Overview of 2010

2010 turned out to be a marginally more optimistic year then 2009 but the market demand for our product, and most other construction / building materials, was still below levels that would ensure maximum operating efficiency. For us this means that we ran our kilns at below capacity at many factories during the year and our energy consumption per tonne of brick or per thousand units was greater than our optimum. We do not have the capability to run our installations intermittently without incurring some major damage with repeated heating and cooling and we also wish to retain the skills of our highly trained workforce for when the recovery finally returns.

Many of the data in this report will have to be read alongside this caveat, in future years when we return to more normal output levels our Carbon Dioxide emissions and other acid gases will show an increase, however, we will be using our energy much more efficiently at higher output.

We wish to continue to invest in our facilities to increase our efficiency, use less energy and create even less waste than the very small quantities that currently arise. However, we are thwarted in this by the lack of clarity in UK energy policy which is a mixture of European measures transposed from Brussels and UK based measures such as the Climate Change Levy and the Carbon Reduction Commitment Energy Efficiency Scheme. All these schemes operate in different time periods to different criteria and targets. Our parent company has few similar situations to cope with in other countries and consequently their investment programme is focused abroad until such time as clarity finally emerges from UK government.

We continue to be concerned at the potential impact of the forthcoming European Union Emissions Trading Scheme (EU ETS) Phase 3 targets for carbon dioxide reduction if our industry is not granted carbon leakage status. This is a mechanism which grants a higher allocation of "free" CO2 allowances to industries considered to be at risk of international competition from countries without any energy or carbon reduction policies. Such industries will consequently only be buying a small percentage of their total requirement in the open marketplace between 2013 and 2020. The higher free allocation is designed to give those industries the time to invest to reduce their carbon emissions before facing the full rigours of competition in the absence of a global carbon dioxide reduction agreement after around 2020. A considerable amount of management time was spent on this issue alone in 2010 compiling data which shows that such measures will lead to considerable market distortion and the potential loss of some industries from the UK and parts of the EU. It remains virtually certain that cement manufacture will be awarded carbon leakage status and as the major CO2 emitting component of concrete products any concrete products in direct competition with clay in the UK or Europe will gain considerable commercial advantage in their respective home markets.

We continue to be unable to fully fund many of the environmental projects that do not give a direct return on investment whilst our focus remains firmly on energy usage which is a significant cost to the business. Such energy projects simultaneously address the future CO2 issues (see above).

Environmental Management Systems

During 2010 all Ibstock Brick Ltd manufacturing sites were deemed to continue to be compliant with ISO 14001 by third party inspections. We sold our site at Funton in Kent but we retain the sites at Pinhoe, Roughdales and Tannochside as non-manufacturing sites.

During 2010 we were a major contributor to work on a Carbon Footprint for the UK brick industry which was third party certified to PAS 2050. Also we achieved the very first Very Good rating under BES 6001 within the UK brick industry (see above). During 2011 we intend to upgrade our environmental management to include BES 6001 and we are implementing an audit of all third party suppliers to include matters on environment, quality, health and safety and employment practices.

Board Member with Responsibility

The Technical Director continued to have executive responsibility for environmental matters in 2010. At the end of the year there was a reorganisation of the company structure the final outcome of responsibilities will be outlined in the next annual report.

The Environmental Continuous Improvement Working Group (ECIWG) met twice during 2010. The meetings continue to be chaired by the Sustainability Manager and has three members of the Ibstock Brick Ltd Board together with the Company Secretary, as attendees.

Corporate Environmental Policy

• The policy is freely available for downloading on the Company Internet site at: http://www.ibstock.com/sustainability-more-info.asp

It is intended to incorporate the principles of BES 6001 on responsible sourcing into our environmental management system during 2011.

Corporate Environmental Targets for 2010

A review of progress on the 2010 corporate targets was conducted in September 2010:

1. Complete the integration of a further 2.9 MW of LFG generating capacity to bring the total up to 10MW.
   This had been achieved and 10.1 MW was the current maximum output. Ibstock was now equivalent to "self sufficient" in terms of electricity generation as 10 MW is the average base load power demand. A further 2.7 MW will be added in 2011.
   
2. Complete reactive power corrections to sites with low Power Factors ie < 0.95.
   A working group has been set up and is dealing with this
   
3. Pursue the feasibility of anaerobic digestion plants at several Ibstock sites and the possibility of combined heat and power (CHP). Also continue to review wind power at other sites as suitable.
   Two Ibstock sites had been included in local development plans for anaerobic digestion neither was currently being pursued. CHP schemes had a 4 year payback which exceeded current CRH guidelines. These could proceed with assistance from external partners who would claim a considerable part of the revenues generated. The wind power schemes had longer payback at 7-8 years and currently these were not feasible for capital submission.
   Pursue pyrolysis of cellulose fibres and other sources as carbon free fuel for kilns / dryers via a Carbon Trust sponsored project.
   Progress had been frustratingly slow. The Carbon Trust had not pushed for faster progress with their consultants (Enviros) at any time. Birtley was hopefully going to host a pyrolysis project to generate a syn-gas fuel and West Hoathly was hopefully going to host a wood-fired conversion of their dryers away from LPG.
   Note at January 2011 the Carbon Trust have now withdrawn from the funding of such projects and this is now being pursued separately as an EU funded project.
   There was also a possibility of a commercial scale pyrolysis project to generate electricity which was being actively pursued. The heat from the CHP engines could potentially be used in the brick dryers.
   Note at January 2011 this is no longer being pursued as the waste contractors concerned have withdrawn form the project.
   
4. Complete registration of Dorket Head to BES 6001 by summer 2010.
   Grading of "Very Good" obtained, next step is to roll-out company wide. Target to complete by end of first quarter 2011.
   
5. Progress a carbon sequestration project using shallow flooding and reeds in part of the Birtley quarry in tandem with Newcastle University.
   Progress again very slow due to reorganisations within Newcastle University.
   
6. Assist the roll-out of Brickshield (innovation project with Rockwool) using any available sustainability data related to construction types.
   Successfully launched and task completed.
7. Promote the use of SUDS compliant pavers when launched using available sustainability data.
   Product launched but sustainability data not requested by sales dept so far.
8. Progress the Environmental Stewardship project using a reduced approach if necessary.
   No progress in 2010. This job has now been outstanding for some 4 years and requires completion.

2011 Corporate Environmental Objectives

1. Extend BES 6001 coverage to all Ibstock factories by end of first quarter 2011.
   
2. Have a draft 2009 CSR report available by March meeting 2011.
3. Extend LFG electricity generation by a further 2.7 MW.
   
4. Investigate alternative materials for brick manufacture eg PFA.
   
5. Complete Site Restoration and Stewardship plan by March meeting 2011.
   
6. Initiate study into syn-gas at Birtley and complete design work on West Hoathly dryer conversion from LPG to wood firing.
   
7. Complete submission to EA to review public register of Discharge Consents in the name of Ibstock and prepare Ibstock Brick Ltd for 2003 Water Act abstraction licences and transfer licences etc.
   
8. Develop website with Marketing Dept to restate prominence of sustainability matters.

Review of Discharges into the Environment

2010 was another year where the assessment of the mass emissions from our kilns is technically marginally unrepresentative due to reduced output levels at most factories. However mass emission results since 2000 are shown below in Tonnes per annum

Average Specific Energy Consumption (SEC) & Carbon Dioxide emissions to Atmosphere.

During 2010 our SEC figure used for UK Climate Change Agreement (CCA) in kilowatt hours per tonne saleable tonne of product improved over 2009 due to slightly increased output levels. However the current SEC is not a true representation of the performance of our investments which are unlikely to show maximum effect until we return back to output levels comparable to 2007 and this is not anticipated during 2011or even 2012. The longer term view of the national housing demand is that output levels for bricks should return back to those around 2007 or even higher if we are to achieve the desired 240,000 new dwellings per annum to meet the housing shortage.

The lack of clarity in Government energy and CO2 policy does not help matters at all. Our current CCA came to an end in September 2010 and we have no details yet as to whether CCA is to continue in whatever format or whether it will combine in some way with the Carbon Reduction Commitment Energy Efficiency Scheme (CRC as it is better known). Also we have the forthcoming impact of the next phase of the EU Emissions Trading Scheme (EU ETS) which will run from 2013 to 2020.

Under such lack of clarity it is going to be difficult to attract investment into the UK and we are concerned that other European nations present a more attractive scenario to our parent company for these investments. In 2006-2007 imports of bricks from other European countries into the UK totalled over 9% of the total demand. These levels could easily be exceeded should domestic energy / CO2 policy not reflect the overall EU ambition. There also remains the continued threat of imports from outside of the EU which are subject to not environmental controls at all and also have cheap labour rates.

In line with European Union Emissions Trading Scheme (EU ETS) rationale, we no longer consider emissions from electricity generation as included within our process definition these are the responsibility of the generators themselves. We estimate that the Carbon Dioxide released by our activities is as according to this breakdown shown below. [Note the apparent significant reduction in 2009 is due to reduced outputs].

It has only been possible to estimate process emissions since 2006 when a data collection system was implemented in preparation for EU ETS in 2008.

Our principal haulier (Wincanton) continues to report to us that on average a total of 5% of bio-diesel is used for deliveries by them. Whilst we do not deliver product on our own fleet of vehicles and approximately 13% of all sales are collected by customers, where in many instances we may not know the ultimate destination, it is possible to reasonably accurately calculate the emissions from product delivery using reliable radial delivery mileage. We estimate that 2,801,100 litres of diesel and 311,200 litres of bio-diesel were consumed in delivery during 2010.

The CO2 equivalent of these fuels (excluding bio-diesel) is 7,507 tonnes for 2010. The energy intensity for delivery is: 0.066 kg CO2 per Tonne mile.

Delivery distances for products are an annual average of 87 road miles which equates to just under 70 radial miles from the point of dispatch. All deliveries are done by road transport; the average load size dispatched is 23.2 metric tonnes net.

In terms of materials imported into our sites, all by road, the average load size (excluding part load deliveries comprised of multiple drops by suppliers) is 24-28 metric tonnes. These deliveries come to us from an average distance of 107 miles. This is the arithmetic average distance travelled and is not the weighted average distance travelled by all materials purchased at all sites.

Discharges to watercourses

We have established a matrix of water discharge testing at all of our sites in our internal reporting system. However, the intermittent nature of the volume and concentration of very low levels of suspended solids in water at consented discharge points to controlled waters continues to make assessment of total quantities discharged very difficult. No "Red List" substances are discharged at any Ibstock clay brick site or any List 1 or List 2 substances.

All Ibstock sites have now been mapped for underground drains and all discharge points on all sites are known and are monitored.

All Ibstock sites are fully compliant with the Oil Storage Regulations contained within the PPC Regulations. Contamination of watercourses with traces of oils should be a very remote possibility.

We are waiting in particular for the implementation of the Water Act 2003 which we believe will require transfer permits and abstraction licences at many of our sites. Until these requirements are known in detail we do not propose any substantial investment programme of monitoring devices.

Disposals to Landfill etc (all figures in Tonnes / annum)

Inert fired brick hardcore is either used for our own purposes as an alternative to primary aggregate for building quarry access roads or it is sold for use as secondary aggregate. We estimate that overall some 45 thousand tonnes of primary aggregate are saved each year by using these non saleable items in this manner.

Both non-hazardous and hazardous categories have seen year-on-year improvements since the implementation of ISO 14001. 2009 saw a decrease in waste disposals to landfill but this was in proportion to our reduced outputs. The 2010 figures should not be regarded as a deterioration in performance.

Hazardous Waste

This category of waste is significantly represented by refractory materials in particular ceramic fibres. These are necessary to maintain our energy reduction programme by maintaining high levels of insulation at high temperature interfaces and it is difficult to foresee a substantial reduction in the use of ceramic fibre if the programme is maintained. The second highest category in this group is oil contaminated materials which are an inevitable part of our maintenance programme.

Recycling of Materials / Resources (some estimated figures)

& indicates in addition to VALPAK PRO obligation quantity

Whilst we have several factories recovering and using rainwater for process purposes it proved to be difficult to accurately calculate the gross volume of surface water and rainwater water recovered. On the basis of previous years' estimations we were above 40% of process water requirements from such sources but we cannot quantify it sufficiently accurately at this time. We are deferring any major spend on metering of water transfers until such a time as the exact requirements of the Water Act 2003 are known.

NB The quantity of oils sent for recovery is variable year-on-year as tanks are emptied when nearly full.

Ibstock also recycle used CDs which go to be melted down for recycle.

Charitable Recycling Activities

2010 unfortunately saw the end of our involvement in the recycling of printer and toner cartridges for charitable purposes

Since its inception the scheme has been operated in her own time by Philippa Molloy who is a member of Technical Department. During the latter half of 2010 she relocated her office and no volunteer came forward to continue the collection and dispatch of the cartridges within the company. Her new office is no longer on any route travelled by the company van which has collected these items from all sites and she has nowhere to store any such cartridges. However, I can report that many of the company offices are going to attempt to return used print cartridges back to manufacturers.

Whilst I cannot guarantee that any monies will be generated for charity in doing this it will avoid any such disposals to landfill.

The certificate shown below is for a majority of 2010 and is probably the last that will be available for some time.

Internal Environmental Audit

An internal Environmental Audit was conducted at every manufacturing Ibstock site. An external audit (third party verification) was also conducted at every site. Results are shown in the table below.

The company uses a risk based approach to auditing. Ratings of 1-5 are used where 1 is totally unacceptable performance which has to be immediately addressed. A score of 5 represents an industry best practice performance level. During 2010 there were three scores recorded below a figure of 3 which is the minimum acceptable level of performance, all have been addressed since the audits were carried out.

Continuous improvement groups at each site have an environmental co-ordinator. Environmental objectives / targets are set by each site each year and these are reviewed annually at the Environmental Review Meeting to ensure that progress is being made and new objectives are continually introduced in addition to any corporate objectives (see earlier in this report).

A new method of addressing the regulatory requirements has been established using the established database CEDREC which will enable us to continually update our environmental aspects and impacts which is an important starting point for environmental management.

Environment Focused Supplier Scheme

During 2010 it was decided to overhaul our supplier assessment scheme whereby all suppliers receive an A-C rating dependent on their capability to supply consistent high quality materials (A is the highest rating). Inevitably there are instances where only a single supplier is available for some materials or services, where such suppliers receive only a C rating greater levels of monitoring / supervision and testing are applied.

Under our new regime factory mangers will visit a selection of suppliers each year and assess their capabilities and report back. It has now been decided that we will press all of our suppliers (where choices are available) to proceed to achieve ISO 9001 on Quality Management and ISO 14001 on Environmental Management or BES 6001 approval for responsible sourcing with preference being given to those achieving certification using a risk based approach.

This task will add substance to our own certification to BES 6001 accreditation on Responsible Sourcing.

Employee Environmental Programme

The Board of Ibstock Brick Ltd remain committed to provide IEMA* Foundation Course training to senior managers. External training commitments have been scaled back as a result of the recession and these courses will resume in the future.

* Institute of Environmental Management and Assessment.

To cater for as many employees as possible new environmental awareness training packages were developed and presented, these remain as the mainstay of our employee programme.

During 2010 a total of 17,000 hours of training was given to the workforce. Whilst this equates to about 1½ days training per employee per year our workforce is very stable and over 60% of our employees have remained with us for over 10 years. Consequently the training need sin such a workforce are considerably less than in other sectors such as retail.

Every contractor appointed to carry out work has to accept the Company Contractors rules which contain a briefing on environmental requirements and must sign these to confirm their acceptance.

Environmental Stewardship

Despite the best endeavours of all employees of Ibstock situations will arise from time to time. Brief details of all corrective actions are also given.

During 2010 the number of reported instances increased dramatically over 2009 and 2008. Whilst many of these are of a minor nature it is believed that the increase is at least partly due to the reiterated demands for written reporting back to Technical; Department to prepare ourselves for BES 6001.

During 2010 Ibstock Brick Ltd recorded a total of 14 environmental complaints from all sources e.g. Ibstock employees, neighbours and regulators. Of these 6 related to noise; 3 on suspended solids in water discharges, a further 2 on miscellaneous issues relating to water discharges and 2 on mud / dirt on the road outside of our factories.

Table of received complaints is shown below

During 2010 Ibstock Brick Ltd had a total of 5 totally contained incidents involving fuels or chemicals all of which were promptly dealt with on site. In each case the integrity of the drainage system was maintained and no pollution left site to any watercourse or sewer. The fact that each of these was fully contained is supporting our view that our environmental management systems are generally robust.

Biodiversity and property matters

During 2010 the following were conducted:

• Four biodiversity surveys to investigate the presence of bats.
• One biodiversity survey to investigate the presence of badgers.
• There is on-going work at our Maltby quarry to relocate Great Crested Newts.
• A woodland development plan was conducted at our Chailey factory.
• We continue to be guardians of two sites containing Marsh Orchids.
• We continue to respect the presence of geological SSSI sites in our quarries.
• At our Shortwood quarry in Avon we have granted a lease to Avon Industrial Buildings Trust to investigate an area of the site.

The company is continuing to develop a wildlife and nature conservancy plan.

Community Relationships

Ibstock Brick Ltd together with Cory Environmental Ltd founded the Ibstock Cory Environmental Trust (ICET) in 2001. The Trust uses funds available via the Landfill Tax Credit Scheme to provide grants to approved community projects.

Since a dramatic revision of the rules was imposed by Government on the qualification of schemes for funding (following abuses of the funding provisions to install facilities that should have been paid for by other means) the monies available to ICET to distribute to such projects has diminished tremendously.

Major funding of projects is no longer possible. However, ICET remains poised to provide support at a level permitted by new scheme rules for qualifying projects.

Other community projects include a large number of visits by schools. A selection of "thank you" replies from a primary school is shown below.

Ibstock is always willing to accept educational parties for site visits.

Age is no barrier to learning about materials especially when it happens in a local community.

Also we endeavour to support local communities in other ways. Girl Guide and Scout groups are supported also groups such as the Royal British Legion and others are supported by local factories subject to a cap on the available funds.

Ashers Wood FC. Equipment supplied by Ibstock, team trained by an Ibstock employee.

Some improvements to the access of a local site which received thanks of "tremendous support" for the scheme from Hyndburn BC.

Stakeholder Communication

Ibstock continues to play a major part in developments in conjunction with Trade Associations. These include consultations on many papers issued by the Environment Agency, DECC (Department of Energy and Climate Change) and BIS (Business Innovation and Skills). Considerable amounts of time are also spent on issues with our European trade association TBE (Tiles and Bricks Europe) on developments with the EU ETS scheme – please see earlier in this report.

Ibstock continues to be a major contributor and supporter of the Brick Development Association (BDA) and the publication of annual KPIs for the industry which are available on the BDA website (www.brick.org.uk).

Further information is available from:  Dr David Hills d.hills@ibstock.co.uk