SVKM’s NMIMS SCHOOL OF BUSINESS MANAGEMENT Program: MBA (LAW) Year: 1 Academic Year: 2022-2028 Subject: Environnient Management Marks: 40 Date: 3 February 2023 Time: 2:00 PM to 4:00 PM Durations: 2 (hrs) No. of Pages: _!* Va < \S- Final-Bxamination (2022-23) Instructions: Candidates should read carefully the instructions printed on the question paper and on the cover of the Answer Book, which is provided for their use. 1. All questions are to be attempted. 2. All questions carry equal marks. 3. Answer to each new question to be started on a fresh page. 4, Figures in brackets on the right hand side indicate full marks. Q4. Draw a process flow diagram of cement production. List possible ways in which the cement production process contributes to environmental pollution? How is Dalmia Cement trying to reduce the various emissions from different sub-processes and what are the challenges involved? 10 marks 2. According to the case facts, Mahendra Singhi, the CEO of Dalmia Cement believes in social and economic sustainability of his business, in addition to environmental sustainability. What is the need for the former two sustainability aspects in the context of cement manufacturing? Don’t you think he is unnecessarily diluting his focus from environmental sustainability by doing ti 10 marks Q3. How do you explain Dalmia Cement’s growth story between 2008 and 2019? What is the role of sustainability in this growth story? 10 marks Q4, What is carbon pricing? How is internal carbon pricing going to help in justifying the investments into waste heat treatment project in the Rajgangpur plant? What are the advantages/disadvantages of the internal current carbon pricing adopted by Dalmia Cement? 10 marksS| ae ey ge A | cas resrute OF wwceuEa Tamnon | BANGALORE IMB 845, GRAY TO GREEN TRANSITION — THE SUSTAINABILITY JOURNEY OF DALMIA CEMENT HARITHA SARANGA AND SIRISH KUMAR GOUDA. Haritha Sarangs, Profesor of Production & Operations Management, Indian Institute of Management Bangalore and Sirish Kumar Gouda, Assistant Professor in Operations Management & ecision Sclences, Indan Insitute of Management ‘Tieuchirappali, prepared this case for cass discussion This cage isnot intended to serve as an endorsement, source of primary data, oF to show effective or inefficient handling of decision or business processes. Copyright © 2020 by the indian Institute of Monagement Bangalore. No part of the publication may be reproduced or {transmitted in any form or by any means ~ electronic, mechanical, photocopying, recording, or otherwise Including internet) ~ without the permission of non Institute of Management Bangalore. ‘Wis document i auherzed fo use nn Dr Bala Kiar Envrcnmont Managemen Narsoe Moje Intute cf Management Stes MMM) fe Sn 2029 oJ 2023In September 2028, 2s an acknowledgment of their decade long efforts towards sustainability, Mahendra Singhi, the Managing Director and CEO of Dalmia Cement (Bharat) Limited (hereafter referred to simply as Dalmia Cement), received an invitation from Jerty Brown, the then governor of California to address world leaders in the Global Climate Action summit. After shating their record-breaking sustainability achievements with the world, ‘Singhi went a step ahead and made a pledge that “Dalmia Cement would become carbon negative by 2040”. Dalmia Cement was the only cement company in the world to make such @ commitment, that too in front of an international audience. To achieve this grand objective, Dalmia Cement would have to not only reduce CO2 emissions significantly but also create mechanisms to absorb more carbon from the environment than what they emitted. This was not the first time that Singhi had made such tall promises. He had made a similar declaration ta 2016 during COP 22 (the Conference of Parties 22) held in Morocco that “Dalmia Cement would become 100% renewable electricity cement group (RE 100}? by 2030". Dalmia Cement was the first company in the world to make sustainability commitments of such grand scale, which include (1) doubling of energy productivity by 2030, (2) 100% renewable electricity by 2030, and (3) carbon negative company by 2040. Puneet Dalmia, the promoter and Managing Director of Dalmia Bharat Limited was the main driving force behind Singh's confidence. Puneet, a sustainability champion, always emphasized on the sustainable growth of the firm, ‘and gave Singhi a free hand in deciding the sustainability goals fr the firm. During the decade leading to 2028, the firm had made significant progress on the sustainability front and was ranked number one among all cement manufacturing firms across the world, on business readiness for a low carbon transition.> Despite this progress, Puneet was well aware that becoming carbon negative was not going to be a cake walk. In addition to the major investments into R&D and technology development, high capital expenditures may be necessary to align their production and procurement processes with the above sustainability targets. In fact, @ completely different ‘rindset and a new approach to business were needed. The technology to achieve such steep targets was still at a nascent stage and pilot studies were being carried out in various parts of the world. Commercializtion of these technologies would take time and required large and risky investments, Mulling over some of these issues, Puneet walked into the board meeting of Dalmia Cement. it was time to chalk out a road map to meet the tall promises ‘made by his CEO to the international audience. OVERVIEW OF INDIAN CEMENT INDUSTRY India was the second largest cement producer in the world next only to China and accounted for nearly 7% of the global cement output. In 2028, India’s cement industry had an installed capacity of close to 480 million tons and employed more than a million people directly or indirectly. A major share of the 298 million tons of cement produced in 2017-2018 was used by the housing sector (“65%) while the rest went into infrastructure, commercial, land industrial construction. In 2038, India was in a growth phase and the demand for cement was expected to increase at 8% compounded annual growth rate (CAGR) over the next 5 years. ‘The cement industry in India was highly fragmented with more than 20 major firms catering to various regions in the country. The top five cement manufacturing firms in India in terms of capacity were Ultratech Cement, Shree Cement, ACC, Ambuja Cement, and Dalmia Cement, respectively. Please refer to Exhibit 1 for a comparison of ‘major players in the industry. CEMENT MANUFACTURING PROCESS Cement industry, the world over is one of the most polluting industries due to the nature of its production processes. While it was the third largest consumer of energy in 2019, it was the second largest in terms of 1€0P 22s the Conference of Parties held under the aegis of United Nations Framework Convention formate Change (UNE). hemes, al the enary wed bythe corporauon wil come rom renewable energy sources 2 This nar based on the roning by CDP. frmerty known 3s the Caton Dilute Projet. i 8 non cot organization tat fctats global closure site of erbon emissions or compari cross the wor, * tie fa del o1g/downoad/ Cement. 2039. Page 2 of 14 ‘is document i aiterze rus on Dr Bola Krishnamoorthy: Enveenment Management _ at Naree Moree nett of Management Stdos (NMI) fom an 2023 J 2028.WA Gray to Green Transition ~ The Sustainability Journey of Dalmia Cement Sow Industrial emissions (after steel industry) contributing to 6% of all global emissions.* According to International Energy Agency's estimates, in 2036, the cement sector consumed 10.5 exajoules of energy and generated 2.2 Bigatons of COs emissions globally.* Cement manufacturing involves four major steps. Fist, the raw materials such as limestone and clay are quarried from the mines and transported to cement manufacturing plants. These raw materials are then erushed and fed Into a rotary kiln where temperatures of the order of 1500°C are maintained. De-carbonization of limestone takes place in the kiln and clinker comes out as output. After cooling, clinker is either stored in lage silo or transferred to grinding mills, which grind the clinker into fine powder and with blending of cementitious alternative raw ‘materials such as blast furnace slag or fly ash, cement is produced, Thus produced cement is then transported to the markets using trucks and trailers, Each step in the cement manufacturing process is a potential contributor to environmental pollution. Limestone being the basic raw material for cement production; cement plants are generally set up closer to a limestone ‘quarry. The quarrying process can also cause dust and particulate matter emissions. Approximately, 55-60% of the (COs released in cement-making process js emitted from the raw materials during the de-carbonization of limestone into clinker. About 20% CO2 emission can be attributed to fossil fuels used in the Kins for heating limestone and nearly 10% GHG emissions are attributable to electricity use, The other minor emissions take place {rom on-site equipment and vehicle use. Traditionally, coal is used for heating cement kilns which is a major source (of carbon emissions. Cement production process is highly energy intensive and use of thermal and electrical ‘energy for various operations also contributes to the emissions from the plants, Apart from these emissions, water Isa key resource in cement production process as itis used for cooling, dust suppression, and other needs, Indian cement manufacturing firms were highly regarded across the world, because of their green operations. Five ut of the top ten cement manufacturing companies with lowest emissions belonged to India, and as per the ranking by the Carbon Disclosure Project (CDP), Dalmia Cement topped the charts with the lowest carbon feotprint in the cement industry anywhere in the world, Even the average energy consumption values of Indian cement companies were well below the global average values. For example, the average specific electrical energy Consumption of an indian cement manufacturer was 80 kWh/ton of cement while the global average was 91 kWh/ton? ABOUT DALMIA CEMENT Dalmia Bharat Group was a leading Indian conglomerate with a strong business presence in cement, sugar and Tefractories, with cement leading the pack. While Dalmia Bharat Limited (DBL) commenced operations in 1935, Dalmia Cement was established in 1939, and it has played a pivotal role in India's manufacturing sector as well as DBL’s growth. In mid-2000, when the group was looking around to make strategie investments, being the major business of the group, Dalmia Cement naturally attracted the major chunk of these investments. These strategic investments coincided with India's rapid economic growth and its focus on infrastructure development. As 2 result, almia Cement saw an exponential growth in a period of one and a hel decades (sce Exhibits 2 & 3). Starting with a single plant (with 2 capacity of 1.2 million tons) in 2006, Dalmia Cement became one of the top five cement ‘companies in India by 2019, operating 12 plants in 9 states (with @ total capacity of 26.5 millon tons) and serving ‘markets in 21 states. Dalmia Cement achieved this through organic and inorganic growth strategies including ‘acquisition of Caleom Cement, Adhunik Cement, OCL, and Kalyanpur cement in the East and greenfield and brownfield expansions in Karnataka and Assam, respectively. In 2018, the company employed 11,343 people, Which included 5,836 permanent employees (and the rest contracted) and reported a revenue of 1.25 billion dollars and eatnings* of about 295 million doliars. The company enjoyed a total of 11.2% market share across its "internal rerey Agency 2017 Report sto "hte mw nang onehewaressleniconment, "Eamings were measured in terms of EBITDA Earrings befor income, a, dprecltion and amertiation, Page 3 of 14 ‘Toe document is sutra fr va ony nr Bas Kisnemoorth/sEnveenment Management at Neste Marjee nse of Managemen Stas (MIMS) or an 2028 oJ 202,Wn — The Sustainability Journey of Dalmia Cement ae Gray to Green Tran: operating geographies. Exhibit 2 provides a visual description of Dalia Cement’s plant sites and serving markets, Exhibit 3 depicts their growth from 2005 onwards, tracking key milestones until 2019. BEGINNING OF THE JOURNEY TOWARDS AN ENVIRONMENTALLY SUSTAINABLE BUSINESS To be a leader in building materials and evoke pride In all stakeholders through customer-centrcity, innovation, sustainability and our values. = Vision statement of Dalia Bharat “The story goes that, when Puneet returned home after completing his MBA in 1997, with a gold medal to boot from IIM Bangalore, one of the most prestigious management institutions in India, his father told him that Puneet ‘would have to prove his worth and credibility on his own, for him to entrust Puneet with a $140 million worth of business, He gave Puneet a grant of about half a milion dollars and asked him to demonstrate that he’ could start a business on his own and un it successfully. Thus, after working in his company for a couple of years 2s a regular employee, Puneet became an entrepreneur by co-founding JobsAhead.com in 1999 with one of his best friends. jJobsAhead soon became one of the few successful dotcom companies in India and garnered a market share of close to 50% before it was sold to the world’s leading e-recrultment firm Monster.com in 2004 for about 9 milion dollars. In 2005, Puneet finally took over the reins of the cement business from his father. Puneet was a strong believer in ‘environmental sustainability from his early childhood and was highly concerned about the adverse impact of ‘cimate change in various parts of the world. Right from his childhood, Puneet was nurtured with the values of ‘compassion and respect for nature and learned from his grandfather that in order to achieve something one should only use (what nature has to offer) but not abuse. He therefore decided to follow the motto of responsible production and consumption and began the sustainability drive at Dalmia Cement in earnest by adopting strong ‘measures to reduce the carbon footprint. For instance, as part of their sustainability drive in 2012, Dalmia Cement tigned the Cement Sustainabllty initiative? (CS!) charter and started following the low carbon technology roadmap they had developed along with other progressive cement companies in india. Even though the company achieved ‘exponential growth under Puneet’s leadership, he tried very hard to ensure that it was not at the expense of ‘environmental sustainability. Infact, Dalmia Cement’s growth in environmental and social sustainability was hand- Inchand with its economic growth. Further impetus to sustainability efforts came about when Singht joined Dalmia Bharat Ltd. as the Group CEO of coment division in December 2013. In addition to the vast industry experience, Singhi also brought with him penchant for sustalnablity.?? He was a great advocate of adoption of sustainable practices in the Indian cement industry and wanted to transform its image from ‘Grey to Green’. He had also served as Co-Chair of CSI in India Puneet felt that both their visions were aligned, which was clear from what he had said during Singhi's joining, "We're very excited to have Mr. Singhi on board with us. With his deep experience in cement, and commitment to increasing the happiness quotient of people, we are confident that he will lad our cement business to newer heights and support in unleashing the potential of our people.” ‘Together with the vision of Puneet and the experience and enthusiasm of Singhi,”* Dalmia Cement began the journey towards becoming a sustainability champion in the industry. ve work caved out by the Cement Sustains Ina tno vansferred to Global oman & Concrete Association (GCCA) ‘=n 2000 Sngh et vais postions inthe nan Cement industry, such st President - Cement Manufacturers sedation (CMAD; Chairman “national Coune for Cement ond Bulg Mater (NCCEMI; Chatman - Development Coure fr Cement Industry, Ministry of Commerce & industry and Co-Char, TER Couelfor Busnes Surana (TER-CBS). "Singh also represented Dolmia Cement in various Intemational forums and commissions, such as Commissioner, Energy Transitions ‘Commision (ETC, London, Uk; Commissioner, Hghdevel Commision an Carbon Pricing and Competitiveness, World Bank Grow, US; Director, Global Cement and Coneree Assoltion(SCCA), London. UK. Page 4 of 14 “nis document i auihrtizn fo us on Bas Klsamcorth/s Envronment Manageant_at Norse Meroe ete of Management Studies (NMIMS) om Jan 2023 oJ 2028.Gray to Green Transition ~ The Sustainability Journey of Dalmia Cement Siw WORK CULTURE @DALMIA CEMENT Given his vast experience in the cement sector, Singhi knew that attaining the environmental sustainability goals that they had set for themselves was not going to be easy. However, he was an eternal optimist and made it a point to say every day ~ “Clean and green is profitable and sustainable” and instiled this sentiment into every employee of the organization. Accordingly, several green initiatives were taken up over the years, such as tree planting to increase the green cover across the various plants and the mines owned by Dalmia Cement, water conservation, and waste utilization to reduce natural resource consumption, ete.” These initiatives not only resulted in making a positive impact on surrounding environment and employee morale, but also increased profitability through reduction in input costs and savings in aw materials. ‘Singhi believed in making the workplace a happier place and emphasized that the prosperity of the employees was very important for the growth of the company. One way to achieve this was through strong economic growth of the company, which in turn would lead to better opportunities and rewards for the employees. Singh's beliefs were closely aligned with Dalmia Bharat’s guiding principle and purpose, which are stated below: ‘To deliver happiness to our people by focusing on both their wellness and well-being, thereby delivering individual, family, and organizational peace & prosperity. ‘Along with sustainability, Puneet and Singhi constantly encouraged innovation. Both felt that one cannot innovate ‘when there is low tolerance for failure in the organization. And they strongly believed that they would not be able ‘to use the full potential of staf if they feared failure. Therefore, they gave a free hand to their employees and ‘encouraged people to experiment, whenever they faced a new challenge, This work cufture helped Dalmia Cement to develop several indigenous solutions which were not only cost-effective but also contributed to the larger goal of sustalnabilty One such project involved developing an in-house solution for alternative fuel feeding system. The traditional feeding system involved manual handling which was laborious and inefficient. A proposal was made to bulld a new feeding system for these alternative fuels which required a capital investment of $650,000. To find an alternative to this large capital investment, the management Invited ideas from employees to develop an in-house solution. After several weeks of brainstorming and collective effort from multiple cross-functional teams (CFTS, see Exhibit 4 for more details, they identified an unused passenger lift, which, with little modification could be used to handle the alternative fuel feeding. This in-house solution cost them only about a tenth of the initial estimates for investment ($73,000) and resulted in a net saving of more than half a million dollars, Dalmia Cement also aligned its business operations with Sustainable Development Goals™ (SOG) and identified key ‘S06 work areas. The Social Responsibility arm, Dalmia Bharat Foundation also developed their 2030 SOG footprint land specific target areas to work with local communities. Further, Dalmnia Cement became part of the New Leadership Group for Industry Transition, which was announced in 2019 in UN General Assembly. This group was formed to drive transformation in hard-to-decarbonize and energy-intensive sectors ‘TACKLING THE SUSTAINABILITY CHALLENGES @DALMIA CEMENT Daimia Cement adopted the following four-fold approach to achieve their environmental sustainability goals: * nups//ww dalniocement com/goaren html ‘The 17 SDGs are apart ofthe 2030 Agenda which was adopted by UN ia September 2015. These SOGE proude 2 Blueprint “to achieve 2 beter and more sustainable future for al. They adress global challenges sch a poverty, dining wate and santtion, gender neqaly, stfordsbehesthcare, sustainable production and consumption, ee hitos/fvon.un o/Sustabbledevelooment/sussinaba-develonmen sl Page 5 of 14 ‘The document i suibriz use ely in Dr Baa Krshramoorb/s Emeerret Management at Nrece Nore ns of Manager Stas (MMS) Hm Jan 2028 fo 2028Gray to Green Transition ~ The Sustainability Journey of Dalmia Cement &% Usage of Alternative Fuels and Raw materials (AFR) ‘Thermal and Electrical Energy Efficiency Fossil Free Electricity Generation Water Conservation ALTERNATIVE FUELS AND RAW MATERIALS Alternative Fuels ‘Traditionally, cement industries have been using fossil fuels for thelr processes. However, an increased emphasis fon conservation of such fossil fuels and reduction in COz emissions led to several innovations at Dalmia Cement. Several alternative fuels such as petroleum sludge, tire chips, rise husk, bamboo, pet coke," carbon black, coal fines and municipal waste, and several other locally sourced materials were used in kilns. Use of alternative fuels is {g00d for the environment as it reduces CO: emissions.* However, it poses a different challenge for the cement production, since the cement plants have to be reconfigured to be able to dynamically use different fuels for ‘energy generation. Thus, Dalmia Cement plants had to change their feeding systems and process parameters in ‘order to become flexifuel and multi-fuel compliant. This substitution of fossil fuels with alternative fuels was represented by thermal substitution rate (TSA). Through their tireless efforts across the plants, Dalmia Cement managed to increase the TSR from 0.6% in F¥2012-13 to 4% in FY2017-18. While the Indian cement industry average was well below 3%, some of Dalmia cement’s plants in Oalmiapuram, Ariyalur, and Kadapa achieved highest TSR level of around 15-20%, However, these rates varied across the year, as the supply of these materials ‘was extremely variable, Also, any changes in the fuel mix caused inconsistencies in the cement production process such as excess moisture, coatings in the kiln, and other emissions. The fuel mix also impacted the overall production capacity per day. ‘Talking about the need for further improvement on alternative fuel front, Puneet said, “Our currant group average TSR of alternative fuels is less than 10%, This means that there is a huge scope for Improvement. In fact, some of ‘our competitors are able to achieve a substitution rate of about 25%. The best substitution rates in the world are close to 80-90% and we want to reach there, We always benchmark ourselves with the best in the world... ‘Thirty percent of GHG emissions in 8 cement plant are attributable to fossil fuel use in the kiln. Hence, 100% use of alternative fuels or biomass fuel can reduce 30% of the GHG emissions In cement plant. Alternative Raw Materials In the process of making cement, limestone gets converted into an intermediate product called clinker. Due to the ‘amount of COz that gets emitted during this process, firms In the cement industry constantly strive towards reducing the amount of clinker used in the overall production process (or) alternatively increase the amount of cement produced proportional to the clinker input. Along with clinker, waste output from other industries was used as a raw material whenever possible. For example, fly ash, a waste of thermal power plants, can be permanently disposed-off In cement manufacturing as a substitute to clinker. Similarly, blast furnace slag, a waste from stee! industry, can be used as @ substitute for clinker in cement, However, It remains a challenge to reach the highest level of permitted substitution, and simultaneously to ensure that there are no adverse impacts on important properties of cement such as its strength, durability, and ability to withstand harsh conditions. This requires optimization of the whole process. Dalmia carried out in-house R&D to develop blended cements using 2 As of 2018, uso of pt coke as fuel is banned in nda except for ue in cement industry ast eleases more emisions than eo during ts infact, soves a maor problem of cipotl of non-recyeble paste. Municipal corporations tle up with cement manufetuing rms to provide non-recylable plastic tlw price, tobe ured a5 an aerate fas bythe cement companies. Ti ia win-win for both patos 25 ths one of the safest and most economical lsposal_-mechanims of nonrecycable plat. tos atin com rumba cemen fuser Som-on-recyiblepia/atile24637227.cce Page 6 of 14 Tis documents avbriced fr us nn Dr Bala KrtrarcotysEnvtenment Management _atNarao Mono nett of Managerent Suse (NMI) om an 2023 oJ 7023c n—Thi Sw ns inability Journey en i Gray to Green Transition ~ The Sustainability Journey of Dalmia Cement industrial waste materials that still met the necessary performance characteristics. Processes were modified to sive blended cement the same or better levels of resilience, strength, quick setting, and ability to withstand corrosive environments as that of unbiended cement. Their sourcing strategies were also revamped up to identify ‘and source finer fly ash, which proved to be a good substitute for clinker. Such innovations not only reduced the amount of COs emitted through limestone processing, it also reduced the ‘amount of limestone mined from natural resources, ultimately helping in further environmental conservation. One Important sustainability measure in the cement industry is the clinker factor, which measured the amount of clinker used per unit of cement produced. The clinker factor of Dalmia Cement has been one of the best in the world. In 2017-18, Dalmia Cement achieved a clinker factor of 0.61. In fact, the Low Carbon Technology Roadmap developed for cement industry in India by CSI had set a target of 0.58 for 2050, and Dalmia was very close to achieving it. ‘The clinker factor however varied across Dalmia Cemert's different plants based on the availabilty of fly ash and bast furnace slag. For example, all the plants of Dalmla cement located in the easter part of India produced 100% blended cement (Portland Slag and Composite Cement) because of the ready availabilty of slag from the steel Industries located in that region. As a result, Dalmia’s plants in the eastern region managed a significant lead over ‘ther plants in reduction of carbon emissions (see Exhibit $). Since transporting slag from one place to another was extremely challenging and expensive, it was not possible for other Dalmia Cement plants to maintain similar clinker factors across the country. To remedy this, Dalmia Cement also started working on development of new ‘cement types such as Limestone Calcined Clay Cement (LC). By the end of 2019, this new variety of cement was under an advanced stage of testing for standardization and had completed a plant scale trial. While alternative raw materials have the potential to reduce 55-60% of GHG emissions coming out of cement production process, significant amount of R&D Is needed to come up with blended products that meet the ‘necessary performance and regulatory requirements to realize this potential. ‘THERMAL AND ELECTRICAL ENERGY EFFICIENCY IMPROVEMENTS Dalmia Cement also invested heavily in the energy efficient technologies. Dalmia Cement was one of the pioneers in bringing the Vertical Roller Mills(VRM)} for grinding of limestone and cement in India, The cement plants being ‘operated by the company were modern dry process plants with 5/6 stage pre-heaters, efficient multi-channel bburers in the kiln, and state-of-the-art grate coolers. The company also signed up for EP 100, for doubling the energy productivity by 2030. Energy Productivity isan integrating concept. Measuring the Energy Productivity (EP) 's altogether different from Energy Efficiency (EE). While EE only covers increasing the efficiency of the energy consuming equipment or system, EP captures total value delivered from energy employed. EE Is technical term and measures the amount of energy consumed per unit of output produced. However, EP is an economic term and ‘typically measures revenue generated per unit of energy consumed. Since EP is defined in terms of a ratio, EP can be increased either by Increasing the economic output (the ‘numerator) or by reducing the energy use (the denominator). This means that improvement in EP can be realized by identifying effective ways of producing more output with the same or lower amount of energy and associated greenhouse gas (GHG) emissions, ‘Acore manufacturer, for example, would be less concerned ina typical energy ‘aut’ that is primarily focused only Con identifying the energy savings. This is because such audits may often neglect wider productivity benefits from improvement in the throughput. Preferably, to measure the EP of an organization, total revenues are considered While verical rer mils cost higher than (hoon) ball mils, hey provide beter quality output and are enery efficient teen eeenrant com fesone: ss2602201G/eament grinding bol lls vera! eller mil 032/k~ et0b ssocaedkocs, Page 7 of 14 ‘This dosent arid ute on Dr Bala Krhramoorty/sErvrorent Management_atNareee Mone lsu of Management Sues (NMIMS) em Jan 2023 4 2023.Gray to Green Transition - The Sustainability Journey of Dalmia Cement pan against total energy consumed (thermal and electrical) to measure the performance on EP over the years. Dalmie ‘Cement improved its energy productivity by 109% within a decade. FOSSIL FREE ENERGY GENERATION Power generation through waste heat recovery system Heat generated in the cement production process in the rotary kilns and calciners, most often gets dissipated into the environment. However, this heat (considered as waste heat) can be utlized to heat the incoming raw material and fuel (which might have inherent moisture content). This system of reusing the waste heat is called as waste heat recovery system (WHRS). In 2017, Dalmia cement commissioned a 9.2-megawatt WHRS in Rajgangpur plant in the state of Odisha. While the investment in this system was considered financially unviable as the company already had access to captive power plant, the application of an internal carbon price (see Exhibit 6 for more details about the Internal Carbon pricing) of $11 per ton of COs made sure that it became a viable option. Of course, this investment became possible only after receiving a strong support and push from the senior ‘management. The recovery of waste heat would reduce the site’s emissions by nearly 80,000 metric tons of CO equivalent annually. Subsequently, three more waste heat recovery power generation systems got approval from the board and were in various stages of implementation by the end of 2019, in the integrated plants operated by Dalmia Cement. ‘Asa thumb rule WHRS can address 15-1856 ofthe captive electricity needs of the cement plant. WHRS can address about 20% of the 10% electricity related GHG emissions ina plant. Renewable Energy ‘To reduce CO: emissions further, Dalmia Cement invested heavily in renowable energy. Dalmia Cement established solar plants in the states of West Bengal and Orissa, and continuously worked towards increasing energy generated through renewable sources. To optimize the energy generated from the solar plants, they adopted several Innovative practices. For example, in thelr Cuttack plant, the solar modules were tilted twice a year to different angles to maximize exposure to sun. To avoid overheating of solar modules during the summer, they grew plants such as watermelon, pineapple, and aloe vera below the panels. Dalmia Cement also invested in harvesting wind energy in the state of Tamil Nadu. Singhi’s pledge in COP 22 gave them a new target, of becoming ‘an organization that uses 100% renewable energy by 2030. After making this decaration, the leadership began to fengage consciously with other industry partners within and outside the cement industry and began to work towards achleving this goal. A detailed roadmap for the renewable energy deployment was developed with the help of a third-party consultant, However, renewable energy would affect only 10% total GHG emissions from a cement plant, even if al fossil fuel-based electricity usage is converted to renewable. WATER POSITIVITY Jn 2014, Dalmia Cement decided on a target to become water positive by 2017. This resulted in concentrated efforts on water conservation and rainwater harvesting across the plants and beyond the plant boundary through their social responsibilty arm Dalmia Bharat Foundation. ‘The water requirements at Dalmia Cement for cement production processes, domestic and other use were fed by 2 variety of sources including surface water, underground water, municipal networks, rainwater, and recycled water. To minimize water consumption in the cement manufacturing process, Dalmia Cement carried out many technological interventions along with debottlenecking exercises. Design stage improvements were also carried out by installing air cooled condensers in the captive power plants. The other water efficiency measures, which included automated float valves, additional metering of sub-sections etc, enhanced recycling and reuse and air cooling of gas. Page 8 of 14 “Tin document i auhrzed fo vs on Dr Baa Krishnamoorthy Envronment Management _ st Narsce Moree laste of Management Sts (NMIMS) or an 20281. 229.ene An interesting example of the impact of water saving came ftom Dalmiapuram, which faced acute shortage of water during the summer of 2016. To address this shortage, a CFT in the plant investigated its operations and found several areas of leakage. The team immediately addressed these leakages and carried out capacity de- bottlenecking at the sewage treatment plant, which resulted In savings of neerly 500 cubic meters of water per aay, As a step towards attaining water-positivity, Dalmia Cement moderated the use of water at all plants and increased development of rainwater harvesting structures. By 2017, all Dalmia Cement plants became zero water discharge systems by reusing the treated water in cement mills, for coal mill water sprays, in green belt development, for dust suppression activities in mines and the internal roads, etc. in addition, Dalia Cement also created Enviro-Parks, using harvested rainwater and ground water from recharged ponds, leading to enhanced aesthetic beauty, biodiversity as well as conservation of water. This meant that the rainwater harvested in thelr plants, mines and through community initiatives was more than the combined annual water consumption at all their cement plants, captive power plants and domestic water consumption In thelr colonies. With these efforts ‘made on water harvesting and conservation, Dalmia Cement became 2.5 times water postive by 2017, and 5 times water positive by 2019 at group level, with & plants having water positive status at the plant level. Their next target was to make every remaining cement plant water positive and reach 20 times water positive status by 2025 by making adequate amount of water available to the local communities and reduce water availabilty risks for business. JOURNEY TO BECOME CARBON NEGATIVE In July 2018, as an acknowledgment to thelr decade long efforts towards sustainability, Daimia Cement received an invitation from H.E. Anténio Guterres, Secretary-General of the United Nations, to share the climate actions and ‘commitments taken by the company at UN General Assembly in New York along with 63 heads of states. The fact that Dalmia Cement was the only Indian company to receive an invitation to address the UN General Assembly that year became a testament of Dalmia’s commitment toward green practices. Singhi took this opportunity to reiterate the pledge he made in the Global Climate Action Summit ~ 2018, that Dalmia Cement wos committed to ‘become a carbon negative cement group by 2040. This pledge required them to putin place enough mechanisms to remove more carbon from the environment than they emit, through carbon sequestration or use of carbon negative technology.” ‘The sustainability measures taken so far had helped Dalmia Cement’s carbon footprint to be 40% lower than the “ alobal average for cement companies by 2020. However, one of the major challenges to become 100% carbon ‘egative was the amount of COz released during the calcination of limestone, which was the main raw material for Producing cement. This emission category constituted 55-60% GHG load of a cement plant and cement manufacturers around the world found it extremely dificult to abate this load due to non-availability of viable technological options. As the technology available for carbon capture and utilization/sequestration (CCU/CCS) was still at a nascent stage (lab phase or test phase), Dalmia Cement held discussions with several global technology Providers to explore if and when these technologies would become commercially viable. They also began to explore potential collaborations with several firms such as Shell, Oil and Natural Ga¢ Initiative, Global CCS institute, Energy Transitions Commission, McKenzie, etc. As a member of New Leadership Group on Industry Transition, which consisted of India, Sweden, France and many more leading countries and companies looking to reach net zero carbon emissions by the mid-century, Dalmia Cement believed that additional synergies could be brought in through this coalition to meet their carbon negative target by 2040, This technology can address 80-85% of process-related emissions. While alternative raw materials can reduce process emissions by limiting the use of limestone, it cannot directly affect the process emissions. CCU/CCS technology is the only solution to reduce [process emission. This is the reason why cement sector is considered a Hard-To-Abate sector and success of (CCU/CCS technology is essential for the success of deep decarbonization in the sector. ® araturl or arial process by whieh carbon exe it removed frm the stmotphece and eld in solid or igi form Page 9 0f 14 ‘Tos docuet is auth for use ery Or aa Kshnamoarthy/ Envonment Management at Naree Meroe Inet of Managemen Stes (NMIMS) rm an 2029 oa 2023,~ ni ia SB jon ~The Sustainability Journey of Dalmia Cement a Gray to Green Tra ‘After going through a variety of options put forth by the senior management team, Puneet and Singhi shortlisted the following four strategies: © One option was to work with various technology providers for improving carbon sequestration technologies. Since these technologies were stil at a lab/test phase, Dalmia Cement could partner with the technology developers to test them on a pilot basis in thelr cement plants and if found successful implement them at @ large scale across the plants. ‘+ Another potential option was to increase the use of biomass such as rice husk and chipped bamboo for heating the kilns. The rice and bamboo plants not only absorb CO: while they are growing but can also be used 1a alternative fuels in cement and power plants,post harvesting; thus, they can act as good sequestration ‘material. If Dalmia Cement starts growing bamboo themselves instead of buying it from someone else, they could also count the CO: absorption during bamboo's growth stage toward their target. + One could reduce dependence on fossil fuels by increasing investments in renewable energy. Dalmia Cement had already commissioned an 8 MW solar power plant and proposals for nearly 90 MW were also in the pipeline. Making more investments into renewable energy should reduce further dependence on fossil fuel- based energy and thus help with the carbon negative targets. + Waste heat recovery, if commissioned across all plants could also help reduce CO. emissions significantly. ‘twas time for them to decide which direction to take. Singhi had already committed on behalf of Dalmia Cement to become 100% renewable energy by 2030. Given that some of these strategies were already underway, Puneet and Singhi had to quickly decide on the mix of efforts to achieve their sustainability goals in an efficient and effective manner. While Singhi was quite confident that Puneet would come up with a way to make his pledge come true, Puneet knew that he had some sleepless nights ahead... Page 10 of 14 ‘ie docuontls suherzd fr ue on n Or Bala Kshrancorty’sEnironmert Management at Narsee Marios tue of Managemeet Suds (NIMS) fom on 2023 oJ 2023Gray'o Geen Transton ~The Sustanaity Journeyo Dania Coment SA Varma Exhibit 1 on of top five cement manufacturing firms in India in 2019 Fie Production | Thermal Glinker] Carbon* | PBT** (in | Specific (Net) (inition | Substitution | Factor | Price (per Emissions (ke tons) Rate (TsR%) ton of Cor/ton of Core} ‘cementitious material) Ultratech 3475 6720 360] 079% 3000 | S236 68 Cement ‘Shree 3730 25:06 300) O77 za) ae 343 Cement Acc” Baar 78.36, aa7| NAL 4733 | 1859 505, 5 ‘Ambuja 23.65 24.32 S61] 065 30.74 | 22034 530 Cement Dalia 2650 19.35 400/061 i100] 3862 36 ‘coment + Cowes the COs equeent “PT Profi before Tax “ACC= was mown formety tthe Asaited Cement Companies United Source Createdby the authors ung data aval rom ann eprts of he frm and other pub avaible sources Exhibit 2 Visual representation of Dalmia Cement's plant sites and serving markets | : Dalmia Bharat’s i : PLANT SITES | Across India i j | | | QQ riamesies Hi neuen | = | Source: As provided by he Company * average Exchange Rate 15 = 68.345 NR apf Apr 2019 * akelted bse on cement and inker production ales frm Ann Reports * Proprtonal vale cael based on egmen-we prof acre and omer Page 11 of 16 “his documents auterzed fr weeny nr Bal Kiehnamoorty’s Envronnant Management _st Nar Monje Iai of Management Stutes MMS) om tn 2023 2028,Gray to Green Transition — The Sustainability Journey of Dalmia Cement pes Exhibit 3 Timeline of sustainability activities/achievements at Dal = Saeco r semen, | See, | SS” a fe | =. Be scchemeiptarmenenncen tect teres Source; Created by authors, ung company provided Iformation and publ availble information on Daimia Cement Page 12 of 14 “Tis document autres for us on Das Krisnemcorts Enveanment Managua _e Narsee Marjo issue of Maragemnt Studs (AMIS) for an 2023 oJ 2023.‘This documentis utorzn or use ely Dr Boa Krisnemcort/sEnvrcment Management _atNarsee Merle Insti of Mangement Sto (NMIMS) fom Jon 2023 to 202, Gray to Green Transition ~ The Sustainability Journey of Dalmia Cement ae Exhibit 4 Cross-functional Teams To promote sustainability practices across the organization, Dalmia Cement adopted a cross-functional team (CFT) ‘pproach. In this approach, each team constituting members from different departments such as production, ‘mechanical, environmental and logistics, was made responsible for one of the operations in the cement ‘manufacturing process. Each of these teams was encouraged to work on at least two radical projects that contributed to the sustainability goals at the plant level. These teams were evaluated annually based on several Sustainability parameters such as energy savings, alternative fuel and raw material usage, safety improvement, etc. ‘An independent jury selected the best CFT every year and an award was bestowed upon them. ‘Some examples of low-cost indigenous solutions by CFTs at Dalmia Cement: ‘+ As Dalmiapuram plant was facing acute water shortage during the summer of 2016, a CFT brainstormed and ‘dentified a low-cost process innovation ($11,600). This involved capacity de-bottlenecking, installation of level-sensors and automatic control systems and saved almost 500 cubic meters/day of water as well 35 ‘energy used for pumping water to overhead tanks, ‘+ At Dalmiapuram plant, CFTs identified and implemented several process improvements such as optimal use of ‘compressors, air conditioners and usage of cogged belts instead of v-belts in turbines which led to energy savings of up to 5%. * At their Cuttack plant, one CFT identified a simple process change of stacking slag source-wise (based on ‘moisture content). This change allowed them to reduce water consumption from mill water spray and power ‘consumption due to temperature control, which accumulated to savings of nearly $300,000 per annum, Exhibit 5 Carbon emissions of Dalmia Group vis-a-vis global average carbon emissions Carbon Negative by 2040| Groupe, BDA aut sastaas on Fran scOsemision-gftonaf cement ‘Source: Company Website Page 13 of 14Exhibit 6 Carbon pricing Carbon pricing i an important too! that was developed to help countries and firms to transition into @ low-carbon ‘economy, It is a tool to account for socal, environmental, and economic costs of climate change in financial decisions made by firms. While many companies governed under the law are implementing these carbon pricing mechanisms, others not mandated by the law are also investing in it to prepare for current and future polices, to foster innovative green solutions, to mitigate climate-change risks and to respond to stakeholder concerns. In 2017, about 1400 companies across the globe had implemented or were in the process of implementing internal carbon pricing across their operations and supply chains. While carbon emissions were priced by countries between $1 and $140 per ton of COz emissions, firms internally priced it anywhere between $0.01 to $909 per ton ‘of CO2 emissions. ‘These are the four popular ways in which businesses price carbo ‘Shadow price: Shadow price represents 2 notional value that firms associate with carbon emissions to assess the risk of investments In projects. This is done in anticipation of future changes in governmental regulations which are Iikely to inerease the cost of emissions. Therefore, in anticipation of higher cost that emissions would attract in future, investments with big carbon footprint will have highly discounted projected net income, as observed by investors. Internal carbon tax/fee: Internal carbon tax isthe price that firms associate with carbon emissions generated as a part of all business activities. Unlike shadow price, which is applied for projected emissions of future investments, internal carbon tax is applied on current emissions of business activities Internal cap and trade: Internal cap and trade approach sets 2 cap on total carbon emissions from business ‘activities. Under this approach, a firm typically creates an allowance for every ton of carbon emission and any unit ‘of the firm can buy and sell any extra allowances with other subsidiaries in the same organization. Implicit carbon price: Implicit carbon price is calculated based on cost of implementing carbon emission abatement programs. An implicit carbon price can only be calculated after a firm has echieved its carbon emission reduction targets through specific investments in green projects, Page 14 of 14 ‘his dosent euros fr we orn Or Bla Kstnancarty’s Enfrnment Manogemant_at Norte Moje nso Management Stuses(NMIMS) fom Jan 2029 oJ 2023.