Heidelberg Materials: Assessing Product Carbon Footprints

By Stefan J Reichelstein, Teresa J Landaverde Lorenzo, Patrick Liebmann, Rebecca Meier, Margot K Sutherland
2023 | Case No. SM365 | Length 11 pgs.

In January 2023, Carolyn Lukaso, CO2 strategist at Heidelberg Materials (HM), formerly HeidelbergCement, considered the challenge of delivering on the emissions target set by the management board: the reduction of CO2 emissions to 400 kg CO2/ton of cementitious material by 2030, a 30 percent reduction from 2021 levels.

Even though HM considered itself an industry leader in reducing carbon emissions in the hard-to-decarbonize cement industry, the company was under intense public, regulatory, and internal pressure. Management at HM felt that, with the introduction of new procurement guidelines in Germany, it was now even more important to win government contracts for cement and concrete. Yet, there was broad recognition within the sector that reaching net-zero by 2050 would require pulling a number of “decarbonization levers,” such as the use of slag as a supplementary cementitious material (SCM).

Lukaso was familiar with the various measures of carbon emissions that global and national stakeholders applied to the cement industry. Given the various ways of assessing emissions, Lukaso wondered whether there would be any measurable impact from choosing one allocation method over another, and what such a selection would mean for the emissions reported by the cement and steel industries. Lukaso hired a consultant to create an Activity-Based Emission (ABE) allocation system (analogous to an activity-based cost system commonly used in cost accounting). The ABE system assigned CO2 emissions rather than costs to products.

Reflecting on the consultant’s analysis and in view of the industry’s projected annual growth rate of over 5 percent, Lukaso wondered how the company should assess the carbon intensity of its different cement products.

For consultant’s ABE analysis (Excel file), please send a request to: businesscases@stanford.edu

Learning Objective

In this case, students consider whether the use of slag in cement is an effective lever in lowering product carbon footprints and CO2 emissions, in the context of industrial decarbonization. Students assess two other methods of allocating emissions, the economic and physical quantities allocation methods, to account for the carbon footprint of slag. Lastly students consider what makes an industry hard-to-decarbonize, the impact of carbon prices on these industries, and whether or not free allowances should be given to firms in these industries.
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