Value Added

2017

Statement VAS

Coffee Highway, Colombia

Disclaimer

The main purpose of our Value Added Statement (VAS) is to illustrate the relative importance of our

externalities. Since this assessment reflects the order of magnitude of our added value in monetized

terms, it will help us to increase our corporate and societal value over time. The calculations contained

in this statement do not reflect our past, present or future income nor are they part of our financial

reporting.

Our VAS results should be considered as indicative, as they are calculated through a customized model

based on a set of assumptions. Current approaches could be refined further as new studies become

available. In the coming years, results from former VAS assessments could be re-expressed according

to further methodological refinements.

Although we strive to provide accurate and timely information in this statement, there can be no

guarantee that it represents an exact description of reality. Thus, no actions should be taken based on

the information disclosed in this report without previous appropriate technical advice and a

comprehensive analysis of the specific situation.

For more information, please contact:

Sustainability Investor Relations

Diana Carrero Manuela Ramírez

dcarrero@argos.com.co mramirezm@argos.com.co

Value Added Statement 3

Contents

Introduction 1 4

Page

52 Our VAS

7Externalities3

4 8Value Added Statement 2017

5 9

6

Results 2017

10Applications

Appendix 2: Updates of our VAS 20178 20

Argos Panama

7 14Appendix 1: Assumptions and details on indicators

Value Added Statement4

Introduction

In 2016 Argos became one of the industry and

regional pioneers in quantifying and valuing in

monetary terms the main economic, social and

environmental externalities derived from our

operations*. The result of this initiative is our

Value Added Statement (VAS), which provides a

comprehensive overview of how we retain, add

or reduce value for society as a whole.

Externalities are impacts that the company

generates towards third parties and which

represents for them costs and benefits that

are not being reflected in our financial

statements. Hence, our VAS allows us to

know the balance between our positive and

negative impacts and, as a result, a

magnitude of the intangible value that we

create for society. In addition, our VAS can

provide us with the necessary information to

increase this value, while aiming to:

Figure 1: VAS objectives

Make better

informed and more

responsible

business decisions

Enable more

accurate risk

management

Promote accountability

within and outside our

sector

In 2017, we achieved significant progress on each objective, through the development and

exploration of specific applications (see page 10).

2017 brought up significant challenges that

required the redefinition of our strategy to

ensure the sustainability of our company over

time. Our VAS not only allowed us to identify the

main impacts derived from this transformation,

but also reassured our commitment with the

superior purpose we have as a company: to

build dreams that foster development and

change lives. As a result, in 2017 the net value

that we created for society was 804.3 million

dollars, 4.73 times the benefit we retained

during the same period.

Results 2017

* Visit our VAS Report 2015-2016 at: http://reporteintegrado.argos.co/pdf/vas.pdf

Argos Center for Innovation, Colombia

Value Added Statement 5

Our VAS

Our VAS is designed to calculate the net value

we create for society during a given fiscal

year. Its results are expressed in monetary

terms and portrayed as a financial bridge

chart (see figure 2), which begins with the

benefit we retain in the form of earnings. This

amount can be tracked in our annual financial

statements (see Appendix 1).

Each subsequent bar shows the societal value

we created through our economic, social and

environmental externalities. The positive or

negative result of each bar depends on the

nature of each impact (see box 1).

The final bar represents the net value added

to society, that is, the societal value we

created after accounting for all externalities.

Additionally, we calculate the proportion

between our retained earnings and the net

value to society, in order to obtain a clear

vision of the relationship between the

generation of corporate and social value.

Currently, our VAS comprises eleven valued

externalities, which derive from our operations

and cover all our regional divisions (Colombia,

United States, Caribbean and Central

America) and business lines (cement,

concrete and aggregates). As new possibilities

arise to quantify and monetize our impacts,

we will explore the feasibility of expanding our

reach to a broader range of externalities and

to the other segments of our value chain.

Box 1: example of an externality

An externality is an impact generated

during the execution of our business

activities, which may generate costs or

benefits to third parties and that we do not

assume as a company, i.e., they are not

accounted in our financial statements.

For example: the effects that our

extraction activities have on biodiversity

can generate costs to society in terms of

fewer or reduced ecosystem services.

However, these negative impacts can be

mitigated by rehabilitation or

compensation projects undertaken by us.

Therefore, the monetary value of this

externality results from the balance

between the use and rehabilitation of our

intervened areas, as well as the effective

compensation actions we take on.

Retained

benefitExternalities

Net value to

society

Figure 2: basic bridge chart

Value Added Statement6

Reviewing scope and

methodology:

The technical teams involved in

the methodology review the scope

of the model

Analyzing and

communicating results:

We report the results,

communicate to our

stakeholders and explore

future applications

> >

Figure 3: Main stages of the Argos VAS update

Our VAS was based on KPMG’s True Value

methodology for 2015 and 2016. We built a

model with the input of all technical areas of

the company, which participated during the

scope definition, data collection and analysis of

results.

The procedure for developing the subsequent

versions of our VAS is explained in Figure 3.

First, we refine our current monetization

approaches as new theoretical developments

become available (see box 2). Therefore, in

2017 we reviewed and updated the

assumptions and multipliers of our VAS.

This exercise will be carried out annually, so

the model always counts on references

aligned with globally implemented impact

valuation methodologies, which guarantees

the reliability of our results, as well as their

correct interpretation and transparent

communication (see Appendix 2).

After disclosing our results, we develop

specific applications oriented to fulfilling our

VAS’ three main objectives. This is possible

due to the contribution of multidisciplinary

teams and stakeholders interested in

initiatives that maximize societal value (see

page 10).

Updating the model:

We update the model with the

most recent data and multipliers

Box 2: how do we monetize our externalities?

In order to quantify and monetize each externality, we require two basic components:

Input data, which are captured when performing our business activities (e.g.: emitted

tons) and are directly related to the externality.

Multipliers, which can be mainly found on the literature and transform the input data

into monetary values.

However, each externality is monetized differently and requires specific assumptions and

valuation approaches in order to adapt these values to the required time and locations. All

calculations are gathered in a model that aggregates the monetized externalities. Appendix

1 explains in detail the assumptions, the methodology and the sources used for each case.

METHODOLOGY

Value Added Statement 7

Externalities

Climate change impact through

Greenhouse gas emissions

(Scope 1 and 2)

Air pollution impacts

associated with Argos’

emissions of NOx, SOx and

Particulate Matter

Impacts on water scarcity

caused by our water

consumption

Impacts on biodiversity via

extraction operations and

facilities as well as offsets and

rehabilitation programs

Environmental externalities

Impacts of replacing raw

materials and fuels with

alternative ones, which results

in avoided CO2 emissions

Impacts on workers and

communities associated with

occupational incidents (injuries

& fatalities) and illnesses

Impacts deriving from the

additional salary earned by

more skilled employees that

return to the job market after

leaving Argos

Impacts of projects on housing,

community and educational

infrastructure,

scholarships and others

Social externalities

Impacts in the economy

deriving from the remuneration

of our employees

Impacts in the economy

related to interest and dividend

payments to financial

institutions and investors

Impacts in the economy

associated with tax payments

done to the governments of

the countries in which we

operate

Economic externalities

The following are the externalities that we valued in 2017:

Salaries and benefits Interests and dividends Taxes

Talent development Community investment Health and safety

Greenhouse Gas (GHG)

emissions

Air emissions Water consumption

Biodiversity Alternative materials and

fuels

Value Added Statement

More than ever, we are conscious that we rely

on our adaptability in order to face the new

challenges common to the industry, the

market and the environment.

Thanks to the commitment of all our

employees, in 2017 we increased our

efficiency, enabled our operational

transformation and optimized our production.

Also, we successfully integrated new

operations and maintained our competitive

position in the market.

In the process of organizational

transformation, it is important to realize that

all of our decisions impact society in a positive

or negative way. We must be aware that there

are different and emerging ways of impacting

society that are currently unknown to us. Our

challenge is to unveil them as we interpret

the information we gather from our

immediate surroundings, which gives us the

opportunity to discover new ways of

maximizing our societal value.

Our most recent results show that we are

fully committed to continue delivering value,

as we transform ourselves for the future.

8

Our net value to society in 2017

amounts to USD 804.3 million

dollars, 4.73 times the benefit

we retained during the same

period.

Figure 4: Value Added Statement 2017

Value Added Statement 2017

Value Added Statement

Results 2017

The net costs to society associated with our

environmental externalities amounted to

345.4 million dollars. Greenhouse Gas (GHG)

emissions are the most significant externality

in this dimension, which currently account for

78% of the total costs to society derived from

our environmental impacts. However, during

2017, the use of alternative materials and

fuels allowed us to avoid 11.7% of the societal

costs derived from our GHG emissions.

The main challenge in 2017 in terms of

reducing our negative externalities was

implementing our guidelines and practices in

our recently acquired operations. We are

committed to continue enforcing our

Environmental Strategy, which includes

climate change, emissions, water and

biodiversity, circular economy and

sustainable construction as fundamental

pillars.

The net social benefits derived from our

economic externalities amounted to 969.8

million dollars, 47% of which come from

the effects in local economies generated

by our salaries and benefits. The effects of

our economic externalities increased by

5.4% compared to 2016.

The main challenge in 2017 in this

dimension was creating social value given

the reorganization of our business

activities and our increasing operational

efficiency, in line with our BEST initiative

(Building Efficiency and Sustainability for

Tomorrow). We continued complying with

the payments to our interest groups in a

timely manner, contributing in this way to

greater dynamism in local economies.

Thus, in the future, our ability to generate

positive economic externalities will be

determined by our increasing

competitiveness and our capability to

endure over time.

9

The net benefit associated with our social

externalities was 9.8 million dollars, mainly

as a result of community investments. In

2017, the returns on these investments

accounted for 71% of the total benefits

derived from our social externalities.

The results in 2017 show greater

opportunities to create value through the

strengthening of our human and social

capital, and to continue preserving the life

and integrity of the people through our I

Promise management system.

Environmental externalities

Social externalitiesEconomic externalities

Value Added Statement10

Applications

Our first strategic objective as a company is to create sustainable value. Our VAS serves as a

tool to assess our progress in the achievement of such purpose. At a more detailed level, with

our VAS, we aim to:

Develop a robust metric for measuring progress on value creation

Integrate sustainability criteria into investment appraisal processes

Understand correlations between externalities and risks, both

strategic and emerging

Identify and compare risk scenarios

3

Continuously inform our stakeholders about our performance in

a transparent manner

Improve our reporting methods and capabilities

1

We conducted the first assessment to analyze financial vs.

environmental cost for potential investments in machinery and

equipment.

We mapped potential risks of internalization of negative

externalities associated with the strategic risks of the company.

We developed new methods for quantifying risks, based on our

impact valuation approaches (see case study).

We disclosed the methodology and results of our VAS for external,

internal and specialized audiences.

2

Make better informed and more responsible business decisions

Applications

Progress

2017

Enable more accurate risk management

Applications

Progress

2017

Promote accountability within and outside our sector

Applications

Progress

2017

Value Added Statement 11

RISK MANAGEMENT

Internalization is the process through which a

company may eventually assume all or part of

its externalities. In particular, the costs to

society derived from our negative externalities

may be internalized through regulations,

natural hazards, changing market dynamics or

stakeholder actions. A lack of awareness of

such internalization possibilities could increase

our exposure to the risks we face as a company

and affect our financial results as a

consequence.

Currently there are limited and case-specific

approaches to quantify the potential drivers

of internalization and the way they affect

business performance. To this date our VAS

has allowed us to make progress in this field,

through the following steps:

Develop quantification methodologies, in order to estimate the impact of internalization

on the company's financial performance

Analyze and communicate results for decision-making

1

2

3

Find common variables of our externalities and our strategic risks and assess the

feasibility of quantification

For the first step, we designed and explored the

feasibility of quantifying certain scenarios. For

example, when facing potential opposition from

stakeholders to keep operating or developing

projects (Strategic Risk 8 - R8), the societal

costs derived from our negative externalities

towards the community might be assumed by

the company in the future through

compensations, taxes, or losses of business

opportunities.

As a result of step 1, we obtained scenarios

that are feasible to be assessed in the short

and medium terms (see figure 5), based on

which we will develop case studies in order to

quantify our risks in a more accurate way (see

box 3).

R12R8

R5

R7

R1

R2

R9 R11

Figure 5: Feasibility of quantification of Strategic Risks (R)

and externalities.

The aforementioned risks are: R1: Loss of market participation and

fall in production/prices in key regions; R2: Delays in closing

competitiveness gaps in costs and expenses in key markets; R5:

Limited access to capital or necessary opportunities for achieving

growth plans; R7: Regulatory changes or political instability that

inhibit cost-efficient, profitable and sustainable operations; R8:

Objections from stakeholders to keep operating or developing

projects; R9: Improper actions associated to fraud, corruption,

money laundering and financing terrorism; R11: Lack of talent for

critical levels and positions, with suitable skills and know-how in

order to execute the strategy and expansion plan.

Short term

Medium term

Value Added Statement12

Box 3: Quantifying our exposure to water-related risks

Water stress is the degree to which the availability of water in a certain territory meets its

demand. Therefore, an increased water demand by different local stakeholders could

derive in negative consequences for our company due to the internalization of the

externality we cause.

Although our VAS currently quantifies and monetizes the costs generated to society derived

from the water we consume, we want to forecast not only the potential future increases in

societal costs, but also the effects of a probable internalization, that is, the magnitude of

the impact on our financial results in the future.

Internalization could be determined by the potential increase in water stress in the areas

which we operate. Water stress is influenced by factors such as demographic growth and

hence an higher demand from different parties for this limited resource. Consequently,

costs to society derived from our consumption in areas of higher water stress could be

internalized through market dynamics (e.g., via prices) and be reflected in our operational

costs. This would represent a materialization of our Strategic Risk 12, which refers to the

occurrence of natural events that could affect the continuity of our key operations.

To estimate our degree of risk exposure, we designed a model that estimates the financial

effects of internalization in the long term (2030), based on:

Our water consumption projections, determined by our Environmental Strategy goals,

Forecasts of water stress in the areas in which we operate,

A demand factor by local inhabitants on water

In 2018, we will run the model for operations located in areas with higher water stress,

which allows us to estimate the relative importance of complying with the goals

established by our Environmental Strategy regarding water consumption, plus the extent to

which our consumption levels can have an impact on the financial results of our company.

Quarry, Dominican Republic

Value Added Statement 13

Since our first impact valuation exercises for

2015 and 2016, we have designed and carried

out a communication strategy in order to

explain the methodology and results of our VAS

to different stakeholders through numerous

platforms. With this, we positioned our VAS as a

transparency mechanism to show the

magnitude of our impacts and the

advancements regarding our applications.

Among others, we disclosed our VAS through

case studies in the Natural and Social Capital

Protocols*.

To date, quantifying and monetizing

externalities does not result from a worldwide

accepted and standardized methodology. For

more than two decades, several organizations

have developed conceptual frameworks that

have awakened the interest of several global

sustainability initiatives, such as the World

Business Council for Sustainable

Development (WBCSD) and the Dow Jones

Sustainability Index (DJSI) (see figure 6)**.

We follow the emerging guidelines in these

initiatives regarding impact valuation, and

contribute to the discussion and definition of

methodological approaches in joint platforms

such as the Impact Valuation Roundtable

(IVR). This allows us to continuously explore

possible improvements of current approaches

and replicability of previously applied

methods in different regions and industries.

Figure 6: Impact evaluation over time. Based on the analysis of KPMG 2016

*: Visit our case studies at the Social Capital Protocol http://social-capital.org/case-studies/understanding-societal-value-creation-

through-cementos-argos-value-added-statement-vas and the Natural Capital Protocol http://www.wbcsd.org/Clusters/Natural-

Capital-and-Ecosystems/Business-Examples/Argos-Assessment-enhances-decision-making-risk-management-and-transparency

**: Figure 6 shows examples of organizations and companies that have publicly disclosed their valuation results. The acronyms

include: ESIA (Environmental Social Impact Assessment); FMO (Netherlands Development Finance Company) NS (Dutch Railways);

TCO (Total cost of ownership); TNC (The Nature Conservancy); DJSI (Dow Jones Sustainability Index); WBCSD (World Business Council

for Sustainable Development); P&L (Profit & Loss); FES (Financial, Environmental and Social).

TRANSPARENCY AND ADVOCACY

14

Appendix 1Assumptions and details on indicators

Pervious concrete

Value Added Statement 15

We calculate the retained benefit by subtracting income tax, as well as the interest and

dividends paid by the company, from ebitda. This information is available in our Financial

Statements found in our 2017 Integrated Report1.

EBITDA: USD 501.331.520

Income tax: USD 72.168.131

Finance cost: USD 150.533.993

Dividends: USD 108.604.351

.

Supplier spend

For 2017 we monetize the economic effects derived from payments to our suppliers. However,

we exclude this item from our VAS report in order to guarantee consistency in the scope, since

we value other externalities only for our operations.

Salaries and benefits, taxes, interests and dividends

We define our economic externalities as the effects on the dynamisation of local economies

derived by stakeholder payments. We made these disbursements during the year to employees,

governments, investors and financial institutions2.

We calculate the value we create using an indirect effect multiplier, which we define as the rise

in demand and consumption in a local economy by an increased liquidity in the economy. This

effect consists of:

GVA (Gross Value Added): percentage of initial expenses injected into different sectors of the

economy through increased consumption and spending by interest groups. GVAs are taken

from the OECD’s input-output tables3.

Backward linkages: multiplier effects created by triggering supply and demand among

interdependent sectors in the economy. A proxy for backward linkages are the inverse

Leontief functions, derived from the OECD’s input-output tables.

Due to limited data availability, we use the same GVA and backward linkage multipliers for

Colombia, Caribbean and Central America.

Initially, we monetize our economic externalities assuming fully efficient local economies

regarding resource distribution and economic impact. Subsequently, we correct for economic

inefficiencies in order to take into account external corruption-related activities in the countries

where we operate and in which we do not participate. We calculate this correction using

Transparency International Corruption Perception Indexes for each country4, which reflect the

way in which external conditions may affect our company's societal value creation.

1) Visit our Integrated Report 2017 at: https://www.argos.co/en/Sustainability/Materiality-Analysis-and-Integrated-Reporting. Figures from our

financial statements are reported in COP and were converted using average rates for the accounts of the Comprehensive Income: 2.950,94.

2) For more information about taxes paid, visit https://www.argos.co/en/Sustainability/Materiality-Analysis-and-Integrated-Reporting

3) Input-output tables are available at: http://stats.oecd.org/Index.aspx?DataSetCode=IOTS

4) Our VAS 2017 took Corruption Perception Indexes of 2016, available at:

https://www.transparency.org/news/feature/corruption_perceptions_index_2016

Economic externalities

Retained benefit

Value Added Statement16

.

Occupational Health and Safety

We monetize the externalities taking into account the work-related incidents (serious or

moderate severity, and fatalities) of employees and contractors, plus occupational diseases of

employees and third-party fatalities (e.g. road incidents).

We multiply the incidents by the social costs of the injuries or fatalities according to Safe Work

Australia (2015)5, which estimates the average costs for the employee and the community in

rehabilitation and healthcare expenses, administrative fees and loss of current and future

income. We do not take into account costs for the employer, since we assume that they are

already reflected in our financial results. Given that monetization factors are expressed in

Australian dollars (AUD) for 2013, we adjusted the currency and GDP, so they reflect the total

costs for each regional division.

Talent development

We assume that employee training translates into greater productivity and efficiency for the

company, which are already internalized in our financial results.

Effects derived by talent development become an externality once employees leave Argos and

earn a higher income in the labor market from higher qualifications. We designed an approach

that allows us to monetize such externalized effects as the impact on the local economy of the

additional salary that the employee receives when getting a new job. We monetize by

multiplying the social return rates of education for a given level of training (Montenegro and

Patrinos, 2014)6 times the average training hours of our employees per year and the annual

turnover rate.

Community investment

We monetize the impacts of the following investment lines: low-income housing, community

infrastructure, educational infrastructure and scholarships. We adopt the Social Return on

Investment (SROI) methodology, which consists of calculating the benefits for the community

derived from a specific project in a given locality, for each monetary unit invested in the project.

SROI multipliers are location or country-specific. When no local multipliers are available, we

select the closest methodological reference and perform approximations to local conditions.

The following are the studies from which we extracted the SROI multipliers:

Low-income housing: For Colombia, Caribbean and Central America, we selected the average

multipliers from four different studies7; while for the United States we use calculations by

Mitchell and McKenzie (2009)8.

5) Safe Work Australia, The Cost Of Work-Related Injury And Illness For Australian Employers, Workers And The Community: 2012-2013, 2015

https://www.safeworkaustralia.gov.au/system/files/documents/1702/cost-of-work-related-injury-and-disease-2012-

13.docx.pdf?_sm_au_=iMVZ1fTLNLrQ8LS8

6) Claudio E. Montenegro and Harry Anthony Patrinos. Comparable Estimates Of Returns To Schooling Around The World, 2014, World Bank Policy

Research Working Paper #7020 http://documents.worldbank.org/curated/en/830831468147839247/pdf/WPS7020.pdf

Social externalities

Value Added Statement 17

Community and educational infrastructure: For Colombia we chose Clavijo et al. (2014)9 as

reference; while for the Caribbean and Central America we take the average multipliers of

Brazil, Mexico and Argentina published by Standard & Poor's (2015)10. The calculations for

the United States are based on Cohen et. al., (2012)11.

Scholarships: We use the private internal rate of return for investment in education from the

OECD (2017)12. For Colombia, the Caribbean and Central America, we select the multiplier

from Chile.

In addition, we monetize the electricity we supply to neighboring communities in our operations

in Haiti. We assume that the avoided expenses in electricity bills by the beneficiaries, lead to an

increase in domestic spending in multiple sectors of the country's economy.

Therefore, we take the price of energy in Haiti from the Bloomberg New Energy Finance’s

Industry Intelligence Database and calculate the spin-off effects derived from such household

spending by using our indirect effects multiplier under the same approach we adopt to

monetize our economic externalities.

.

Greenhouse gas (GHG) emissions

We monetize the impact of scope 1 and 2 emissions, which represent around 70.7% of our

GHG emissions. Our calculations are based on the social cost of carbon (SCC), which reflects

the damage to society generated by GHG emissions during its useful life.

We use the estimate of the United States Environmental Protection Agency (EPA, 2016)13,

which amounts to USD 30.44 after adjusting for inflation and the 4% discount rate applied

according to the options provided by the study. SCC figures from the EPA consider changes in

net agricultural productivity, human health, property damage due to increased flood risk, and

value of ecosystem services due to climate change. However, estimates vary according to the

discount rate applied, which determines the present value of future damages.

7) i) Acumen Fund. Property Rights: Ensuring Well Being Through Low-income Housing, 2009 http://acumen.org/wp-

content/uploads/2013/03/Property-rights-for-low-income-housing.pdf

ii) MacKinnon, Lesley. Alolo, Sahada. The Social Return On Investment Of Multifaith Housing Initiative’s Housing Program: Demonstrating Social

Value In Affordable Housing, 2015 https://carleton.ca/3ci/wp-content/uploads/MHI-Social-Return-on-Investment-23022015-v3.pdf

iii) Kliger, Beverley. Large, Jeanette. Martin, Amanda. Standish, Jane. How An Innovative Housing Investment Scheme Can Increase Social And

Economic Outcomes For The Disadvantaged, 2010 http://soac.fbe.unsw.edu.au/2011/papers/SOAC2011_0109_final(1).pdf

iv) ECODES. Análisis Del Retorno Económico y Social Del Proyecto de Viviendas En La Comarca De Bajo/Baix Cinca en Fraga de ATADES Huesca,

Mediante Aplicación De La Metodología SROI, 2012 http://goo.gl/sDIYfG

8) Mitchell, David. McKenzie, Russell. Analysis Of The Economic Effects Of Low Income Housing Tax Credits, 2009

http://www.google.com.co/url?sa=t&rct=j&q=&esrc=s&frm=1&source=web&cd=1&cad=rja&uact=8&ved=0ahUKEwjl64eH1aHQAhXKjFQKHQIoC

hcQFggZMAA&url=http%3A%2F%2Fwww.cluteinstitute.com%2Fojs%2Findex.php%2FJBER%2Farticle%2Fdownload%2F2322%2F2370&usg=AFQjC

NFCWtb6PIqZsCmyGZi1MyU1_6wyww&sig2=a0wBsAOa3imOeE9tmlAgxQ

9) Clavijo, Héctor. Álzate, Marco. Mantilla, Libia. PMI Bogotá Colombia Chapter. Análisis Del Sector De Infraestructura En Colombia, 2015

http://www.pmicolombia.org/wp-content/uploads/2015/06/PMIBogota-Analisis-sobre-el-sector-de-infraestructura-en-Colombia.pdf

10) Maguire, Joe. Standard & Poor's Financial Services LLC. Global Infrastructure Investment: Timing Is Everything (And Now Is The Time), 2015

https://www.standardandpoors.com/en_AP/web/guest/article/-/view/sourceId/8990810

11) Cohen, Isabelle. Freiling, Thomas. Robinson, Eric. The Economic Impact and Financing of Infrastructure Spending, 2012

http://www.wm.edu/as/publicpolicy/documents/prs/aed.pdf

12) OECD, Education At A Glance 2017 OECD Indicators, 2017 http://www.oecd.org/edu/education-at-a-glance-19991487.htm

13) EPA. Technical Support Document: Technical Update Of The Social Cost Of Carbon For Regulatory Impact Analysis Under Executive Order 12866,

2013-revised in 2016 https://www.epa.gov/sites/production/files/2016-12/documents/sc_co2_tsd_august_2016.pdf

Environmental externalities

Value Added Statement18

Air emissions

Global multipliers from TruCost (2013)14 are used to monetize air emissions in order to reflect

their corresponding social cost in the three regions where we operate. Due to data availability,

we calculate the negative impact of particulate matter (PM) emissions based on the cost of

PM10 (relative to particle size), while the impact of sulfur oxide emissions SOx is based on SO2.

The scope also includes nitrogen oxide (NOx) emissions. The impact derived from air emissions

depends on the population density of the areas where we operate. As a conservative approach,

we use the average cost of atmospheric pollutants.

Selected multipliers include impacts on human health, forest and crop yields, corrosion of

materials and water acidification. However, health impacts (monetized according to the value of

a statistical life) account form approximately 90% of the total cost.

Water consumption

We monetize the externality associated with water consumption by multiplying the amount of

water consumed times the cost it generates to society, based on a study conducted by TruCost

(2013)15. This approach assumes that the societal cost derived from water use varies

depending on the level of water scarcity in a given territory. Calculations include water

consumption across all operations, taking into account direct non-consumptive use and indirect

use (e.g., value for recreation, biodiversity, groundwater recharge, waste assimilation).

Biodiversity

We calculate the impact on biodiversity using the estimated annual benefits of restoration

projects in different ecosystems around the world (TEEB, 2009)16 due to the limited availability

of local assessments. We apply this multiplier to the liberated areas, plus the current active

operations, less the areas we rehabilitate.

We excluded the areas of concrete plants, since they were established on built areas, and

therefore we assumed that there was no additional impact on biodiversity.

Alternative materials and fuels

We estimate the relative impact of the use of alternative fuels and materials taking into

account:

Landfill emissions avoided by the use of alternative materials or fuels (if the alternative

material or fuel had not been used by another company).

The emissions that were avoided by not extracting, producing or consuming natural

resources (in the case of fuels).

14) TruCost PLC Natural Capital at Risk: The Top 100 Externalities Of Business, 2013 https://www.scribd.com/document/282468297/Natural-

Capital-at-Risk-The-Top-100-Externalities-of-Business-TEEB-2015-pdf

15) Idem.

16) TEEB (2009) TEEB Climate Issues Update. September 2009 http://www.teebweb.org/wp-

content/uploads/Study%20and%20Reports/Additional%20Reports/TEEB%20climate%20Issues%20update/TEEB%20Climate%20Issues%20Upd

ate.pdf

Value Added Statement 19

Since the materials and alternative fuels used are waste or by-products, we do not include the

negative impact of manufacturing them. We monetize avoided emissions based on the social

cost of carbon that we choose in the externality generated by our GHG emissions.

.

Geographic scope

Our Value Added Statement (VAS) covers our three business lines (Cement, Concrete and

Aggregates) in our three regional divisions: Colombia, the United States and Caribbean and

Central America. The latter comprises the following countries: Haiti, the Dominican Republic,

Honduras, Panama, Suriname, Dominica, Antigua, Puerto Rico, Saint Marteen, the Virgin

Islands, the British Virgin Islands and French Guiana.

Inputs from Argos White and Argos Aggregates were added to the Colombia regional division

under geographical criteria and given that the company has financial control over these two

companies.

Adjustments for inflation

When necessary, we brought to present values the monetary figures of 2017 using the

variations of the Consumer Price Indexes from the International Monetary Fund World

Economic Outlook (WEO) databases.

External assurance

Indicators for building our VAS were verified by Deloitte as part of their Independent Review of

our 2017 Integrated Report. The corresponding assurance statement is available on pages 116

to 120 of such report17.

General remarks

17) https://www.argos.co/en/Sustainability/Materiality-Analysis-and-Integrated-Reporting

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Appendix 2Updates of our VAS 2017

Colored concrete

Value Added Statement 21

We constantly update and refine our model, so we always count on the most recent approaches

and studies for our impact valuation calculations. We can make the following changes with

respect to previous years:

Changes in data collection mechanisms

Changes in monetization approaches

Update of multipliers with new external references

The following table shows the updates and changes for each externality in 2017:

Table A2.1. VAS updates and changes in 2017

Occupational Health and Safety

The costs to society derived from incidents and fatalities were updated with a new version of

the study The Cost Of Work-Related Injury And Illness For Australian Employers, Workers And

The Community. This version updates the 2008-2009 estimated costs, which were selected as

reference for our VAS 2015 and 2016. The update consists of an alignment with the most

recent version of the Work-related Injuries Survey (WRIS, by its acronym in English) by the

Australian Bureau of Statistics (ABS).

Externality

Changes in data

collection

mechanisms

Changes in

monetization

approaches

Updates in

multiplier

Salaries and benefits

Taxes

Interests and dividends

Talent development

Health and Safety X

CI* – infrastructure

CI – housing

CI – education

CI – scholarships X

CI – electricity

GHG emissions** X

Air emissions

Water consumption X

Biodiversity

Alternative materials and

fuels

*CI: Community investment.

**: Although an updated version of the EPA study was published, the value of the multipliers did not change.

Value Added Statement22

Community investment: scholarships

The private internal rate of return for investment in education by the OECD was updated to

2017 values found in the most recent version of Education At A Glance. For this version, the

counterfactual of the educational levels also comprises middle education. For 2016 values,

post-secondary non-tertiary education was also taken into account. Additionally, for calculating

foregone earnings in the 2017 version, the income of non-students replaces the minimum

wage used in the previous version.

GHG Emissions

We recalculated the baseline (2006) and the series of direct emissions from cement operations

in 2014, 2015, and 2016, in compliance with the Energy and CO2 Protocol (WBCSD - CSI,

2011), in its chapter on baselines, acquisitions and divestments.

Water consumption

In 2017, for the definition of facilities located in areas with some degree of water stress, we

used the Aqueduct tool of the World Resources Institute (WRI), which measures the relationship

between the total water intake and the total supply available per year. This tool replaces the

Global Water Tool, used for calculating estimates in our VAS 2015 and 2016.

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