which works based on the methodology of the GHG Protocol Corporate Accounting and Reporting Standard (Scope 3) Corporate Value Chain (Scope 3) World Business Council for Sustainable Development (WBCSD), World Resources Institute (WRI) (2011).Coverage: Cement, concrete, and aggregate operations in the Colombia, Caribbean & Central America, and United States regional branches. For the Colombia and United States regional branches, we collected information from the travel agencies that operate the logistics of corporate travel. In order to calculate emissions of the Caribbean and Central America regional branch, we used Quantis SUITE 2.0 software, which works based on the methodology of the GHG Protocol Corporate Accounting and Reporting Standard (Scope 3) Corporate Value Chain (Scope 3) World Business Council for Sustainable Development (WBCSD), World Resources Institute (WRI) (2011).Coverage: Cement, concrete, and aggregate operations in the Colombia, Caribbean & Central America, and United States regional branches Out of the 15 categories that make up Scope 3, Argos prioritized 5 categories as Relevant. The prioritization process was based on the results of the study carried out by Quantis for Argos titled Calculation of Cementos Argos GHG Emissions from Priority Sources of Scope 3 Emissions and on the guidelines set out in the Cement Sector Scope 3 GHG Accounting and Reporting Guidance developed by the Cement Sustainability Initiative (CSI). Among the 5 relevant categories is Category 4 (Upstream transportation and distribution of water). This category is not considered relevant to the company s Scope 3 emissions. Out of the 15 categories that make up Scope 3, Argos prioritized 5 categories as Relevant. The prioritization process was based on the results of the study carried out by Quantis for Argos titled Calculation of Cementos Argos GHG Emissions from Priority Sources of Scope 3 Emissions and on the guidelines set out in the Cement Sector Scope 3 GHG Accounting and Reporting Guidance developed by the Cement Sustainability Initiative (CSI). Business travel (Category 6) is found among the 5 relevant categories.

14 appendix 15 Employee commuting Upstream leassed assets Total Upstream Emissions tco 2 e Scope 3 7 Not relevant NA NA NA NA NA NA 8 Not relevant NA NA NA NA NA NA 3,891,521 3,957,945 3,649,996 3,476,085 This category is not considered relevant to the company s Scope 3 emissions This category is not considered relevant to the company s Scope 3 emissions. Downstream transportation and distribution Processing of sold products Use of sold product End of life treatment of sold products Downstream leased assets 9 Relevant, calculated 33,237 87,932 93,854 95, % 10 Not relevant NA NA NA NA NA NA 11 Not relevant NA NA NA NA NA NA 12 Not relevant NA NA NA NA NA NA 13 Not relevant NA NA NA NA NA NA Franchises 14 Not relevant NA NA NA NA NA NA Investments 15 Not relevant NA NA NA NA NA NA At the Colombia regional branch, information was collected from Transportempo and Imbocar, which are two of the most representative companies among transporters of finished products.in order to calculate emissions of the other two regional branches, we used Quantis SUITE 2.0 software, which works based on the methodology of the GHG Protocol Corporate Accounting and Reporting Standard (Scope 3) Corporate Value Chain (Scope 3) World Business Council for Sustainable Development (WBCSD), World Resources Institute (WRI) (2011).Coverage: Cement, concrete, and aggregate operations in the Colombia, Caribbean & Central America, and United States regional branches. Out of the 15 categories that make up Scope 3, Argos prioritized 5 categories as Relevant. The prioritization process was based on the results of the study carried out by Quantis for Argos titled Calculation of Cementos Argos GHG Emissions from Priority Sources of Scope 3 Emissions and on the guidelines set out in the Cement Sector Scope 3 GHG Accounting and Reporting Guidance developed by the Cement Sustainability Initiative (CSI). Among the 5 relevant categories is Category 9 (Downstream transportation and distribution of water). This category is not considered relevant to the company s Scope 3 emissions. This category is not considered relevant to the company s Scope 3 emissions. This category is not considered relevant to the company s Scope 3 emissions. This category is not considered relevant to the company s Scope 3 emissions. This category is not considered relevant to the company s Scope 3 emissions. This category is not considered relevant to the company s Scope 3 emissions.

15 16 CLIMATE CHANGE Total Downstream emissions tco 2 e Scope 3 Total Emissions of Greenhouse Gases tco 2 e Scope 3 33,237 87,932 93,854 95,606 3,924,758 4,045,877 3,743,850 3,571,690 GRI [305-5] REDUCTION OF GHG EMISSIONS Initiative Colombia - Cartagena Plant: Plant Efficiency Opportunities Plan Colombia - Rioclaro Plant: Stabilization of the new MC5 grinding station and improvement plans for admixtures. Colombia - Sogamoso Plant: Optimization of the use of correctors in raw meal. Colombia - Sogamoso Plant: Optimization of the use of admixtures in cement. CCA - Piedras Azules Plant (Honduras): Product quality monitoring program USA - Roberta Plant: Energy Management Plan Base year for the calculation of the reduction Reduction of emissions (t CO2) up to 2017 Indicate whether reduced emissions correspond to Scope 1, 2 and/or Scope 2 CO Scope 2 CO 2 Gases included in the calculation Description of the initiative The plant s duty cycle increased by 2 percentage points by reducing the consumption of heat and electricity. A program was implemented to increase admixtures in cement grinding. This helped to reduce the consumption of electricity by 2 kwh/t. Improved performance of the vertical mill and implementation of a program to increase admixtures in cement grinding. This helped to reduce the consumption of electricity by 3 kwh/t ,173 Scope 1 CO 2 The use of correctors (ashes) improved the consumption of heat by saving 5% Scope 2 CO ,331 Scope 2 CO Scope 1 CO 2 A program was implemented to increase admixtures in cement grinding. This helped to reduce the consumption of electricity by 3 kwh/t. We worked on a clinker quality monitoring scheme that helped reduce the consumption of electricity, which saved 4% of electricity consumption. Reduced consumption of heat due to the implementation of an energy management plan. Three per cent savings in the consumption of fuel, focused on controlling the kiln operation for a high duty cycle. Energy Star certified.

16 appendix 17 USA - Roberta Plant: Energy Management Plan USA - Harleyville Plant: PIP2017 Energy Management Plan USA - Harleyville Plant: PIP2017 Energy Management Plan USA - Roberta Plant: Increased use of alternative fuels as substitutes for traditional fuels. Colombia - Rioclaro Plant: Increased use of alternative fuels as substitutes for traditional fuels ,455 Scope 2 CO Scope 1 CO ,436 Scope 2 CO Scope 1 CO ,471 Scope 1 CO 2 Reduced consumption of electricity due to the implementation of an energy management plan. Eleven per cent savings in the consumption of electricity, focused on managing grinding operations and measurements. Energy Star certified. Reduced consumption of heat due to the implementation of an energy management plan. Three percent savings in the consumption of fuel. Reduced consumption of electricity due to the implementation of an energy management plan. Sixteen percent savings in the consumption of electricity. Increased percentage of substitution of traditional fuels (coal and natural gas) for alternative fuels, such as mixed industrial waste, tires and biomass. Mixed fuels went from 17.5% to 20.9% in the clinker kiln.the CO 2 and Energy Accounting and Reporting Standard for the Cement Industry The Cement CO 2 and Energy Protocol (WBCSD CSI, 2011) was used for this calculation Increased percentage of substitution of traditional fuels (coal and fuel oil for alternative fuels, such as tires. Mixed fuels went from 3.0% to 4.9% in the clinker kiln.the CO 2 and Energy Accounting and Reporting Standard for the Cement Industry The Cement CO 2 and Energy Protocol (WBCSD CSI, 2011) was used for this calculation Colombia - Cairo Plant: Reduction of the clinker/cement factor Colombia - Rioclaro Plant: Reduction of the clinker/cement factor Colombia - Sogamoso Plant: Reduction of the clinker/cement factor Colombia - Toluviejo Plant: Reduction of the clinker/cement factor Total 78, Scope 1 CO ,904 Scope 1 CO ,048 Scope 1 CO ,821 Scope 1 CO 2 Reduction of the clinker/cement factor by 0.7 percentage points.the CO 2 and Energy Accounting and Reporting Standard for the Cement Industry The Cement CO 2 and Energy Protocol (WBCSD CSI, 2011) was used for this calculation. Reduction of the clinker/cement factor by 1.0 percentage points.the CO 2 and Energy Accounting and Reporting Standard for the Cement Industry The Cement CO 2 and Energy Protocol (WBCSD CSI, 2011) was used for this calculation. Reduction of the clinker/cement factor by 1.3 percentage points.the CO 2 and Energy Accounting and Reporting Standard for the Cement Industry The Cement CO 2 and Energy Protocol (WBCSD CSI, 2011) was used for this calculation Reduction of the clinker/cement factor by 1.5 percentage points.the CO 2 and Energy Accounting and Reporting Standard for the Cement Industry The Cement CO 2 and Energy Protocol (WBCSD CSI, 2011) was used for this calculation.

17 18 CLIMATE CHANGE GRI [201-2] FINANCIAL IMPLICATIONS AND OTHER RISKS AND OPPORTUNITIES DERIVED FROM CLIMATE CHANGE RISKS DERIVED FROM CLIMATE CHANGE Driver Description Potential impact Time frame Direct/ indirect Likelihood of Occurrence Magnitude Estimated Financial Implications Management Method Management Costs Changes to the applicable standards and regulations (international agreements) The COP21 conference recorded the commitment of countries to keeping the rise in global temperature below 2 Celsius compared to the pre-industrial age. Locally, this was reflected in the targets each country s set and committed to for their nationally determined contributions (NDCs). The implementation of these targets will involve taking measures for industries with an intensive use of fuels, energy and CO 2 emissions, such as the cement industry. Regarding Argos areas of operations, the USA committed to decreasing absolute emissions by 26 % to 28 %, while Colombia committed to decreasing them by 20% by the year 2030 with a Business-As-Usual (BAU) scenario. Similarly, several countries in the Caribbean and Central America committed to reducing their CO 2 emissions, such as Honduras, which committed to 15% under the BAU, by 2030.The COP21 commitment is that these targets should be increasingly ambitious, since current commitments will not keep the temperature within the expected range.the main implications for Argos operations are political measures, the implementation of economic instruments (taxes or CO 2 market) and incentives, as well as mandatory reporting and verification systems. Loss or decrease of income 1-3 years Direct Very Likely Medium-High It is expected that the agreement reached at the COP21 will result in the implementation of some type of economic instrument over the next few years, whether that is a carbon market or taxes on emissions, for the purpose of reducing CO 2 emissions in the regions where Argos operates. Signs by the governments of the countries where Argos operates indicate that the cost to the company for the implementation of this type of instruments could be within a wide range between USD 2 and USD 30/ton CO 2. Monitoring and mitigation of this risk are included in the company s risk management system. Likewise, Argos Environmental Policy and Energy Policy include lines of action that enable us to monitor and implement actions to reduce GHG emissions, such as: CO 2 inventory (Scope 1, Scope 2, and Scope 3), CO 3 reduction target, energy efficiency, use of alternative fuels, reduction of the clinker/cement factor, and the increased efficiency of the value chain, among others. In 2017, Argos finished and developed new projects and initiatives that involved investments of approximately USD $11.2 million. Some of these projects and initiatives include the following:- Continuation of the production management system focused on finding the best operational practices, which has led to improvements in process efficiency and a lower consumption of energy.- Optimization of processes through thermal and electric efficiency projects within the framework of the energy task list and other initiatives.- Increased use of alternative raw materials in cement and concrete operations.- Reduced clinker content in all types of cement.- Increased substitution of traditional fuels with alternative fuels.- Energy Star certification for the Newberry and Roberta plants in the USA.

18 appendix 19 Changes in applicable regulations and standards (CO2 emissions market). In 2015, the company classified the risks inherent to climate change, which enabled it to identify the CO2 market schemes as the economic instrument that will most likely be implemented over the next few years in the locations where Argos operates.the highest risks have been identified for the USA and Colombia, which represents an exposure to this risk for most of the company s cement operations Loss or decrease of income 3-6 years Direct Very Likely Medium-High There is currently a high level of uncertainty about the operation of the possible CO2 market schemes that could be implemented in the regions where Argos operates. The most unfavorable scenario, based on currently available information, involves a CO2 market in which the governments of the USA (depending on its withdrawal from the Paris Agreement) and Colombia impose a reduction target on the cement industry that matches each country s target, which is 26% and 20%, respectively. Argos analyses show that a cap-and-trade scheme could have an impact on operating costs between USD 4.3 million and USD 18.8 million. Monitoring and mitigation of this risk are included in the company s risk management system. Likewise, Argos Environmental Policy and Energy Policy include lines of action that enable us to monitor and implement actions to reduce GHG emissions, such as: CO2 inventory (Scope 1, Scope 2, and Scope 3), CO3 reduction target, energy efficiency, use of alternative fuels, reduction of the clinker/cement factor, and the increased efficiency of the value chain, among others In 2017, Argos finished and developed new projects and initiatives that involved investments of approximately USD $11.2 million. Some of these projects and initiatives include the following:- Continuation of the production management system focused on finding the best operational practices, which has led to improvements in process efficiency and a lower consumption of energy.- Optimization of processes through thermal and electric efficiency projects within the framework of the energy task list and other initiatives.- Increased use of alternative raw materials in cement and concrete operations.- Reduced clinker content in all types of cement.- Increased substitution of traditional fuels with alternative fuels.- Energy Star certification for the Newberry and Roberta plants in the USA. Changes to the applicable standards and regulations (tax on carbon) Changes in applicable regulations and standards (mandatory CO2 emissions report). Although it is still an instrument that will likely be implemented in the geographical areas where Argos operates, it is less politically accepted than schemes related to the CO2 emissions market. However, this economic instrument is still being studied by several government of countries where Argos operates, so it may become a reality in the medium term.in 2016, there was a tax reform in Colombia that approved the carbon tax on liquid fuels and natural gas. Because this taxes fuel and not CO2 emissions, the company did not change the evaluation of this risk. Because the Paris Agreement involves a review of each country s NDC commitments every 5 years, mandatory reporting is almost a reality. It is the only way for each country to identify the progress it has made towards its target. Loss or decrease of income Damage to the company s image > 6 years Direct Very Likely Medium-High 1-3 years Direct Very Likely Medium-High Assuming a tax on GHG emissions due to the use of fuels, the impact would be between USD 2.6 million and USD 8.6 million. There is no financial implication associated with this risk given that Argos currently reports its CO2 emissions voluntarily. A good CO2 emission performance prevents any negative financial implications for the company. Monitoring and mitigation of this risk are included in the company s risk management system. Likewise, Argos Environmental Policy and Energy Policy include lines of action that enable us to monitor and implement actions to reduce GHG emissions, such as: CO2 inventory (Scope 1, Scope 2, and Scope 3), CO3 reduction target, energy efficiency, use of alternative fuels, reduction of the clinker/cement factor, and the increased efficiency of the value chain, among others. Monitoring and mitigation of this risk are included in the company s risk management system. Likewise, Argos Environmental Policy and Energy Policy include lines of action that enable us to monitor and implement actions to reduce GHG emissions, such as: CO2 inventory (Scope 1, Scope 2, and Scope 3), CO2 reduction target, energy efficiency, use of alternative fuels, reduction of the clinker/cement factor, and the increased efficiency of the value chain, among others. In 2017, Argos finished and developed new projects and initiatives that involved investments of approximately USD $11.2 million. Some of these projects and initiatives include the following:- Continuation of the production management system focused on finding the best operational practices, which has led to improvements in process efficiency and a lower consumption of energy.- Optimization of processes through thermal and electric efficiency projects within the framework of the energy task list and other initiatives.- Increased use of alternative raw materials in cement and concrete operations.- Reduced clinker content in all types of cement.- Increased substitution of traditional fuels with alternative fuels.- Energy Star certification for the Newberry and Roberta plants in the USA. The management cost associated with this risk is already included in the budget and it corresponds to the environmental team in the corporate structure.

19 20 CLIMATE CHANGE RISKS DERIVED FROM CHANGES TO PHYSICAL CLIMATE PARAMETERS Driver Effects on operations caused by natural events Description Monitoring and mitigating risks derived from changes in climate parameters are included in Argos strategic risk management work. These risks include the effects on operations due to different climate events. In 2015, Argos started a risk analysis process related to natural disasters, which include hurricanes, floods, and landslides, among others. This analysis has enabled the company to identify the impact of these natural events on the efficiency of the supply chain, which is a strategic risk for the company. Potential impact Reduction/ interruption of production capacity Time frame Direct/ indirect Likelihood of Occurrence Magnitude < 1 year Direct Likely Medium-High Estimated Financial Implications The natural risk disaster analysis developed in 2015 has allowed the company to identify the financial implications derived from impacts on logistical operations due to an interruption to the production capacity of the main cement plants in Colombia. The impacts were estimated for intervals of 6, 12 and 18 months.we have determined that revenues would decrease somewhere between USD 6 million and USD 27 million Management Method Monitoring and mitigation of this risk are included in the company s risk management system. The potential impacts that were identified have enabled Argos to implement actions aimed at optimizing the logistics chain in order to reduce the magnitude of the impact. The Supply Chain Excellence department is responsible for modeling scenarios and proposing actions to reduce the exposure to risks Management Costs The cost of managing this risk is associated with the adaptation measures that must be implemented for each operation. RISKS DERIVED FROM OTHER CLIMATE-RELATED VARIABLES Driver Serious damage to the company s image Description Argos considers that a negative effect to its image and reputations is a risk that could materialize based on any of the other strategic risks that have been identified.it is clear that under the current global context, industries with intensive CO2 emissions must demonstrate their commitment by adequately managing the risks derived from climate change and by reducing their CO2 emissions.it is also evident that public opinion is ever less accepting of CO2 emission intensive processes, which is why a management and performance that falls below the expectations of stakeholders would very likely result in events that damage the company s reputation. Potential impact Damage to the company s image Time frame Direct/ indirect Likelihood of Occurrence 1-3 years Direct Very Likely High Magnitude Estimated Financial Implications It has been established that reputational risk can generate significant impacts for the company, including: negative impact on the perception of shareholders and other stakeholders, financial impacts, impact on sales and on the market value of the company. However, the magnitude of the financial impact these effects would have has not been estimated. Management Method Monitoring and mitigation of this risk are included in the company s risk management system. Additionally, the following mitigation measures have been considered: Crisis Management Manual, which takes into account the possible scenarios associated with events that affect operations and Sustainability Talks with stakeholders. Management Costs The management cost associated with this risk has not been estimated. Risks associated with the availability and variability of the cost of energy resources for our operations and their efficient use. Risks associated with the availability, reliability and variability of energy resources due to new regulations for the energy industry that imply reduced energy prices, effects on the offer of fossil fuels or a higher demand and competition for sources of alternative fuels. Loss or decrease of income > 6 years Direct Relatively Certain Medium-High Long-term projections indicate that by 2019 the price of electricity will increase as a consequence of the implementation of the clean energy plan in the USA. The price of electricity could rise by more than 10%. Monitoring and mitigation of this risk are included in the company s risk management system. The company s Strategic Resources department is responsible for taking actions to mitigate this risk, which is also included in the company s Energy Policy. The magnitude of the management cost is represented by the team dedicated to managing this variable.