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Value added to society (VAS)

Impact assessment

Impact assessment is the monetization of positive and negative externalities derived from our operations that are not reflected in the Financial Statements.

 

At Cementos Argos, we have developed a model that we call the Value Added Statement to Society (VAS), based on the KPMG True Value methodology, which allows us to convert social, economic and environmental impacts to US Dollars and, thus, determine our value generation to society

Principal objectives of the VAS

01

TO MAKE MORE RESPONSI BLE, BETTER INFORMED DECISIONS
  • To offer extraordinary solutions to our clients.
  • To more accurately respond to the interests and needs of our Stakeholders.

02

Acting in a precise manner and in response to today's challenges
  • To be more agile and adaptable in a changing world.

  • To ensure our sustainability

03

TO PROMOTE ACCOUNTABILITY INSIDE AND OUTSIDE THE SECTOR
  • To contribute to transparency in the sector
  • To sensitize Stakeholders and society

Scope of the business model

The vas monetizes impacts of:

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Externalities

Our VAS is composed of eleven externalities classified in three dimensions.

These were chosen to be part of our model due to the magnitude of the impact generated and their relevance to our stakeholders:

VAS Results 2022

In 2022, we will contribute to society 3.75 times the value we retained for the company.

The results of the VAS show the social and economic influences we are facing, the economic growth in the countries where we are present, the behavior of the housing and infrastructure construction sector, consumer confidence and the purpose of working for the progress of the countries, clients, communities, collaborators and investors who trust us. This is why, in addition to the excellent news of our all-time highs in terms of consolidated revenues and operating EBITDA, we added the increase in net value to society, as we contributed more than US$760 million.

The main lines of work that maximized the positive impacts were: -Payment of salaries and benefits, interest and dividends that allow us to invigorate the economy. Talent development, with a focus on equity, diversity, employee training, health care and well-being.-Joint work and investments in the communities, which positions us as better neighbors and allies.-Identification of environmental externalities, which allows us to be more aware of the use of natural resources and our role as agents of change.

Net value to society

0

CORPARATE VAS 2022

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The economic value generated in 2022 from externalities Wages and Benefits, Taxes and Interest and Dividends was USD 943,953,397. We continue to work with conviction so that our share price reflects the true value of the company and its multiple growth opportunities. At this point it is also necessary to mention our commitment to reduce the company’s leverage indicator, which closed at 2.8 times for the period 2022, thus achieving greater financial flexibility, which is a great achievement to highlight in our management during the year.

We generated social value equivalent to USD 10.2 million. In 2022, we continued with our desire to continue investing and generating development hand in hand with our communities, which explains the good performance of the externality “Investments in the community”, which presented an increase of 168.5%.

In 2022 we generated environmental costs equivalent to USD -394.4 million, as a result of our greenhouse gas (GHG) emissions, atmospheric emissions, water consumption, and impacts on biodiversity. In this dimension we also have a positive externality that evidences our efforts to replace traditional materials and fuels with less polluting ones, which was quantified at USD 23.6 million.

Annexes

SALARIES AND BENEFITS

Through the payment of salaries and benefits to our employees, we contribute to the dynamization of the economy and support the development of our entire team. This externality increased by 0.6% compared to the previous year, reflecting the stability that the company provides to its employees and their remuneration levels.

TAXES

By paying taxes, we contribute to the development of the countries where we operate. 2022 had very good results for the company in terms of income, which brought higher contributions in tax obligations; these payments increased by 5 % compared to the previous year. Cumulatively between 2021 and 2022, we have increased tax payments by 52 %, which is positive after a pandemic period in which this item had dropped considerably.

INTERESTS AND DIVIDENDS

We are fully focused on producing ever better financial results that repay the trust of our investors. In 2022 we advanced several initiatives focused on maintaining constant and transparent communication and generating greater value to this stakeholder group, always seeking that our actions reflect the true value of the company and its growth opportunities. This externality had an increase of 57% over the previous year, mainly due to the increase in interest payments in the Colombia and United States regions.

GREENHOUSE GAS (GHG) EMISSIONS

GHG emissions represent the global impact we have on everyone. They mainly refer to our Scope 1 and 2 CO2 emissions. This externality had a negative increase of 3.6%, explained by an increase in cement production of close to 5%. On the other hand, during most of the year, there was a higher demand for coal exports due to the increase in international prices, which affected the domestic supply and the supply of good quality thermal coal.

ATMOSPHERIC EMISSIONS

Atmospheric emissions also had a lower performance compared to 2021, increasing by 14.87 %. This is partly due to increases in production and other variables in the production processes.

WATER

The cost associated with this externality increased by 33.9%. We understand that our productive activities have an impact on ecosystems; therefore, in 2022, we will see increases in water consumption in our three regions and in the intervened areas in the Caribbean and Central America.

BIODIVERSITY

The cost associated with this externality decreased by 7%, which demonstrates our commitment to caring for this ecosystemic resource.

ALTERNATIVE MATERIALS AND FUELS

This externality decreased 18.5% due to multiple variations in the availability of alternative materials and fuels in the three regions. We seek to increase the use of materials such as ash and slag and fuels such as tires and biomass with the objective of betting on a more sustainable production.

TALENT DEVELOPMENT

The impact of this externality depends on the turnover of our employees, the total hours of training offered and the ratio between men and women. This externality increased by 27.17 %, explained by the increase in the number of female employees in the United States and the Caribbean and Central America regions. There were also significant increases in the number of training hours in these regions. On the other hand, this externality is positively impacted by the number of employees who leave the company, because they take with them the knowledge and experience acquired to be applied in new scenarios. In 2022, we reported a total of 251,570 training hours for our employees.

INVESTMENT IN COMMUNITIES

In 2022 we evidenced an increase of 168.5% in this externality. This is due to our commitment to continue investing and generating development hand in hand with our communities. Also, this year we redefined our social investment lines so that they can more rigorously represent the contributions we make in the territories. We highlighted significant increases in the Colombia and Caribbean and Central America regions, specifically in housing, linked to the Healthy Homes program, and educational infrastructure.

OCCUPATIONAL HEALTH AND SAFETY

For Argos, the health and life of its employees will always be of the utmost importance. In 2022, this externality presented a negative behavior of 27% due to the increase in long absences reported by employees in the Caribbean and Central America and the United States. In 2023, we will continue our commitment to contribute to the development of a safe and healthy society; therefore, we focus beyond ZERO, zero: injuries, illnesses and affectations to our employees and stakeholders to raise awareness about wellness and the value of life.

Atmospheric emissions

We are committed to reducing our emissions through actions that achieve more efficient processes and the implementation of abatement measures, contributing to good air quality in the places where we operate.  Our cement-, concrete- and aggregate-production processes generate punctual and scattered particulate matter (PM) emissions, as well as emissions of sulfur oxides (SO2) and nitrogen oxides (NOx) in the clinkering furnaces of the cement plants.

  • For society:  To contribute to mitigating the impact on air quality in the areas where we operate, acting responsibly and promoting relationships of trust with our Stakeholders.

 

  • For the company:  To develop more efficient processes that allow us to reduce our atmospheric emissions and contribute to responsible production, complying with local regulations in the countries where we operate and – in some cases – going beyond compliance with said regulations, contributing to the profitability of the business and preparing to face future challenges.

The “Emissions” pillar of our Environmental Strategy focuses on: Working on the adequate measurement, control and reduction of SO2, NOx and particulate-material (PM) emissions generated by our production processes in the cement business and on the prevention and mitigation of our dispersed emissions of particulate material (dust), originated mainly by the activities of transportation, transfer, unloading and storage of materials in the cement, concrete and aggregate processes. The foregoing, through operational control, optimization and renewal of emission-control systems to achieve continuous improvement.

Industry positioning

We position ourselves as strategic allies for the development of the territories where we are present, directly and through the empowerment of our value chain.  We do it through the construction of housing and sustainable infrastructure that enables the closing of socioeconomic gaps, the generation of employment, the improvement of the quality of life and the reduction of the impacts generated.

  • For society:  To sustainably respond to the growing demand for housing and infrastructure of the world population with the aim of improving people’s quality of life, interconnecting regions and developing innovative solutions. 

 

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    For the company:  To be strategic allies of the actors in our value chain in order to maintain the Company’s leadership in the market, ensure its competitiveness over time and increase the generation of sustainable value.

We are committed to the role we have as a Company in the achievement of the 2030 Agenda goals, the consolidation of territorial development plans where we operate, and the economic reactivation of the countries affected by the pandemic. Therefore, we focus our efforts in the development of sustainable housing and infrastructure projects that contribute to closing socioeconomic gaps, generating employment under safe conditions, environmental protection, and investment in improving people’s health systems and quality of life. 

Our work unfolds in three large lines:

 

Cities for everyone:

 

With nearly 54% of the world  population living in urban areas, the pandemic made inequality of those who live in the cities of the world

manifest. Nearly 90% of the COVID-19 cases are concentrated in the urban

centers that have, among others, challenges associated with access to basic services and decent housing conditions. For this reason, we work together with our value chain to develop projects that benefit the lessfavored population, facilitate access to housing, and promote development in

the areas of influence.

 

Interconnected cities

 

The need to connect urban areas with rural areas to expand the coverage

of basic services, such as health, has been a priority of developing countries

since before the pandemic. Therefore, during 2020, we continued working on creating innovative solutions that allow us to be present in the large projects of the countries and territories where we are present.

 

Intelligent cities

 

In recent years, the acuteness of the effects of climate change became the

risk of greatest impact to the world. Therefore, in the global stage, a need

has grown to transition to a low-carbon economy, an opportunity that becomes more relevant amid post-pandemic recovery scenarios and the effort we are making as a Company to generate new business models that respond to environmental and social challenges. For this reason, our Climate-Change Strategy includes actions aimed at mitigating the impacts associated with our productive processes, adapting our operating model and innovating from the identification of optimization opportunities.

Supplier management

Supplier management is a fundamental pillar of our Supply Chain Strategy; it seeks to build and strengthen relationships with strategic allies who have the ability to contribute to the Company in terms of efficiency, productivity, customer service and innovation.  For this reason, we carefully select our suppliers, transfer knowledge to promote their development, promote good practices and recognize those who are an example of sustainable, innovative, safe and responsible management.

  • For society:  To develop our suppliers, promote transparent practices and responsible conduct, to improve the productivity and competitiveness of our society and support the construction of a better future.

 

  • For the company:  To seek to add value throughout the Company’s supply chain, from the purchase of goods and services to the delivery of products to clients.  Through the mitigation of risks and potentiation of opportunities, the implementation of good contracting practices and service excellence, we create relationships of trust and turn suppliers into business allies.

Our management is divided into five stages:

  1. Identification: We determine the goods and services required for our operation and the category to which they belong, according to our Category Tree. This groups our suppliers into macro-categories which – in turn – are subdivided into two more specific levels.
  2. Pre-Selection: We validate the suitability of suppliers through due diligence and review aspects of sustainability and financial health to ensure long-term relationships.
  3. Negotiation: We select suppliers with high standards, considering technical, economic, sustainability and service aspects.
  4. Retention and evaluation: We carry out knowledge-transfer processes with those suppliers with growth potential.
    • We characterize our suppliers as critical suppliers or with potential risk in sustainability.
    • We measure the management of critical suppliers through performance evaluations in terms of quality, service, occupational health and safety, having constant feedback and identifying key factors for their development.
    • We apply the Sustainability Index to suppliers with potential sustainability risks, to identify challenges, opportunities, and to develop joint action plans in environmental, economic, social and Human-Rights matters.
    • We implement additional controls and development plans to suppliers belonging to categories where the greatest potential risks have been identified. This is how, for example, we develop road-safety strategies for our logistics suppliers; with mining suppliers, we carry out a more rigorous pre-selection process, and with contractors, we have special controls on occupational health and safety.
    • We have a Transparency Line for Stakeholders to report possible improper actions and to implement the pertinent corrective actions. 
  5. Recognition:  Every two years, through Growing Together (Creciendo Juntos), we recognize the suppliers that have shown outstanding performance in innovation, sustainability, health and safety and development and comprehensiveness.

 

Additionally, we have:

 

Contracting manual: transparent action framework that guides the negotiation and contracting of our suppliers to allow the process to be agile, make use of best practices and carry out adequate risk management.

 

Code of conduct for suppliers: in which we define the principles and behaviors that we expect from our allies in terms of respect for human rights, protection of workers, environmental management, business ethics and responsible business practices.

Ethics and compliance

We are convinced that ethics and integrity are fundamental and non-negotiable; that is why we live by these principles, integrating them into our operations, processes, and strategy, thus generating value responsibly for our business, our Stakeholders, and for society.  Through the Global Governance and Compliance Program, our ethics and business conduct system, we seek to promote that our actions are consistent with the pillars of corporate culture and integrity as the guiding principle of our business activity.

  • For society:  To promote transparent, competitive, and sustainable business environments that strengthen trust and ethics in business, generating positive impacts for the market and society.

 

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    For the company:  To promote that our actions are consistent with the pillars of culture and that integrity is the inspiring principle of all members of the Organization.  This is how we consolidate ourselves as a competitive, reliable company in the eyes of investors and other Stakeholders.

We have voluntarily adopted a self-regulatory framework that confirms our commitment to business ethics as a way to promote transparent practices that contribute to the development of competitive environments. This framework* incorporates mandatory principles of ethics and conduct:

 

 

For the proper implementation and application of these guidelines, the strengthening of the ethical culture, the prevention and control of incorrect actions, our Board of Directors approved the Global Governance and Compliance Program (GGCP, in Spanish). The program structure incorporates international best practices to evaluate compliance programs, such as ISO 37001, ISO 19600 and the United States Department of Justice (DOJ) guidelines. The program has the following scope:

 

 

Likewise, it systematically groups together the activities carried out to promote integrity in the Company’s actions, its employees, and members

of the value chain, which allow the updating and permanent strengthening

of the program. Operating Scheme:

 

Efficiency and productivity

We materialize our Corporate Strategy through actions aimed at the efficient use of resources, the improvement of our financial flexibility and the maximization of income generation and business profitability.  We focus on the application of efficient, safe production processes and circular economy models, on the diversification of energy management models and on the efficient management of the supply chain.

  • For society:  To provide solutions and products that meet the needs of our clients through the responsible, appropriate use of resources and the incorporation of raw materials and alternative energy sources.

 

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    For the company:  To guarantee business sustainability, optimize working capital and capital investments, reduce costs and the level of indebtedness, and mitigate risks regarding the availability of resources necessary for our operation and the emergence of new business realities, environmental requirements and new regulations.

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