New Holcim boss faces long road to decarbonisation

More than two decades ago, Miljan Gutovic, pursuing an engineering PhD at Sydney’s University of Technology, set out to explore how waste clay materials could be used to lessen cement’s climate impact.

The challenge that the Sarajevo-born Australian will face from May as the chief executive of Swiss cement giant Holcim will be much the same: figuring out how to slash the carbon footprint of the most widely consumed man-made material without altering its fundamental nature as a cheap binding agent.

The 44-year-old’s new role at Holcim, the largest cement manufacturer outside China, comes as the Swiss group pushes to spin off its North-American business next year. 

An infrastructure boom in the US, fuelled by President Joe Biden’s historic $1.5tn spending plan, has boosted demand for building materials, driving up cement prices. Holcim has secured work on more than 100 infrastructure projects in the US until 2026, turbocharging the company’s growth there.

Formed from the merger of Switzerland’s Holcim and France’s Lafarge close to a decade ago, Holcim has been among building materials groups that have fallen out of favour with more climate-conscious investors.

The US revival for infrastructure leading to the decision to split its business has underscored Holcim’s existential need to decarbonise. Shorn of its fastest-growing business, which contributed $11bn in net sales, about 40 per cent of the group, the fortunes of Holcim and of Gutovic will be made or broken by its slower growth but higher-margin sustainable-cement business in Europe.

Gutovic, who has overseen the European business for the past five years, has also led the group’s decarbonisation push. “We are working on decarbonising Holcim, the construction industry, making our cities more sustainable and we are also driving circular construction,” he said last month at the World Economic Forum in Davos.

To that end, the company has innovated and promoted low-carbon products as well as selling off some of its more polluting core cement assets, particularly in emerging markets.

Under its merger and acquisitions strategy put in place by Gutovic’s predecessor, Jan Jenisch, Holcim has disposed of assets in countries including Brazil, Indonesia and Uganda. Two years ago it sold off its India operations for $10.5bn to the Adani Group. At the same time, it has been expanding its lower-carbon business, last year acquiring more than 20 companies.

Jenisch, who will stay on as chair, hired Gutovic into Holcim in 2018 from the Swiss chemical manufacturer Sika, which the outgoing chief executive previously ran. Gutovic is expected to continue to refocus the company, telling Bloomberg last month the group was looking at 20 acquisitions this year.

Some industry executives question Holcim’s commitment to decarbonising the “whole construction industry” when its M&A activity has not solved the notoriously “hard-to-abate” carbon footprint problem facing cement.

“The continuing divestments that Holcim has made . . . leads the industry to question whether they’re stepping down as sort of the industry leaders [on climate change],” said Ian Riley, chief executive of the World Cement Association.

Holcim’s decarbonisation plan has been approved by the Science Based Targets initiative, an arbiter of corporate net zero goals. But as long as the cement industry remains one of the world’s top polluters, responsible for about 8 per cent of greenhouse gas emissions, its leaders will face calls to move faster. 

Despite scepticism surrounding its claims about industry-wide decarbonisation in some quarters, Holcim has been developing lower- carbon cement products, which use limestone substitutes, and recycles materials such as rubble into the cement. It is also investing globally in less-polluting building materials, including heat-reflective roofing materials.

The enduring problem is that much of cement’s footprint comes from the decomposition of limestone when it is heated in a kiln, to create clinker, a crucial ingredient of cement. Hitting net zero emissions by 2050 will rely on reabsorbing some of the CO₂ released in these processes, for which Holcim is building carbon capture and utilisation plants supported by EU funding.

Clay is still on the agenda for Gutovic as a less carbon-intensive cement ingredient. Last year the cement group launched what it said was Europe’s first production line of “calcined clay” for use in cement.

Despite Gutovic’s efforts to refocus Holcim’s business, the negative impacts of the legacy business will be hard to avoid.

In an ongoing legal case filed last year against Holcim in the Swiss canton of Zug, where it is headquartered, residents of the Indonesian island of Pulau Pari affected by rising flood waters demanded Holcim pay compensation for the costs of their water damage and flood protection measures.

Holcim is responsible for 0.42 per cent of global fossil fuel and cement emissions in the atmosphere since the mid 18th century, according to a study by the Climate Accountability Institute research group.

The company said when the case was filed that litigation focused on a single company was not “an effective mechanism to tackle the global complexity of climate action”.

The EU’s tough regulatory environment will provide a tailwind for Gutovic, by providing a “level playing field”, Holcim executives believe. Brussels has put a high price on carbon-intensive industries, including cement and steel, under its flagship emissions-trading scheme, and will introduce a carbon tax on the most polluting imported goods from 2026.

The incoming CEO is counting on government policies as “enablers” of decarbonisation. Speaking at Davos last month, he called for a regulatory framework “to ensure fast execution and deployment of carbon capture technologies” as well as “to accelerate the use of low-carbon solutions”.