S T N E T N O C 03 08 09 09 16 18 19 20 22 23 25 26 27 27 28 30 letter from the president about gr up o méxico INTRODUCTION TO GRUPO MÉXICO OUR PRESENCE CORPORATE STRUCTURE MISSION, VISION AND VALUES CORPORATE GOVERNANCE GOVERNANCE BODIES ETHICS AND INTEGRITY DILIGENCE IN HUMAN RIGHTS our sustainable approach SUSTAINABILITY STRATEGY RECOGNITIONS RELATIONSHIPS WITH OUR STAKEHOLDERS COMMUNICATION AND FEEDBACK WITH STAKEHOLDERS SUPPORTING OUTSIDE INITIATIVES AND ASSOCIATIONS 31 GENERATING SHARED VALUE gr upo méxico foundation HEALTH TRAIN 33 34 35 EDUCATION 39 THE ENVIRONMENT 41 CONCIENCIA CINEMEX 43 SUPPORT FOR INSTITUTIONS 46 RED DE ASOCIACIONES Y FUNDACIONES EMPRESARIALES 47 SOCIAL LINKAGE m i n i n g d i v i s i o n GROW STRUCTURE OF THE DIVISION AND PRINCIPAL SUBSIDIARIES SIGNIFICANT CHANGES IN THE ORGANIZATION PRINCIPAL PRODUCTS AND MARKETS INVESTMENTS AND PROJECTS EXPLORATIONS CUSTOMER RELATIONS PROMOTE WORKFORCE AND LABOR PRACTICES TRAINING AND CAREER DEVELOPMENT OCCUPATIONAL HEALTH AND SAFETY 48 49 49 49 49 52 54 55 56 56 62 65 70 COMMUNITY DEVELOPMENT PROTECT 118 119 119 119 121 122 i n f r a s t r u c t u r e d i v i s i o n GROW STRUCTURE OF THE DIVISION AND PRINCIPAL SUBSIDIARIES PRINCIPAL SERVICES AND MARKETS INVESTMENTS AND PROJECTS CUSTOMER RELATIONS 123 PROMOTE 123 126 128 130 WORKFORCE AND LABOR PRACTICES TRAINING AND CAREER DEVELOPMENT OCCUPATIONAL HEALTH AND SAFETY COMMUNITY LINKAGE 134 PROTECT 134 ENVIRONMENTAL MANAGEMENT AND PERFORMANCE 76 76 77 85 86 87 88 88 89 90 91 93 94 94 98 99 MANAGEMENT APPROACH 139 COMPLIANCE ENVIRONMENTAL MANAGEMENT AND PERFORMANCE CLOSURES COMPLIANCE t r a n s p o r tat i o n d i v i s i o n GROW 140 independent assurance report 144 gri con tent i ndex STRUCTURE OF THE DIVISION AND PRINCIPAL SUBSIDIARIES SIGNIFICANT CHANGES IN THE ORGANIZATION PRINCIPAL SERVICES AND MARKETS INVESTMENTS AND PROJECTS CUSTOMER RELATIONS PROMOTE WORKFORCE AND LABOR PRACTICES TRAINING AND CAREER DEVELOPMENT OCCUPATIONAL HEALTH AND SAFETY 104 COMMUNITY LINKAGE 111 PROTECT 111 ENVIRONMENTAL MANAGEMENT AND PERFORMANCE 117 COMPLIANCE LETTER FROM THE PRESIDENT L E T T ER FROM T HE P R E S I DEN T G4-1, G4-2 At Grupo México, sustainable development is at the core of our business model. Our work strategy is These losses had a profound impact on families, friends, colleagues, and on all Grupo México. We based on three pillars: GROW, PROMOTE and PROTECT. This means creating value, fostering wellbe- share in the grief of their families and we affirm the commitment of our whole organization to prevent ing and protecting the environment. further fatalities. We need to ensure our people will get home safely. Nothing is more important. For the last 12 years, we’ve reflected our vision of sustainability through our annual Sustainable De- There is still much to do to reach our goal of ZERO ACCIDENTS. However, we’ve made progress and velopment Report prepared according to an internationally accepted methodology: Global Reporting our efforts have brought reduced occupational incident rates across the board in recent years. In all Initiative. This report has served as a tool for transparency and self-assessment by which we are able cases, we’re below the industry averages in each of the countries where we have operations. Safety is to communicate our progress and identify areas of opportunity. the responsibility of everyone at Grupo México, therefore we continue the ongoing task of identifying The results of the economic, environmental, social and corporate governance strengthening of our company are reflected in various assessment processes. For the seventh year, we are included in the risks and preventing accidents. Strengthening partnerships Mexican Stock Exchange (BMV) IPC Sustainability Index and, for the first time this year, the S&P Dow All our Mining Division investment projects, from the outset strive to create jobs and opportunities for Jones Sustainability MILA Pacific Alliance Index (DJSI MILA). people from our neighboring communities. With our program ‘Forjando Futuros’ (Forging Futures) in Peru, we offer training to residents in the places where we operate. We have trained nearly 500 peo- We have been mining and driving development for over a century, conscious that growth and tech- ple in different trades and over 400 youth have had the opportunity to gain work experience through nological advances depend on the metals that we mine. Since our origins, we’ve followed criteria of professional practices with our affiliate, Southern Copper. sustainability, which today we integrate into a common vision of sustainable development. We’re com- mitted to making this a safe and sustainable industry. Safe families People are our backbone. Their wellbeing and safety are our top priority. We know that a collaborator in a safe environment means a safe family. Because of this, our goal is ZERO ACCIDENTS. Four 4 collaborators lost their lives on the job in 2017, three in the Mining Division as a result of accidents occurring in Mexico, Peru and the United States; and one in the Transportation Division, in a regret- table incident in Mexico. 5 SUSTAINABLE DEVELOPMENT REPORT 2017 Together with our employees, communities, suppliers and government agencies, we continue to grow. In 2017, we completed major projects to boost the social and economic development of Mexico, Peru and the United States. These investments, added to those made in the last five years, total US$13.80 billion. We have also made voluntary investments totaling US$322 million in community development, health, training, infrastructure and services. In the communities where we operate, we promote the development of social capital through a model that we call ‘Casa Grande’ to connect us with our people. Casa Grande are community centers where we offer various programs and promote the participation of charity organizations. Also, thanks to Grupo México Foundation with the support of the Transportation Division, we have been able to offer healthcare ser- vices through Dr. Vagón, a mobile clinic that serves communities along the railroad line free of charge. Dr. Vagón is a project without precedent in the Americas that has contributed significantly to improving the health and quality of life of people living in the most remote communities in Mexico. In 2017, we provided 266,440 comprehen- sive medical services. Long term vision We believe that sustainability must be present throughout the life of a project. In close coordination with the authorities, we dismantled a smelter in San Luis Potosi that had been in operation for more than a hundred years. This process involved in 6 situ confinement of the waste and the removal of affected soils. The result was the remediation of 192 hectares of industrial land, which can now be zoned for urban developments and green spaces. This project is clear evidence as to how responsible mining can leave a positive mark. LETTER FROM THE PRESIDENT For Grupo México, sustainable development is also the way to face climate change. Our strategy in this sense has three lines of action: using energy more efficiently, developing and consuming renewable energies, and fostering the capture of green- house gases. In the Mining Division, from 2014 to 2017, we reduced the emissions and the energy needed to produce a ton of copper. By consuming clean and renew- able energy produced by our Infrastructure Division, we prevented the emission of 559,866 tons of CO2eq, equal to taking 119,886 cars off the road for a year. Facing these challenges has been possible thanks to the efforts, talent and dedication of our collaborators, as well as teamwork with authorities and various stakeholders. We have brought leadership, experience and values together to consolidate a vision that affirms our commitment to economic and social growth; and also to caring for the environment, the communities and the countries where we operate. Regards 7 GERMÁN LARREA MOTA VELASCO CHAIRMAN OF THE BOARD SUSTAINABLE DEVELOPMENT REPORT 2017 ABOU T GR UPO M ÉX IC O ABOUT GR UPO MÉXICO IN T ROD U C T I ON TO G RU P O MÉ X I C O G4-3, G4-4, G4-5, G4-7 We are a diverse group of companies, with mine operations in Mexico, Peru and the United States, positioning Grupo México as the fourth largest copper producer in the world. We operate the largest multimodal freight railroad service in Mexico, with increasingly greater presence in the United States. We also offer engineering and construction services, power generating, onshore and offshore drilling, including the leasing and operation of oil rigs. To this, we have added the operation of highways under concession. The diversification of operations is achieved under a joint approach of cost efficiency and productivity to ensure financial balance so as to follow a sustainable path, in syn- ergy with creating value for our stakeholders. We are committed to Development with Purpose, with which we contribute to the health and safety of our collaborators, to strengthening the communities that embrace us, and to caring for the environment. We have been trading on the Mexican Stock Exchange since 1966 as Grupo México (GMEXICOB) and since 2017 through GMéxico Transportes (GMXT). Our subsidiary Southern Copper Corporation (SCC) trades on the New York Stock Exchange and the Lima Stock Exchange. OU R P R E SENC E G4-6, G4-8 Our portfolio of products and services is delivered by three divisions: Mining Division, 9 Transportation Division and Infrastructure Division. Our presence in Mexico, Peru, the United States, Argentina, Chile, Ecuador and Spain is shown following: SUSTAINABLE DEVELOPMENT REPORT 2017ABOUT GRUPO MÉXICO 3 1 2 7 11 12 4 5 6 8 9 10 13 15 14 18 19 17 16 20 21 22 23 GULF OF MEXICO GEOGRAPHIC LOCATION MINING DIVISION−GRUPO MÉXICO PACIFIC OCEAN LOCATION ASARCO RAY - SX/EW COPPER MINE HAYDEN - COPPER SMELTER AMARILLO - COPPER REFINERY SILVER BELL - SX/EW AND MINE TUCSON - US OFFICE MISSION - COPPER MINE 1 2 3 4 5 6 10 MINERA MÉXICO AGUA PRIETA - LIME PLANT EL PILAR - SX/EW COPPER PROJECT BUENAVISTA DEL COBRE - SX/EW AND MINE BUENAVISTA ZINC - MINE LA CARIDAD - MINE, SX/EW METALLURGIC COMPLEX PILARES - COPPER PROJECT SANTA EULALIA - POLYMETALLIC UNDERGROUND MINE EL ARCO - SX/EW AND COPPER MINE PROJECT SANTA BARBARA - POLYMETALLIC UNDERGROUND MINE NUEVA ROSITA - COAL AND COKE CHALCHIUITES - UNDERGROUND MINE PROJECT SAN MARTIN - POLYMETALLIC UNDERGROUND MINE CHARCAS - POLYMETALLIC UNDERGROUND MINE SAN LUIS POTOSI - ZINC REFINERY ANGANGUEO - UNDERGROUND MINE PROJECT TAXCO - POLYMETALLIC UNDERGROUND MINE MEXICO CITY - CORPORATE OFFICES 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 AMC AZNALCOLLAR, SPAIN - POLYMETALLIC UNDERGROUND MINE SPCC CHAUCHA - COPPER PROJECT TANTAHUATAY - GOLD MINE LIMA - CORPORATE OFFICES LOS CHANCAS - COPPER PROJECT TIA MARIA - SX/EW COPPER PROJECT CUAJONE - COPPER MINE TOQUEPALA - SX/EW AND COPPER MINE ILO - METALLURGIC COMPLEX CATANAVE - COPPER PROJECT LEGEND MINES PLANTS OFFICES FUTURE MINE PROJECTS *SX/EW (Copper Solvent Extraction and Electrowinning plant) 11 SPAIN 24 ECUADOR 25 26 27 PERU 28 29 30 31 32 CHILE 33 SUSTAINABLE DEVELOPMENT REPORT 2017 1 Mexicali Pascualitos 2 Nogales 3 El Paso Cd. Juarez Sierra Blanca Rustler Springs Sweetwater Coleman San Angelo J.C.T. Ft. Worth Cresson Gorman Comanche 4 Ricker Brownwood 5 Dallas Cleburne Granbury Dublin Longview Benjamin Hill Hermosillo Guaymas Topolobampo Sufragio Ft. Stockton Alpine Ojinaga Presidio Chihuahua Piedras Negras San Angelo Austin San Antonio Spofford 6 Eagle Pass Corpus Christi Laredo College Station Houston Galveston Cd. Frontera Cd. Frontera Paredon Culiacan Torreon R. Arizpe Monterrey GEOGRAPHIC LOCATION TRANSPORTATION DIVISION−GRUPO MÉXICO Connections: 12 UP 1 UP 2 BNSF / UP 3 BNSF / FWWR 4 BNSF / FWWR BNSF / UP 5 BNSF / UP 6 BNSF / CN / CSX / NS 7 CSX / NS 8 Cd. Victoria Mazatlan Zacatecas Aguascalientes Tepic Guadalajara Silao Celaya Penjamo Irapuato Rail Ferry Altamira Tampico Colima Ajuno Mexico City Veracruz Coatzacoalcos Manzanillo Puebla Sanchez Salina Cruz 7 Pensacola 8 Jacksonville Titusville Orlando Canaveral Tampa West Palm Beach Palm Beach Everglades Miami Ferromex Ferrosur 13 Texas Pacífico Florida East Coast Kansas City Southern Trackage rights SUSTAINABLE DEVELOPMENT REPORT 2017 1 2 GEOGRAPHIC LOCATION INFRASTRUCTURE DIVISION−GRUPO MÉXICO ASSETS CANANEA 500 MW COMBINED CYCLE PLANTS MONTERREY GUADALAJARA LEON-SALAMANCA HIGHWAY 1 2 3 4 5 14 6 15 IRAPUATO 7 8 9 10 11 12 ONSHORE DRILLING POZA RICA, VERACRUZ CORPORATE OFFICES, MEXICO CITY EL RETIRO, WIND FARM, 74 MW “TAMAULIPAS” RIG “VERACRUZ” RIG “SONORA” RIG 11 “TABASCO” RIG 13 14 “ZACATECAS” RIG 13 “CAMPECHE” RIG 15 16 17 “CHIHUAHUA” RIG OFFSHORE DRILLING CD. DEL CARMEN, CAMPECHE PACIFIC OCEAN LEGEND PEMSA MGE MCC HIGHWAY 3 8 7 4 5 6 GULF OF MEXICO 9 16 15 14 17 13 12 11 10 15 CENTRAL AMERICA SUSTAINABLE DEVELOPMENT REPORT 2017 C OR P OR AT E S T RU C T U R E G4-17 The corporate structure of Grupo México is based primarily on three divisions: Mining, Transportation and Infrastructure: DIVISION MINING DIVISION - SUBSIDIARIES & AFFILIATES Southern Copper Corporation DIMENSIONES - 15 underground and open pit mines AMERICAS MINING - Minera México - 52 smelters, refineries and other plants CORPORATION (AMC) - Southern Peru - 13 explorations ASARCO (USA) - Mexico, Peru, USA, Argentina, Chile, Minera Los Frailes (Spain) Ecuador and Spain - 15,672 employees ABOUT GR UPO MÉXICO GRUPO MÉXICO HAS BEEN TRADING SINCE 1966 AMERICAS MINING CORPORATION (AMC) 100% GRUPO MÉXICO TRANSPORTES 16.6% 70% 13.4% Private investment MÉXICO PROYECTOS Y DESARROLLO (MPD) 100% TRANSPORTATION Ferromex DIVISION - GMÉXICO Ferrosur - 2.7 million horsepower - 11,146 km rail network TRANSPORTES, S.A.B. Intermodal México - Fleet of 862 locomotives and 34,380 cars DE C.V. (GMXT) Florida East Coast Holding Corp. - 11,230 employees Texas Pacífico Southern Copper Corporation ASARCO (USA) Minera Los Frailes (Spain) FERROMEX FERROSUR IMEX Perforadora México México Compañía Constructora Grupo México Servicio de Ingeniería 88.9 100% 97.3 74% 100% 100% 100% 100% 100% 11.1% Private investment 26% DINFRASTRUCTURE México Compañía Constructora - 2 modular rigs DIVISION - Grupo México Servicios de Ingeniería - 5 jack-up rigs MÉXICO PROYECTOS Perforadora México - La Caridad combined cycle power Y DESARROLLOS, Grupo México Energía plants (516 MW) 16 S.A. DE C.V. (MPD) Grupo México Autopistas - El Retiro wind farm (74 MW) - High-specification highways (construction, operation and maintenance) - 3,362 employees Minera México Southern Perú Texas Pacífico 100% Florida East Coast 100% Grupo México Energía 100% Grupo México Autopistas 100% 17 Among the largest Leading transport producers of copper, company in Mexico, with Over 80 years experience in molybdenum, silver and the largest coverage and infrastructure and zinc worldwide. Largest connectivity. construction projects. copper reserves in the world. SUSTAINABLE DEVELOPMENT REPORT 2017 M I S S I ON, V IS I ON A ND VA L U E S G4-42, G4-56 At Grupo México, we operate our business according to our Mission, Vision and Values, which establish the focus for our relationships with our stakeholders and are outlined in the corporate policies of Grupo México, approved by the Board of Directors. Mission. To meet the needs of our markets through large scale and long term projects, staying on the cutting-edge in technology, and always committed to our people, the environment, our values and our social responsibility, maximizing the generation of value for our stockholders. Vision. To be the world leader in efficiency and profitability in our areas of business, prioritizing people and their com- prehensive development, guaranteeing the sustainability of our operations. OUR VALUES Honesty Respect Responsibility Acting with integrity, professional For all persons, laws and Meeting our commitments ethics and ongoing improvement. the environment. with results. 18 C OR PO R ATE G OVER N ANCE CORPORATE GOVERNANCE CORPOR ATE GOVERNANCE G4-34, G4-35, G4-36, G4-37, G4-38, G4-39, G4-40, The Stockholders’ Meeting also appoints the members of Each subsidiary also has management committees, Internal control. Grupo México has an internal control the Board of Directors, the Executive Committee, and the which address the different evaluation indicators and system to ensure its corporate governance is managed G4-42, G4-43, G4-44, G4-45, G4-46, G4-47, G4-49, Audit and Corporate Practices Committee, considering their stakeholder concerns, raised by the executives in charge appropriately. According to the guidelines of the Board G4-50, G4-51, G4-52, G4-53 experience and the absence of conflicts of interest. The of relations. The committees and board members under- of Directors, the company’s administrative organization Meeting also sets the remunerations for board members. go an annual review through a self-assessment process. regularly and strictly measures and reviews the internal The Grupo México corporate governance structure seeks control system, covering budgetary, economic, financial, to ensure that our procedure for strategic decision-mak- The board of directors met four times in 2017. During these It’s important to note that our principal subsidiaries have equity, regulatory and management aspects. ing generates value for investors and all our stakeholders. sessions, information was presented on the results of the their own boards of directors, which inform the Grupo This structure is characterized by its risk management company’s principal financial and operational indicators, México board. Their responsibilities include monitor- There is also an ongoing improvement process that processes, transparency and accountability. the status of the risk management, and the performance ing and assessing the social and environmental perfor- strives to make the operational, financial and admin- G OV ER N A N C E BOD IE S Board of Directors. The board of directors is the gover- of the principal social and environmental indicators. mance, the management of which falls to collaborators istrative processes more efficient, strengthen and in the operational areas at the subsidiary level and also making more transparent the disclosure of informa- Committees. The Grupo México corporate governance teams created for this purpose. tion to stockholders. CORPORATE GOVERNANCE ning body of Grupo México, setting the corporate strategy structure has two committees: the Executive Commit- and reviewing performance. Its functions include ensu- tee and the Audit and Corporate Practices Committee. ring the efficient use of resources and available assets, The members of these committees are appointed by the monitoring the social and environmental performance of stockholders’ meeting, considering absence of conflicts the company, and overseeing risk management. of interest and the experience of the board members. In 2017, there were 15 members of the Grupo México Three of the four board members that sit on the Executive Board of Directors, appointed by the General Stockhold- Committee are independents. This committee provides ers’ Meeting, 9 of which were independents. The chair- more frequent supervision and prepares the quarterly re- STOCKHOLDERS’ MEETING BOARD OF DIRECTORS man of the board also holds the position of Executive port presented to the board. EXECUTIVE COMMITTEE AUDIT & CORPORATE PRACTICES COMMITTEE President of Grupo México. The Audit and Corporate Practices Committee is com- The governance structure is defined according to the prised of independent board members. This committee 20 guidelines established in the Grupo México bylaws, monitors the internal control and audit systems, con- approved by the stockholders’ meeting, which is re- ducting regular reviews, and is also responsible for due sponsible for the final approval of the management diligence on the implementation of and compliance with reports presented by the board of directors. The hold- the ethical guidelines laid out in the Code of Ethics. This ers of Grupo México shares are represented at the committee also sets the fixed salary policies for senior stockholders’ meeting. management, and the variable portion of these salaries based on performance. AMC BOARD OF DIRECTORS GMXT BOARD OF DIRECTORS MPD BOARD OF DIRECTORS 21 AMC PRESIDENT & CEO GMXT PRESIDENT & CEO MPD PRESIDENT & CEO SUSTAINABLE DEVELOPMENT REPORT 2017 CORPORATE GOVERNANCE E T H I C S A ND IN T EG R I T Y G4-41, G4-56, G4-57, G4-58, G4-SO3, G4-SO4, G4-SO5 Code of Ethics training. Our collaborators receive the is also responsible for overseeing its enforcement. All We base our activities on principles of respect and in- Code of Ethics when they join the company and they are Grupo México subsidiaries are subject to this policy. clusion and we reject any form of violation of the rights required to sign a letter of agreement confirming they of people, including child exploitation and forced labor, Our values have read and understood the document, making the Anticorruption. Regarding the prevention of acts of and also any form of discrimination. Grupo México is Code of ethics. To maintain our high level of integrity, commitment to observe it. Collaborators also receive corruption, all our collaborators receive training to con- committed to equal opportunity and we do not discrimi- Grupo México has policies, procedures and a code of training in the Code, when there are revisions or to rein- duct themselves ethically. Guidelines for analysis and nate on the basis of ethnic origin or nationality, gender, ethics in place that, together, outline and reflect the force their understanding. Code of Ethics training was resolution are applied when any act of corruption is age, disability, social condition, political affiliation, health company’s values, principles and rules of conduct. given to 1,051 new Grupo México collaborators in 2017. suspected, determining the corresponding actions to condition, religious beliefs, immigration status, personal take. Any supplier or contractor suspected of engaging opinion, sexual preference or marital status. All the abo- The Code of Ethics is the guiding document that de- Reporting mechanisms. At Grupo México, we promo- in illicit practices or corruption will be submitted to a ve are covered in our Code of Ethics and we monitor due fines the guidelines of conduct under a framework of te an environment of trust that facilitates reporting and review process to consider their continuation or to end diligence in compliance within the company. legality, professionalism, ethics and transparency for taking action on illegal practices and infractions of our our commercial relationship with them. our activities as botha individuals and as a team. The guidelines. We have established the following repor- The Code of Ethics establishes reporting mechanisms scope of the code of ethics guidelines includes our ting mechanisms to promptly report any violation of the Five cases of practices contrary to our anticorruption and also that under no circumstance will retaliation be collaborators, representatives and any person who Code of Ethics: and conflict of interest guidelines were reported this taken against anyone who, in good faith and honest- acts on behalf of Grupo México and its subsidiaries • Direct communication with the corresponding year. In the cases where breach of trust was proven, ly, raises, facilitates or addresses a concern or report in Mexico and overseas. We also extend the Code of immediate supervisor, manager or director, or the employees involved were dismissed. involving compliance with the document or any other Ethics to our board members, suppliers of goods and through the Human Resources, Internal Audit or company policy. services, and contractors, with recommendation for Legal departments at each subsidiary. its implementation and observance, actions that be- come a criterion for selection and continuance in our • Reporting line managed by a third party, which D I L I G ENC E IN H U M A N R I G H T S G4-HR1, G4-HR2, G4-HR4, G4-HR5, G4-HR6, G4-HR7, At Grupo México, we not only work to ensure that res- pect for human rights is present in our decision making supply chain. includes a telephone number, email and website. G4-HR8, G4-HR9, MM5, MM6, MM7, MM8, MM9 and in how we operate, we also promote awareness 22 The Grupo México Code of Ethics is a public document The Ethics and Discipline Committee and/or audit de- Management. At Grupo México, we have a permanent customers, suppliers and contractors. and may be consulted on the Grupo México website. partments corresponding review the reports received. commitment to our people, strengthening our organi- Among other topics, the Code of Ethics covers preven- zational and labor culture, the environment and society. Human rights training. It’s important to note that our ting conflicts of interest, non-discriminatory and fair la- Conflicts of interest. Grupo México has a conflict of This commitment means respecting human rights as collaborators receive training on the Code of Ethics bor practices, protecting human rights, zero tolerance interest policy, approved by the Board of Directors, which fundamental, according to the United Nations Universal every two years, including human rights topics. In 23 of these issues throughout our value chain, including to harassment in any form, fair competition, protecting information, respecting the communities we join and the environment, among others. Declaration of Human Rights, in compliance with the 2017, a total of 2,673 training hours were provided in laws of the countries where we operate. this area. SUSTAINABLE DEVELOPMENT REPORT 2017 Of note are our efforts to train our in-house securi- Respect for human rights in the countries where ty personnel on the protection and defense of human we operate. To ensure respect for human rights ex- rights. Also, the employees of all the private security tends throughout our value chain, meaning customers, firms with which we have relations receive training and suppliers and contractors, we have contract clauses in refresher training in this area. place requiring regulatory compliance in this area in the countries where we operate. Respect for labor rights. Under the framework of res- In Peru, our contracts contain clauses that define hu- pect for the rights of our collaborators, at Grupo México man rights acts and obligations for each of the parties we adhere to the principles of the International Labor involved, including non-discrimination and ensuring no Organization’s Declaration on Fundamental Principles child exploitation or forced labor. and Rights at Work. Therefore, we support freedom of association and adhere to the terms agreed to in the In the United States, our Mission mine borders the To- collective bargaining agreements. hono O’dham Native American Reserve. We respect the rights of the people living on the reserve and as All our collaborators are guaranteed access to social part of the lease, preference is given to hiring people security, to receive a salary, ongoing training to increa- from this indigenous community. se productivity with shared benefits, and to optimal health and safety conditions to prevent workplace risks. During 2017, no dispute was reported involving the use of indigenous lands, the rights of indigenous com- In Mexico, the requirements related to social security munities or peoples, in relation to the operations of for our collaborators as set by the Federal Labor Law, Grupo México. the Social Security Law and the National Workers’ Housing Fund Law, among others, are incorporated into our agreements. 24 O UR SUSTA IN ABLE A PPR OA CH OUR SUSTAINABLE APPROACH SUS TA IN A B I L I T Y S T R AT EGY R EC OG N I T I ONS At Grupo México, we’ve created a corporate strategy of sustainability, which permeates our divisions and subsidiaries. Our strategy, “Development with Purpose”, stands on the following three key pillars: DEVELOPMENT WITH PURPOSE We invest to generate opportunities and prosperity, therefore we are an engine for positive change for the economies in which we operate. • We ensure our continuity, adapting to the needs of our surroundings. • We encourage communities to participate in the growth, promoting partnerships with suppliers, working with local suppliers as much as possible. • We operate with transparency, thanks to timely communication with our stakeholders. • Our structure is process and result-oriented. We strive to be good neighbors, improving the quality of life of our people and that of our communities. • Our teams are made up of capable, motivated people, in keeping with our values, putting the dignity of the individual at the center of all that we do. • We create safe work environments for our collaborators and we operate to the highest standards of occu- pational health and safety. • We are continually building a work environment where respect, non-discrimination and equality are the norm. • We are working to contribute to the common good of our neighbor communities, fostering collaboration and dialog. W O R G E T O M O R P 26 T C E T O R P We care for and work to preserve the environment. To build shared value, we know that leaving posi- tive footprints environmentally is the basis for sustainable progress. • We mitigate our negative impacts to contribute to the national and international environmental goals. • We have established an ongoing improvement process that ensures efficiency and responsible usage in the consumption of raw materials, energy and water. • We manage our operations focusing on reducing waste and controlling emissions. • We respect and protect the biodiversity of the environment where we operate. Sustainability index – DJSI MILA. There is in- creasing interest among investors in the current global trend of corporate sustainability. In this regard, Grupo México is proud to report that on October 18, 2017, Gru- po México S.A.B. de C.V. was selected to join the S&P Dow Jones Sustainability Indices MILA Pacific Alliance (DJSI MILA). This regional sustainability index included, for 2017, 42 leading companies in sustainability from the countries that form part of the Pacific Alliance: Mexico, Chile, Colombia and Peru. The DJSI MILA is part of a family of 8 Dow Jones sustain- ability indexes, which are recognized at the global level as the highest references used by investors who consider sustainability factors in their investment decisions. IPC sustainable. In 2017 Grupo México remained on the list of the 30 companies that comprise the Mexican Stock Exchange (BMV) sustainability index. The IPC Sustainability Index is a financial indicator that recog- nizes companies committed to best practices in envi- ronmental, social and corporate governance aspects. This is the seventh year that Grupo México has been included in this index. ESR Distinction. The five companies of our Infras- tructure Division received for the 1st time in 2017, the distinction as socially responsible companies (ESR in Spanish), awarded by the Centro Mexicano para la Fi- lantropía (CEMEFI), joining Ferromex and Ferrosur which OUR SUSTAINABLE APPROACH have been ESR recognized since 2015. This represents a recognition of our actions to improve the quality of life in the company, corporate ethics, linkage with the commu- nity, care and preservation of the environment, and social responsibility management. R E L AT I ONS W I T H O U R S TA K EHO L DERS G4-24, G4-25, G4-26, G4-27 At Grupo México, we believe that generating value de- pends, to a large extent, on ongoing involvement with our stakeholders. The participation of stakeholders makes our manage- ment approach better in terms of the most important issues for each of our sectors. Better initiatives and pro- grams translate into more successful results in terms of economic, environmental and social performance. To hear the concerns and expectations of our stakehold- ers, we have set up channels for dialog and communica- tion, according to the needs of our communities, including them, directly or indirectly, in the decision-making for our Development with Purpose strategy. 27 Through various channels and mechanisms, we seek open and transparent communication with our stake- holders, particularly those that are most vulnerable, building a culture of collaboration and sustainability in benefit of everyone. SUSTAINABLE DEVELOPMENT REPORT 2017 COMMUNICATION AND FEEDBACK WITH STAKEHOLDERS G4-24, G4-25, G4-26, G4-27 Yearly or Semiannually Quarterly Bimonthly As necessary s r e m o t s u C s e e y o p m E l s n o n U i s r o t s e v n I s r e i l p p u S s r o t c a r t n o C s e i t i n u m m o C s r e d a e L i n o n p O i i y t e c o s l i i v C i a d e M i s e c n e g a t n e m n r e v o G s n o i t u t i t s n i i c m e d a c A i s e c n e g a s g n i t a R s n o i t u t i t s n i l i a c n a n F i • • Ongoing Yearly COMMUNICATION CHANNELS OR MECHANISMS / STAKEHOLDERS Website E-Ferromex; E-Ferrosur Intranet Sustainable Development Report Annual financial report Quarterly financial reports News bulletins In-house company newsletters Publication of relevant events Press releases Stockholders’ meetings In-person meetings CBA review Diagnostic studies Interviews Surveys 28 Workplace climate survey Telephone consultations Ethics reporting line Guided tours Site visits Community committees Awareness days Community development centers STAKEHOLDERS AREA OF INTEREST OUR SUSTAINABLE APPROACH Customers Employees Unions Investors Suppliers Contractors Communities Opinion leaders Civil society Media Financial institutions Government agencies Academic institutions Ratings agencies • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • Quality of products and services Operational continuity Market value of products Ethics and integrity Salaries and benefits Occupational health and safety Internal communication and workplace climate Recognition Training and career development Ethics and integrity Labor relations Ethics and integrity Business strategies and models Financial results Share value Corporate governance practices Risk management Ethics and integrity Contract conditions (payment, termination, etc.) Financial results Occupational health and safety (contractors) Job creation Quality of life Operational risk management Environmental impacts Community development programs and initiatives Ethics and integrity Social and environmental impacts Financial results Financial results Risk management Risk management Legal compliance Social and environmental impacts Innovation Business strategies and models Financial results Share value Corporate governance practices Risk management Ethics and integrity Transparency 29 SUSTAINABLE DEVELOPMENT REPORT 2017 SUPPORTING OUTSIDE INITIATIVES AND ASSOCIATIONS G4-15, G4-16 GENERATING SHARED VALUE G4-12, G4-EC1, G4-EN31, G4-EN33 Our commitment to sustainable development extends beyond our operations, backing organizations and initiatives seek- Our Development with Purpose strategy strives to generate direct and indirect pos- ing synergies between the efforts of the private and public sectors and the civil society, to determine the way forward itive impacts for our investors and our stakeholders. Our activities foster economic together in the effort to improve the socioeconomic conditions of our communities and respect for the environment. spillover, job creation and community development in the regions where we operate, OUR SUSTAINABLE APPROACH Division Association Mining Division: Global Mining Division: United States of America Mining Division: Mexico Mining Division: Peru 30 Transportation Division Infrastructure Division • • • • • • • • • • • • • • • • • • • • • • • • • • • • • International Copper Association (ICA) International Molybdenum Association (IMOA) International Zinc Association (IZA) Arizona Mining Association (AMA) North American Metals Council (NAMC) Society for Mining Metallurgy and Exploration (SME) Tucson Metropolitan Chamber of Commerce Cámara Minera de México (CAMIMEX) Sociedad Minera de México Asociación de Mineros de Sonora (AMSAC) Comisión de Estudios del Sector Privado para el Desarrollo Sustentable (CESPEDES), Consejo Coordinador Empresarial (CCE) Sociedad Nacional de Minería, Petróleo y Energía de Perú (SNMPE) Cámara de Comercio de Lima (CCL) Asociación de Exportadores (ADEX) Confederación Intersectorial de Empresas Privadas (CONFIEP) Sociedad de Comercio Exterior del Perú (ComexPerú) Instituto de Ingeniero de Minas de Perú (IIMP) Asociación Mexicana de Ferrocarriles (AMF) American Association of Railroads (AAR) The Rail Transportation and Engineering Center (RailTEC) Asociación de Proveedores de Productos Agropecuarios (APPAMEX) Asociación mexicana de Transporte Intermodal (AMTI) Consejo Nacional Agropecuario (CNA) Asociación Nacional de la Industria Química (ANIQ) Asociación Nacional del Plástico (ANIPAC) Comisión Regional de Logística de Guanajuato (CORELOG) Cámara Mexicana de la Industria de la Construcción (CMIC) Asociación de Recursos Humanos de la Industria Petrolera (ARHIP) Asociación Mexicana de Energía Eólica (AMDEE) improving the quality of life for these residents, including the members of indigenous and/or marginalized communities. Supply chain At Grupo México, we contribute to the development of auxiliary industries in the different activity sectors where we participate: mining, transportation, energy, con- struction, engineering and drilling. When a commercial relationship is established with suppliers and contractors, their legal compliance is assessed in terms of environmental and labor history; and it’s important they have the permits required. We require contractors to have the technical expertise necessary to deliver services at our sites, which we reinforce with any knowledge that may be specific to our processes. The assessment of legal compliance with obligations in terms of our prin- ciples of sustainability is strengthened with the requirement to act according to our health and safety policies and procedures, and also the Grupo México Code of Ethics. Also, we seek to strengthen the economy of the regions where we operate and contribute to their social development, by selecting local suppliers and contractors according to our criteria of quality, price, and environmental and labor compliance. 31 SUSTAINABLE DEVELOPMENT REPORT 2017 ECONOMIC VALUE GENERATED & DISTRIBUTED US$ Millions Economic Value Generated (EVG) Sales Economic Value Distributed (EVD) Operating costs (1) Salaries, wages and benefits Financial institutions and stockholders Government (taxes) Investments in community development Total EVD 2015* 2016* 2017 8,179 8,173 9,786 3,667 953 845 1,077 86 6,628 3,653 1,004 677 983 54 6,370 3,911 1,103 1,125 1,648 61 7,848 * Note: The G4-EC1 indicator for previous years is restated to improve adherence to the directives of the Global Re- porting Initiative. (1) Does not include personnel costs (salaries, wages and benefits). ENVIRONMENTAL INVESTMENTS AND IN HEALTH AND SAFETY US$ Millions Environmental investments and expenses Health and safety investments and expenses 2015 236 132 2016 309 138 2017 326 130 32 G R U PO MÉXI CO FO U NDATION GRUPO MÉXICO FOUNDATION HEALTH TRAIN In its three years of operation Dr. Vagón, the Health Train, has delivered 647,571 free comprehensive medical ser- vices to 156,951 patients in 122 communities in 22 Mex- ican states, traveling a total 50,896 kilometers. In 2017 alone, the Health Train provided 266,440 free comprehensive medical services to 61,212 patients in 30 communities in 15 Mexican states, traveling a total 15,443 kilometers. The states visited were: Sonora, Baja California, Chihua- hua, Coahuila, Tamaulipas, Sinaloa, Nuevo Leon, Zacate- cas, Nayarit, Jalisco, Michoacan, Guanajuato, Veracruz, Queretaro, Hidalgo, Estado de Mexico, Puebla, Tlaxcala, Oaxaca, Colima, and Aguascalientes. ear and hearing tests and speech therapy; delivering free hearing devices to 600 people. In 2017 alone, 25,747 audiology services were provided and 300 hearing devices fitted. With the collaboration of ESSILOR since 2015, our optometry service has conducted 49,992 visual as- sessments and diagnoses, fitting 18,506 people with prescription glasses. In 2017, the optometry service con- ducted 25,506 visual assessments and diagnoses, deliv- ering 6,604 pairs of glasses to 8,502 people. In parallel, in its 3 years of operation, the Health Train has offered 2,759 health education workshops to 95,685 participants. In 2017, we offered 1,028 health education workshops attended by 45,806 people, focusing on the Fundación Farmacias del Ahorro has been an essential following topics: partner since 2015, delivering 358,103 free medications, principally for patients with chronic degenerative, infec- tious-contagious and dermatological diseases to start • Cancer in men and women • Teenage pregnancy timely medical treatment. 34 79,013 free medications were delivered in 2017. In June 2016, we began a partnership with Fundación MVS Radio and the program “Ponte Oreja”, through which 37,175 audiology services have been provided, including • Sex education • Healthy lifestyles • Oral hygiene • Family planning • Vaccinations • Respiratory diseases • Health emergencies GR UPO MÉXICO FOUNDATION In February 2017, we added chiropractic and physical therapy services, attending 5,760 patients who re- With the support of Cinemex and Ferromex, we creat- ceived 40,000 services, including neurological, chiro- ed ‘Cine Vagón’, a unique free entertainment program, practic and orthopedic assessments, muscle-skeletal which consists of a train car fitted with screens, the system diagnoses, manual and mechanical chiropractic best sound equipment, high definition projectors, com- adjustments, and physical therapy sessions. fortable seats and a concession stand. The goal is to take to magic of the movies to the communities that Dr. In March 2017, we began a partnership with Lab- Vagón, the Health Train, visits. oratorios LAPI to include x-ray services, conducting 18,822 scans. We enhance the theater experience by handing out free popcorn and drinks at each showing, as well as healthy This year, we added a cervical cancer prevention ser- snacks and treats for children. With the support of part- vice through our partnership with ONKO Solutions, con- ner distributors Sony and Videocine, we show movies ducing cervical screenings and colposcopies for the portraying universal values and promote families spend- early detection of cervical cancer in 5,760 women. ing time together. Following the September 7, 2017 earthquake, Dr. During 2017, we held 108 showings, in 30 commu- Vagón traveled to the Oaxaca communities of Ixtepec nities, and delivered 12,960 buckets of popcorn to and Juchitan, where the train stayed for 12 days provid- 22,680 people who enjoyed the magic of the movies in ing 18,795 emergency services and medical attention the new ‘Cine Vagón’. to 5,200 local residents. Thanks to our partnership with the Universidad Autóno- EDUCATION EDUCATIONAL MATERIALS: 35 ma Metropolitana, we operated a training and refresher EDUCACIÓN PARA LA SALUD Y LA VIDA program on topics related to the illnesses detected in The educational materials produced by Grupo México Foun- the states visited by the Health Train, to raise the cur- dation are and have been the only such materials approved ricular level for the Dr. Vagón doctors. by the Sindicato Nacional de Trabajadores de la Educación (SNTE) (Mexican Educators Union), making us the only NGO We set up a toll-free line at 01800 DRVAGON (3782466) to provide psychological counseling and support, to re- spond to demand from patients of the Health Train. SUSTAINABLE DEVELOPMENT REPORT 2017 that has introduced social issues into basic education in Mexico to offer children and youth a more integral curricula. These materials have been provided to 220,000 elementary and middle schools throughout the country as part of the curriculum set by the Mexican Department of Education. Our educational platform www.educacionsaludyvida.org was created so that our materials, contri- butions from experts, legal and psychological advice, and statistics on the topics covered (violence, sexuality, nutrition and addictions) can be read and used by more people. These materials can be viewed online or downloaded free of charge from anywhere in the world. There are currently 20,128 active users of the platform, 16,579 teachers and 3,549 parents and students. We have logged 58,053 downloads of our materials: Elementary 1. Como, me nutro y me divierto (nutrition) 5,284 downloads 2. Aprendo a cuidarme de la violencia (non-violence) 8,657 downloads 3. ¿Qué son las adicciones? Cómo decido (addictions) 7,566 downloads 4. ¡Mi cuerpo se respeta! (sexuality) 8,789 downloads Middle school 1. Distingo la violencia y me protejo (non-violence) 5,622 downloads 2. ¿Adicciones? ¡Alerta máxima! (addictions) 6,235 downloads 3. Para comer mejor (nutrition) 4,851 downloads 36 4. En mi cuerpo, ¡yo decido! (sexuality) 6,201 downloads General 1. Como, disfruto y me nutro (nutrition) 4,848 downloads We visited 134 public and private elementary and middle schools this year (81 elementary schools and 53 middle schools) to offer training and to deliver our educational materials as support tools in schools that are not members of the Sindicato Nacional de Trabajadores de la Educación. GR UPO MÉXICO FOUNDATION We have trained 4,278 teachers on using the platform and the materials in their classrooms. 1,381 legal and psychological consults have been provided on our two discussion forums, where our users exchange experiences on issues of violence, sexuality, addictions and nutrition. Various experts collaborate with us on this project and have provided 22 articles for our educational platform. EDUCATIONAL WORKSHOPS: At the Grupo México Foundation, we’re aware that all education must be compre- hensive. In this regard, we’ve been working with Fundación Nemi for four years of- fering various educational workshops to more than 69,000 middle and high school students since the project started. This year, we began operations in Chihuahua and San Luis Potosi, while continuing the work in the states of Sonora, Zacatecas and Baja California Sur. During 2017, 261 workshops were held at 43 middle and high schools to educate 19,846 students on the principal social issues they face as teenagers. The topics we focus on are: 1. Violence 2. Sexuality 3. Nutrition 4. Addictions 5. Financial Education 6. Life Plan 7. Smart Communication 8. Self-Esteem 9. Entrepreneurship 37 SUSTAINABLE DEVELOPMENT REPORT 2017 GR UPO MÉXICO FOUNDATION HUMANITARIAN AID With the support of Ferromex, 554.5 tons of dry goods 2. Mazatlan Food Bank - distribution of high nutritional value foods (50 children benefited in Sinaloa) were transported free of charge to five Mexican states: 3. Fondo para la Paz - construction of a community kit- Chihuahua, Chiapas, Mexico City, Oaxaca and Morelos. chen (294 children benefited in Chiapas) These actions supported 59,781 people. 4. AMEXTRA (Asociación Mexicana de Transformación Rural y Urbana) - training in producing traditional re- Thanks to this bus adapted as a “mobile school”, we’ve contributed to raising the level of education among adults over 15 years of age with no access to formal education, bringing to their communities the opportunity to complete their studies. During 2017, students took 543 certification exams in basic education, in 40 Parral communities, where 73 students completed their elementary education and 27 continue to take classes with the mobile school to receive their middle 311 tons of dry goods were delivered in the state of gional crops, backyard orchards (100 children benefi- school diploma. Chihuahua, benefiting 24,412 people in four Tarahu- ted in Chiapas) mara communities: Creel, Temoris, Cuauhtemoc and 5. FAE (Fundación para la Asistencia Educativa) - meals Bahuichivo. for children of scavengers who live and work in Bor- do de Xochiaca (300 children benefited in Estado de THE ENVIRONMENT REFORESTATION As a result of the disasters following the September Mexico) Thanks to our partnerships with various local and state governments and institutions working to protect the environ- earthquakes, and for the first time, more than 243 tons 6. Niños de Santa Fe - medical supervision for children ment, we reforested 839 hectares with 839,247 trees in 19 Mexican states this year. This achievement was largely of foodstuffs and personal hygiene items were transport- with advanced child malnutrition, purchase of dietary due to the collaboration and commitment of 2,702 volunteers, mostly Grupo México employees and their families who ed to states other than Chihuahua, directly supporting supplements (100 children in Michoacan) participated in the tree planting days we held in different states where we operate. With these actions, we impacted 35,369 people. 7. ONL (Organismo de Nutrición Infantil) - monthly deli- 8,524,762 people. veries of nutritional supplements (300 children bene- WORLD FOOD DAY fited in Jalisco) The states reforested were: There are 1.5 million children under 5 years of age suf- 8. Fundación Tarahumara José A. Llaguno - deliveries of fering from chronic malnutrition in Mexico today, 13.6% fortified milk and nutritional supplements to Raramuri of the total population of this age group (UNICEF). Be- communities (816 children benefited in Chihuahua) cause of this, it has been fundamental for us to develop 9 Fundación Nacional de Mujeres por la Salud Comuni- a partnership with HSBC and Fundación CMR, through taria - providing baby formula for infants exposed to a “World Food Day” project, which raises funds for dif- perinatal transmission of HIV, from newborns up to 18 ferent NGO’s working to eliminate child malnutrition. In months (90 children benefited in Chiapas) 38 2017, this program benefited 2,300 children through nine organizations in six states. PLAZA MOVIL PARRAL This project, supported by the Instituto Chihuahuense de 1. Mundo Unitatis - purchase of nutritional supplements Educación para los Adultos (ICHEA) and the Department with high biological value proteins (250 children be- of Education, began operations in 2016 and has support- nefited in Chiapas) ed 1,823 adults to complete their basic education. PACIFIC OCEAN GULF OF MEXICO 39 CENTRAL AMERICA SUSTAINABLE DEVELOPMENT REPORT 2017 n o. STATE T REES PLA NTE D HECTARE S REF OREST ED 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Veracruz Puebla Aguascalientes Guanajuato Mexico State Mexico City Tlaxcala Zacatecas Michoacan Tamaulipas Hidalgo Jalisco Oaxaca Sonora Queretaro Chihuahua Durango Baja California Sur San Luis Potosi TOTAL 20,000 50,000 68,907 60,000 76,541 7,000 7,000 17,500 196,088 150,000 20,000 45,450 23,000 50,000 7,000 11,238 20,000 5,000 4,523 20 50 69 60 77 7 7 17 196 150 20 45 23 50 7 11 20 5 5 839,247 839 During our 7th Grupo México Foundation Tree Planting Day held in Huixquilucan, Estado de Mexico, we planted 16,000 pine trees on 16 hectares of forest. Gru- po México, Intermodal, Ferromex, Ferrosur, Cinemex, Sura, Fundación Posadas, Hogan Lovells, KPMG, Laboratorios LAPI, Coparmex, Manpower and Nestlé em- ployees and family members made up the 1,502 volunteers who participated, im- 40 pacting 443,000 residents near the “Las Cruces” site. Of note is that more and more companies are joining our tree planting efforts, raising awareness among their employees on the importance of the environment, strengthening family and company ties through these actions. A further 1,200 volunteers joined our reforestation efforts, planting 12,400 trees on 12 hectares of grasslands in the communities of Guerrero Negro, Esqueda, Nacozari, Charcas and San Luis Potosí. GR UPO MÉXICO FOUNDATION Parallel to working with our volunteers, we are collaborat- CONCIENCIA CINEMEX ing with Ferromex on a project without precedent, ‘Vagón Verde’ (Ecology Train), which holds mass tree planting BENEFIT PREMIERES days in various communities near the rail lines to improve the physical appearance of public spaces, but more so to raise awareness among children and youth on damage This program offers a fundraising tool for participating or- ganizations. Grupo México Foundation supports the work of these organizations, matching the amount raised from to the environment. The trees planted are produced at ticket sales for their assigned premieres. our nurseries, donated by Grupo México Foundation and transported by Ferromex and Ferrosur on their rail lines. During 2017, Grupo México Foundation matched $1,932,248 pesos through 31 premieres given to 24 dif- LO HECHO EN MEXICO ferent organizations, impacting 541,806 people. For the fifth year, we supported the “Mexico in 1 image, 1 Photo = 1 tree” contest, the goal of which is for par- We appreciate the support of distributors like Videocine, ticipants to express why they are proud to be Mexican, Mantarraya, Diamond, Corazon, Amarok, Zima, Concien- through a photograph. Participants are divided into three cia Films and Casa de Arte, who support this program by categories: professionals, amateurs and a special eye, providing the movies. We continue to look for new part- which is reserved for people with Down syndrome. nerships to increase the number of offerings and hold more premiere events. The confidence the distributors In 2017, 19,889 photographs were submitted to the have in the program is due to our excellent handling of website and more than 1.7 million likes were recorded their films, and also the transparency and consistency for the participating photographs. The top 50 photos are with which we report the results of the work by the orga- shown in a touring exhibition that travels internationally nizations benefited. for a year. SOCIAL MARKETING CAMPAIGNS / The exhibition tour began at the Museo Soumaya in Mex- FUNDRAISING ico City, then moved to Tlaxcala, Estado de Mexico, Coli- During 2017, we led three fundraising campaigns at 41 ma, Hidalgo, Nuevo Leon and Atlanta, and is currently in the concession stands at various Cinemex movie the- Toronto. The tour has been taken overseas thanks to the aters across the country. The money raised is donat- assistance of the Mexican consulates in the United States ed to selected organizations to support their projects and Canada. and social causes. SUSTAINABLE DEVELOPMENT REPORT 2017 2017 Campaigns: 1. Fundación CMR MARQUEE CAMPAIGN This program, which has been in operation for 2 years, 1,000 children benefited Cause: Nutrition offers spaces on the marquees at our movie theaters for 2. La Alegría de los Niños I.A.P. organizations to display their social message, to increase 70 children benefited Cause: Education their visibility and to raise awareness for their work. Elev- 3. Animal Defense Heroes en campaigns were held in 220 complexes nationwide 1,550 people benefited Cause: Animal abuse in 2017. We displayed 2,420 posters during the year, reaching approximately 30 million people. “CINEMINUTO” SOCIAL MESSAGES It is a priority of Grupo México Foundation to showcase The organizations benefited were: the work of those who care for the less privileged. In this 1. ORT de México regard, we donated airtime at Cinemex theaters across Education in social responsibility the country to educate the public on being generous and 2. Animal Defense Heroes to raise awareness on the work of the different organiza- Animal abuse tions we support with this program. In 2017, we showed 3. Expo Fundación y Congreso 3,445 Cineminutos in 265 complexes, reaching more Professionalization of charity organizations than 32 million moviegoers. 4. La Alegría de los Niños CINEMEX RUN Education for abandoned children 5. Apoyo, Salud y Asistencia GIN For the 8th year, this charity run took the Magic of the Developing Mexican talent Movies to the streets of Mexico City. More than 6,000 6. Congregación Marina Trinitaria runners participated with the goal of supporting an orga- Support for underprivileged children nization that we carefully selected to receive a donation 7. Fundación Lorena Ochoa collected from the registration fees. Education for underprivileged children 42 In 2017, La Alegría de los Niños I.A.P. was chosen Fostering tolerance and respect 8. Museo Memoria y Tolerancia A.C. as the recipient from the run, to continue their proj- 9. Juguetón ect Corriendo por la Educación (Run for Education), Campaign to collect toys for underprivileged children where children victims of abandonment and abuse will receive quality education within a model of com- FUNDRAISING CAMPAIGNS 1x1 AND 1x3 FO- prehensive care that ranges from physical and psy- LLOWING THE SEPTEMBER EARTHQUAKES chological rehabilitation, academic regularization, In response to the September earthquakes, Cinemex and affection and attentive care within the shelter, until Grupo México Foundation launched a fundraising cam- the children are placed with a family. paign with the funds raised going to support the most GR UPO MÉXICO FOUNDATION affected areas of the country. In the first stage, Grupo México Foundation matched peso for peso the money donated by the public, however because of the level of the disaster, a second stage was launched, where Grupo México Foundation tripled each peso donated, raising more than 37 million pesos. Committed to everyone who made a donation placing their trust with us, Grupo Méx- ico Foundation took on the task of seeking out a major project that would impact the most people possible, and so the decision was made to build a specialization hospital in the municipality of Juchitan de Zaragoza, Oaxaca. Given the magnitude of this project, Grupo México Foundation stepped in to make up the shortfall and contrib- uted in excess of $140 million pesos to ensure the project becomes a reality. The total investment for this project will be $178 million pesos, which will benefit 255,315 residents of the Oaxaca Isthmus. DONATIONS RECEIVED FROM THE GENERAL PUBLIC $1,306,585 $8,778,982 $10,085,567 GRUPO MÉXICO FOUN- DATION CONTRIBUTION $1,306,585 $26,336,947 $27,643,532 $37,729,099 $140,270,901 $178,000,000 First stage: Double Second stage: Triple Subtotals Total Fundraising Campaign Grupo México Foundation Additional Investment TOTAL INVESTMENT SUPPORT FOR INSTITUTIONS EFICINE 189 Support Committed to what Mexico does well, Grupo México Foundation received, reviewed 43 and selected cinematographic projects with great potential and supported the success- ful projects through the EFICINE tax incentive program to complete their production. In 2017, we supported 8 projects approved by the CIEFICINE: 1. Invisible 2. El Rey de la Fiesta 3. La Nave 4. Los Idealistas SUSTAINABLE DEVELOPMENT REPORT 2017 2016-2017 COMPARATIVE Dr. Vagón, the Health Train 2016-2017 COMPARATIVE Environment States Increase Patients Increase 2016 2017 2016 - 2017 2016 2017 2016 - 2017 Dr. Vagón, the Health Train 13 15 15% 45,573 61,212 Doctor’s visits Increase Workshops held 2016 2017 2016 - 2017 184,928 266,440 44% 2016 803 2017 1,028 34% Increase 2016 - 2017 28% Workshop participants Increase Medications Increase 2016 2017 2016 - 2017 2016 2017 2016 - 2017 Dr. Vagón, the Health Train 22,925 45,806 Kilometers 100% Increase 2016 2017 2016 - 2017 12,796 15,443 21% 64,741 79,013 22% 2016-2017 COMPARATIVE Education 44 Project Humanitarian Aid Project Educational Workshops Project World Food Day Project Health and Living Educational Materials States People Impacted 2016 2017 2016 2017 Increase 2016 - 2017 3 5 15,230 people 59,781 people 292% States People Impacted 2016 2017 2016 2017 4 5 11,629 middle and high school students 19,846 middle and high school students States People Impacted 2016 2017 2016 2017 Increase 2016 - 2017 71% Increase 2016 - 2017 4 6 728 children 2,300 children 215% States Visits Increase Consults Increase 2016 2017 2016 2017 2016 - 2017 2016 2017 2016 - 2017 32 32 4,938 20,128 308% 496 1,381 178% GR UPO MÉXICO FOUNDATION Increase 2016 - 2017 Project Tree Planting Project States People Impacted 2016 2017 2016 9 2017 18 3,619,725 8,524,762 136% Trees donated Increase Volunteers 2016 2017 2016 - 2017 2016 608 2017 2,702 Increase 2016 - 2017 344% Tree Planting 412,159 839,247 104% 2016-2017 COMPARATIVE Conciencia Cinemex and Support for Institutions Events States Project Benefit Premieres Project Cineminutos Sociales Project Expo Fundación y Congreso Project Directly Impacted Increase 2016 2017 2016 2017 2016 2017 2016 - 2017 29 31 6 10 53,498 24 Institutions 541,806 24 Institutions 913% Copies Shown States Directly Impacted Increase 2016 2017 2016 2017 2016 2017 2016 - 2017 2,786 3,445 32 32 4,107,583 13 Institutions 23,723,351 13 Institutions 478% Events States Directly Impacted Increase 2015 2017 2016 2017 2016 2017 2015 - 2017 1 1 1 1 200 174 Institutions 354 152 Institutions 77% Workshops States Directly Impacted Increase 2016 2017 2016 2017 2016 2017 2015 - 2016 CAI Monterrey 6 2 1 1 476 1 Institutions 674 1 Institutions 42% 45 2016-2017 COMPARATIVE Red de Asociaciones y Fundaciones Empresariales States Orgs. Benefited Increase Indirect Beneficiaries Increase 2016 2017 2016 2017 2016 - 2017 2016 2017 2016 - 2017 32 32 985 1,530 55% 49,250 76,500 55% Project Red de Asociaciones y Fundaciones Empresariales SUSTAINABLE DEVELOPMENT REPORT 2017 CAI MONTERREY RED DE ASOCIACIONES Y FUNDACIONES Since 2012, the stylist workshop offered at the Monterrey EMPRESARIALES CAI has held courses on: hair stylist, nail care and art, After two years, the ‘Red de Asociaciones y Fundaciones barbering, coloring, and professional make-up, improving Empresariales’ (Network of Organizations and Corporate the quality of life of people with limited job opportunities. Foundations) has 3,000 organizations and 91 companies To date, 2,114 people have participated in this program to and corporate foundations registered. receive training for trades in demand and with the option of self-employment or entrepreneurship. In 2017, the network expanded its presence across Mexi- co and into various countries in Latin America (Colombia, Expo Fundación y Congreso Venezuela, Chile, Argentina and Peru). We successfully held the fourth Expo Fundación y Con- greso creating a space to train charity organizations and The network received recognition from INDESOL, partic- to strengthen social efforts in Mexico. The event was ipating in the annual regional meetings on strengthening planned and organized to offer participants conferences charity organizations. and seminars rich in social content. We also received recognition at the International Con- The inaugural event was led by Lorena Ochoa, Mexican gress “Education and Culture of Peace” organized by professional golfer, who shared her story of success in SERCAP International (company that provides training raising awareness on the discipline and values needed to services for the public and private sectors), Peru office, achieve any purpose in life. Our speakers filled the forum as the best innovative and socially responsible project in with innovative know-how and gave attendees practical the category corporate social responsibility. tools to better manage their organizations. Marco Antonio Regil, Yordi Rosado and Odin Dupeyron addressed differ- 32 in-person workshops and 12 webinars were held, ent topics to offer conference-goers essential techniques which translates into 192 hours of in-person training and and know-how to improve their work. 48 hours of online training, free of charge. 46 Representatives from 152 NGO’s attended the event, learning and sharing about social issues and form- ing alliances. GR UPO MÉXICO FOUNDATION SOCIAL LINK AGE VOLUNTEER DAY GRUPO MÉXICO FOUNDATION As we do each year, on the second Saturday in October, Grupo México Foundation held its annual Volunteer Day, bringing together employees from the companies of Gru- po México and Cinemex to volunteer with their families, channeling their selfless work, joining forces and multi- plying efforts to benefit those most in need in the com- munities where we operate. Building on the success and VACATIONS WITH PURPOSE In May 2017, we launched the ‘Vacaciones con Sentido’ (Vacations with Purpose) program in Peru, the goal of which is to offer Grupo México collaborators the opportu- nity participate in experiences of international cooperation contributing to the social development of communities in different countries, fostering respect for diversity and sol- idarity, through mutual support and commitment. Our employees in Mexico, Peru and the United States impact of this program, we again extended these social gave 440 hours of volunteer service. efforts this year to communities in Peru and the United States, through the participation of collaborators from the Grupo México companies in these countries, Southern Copper Corporation and ASARCO, respectively. This year, 7,200 employees who, with their families, to- taled more than 29,000 volunteers in Mexico, Peru and the United States to benefit schools, public spaces, social institutions, and immigrant centers. During the Grupo México Foundation Volunteer Day, our efforts reached more than 95,000 people and 45 insti- tutions in 32 communities in 14 Mexican states, two US states and two provinces in Peru. This program benefited 621 people and 7 institutions in five communities in Peru: 1. San Sebastián 2. Wanchaq 3. Yucay 4. Cusco 5. Huasao 47 SUSTAINABLE DEVELOPMENT REPORT 2017 MINING DIVISION MINING DIVISION / GROW GR OW STRUCTURE OF THE DIVISION AND PRINCIPAL SUBSIDIARIES G4-7 The Mining Division of Grupo México is represented by our subsidiary Americas Min- ing Corporation (AMC), comprised of: Southern Copper Corporation Minera México, S.A. de C.V. Southern Peru Copper Corporation Asarco LLC Minera los Frailes, S.L. SIGNIFICANT CHANGES IN THE ORGANIZATION G4-13 Nueva Rosita plant closure. In September 2017, we announced the conclusion of our operations in Nueva Rosita, Coahuila, consisting of a coal preparation plant with an annual production capacity of 900,000 tons of clean, high quality coal, and a coke plant with 21 furnaces with an annual production capacity of 100,000 tons of coke. 49 PRINCIPAL PRODUCTS AND MARKETS G4-4, G4-8, G4-9 Products. The principal activities of our Mining Division are the exploration, exploita- tion (mining and extraction of raw materials), and production of minerals, metals and other byproducts. SUSTAINABLE DEVELOPMENT REPORT 2017MINING DIVISION PRODUCTS & CLIENTS Mining Division, 2017 Our products Copper Copper is the third most used metal in the world and is a basic compo- nent for infrastructure and growth. It has exceptional chemical and physical proper- ties, including high electrical conductivity and high resistance to corrosion. It also has excellent malleability and ductility. Copper Molybdenum Zinc Silver Gold Molybdenum is used primarily to manufac- ture stainless and special steels. It is used to strengthen steel alloys and to soften tungsten alloys. It is also used as a catalyst in the oil and gas industry, and in fertilizers, dyes, paints, reagents and lubricants. Zinc is used primarily to galvanize iron and steel to protect against corrosion, in man- ufacturing batteries and for architectonic purposes. It is also the base for zinc oxide, which is used in tires, paints and livestock feed, among other products. Silver is used in photography, electrical products and electronics, and to a lesser degree, in traditional welding and weld- ing alloys, jewelry, coins, silverwork and catalysts. Gold is used in jewelry, in cancer treatments and for other diseases. It is also used in industrial welding, coloring in photography, and also in the aerospace sector, among other uses. Our customers Our customers work in construction, the manufacturing of electrical products and electronics, telecommunications, computers, mobile phones, industrial machinery and equipment, consumer products, and are also in the automo- tive and transportation sectors. Our customers also include metals sellers, smelters, and metal recovery and recy- cling companies. Our principal customers work in the transformation industry, treating and processing molybdenum, and its deriv- atives, including molybdenum oxide. Our customers are in the steel, electri- cal and cable industries, sellers of zinc alloy products, and pure metal supply companies. Our principal customers are in the haz- ardous waste treatment and recovery industry, manufacturers of specialty pieces that use metal alloys, and sellers of construction materials. Our customers are active in many sec- tors, benefiting from the properties of this metal, such as its corrosion resis- tance, among others. 50 MINING DIVISION / GROW The Mining Division reported US$7.555 billion in sales in 2017, a 22% increase over 2016, due to higher metals prices: copper +28%, zinc +38%, and molybdenum +28%. EBITDA was US$3.457 billion, equal to 46% of sales, which represents a year-over-year growth of 51%, attributed to low-cost production and operating effi- ciencies, and also improved copper prices. Contribution by metal to AMC’s 2017 cumulative sales: CONTRIBUTION BY METAL TO AMC’S CUMULATIVE SALES 7 8 6 4 5 3 2 1 1 Copper 2 Silver 3 Molybdenum 4 Sulfuric Acid 5 Zinc 6 Gold 7 Others 8 Lead 2017 84.2% 3.8% 4.7% 1.1% 4.3% 0.9% 0.3% 0.7% 51 INVESTMENTS AND PROJECTS G4-EC7, G4-EC8 The Mining Division of Grupo México has set as a goal to become one of the top copper producers in the world. We currently have the largest reserves in our sector and in the next 6 years, we anticipate increasing production to over 1.6 million tons of copper. As part of this growth, in 2017 we invested US$1.174 bil- lion, of which US$336 million was allocated to our proj- ects in Mexico, US$639 million to projects in Peru, and US$199 million in the United States. Principal Projects in Peru Expansion Project in Toquepala, Tacna. Represent- ing an investment of over US$1.700 billion, we are mod- ernizing our operation and building a new plant, which will increase our production capacity by 69%, to 250,000 tons of copper per year at this mine. This investment will modernize our mine equipment to build a fleet of more than 90 trucks, a new warehouse and shop for mine 52 sustainable operation and a more compact plant, easier to supervise and maintain. As part of the modernization project, we’ve replaced pro- cess equipment that will allow us to recover 10% more water from the industrial process, meaning 240 liters per second. These savings equal the daily water consump- tion of more than 172,800 people. Additionally, we’re in- vesting in infrastructure to recover water from our tailings dam to reintroduce this water into the process, resulting in a lower consumption of fresh water. More than 8,000 direct jobs have been created during the project’s construction phase in an area away from urban centers and where opportunities are scarce. Also, the supply chain for our operations in Peru has been strengthened, comprised of more than 1,900 suppliers, making a significant contribution to the region’s economy. At December 31, 2017, the project reported 87% com- pletion and the concentrator is expected to start opera- tions mid-2018. MINING DIVISION / GROW and a new crusher at the pit optimizing the haulage dis- Principal Projects in Mexico tances of the cargo trucks, resulting in operational sav- Buenavista Zinc, Sonora. This project is locat- ings of US$23 million per year. The project represented ed at the Buenavista deposit in Sonora and consists an investment of US$226 million and is fully completed of the construction of a concentrator with a produc- and in operation. tion capacity of 80,000 tons of zinc and an additional 20,000 tons of copper per year. The basic engineering Tailings Thickeners at the Toquepala and Cuajone has been completed and we have started to purchase Concentrators. The thickeners allow us to capture the principal equipment. On completion, the proj- more water from the metallurgical process by removing ect will double the zinc production of the Mining Divi- solids from our mine waste and recover more water from sion. This investment has a budget of US$413 million the industrial process. We’ve installed seven additional and the project is expected to be completed in 2020. high-efficiency thickeners at our operations in Peru, with which we can recover 104,000 m3/day at Toquepala and Pilares, Sonora. This project is located in Sonora, 6 140,000 m3/day at Cuajone. This equipment will increase km from the La Caridad mine consists of an open pit water recovery by 10%, meaning 240 liters per sec- mine with an annual production capacity of 35,000 ond, equal to the daily consumption of 172,800 people. tons of copper concentrate. The high-grade ore will be transported by the mine trucks to feed the prima- The investment in the installation of the thickeners at our ry crushers at the La Caridad copper concentrator, Toquepala and Cuajone mines totaled US$85 million. enriching the average grade. We are currently design- ing the mine plan and the new road has been chart- Tia Maria. The engineering process for this project was ed. The budget for this investment is US$159 million completed in 2017, fulfilling the environmental require- and the project is expected to be completed in 2019. ments, and we finalized the environmental impact as- 53 equipment, a new primary pit crushing plant, a concen- Ore transportation and crushing project in Cuajone, sessment. We will continue to work with the Peruvian Principal Projects in the United States trator with a capacity to process 60,000 tons of ore per Moquegua. The project consisted of replacing the rail trans- government and expect to receive the construction permit Modernization of the Hayden Smelter. This modern- day, and various investments in auxiliary infrastructure. portation system with a conveyor belt and crushing system, during the first six months of 2018. This project will increase ization project includes replacing converter furnaces at Using cutting-edge technology, we have installed high-capacity and more efficient equipment in terms of water and energy consumption. Efficiency in the use of resources and in our processes translates into a more our annual metallic copper production by 120,000 tons. the Hayden smelter, and optimizing the vapor and dust collection and management systems. With this, we will SUSTAINABLE DEVELOPMENT REPORT 2017 increase our SO2 capture rate from 95% to 99% and also improve our production efficiency to produce an additional 15,000 tons of copper per year. The project has an investment budget of US$229 million, reports 73% progress, and CUSTOMER RELATIONS G4-PR5 will be completed in April 2018. Principal Projects in Spain Quality Policy. The Mining Division’s quality policy states that quality will be mea- sured through customer satisfaction, based on understanding customer needs, and is reflected in the ongoing improvement of our production processes. Aznalcollar, Andalucía. This project is located 35 km from the city of Seville in Spain. After the project was awarded to Grupo México through an international public tender in 2015, in mid-2016 the regional authorities granted us permis- Customer Satisfaction. For all Mining Division subsidiaries, the satisfaction of our sion to start exploratory activities. From July 2016 to April 2017, we conducted an intense exploratory campaign. The customers is essential to maintaining our operations and being recognized for the results so far confirm the initial information for the project and would suggest a promising potential to eventually increase excellent quality of our products. Because of this, we conduct a customer satisfaction the initial size of the ore bodies. We’re working on a revised feasibility study, which will be completed by the end of the survey each year to identify opportunities for improvement. Products and/or services year. The permit process will continue and the detailed engineering is expected to begin at the end of 2018, with the that receive a low rating are assessed and corrective measures are determined and monitored. The effectiveness of the corrective actions is supervised internally as a result of the interaction with the customer. In 2017, we received a rating of 93%, a score that shows us that most of our prod- ucts and services meet or exceed the expectations of our customers. mine starting operations in 2021. The estimated investment for the project is budgeted at US$290 million and will increase zinc production by 102,000 tons of zinc equivalent per year. EXPLORATIONS In our search for economic growth, we’ve conducted extensive exploratory projects to identify new mineral resources at our current sites and at new deposits in Peru, Mexico, Chile, Argentina, the United States and Ecuador. PRINCIPAL EXPLORATION PROJECTS 54 Country Project Country Project Mexico • El Arco • El Pilar • Bella Union (La Caridad) • Chalchihuites • Alfareña Project (Santa Barbara) Peru Chile Ecuador Argentina • Los Chancas • El Salado • Chaucha – Ruta del Cobre • Caldera Project United States • Chilito (Arizona) MINING DIVISION / GROW 55 SUSTAINABLE DEVELOPMENT REPORT 2017 MINING DIVISION / PROMOTE Contractors. At Grupo México, our activities contribute indirectly to job creation. In 2017, 10,303 contractors delivered services at our Mining Division sites. Freedom of association G4-11, G4-LA4, G4-LA8 The companies that comprise the Mining Division of Grupo México guarantee free- dom of association as a labor right. At 2017 close, 11,889 of our collaborators were unionized, representing 76% of the division’s workforce. We strive to strengthen trust between the company and our collaborators, including their union representatives, for which we maintain ongoing dialog through the hu- man resources department. We communicate operational changes with the advance notice required under the collective bargaining agreements and we act according to legal requirements, as applicable. For example, in the United States, the Worker Adjustment and Retraining Notification Act (WARN) requires 60 days notice for mass layoffs and/or closures. There were illegal 3 work stoppages at our operations in Peru this year, although the company signed agreements with the unions involved. There was no impact on the company’s operations or activities. 57 PRO MOTE WORKFORCE AND LABOR PRACTICES Workforce G4-9, G4-10 Our People. The Mining Division team was comprised of 15,672 collaborators in 2017, with 98% under permanent contract and 100% working full time. This means we can design career development plans, and also create a solid culture that perme- ates all our operations. COLLABORATORS Mining Division, 2015-2017 Year 2015 2016 2017 COLLABORATORS BY REGION Mining Division, 2017 Subsidiary Mexico Peru USA 56 Collaborators 8,453 4,869 2,350 COLLABORATORS BY AGE GROUP Mining Division, 2017 Age group 18-24 25-34 35-44 45+ Collaborators 839 4,599 3,925 6,309 Collaborators 16,062 15,883 15,672 % 54% 31% 15% % 5.37 29.34 25.04 40.25 SUSTAINABLE DEVELOPMENT REPORT 2017 MINING DIVISION / PROMOTE Equal opportunity and non-discrimination G4-LA12, G4-HR3 Base salary and wage equality G4-EC5, G4-LA13 Although the mining operation’s workforce remains primarily made up of men, we encourage the par- During 2017, the average Base Salary in the Mining Division was equal to 8.07 times the local mini- ticipation of women under our approach of inclusivity and equal opportunity. We would like to involve mum wage.2 The Base Salary includes the basic wage, productivity bonuses, cash benefits and profit more women in the recruitment processes and we strive to always offer equal conditions. In 2017, 942 sharing, where applicable. of our collaborators were women, representing 6% of the workforce. WOMEN BY EMPLOYEE CATEGORY Mining Division, 2017 Category Senior management and Department heads Technicians Specialists Assistants Number of collaborators Number of collaborators that are women % Women 166 5,400 552 9,554 21 444 98 431 12.65 8.22 17.75 4.51 Non-discrimination. We adhere to the company’s principles and values and in keeping with our com- mitment of respect for human rights, the Mining Division of Grupo México has zero tolerance for acts of discrimination. Our Code of Ethics expressly prohibits discrimination on the basis of ethnic origin or nationality, gender, age, disability, social condition, political affiliation, health condition, religious beliefs, immigration status, opinions, sexual preference, or marital status. Any collaborator that is witness to or the victim of any form of discrimination is encouraged to report 58 the incident via the Grupo México reporting line. This formal mechanism is operated by a third party and offers a phone number, email and website to report incidents.1 We continue to work to ensure wage equality in all professional categories for women. Attracting and retaining personnel G4-LA1 During 2017, 2,114 collaborators joined our mine operations workforce in Mexico, Peru and the United States, and there were 1,506 separations. The turnover rate this year was 9.6%. NEW HIRES Mining Division, 2015-2017 Subsidiary Mexico Peru USA 18-24 556 31 53 Age groups Gender 25-34 800 166 68 35-44 183 76 44 45+ 73 20 44 Male 1,465 278 191 Female 147 15 18 59 1 For more information on our Code of Ethics and reporting procedures, see the section on Human Rights in the Corporate Gover- 2 Considering the Base Salary (BS) and the Minimum Wage (MW), the BS/MW average is calculated weighting the BS and MW for each country where we nance chapter. operate, based on the number of collaborators in the Mining Division in each territory. SUSTAINABLE DEVELOPMENT REPORT 2017 SEPARATIONS BY REGION Mining Division, 2017 Subsidiary Mexico Peru USA TURNOVER RATE Mining Division, 2017 Subsidiary Mexico Peru USA TURNOVER RATE Mining Division, 2015-2017 Subsidiary 2015 2016 2017 Collaborators 1,068 202 236 Collaborators 12.6% 4.1% 10.0% Collaborators 6.72% 10.31% 9.61% TURNOVER RATE BY GENDER Mining Division, 2017 Gender Male Female No. of Separations 1,418 88 Turnover rate 9.61% 9.54% 60 MINING DIVISION / PROMOTE Employee Benefits G4-LA2 To contribute to the employment stability of our Mining Division employees, we offer the following benefits above those required by law: Salary-related Life insurance Major medical insurance Family protection insurance Savings fund Grocery vouchers Productivity bonus Pension fund Others Housing assignment Utilities (power, water, etc.) Medical clinics School (elementary and middle school) for children of employees Employee cafeterias Sports facilities Scholarships for employees and their children Share purchase plan for employees Retirement plan 61 SUSTAINABLE DEVELOPMENT REPORT 2017 MINING DIVISION / PROMOTE TRAINING AND CAREER DEVELOPMENT Training G4-LA9, G4-LA10 TRAINING PROGRAMS Mining Division, 2017 Peru The competencies required are defined based on the position, considering the types of tasks per- In 2017, we delivered a total of 413,158 training hours in the Mining Division, with an average 26.38 formed, the technology available, and possible special projects. These competencies then provide training hours per collaborator. TOTAL TRAINING HOURS Mining Division, 2015-2017 Year 2015 2016 2017 No. of Hours 595,426 548,118 413,158 essential input for the annual training plan. The principal programs are: (i) occupational health and safety, (ii) technical competencies, and (iii) behavioral skills (coaching, supervisor responsibilities and management skills). United States Programs are based on developing leadership skills, such as conflict resolution, mechanisms for employee feedback and adaptive leadership, among others. Management courses are offered on diversity, understanding policies and procedures, gender equality and discrimination. Additionally, courses are held at a creative leadership center, outside the ASARCO facilities, where we strive to The skills management and training programs we offer our collaborators in the Mining Division vary maximize the management skills of our collaborators. according to their activity and the country where they work. TRAINING PROGRAMS Mining Division, 2017 Mexico Mining requires highly specialized technical skills. As a result, it is a priority to develop talent in the communities where we operate, through education programs in collaboration with different organi- zations. In Mexico, we continue to collaborate with the INEA, Conalep, Instituto Sonorense de Edu- cación and the Universidad Autónoma de San Luis Potosi, developing industry-related educational programs. Thanks to this, various collaborators and people from the communities where we work Programs are based on the Minera México Corporate, Administrative and Technical Competencies have received training. Model, which has a specific profile of required competencies for each position. These competencies are assessed to identify training needs and define the annual training programs. Detecting opportu- Similarly, our mine operations in Peru support the professional development of the members of our 62 nities for training results from dialog between supervisor and collaborator, planning their professional neighbor communities. 63 development and training together SUSTAINABLE DEVELOPMENT REPORT 2017 MINING DIVISION / PROMOTE Performance review G4-LA11 OCCUPATIONAL HEALTH AND SAFETY In addition to training, and also relevant for professional development, we conduct a performance re- view for non-union employees, in which all employees who were with us throughout 2017 participated. Workplace health and safety G4-LA5, G4-LA6, G4-LA7 PERFORMANCE REVIEW PROCESSES Mining Division, 2017 Mexico Goals for our employees are defined based on the strategic goals of the business. Employee competencies and goals achieved are assessed annually. In the process, dialog is strength- ened between the employee and their supervisor, and also alignment between projects and teamwork. Peru A Performance Review Tool is applied to employees that have been with the company for more than 6 months, and includes general criteria, such as: applying skills and knowledge, work plan- ning and organization, interpersonal relationships, results, initiative, work attitude and creativity. Additionally, management with employees under their charge are assessed in: management skills, cost control and resource management, safety, problem analysis and decision making, and de- veloping their team. United States Each employee and their supervisor set goals, which forms the basis for the annual review at the end of the year, using an online tool. Career planning sessions are held, where the employee and 64 the supervisor set new goals and discuss skills and areas for improvement for the next perfor- mance review. Focus. For Grupo México, caring for the lives, health and wellbeing of our collaborators and their families is the top priority at all our operations. No other task is more important. Our primary commitment is to creating optimal and safe work environments for our collaborators, which we do to the highest standards in occupational health and safety. Our goal: ZERO accidents. The Mining Division’s Comprehensive Workplace Health and Safety Management System helps us to implement effec- tive processes and provide our collaborators with the knowledge and skills they need to manage risks, prioritize goals, and to prevent accidents. Investment in Occupational Health and Safety. We invested US$127 million in occupational health and safety in 2017. INVESTMENT AND SPENDING IN WORKPLACE SAFETY US$ millions Mining Division, 2017 Category Administrative costs Training Personal protective gear Industrial hygiene studies Engineering works Total Amount 6.90 1.02 12.14 2.45 97.85 120.36 INVESTMENT AND SPENDING IN HEALTH US$ millions Mining Division, 2017 Category Health awareness promotion and protection Detection and prevention Treatment Rehabilitation Total 65 Amount 0.94 2.58 2.60 0.04 6.16 SUSTAINABLE DEVELOPMENT REPORT 2017 INCIDENT RATE (IR), Mining Division, 2013-2017 SEVERITY RATE (SR), Mining Division, 2013-2017 OCCUPATIONAL DISEASE RATE (ODR), Mining Division, 2013-2017 3 1 0 2 4 9 . 0 4 1 0 2 4 8 . 0 5 1 0 2 9 6 . 0 6 1 0 2 5 7 . 0 7 1 0 2 8 7 . 0 IR = No. of incapacitating accidents Total man hours worked 3 1 0 2 9 1 . 0 4 1 0 2 9 4 . 0 5 1 0 2 3 2 . 0 6 1 0 2 0 3 . 0 7 1 0 2 2 3 . 0 x 200,000 SR = No. of days lost Total man hours worked x 1.00 3 1 0 2 7 4 . 0 4 1 0 2 2 3 . 0 5 1 0 2 2 1 . 0 6 1 0 2 7 3 . 0 7 1 0 2 0 3 . 0 No. of cases of occupational diseases ODR = x 200,000 Total man hours worked Occupational Safety. Over the last 5 years, the Mining and prevention and educational programs, and also the Occupational Health and Safety Committees. Our guidelines to safeguard the safety of our employees include Division has reduced its incident rate by 28%, and its treatment of diseases. the creation and operation of our health and safety committees, where 7% of the total collaborators represent the severity rate by 48%. Our occupational accident rate is entire workforce. 42% below the average for the mining industry in the Despite all the efforts made in occupational safety, in United States, according to the Mine Health and Safety 2017 we deeply regretted the loss of three collaborators Administration. 66 as a result of accidents at our Mission (United States), Ilo Smelter (Peru) and Santa Eulalia (Mexico) operations. In the United States, our mines again reported record low These losses impacted us deeply and motivate us to dou- HEALTH AND SAFETY COMMISSIONS Mining Division, 2017 Country Description % of the workforce represented 67 accident and severity rates, with an incident rate 59% ble our efforts. We will stop optimizing preventive mea- Our operations in Mexico have a Central Safety Committee comprised of managers, below the regional average. At our operations in Mexico, sures to eliminate unsafe conditions and behaviors until directors and superintendents, which is responsible for ensuring compliance is met thanks to teamwork, the accident rate is 53% below the we have reached our goal of “zero accidents”. Mexico with regulations and the corrective measures defined from monitoring operations. 100 industry average. Over the last 5 years, we’ve reduced our occupational disease rate by 34%, as a result of different risk control Also, the Departmental Safety Committee reviews the work conditions within the Mining Division and is comprised of supervisors, and there is a Health and Safety Commission made up of management and collaborators. SUSTAINABLE DEVELOPMENT REPORT 2017 MINING DIVISION / PROMOTE HEALTH AND SAFETY COMMISSIONS Mining Division, 2017 - Mine Rescue Brigades. All our mine operations - Cuajone, Ilo and Toquepala hospitals. In Peru, have emergency brigades, formed by volunteer our collaborators and their families have 3 company In Peru, we have a Joint Workplace Health and Safety Committee at all our opera- mine workers who assist their colleagues in the hospitals available to them, in Cuajone, Ilo and Toque- Peru tions, comprised of management and collaborators from all the different areas. This 100 event of any emergency requiring immediate action. pala. Collaborators who perform higher risk activities committee reviews the operating conditions to ensure these are optimal, analyzes It is essential that these brigades receive proper receive regular medical examinations to assess their risks, and follows up on health and safety plans and programs. training to know how to act. In the Mining Division, health and take any measures needed. Our mines in the United States also have a health committee at each operation, we train these brigades in the necessary skills in United States made up of management and collaborators, representing the entire workforce. the event of a disaster. - Certifications. During 2017, we maintained various In addition to participating in the design of the health and safety programs, the 100 certifications in occupational health and safety and we committees regularly inspect the working conditions, participate in accident investi- - “Bienestar” program. In Mexico, we have imple- also maintained units certified as healthy workplaces. gations, and hear concerns from employees on health and safety issues. mented the program “Bienestar” (Wellbeing), focus- We have also continued to work with the Mexican De- Health and Safety Programs ing on preventing chronic degenerative diseases, such partment of Labor and Social Welfare, participating in as diabetes, high blood pressure, dyslipidemias or the voluntary Workplace Health and Safety Self-Man- obesity, through the detection of potential risk factors agement Program. - Total Safety Culture (TSC). In 2017, we started - Behavior-Based Safety (BBS). In Peru, the beha- and recommending courses of action, with the sup- to implement this training program on occupational vior-based safety model is being consolidated. The port of nutritionists. Additionally, we continue working This has been possible thanks to our internal man- safety for the different supervisor levels, who in turn goal of this program is to reinforce safe behaviors on the “Entornos Saludables” (Healthy Environments) agement system, known as the Sistema Integral de then share the training with the employees under their through observation and feedback during the day- program, maintaining recognition for 3 schools and 5 Administración de Seguridad y Salud en el Trabajo charge. to-day work, creating a positive environment that en- company neighborhoods as healthy and safe environ- (SIASST) (Comprehensive Workplace Health and courages participation and pride in efforts aimed at ments by the Department of Health. Safety Management System), which covers monitor- The sessions are delivered by the operations officers, creating a safe work environment. ing risks and developing improvement plans as results mine managers and engineers, among others. Each - Healthy lifestyle. In addition to the actions men- are obtained, and also the responsibilities of our col- 68 8-hour session addresses key safety principles. In 2017, we started to implement the program at the tioned above, we offer workshops on prevention and laborators and contract employees. 69 This training was offered to personnel at Mission in zinc electrolyte refinery in Mexico. self-care for our collaborators, their families and the general public. The goal is to raise awareness on be- 2017 and will be implemented at Hayden and Silver - Safety Cells Forum. For the seventh year, we facili- haviors that help to live a healthy lifestyle. Bell in 2018. tated this space for our collaborators to present their best initiatives in accident prevention to make their day-to-day tasks safer. SUSTAINABLE DEVELOPMENT REPORT 2017 HEALTH AND SAFETY CERTIFICATIONS AND RECOGNITIONS Mining Division, 2017 Certification Sites certified OHSAS 18001:2007 • 12 units certified in Mexico and Peru Workplace Health and Safety Self-Management Program • 17 units accredited The Mexican Mining Chamber (CAMIMEX) Casco de • Mexicana del Cobre “La Caridad” Mine Plata “Jorge Rangel Zamorano” prize, for reporting the • Santa Eulalia Mine lowest incident rates in the industry. COMMUNITY DEVELOPMENT G4-SO1, G4-SO2, G4-SO11 Community Development Model Approach. The Grupo México Mining Division strives to foster the economic and social development of our communities through our Community Development Model. This model is implemented in the communities that neighbor our operations and is based on specific methodologies and procedures, which include the community immersion process to encourage citizen participation in designing their MINING DIVISION / PROMOTE PARTICIPATIVE DIAGNOSTICS COMMITMENT OF THE LOCAL MANAGEMENT TEAM PARTNERSHIPS AND SHARED RESPONSIBILITY EXPANDING THE VISION FOR THE COMMUNITY COMMUNITY DIALOG ON RESULTS SPONSORS AND VOLUNTEERS COMMUNITY COMMITTEES PARTICIPATIVE PROJECTS “Casa Grande” G4-SO1, G4-EC7, G4-EC8 own programs, and also in preparing social diagnostics to help us to mutually understand -company Approach. “Casa Grande” embodies our Community Development Model, the goal of which is to improve the quality of and community-, the socioeconomic reality of each region to identify their needs. life of the residents in the communities where we operate. This model is put into practice as follows: 70 The eight phases of the social linkage process are structured to the company’s sustainable develop- • 16 Community Development Centers - These community spaces are located in all the places where we operate 71 ment model and are strategically designed to include the participation of all sectors and actors from and offer programs, workshops and courses. These activities focus on culture, art, sports and overall education. the community, including educational institutions, government agencies and charity organizations and associations, under a framework of shared responsibility and collaborative efforts to expand the vision • Participative Diagnostics - We conduct participative diagnostics to listen to the community and ensure that deci- for the development of the community and the continuity of programs and projects for the common sions are made together. good of present and future generations. SUSTAINABLE DEVELOPMENT REPORT 2017 • Community Committees - Community committees are formed with volunteer community leaders and com- pany representatives who work together to evaluate sus- tainable project proposals received from open calls to the community. Our mine operations in Mexico and Peru contribute to ed- ucation for our communities through 13 schools sustained or sponsored by the company, which we complement by awarding scholarships for different levels of study, ex- tending this to our collaborators and their families. • Seed Capital - The company invites the community to submit projects, which are then evaluated and successful social projects receive seed capital to improve the quality of life of the community. • Productive Projects - We develop projects that transform lives through training in productive skills. This promotes the strengthening of individual skills and oppor- tunities, and the diversification of local economies. In 2017, we conducted 1,743 activities, 374 programs and projects, with the participation of 12,303 communi- ty and corporate volunteers, benefiting 112,272 people through “seed capital” projects and productive projects. With these efforts, we promote the formation of agents for development and proactive leaders, strengthening 72 wellbeing in their communities. We also continue to support the job training and selection program ‘Forjando Futuros’ (Forging Futures), created to respond, by strengthening skills, to the professional and employment needs of the residents in the areas around our operations in southern Peru, at the Cuajone and Toquepala mines and the Ilo Smelter. The initiative has been going since 2011, for youth in the Jorge Basadre and Candarave provinces in the department of Tacna, along the Chilean border; and also in the district of To- rata, department of Moquegua. The participants in the ‘Forjando Futuros’ program im- prove their skills to access jobs in sectors such as mining, construction and investment projects with public and pri- vate organizations. With initiatives like this, we are taking Development with Purpose to the communities in the ar- eas where we operate. The program has three compo- nents: trades, education fund and professional practice. MINING DIVISION / PROMOTE its effort to reduce the technological gap in rural areas in Peru. This joint project between the Moquegua regional government and Grupo México seeks to adapt and in- corporate the use of ICT’s in the teaching and learning process, benefiting 33,560 students and teachers in Mariscal Nieto, Ilo and Sanchez Cerro in the region of Moquegua, Peru. To date, Grupo México has invested over US$33 million in information and communication technologies for stu- dents and teachers in the Moquegua region, Peru. We also support a scholarship program in the United States and participate in joint initiatives with charity or- ganizations and the government. During 2017, we dis- bursed US$163,496 in scholarships, sponsorships and community linkage. We participated in initiatives such as United Way, with direct contributions from the company manifests in the following tracks: education and strength- ening skills, health, nutrition, infrastructure and support for the farming sector. In this regard, the Mining Division contributes to the expansion of the water supply infra- structure and irrigation technification infrastructure in the provinces where we operate. An example of this is the work to improve the irrigation infrastructure in Torata, in the Moquegua region. This includes improving the water reservoirs, installing pipelines, building support walls and other water infrastructure maintenance works. We also promote development and improve the quality of life in our communities by constructing communication routes opening access to different sources of income and wellbeing. We supported the mobility of more than 4,000 people, fostering trade, education and the economic di- versification of our people. and also from our collaborators. United Way is a national With the construction of the Ilabaya - Cambaya highway organization, involving volunteers, donors and nonprofits, we increased the connectivity of High-Andean commu- which fundraises for community projects, promoting sus- nities. This road infrastructure project is considered the tainable solutions through education, financial stability largest investment nationally under the Works for Taxes and healthy lifestyles. program. This project was promoted by the district mu- 73 nicipality of Ilabaya and financed by Grupo México. Rep- Education and entrepreneurship Infrastructure and services resenting an investment of more than US$39 million, we Another way to contribute to development is through Of note is the Moquegua ICT (Information and Commu- Our mine operations in Peru are located in a remote area supported local trade, road safety and regional tourism to educational activities for children and youth in our nication Technologies) project, considered a pioneer in in the south of the country in a rural environment, and benefit 4 communities in Tacna, Peru. neighbor communities, from their basic education through to university. we are contributing to the development of the region in close partnership with the authorities and representative local organizations. Our commitment to the community SUSTAINABLE DEVELOPMENT REPORT 2017 MINING DIVISION / PROMOTE Humanitarian Aid Responding to community complaints and concerns The Mining Division joined the efforts to aid those affected by the earthquakes that We have a mechanism in place to respond to complaints and concerns in the community in relation to our industrial pro- hit the state of Oaxaca and Mexico City in September 2017. We supported the com- cesses, our staff ethics, and issues involving our activities. Through transparency and effective response to complaints, munities of Juchitan and La Ventosa in Oaxaca, with demolition, removal of debris, we strive to foster a relationship of trust and dialog between the company and the community. delivering foodstuffs, structural assessments, providing temporary spaces, and offer- ing the community psychological and emotional support. Through this mechanism, we responded to three reports involving staff ethics and the impact of company activities this year. These matters were addressed and concluded to the satisfaction of both parties. We also contributed supplies and human capital. We sent backhoes with operators and we made donations to the Mexican Red Cross to provide immediate assistance Social investments to the injured. We collected foodstuffs, household items and clothing at the 20 col- In 2017, the Mining Division collaborated with a social investment and spending of US$60 million to contribute to eco- lection depots we opened at our “Casa Grande” community development centers, nomic development and creating opportunities for our communities. where 250 volunteers gave more than 4,200 hours of their time. In Mexico City, 24 of our expert mine rescue brigade members supported search and rescue efforts in coordination with the Mexican Department of Defense and the state civil protection. On September 20, our “Coyotes” and “Nahuales” brigades arrived at a textile factory in the Obrera neighborhood of Mexico City. They immediately joined the rescue efforts among the debris and helped to locate various bodies, managing to rescue two people alive. VOLUNTARY SOCIAL INVESTMENT AND SPENDING US$ Mining Division, 2017 Community development programs, social linkage and productive projects Infrastructure, works projects and equipping neighbor communities Infrastructure in SCC neighborhoods Total $ $ $ $ 4,995,021 37,558,049 17,944,493 60,497,563 74 75 SUSTAINABLE DEVELOPMENT REPORT 2017 PROTECT MANAGEMENT APPROACH Environmental management system Caring for the environment is one of the pillars of our sustainability strategy. Mea- suring our results and taking appropriate actions, we’ve implemented management systems to properly manage the resources that form part of the environment in which we operate. Our environmental performance looks at different areas that cover the whole of the lifecycle of our activities, classified into the following six lines of action: RATIONAL USE OF WATER AND NATURAL RESOURCES 76 COMPREHENSIVE WASTE MANAGEMENT REFORESTATION AND PRESERVATION OF BIODIVERSITY REDUCE GHG EMISSIONS FROM PRODUCTION EFFICIENT ENERGY USAGE PREVENTION AND CONTROL OF ATMOSPHERIC POLLUTANTS MINING DIVISION / PROMOTE Environmental investment G4-EN31 The Mining Division invested US$325 million in environ- mental projects in 2017, an 18% increase over the pre- vious year. - Installation of Closed Circuits - We install closed circuits in the mine processes and operations as pos- sible, for continual recycling and total usage of pro- cess water. This involves maintenance for recovered water pumping systems at tailings dams. ENVIRONMENTAL INVESTMENTS Mining Division, 2017 Area Water Air Soil Waste Biodiversity & reforestation Management Total Amount 29.68 184.13 58.35 37.29 3.27 12.41 325.13 ENVIRONMENTAL MANAGEMENT AND PERFORMANCE Water G4-EN8, G4-EN9, G4-EN10, G4-EN22, G4-EN26 Approach. Water is the most important input in the oper- ation of our extractive processes. Therefore, the Mining Division installs the latest technologies to increase the reuse and recycling of process and wastewater. - Thickeners for water recovery - Thickeners help to recover more water from the metallurgical process through a process to remove solids. We’re installing an additional seven high-efficiency thickeners at our Peru operations with which we will be able to recover 104,000 m3/day at Toquepala and 140,000 m3/day at Cuajone. This equipment will increase water reco- very by 10%, meaning, 240 liters per second, equal to the daily water usage of 172,800 people. - Wastewater treatment plants - Treating wastewa- ter supports the sustainability of the water cycle, and avoids the overexploitation of aquifers and the conta- mination of ecosystems. Our wastewater treatment plants in Cananea and San Luis Potosi collect untrea- ted municipal wastewater to then treat this water and reuse it in our operations, nurseries and to indirectly 77 benefit 70,500 residents of these cities, through urban sanitation and increased availability of clean water. To ensure we are managing water appropriately, our mine of the total water consumed at our mine operations was Water consumption and recovery. In 2017, 71.83% operations incorporate the following actions to maximize the efficient use and reuse of water: SUSTAINABLE DEVELOPMENT REPORT 2017 recovered water. We consumed 146.66 million m3 of first use water and 370.87 million m3 of recovered water. In 2017, water discharges totaled 1.94 million m3 for the whole of the Mining Division. These discharges were managed according to federal regulations and requirements. WATER CONSUMPTION BY SOURCE AND USAGE (m3 millions) Mining Division, 2015-2017 Consumption of first use water by source Underground Surface Desalinated Subtotal Recovered water Total Percentage of usage 2015 71.3 56.24 0.86 128.4 291.14 419.54 69% 2016 99.58 50.5 0.85 150.93 358.57 509.5 70% 2017 99.08 46.92 0.66 146.66 370.87 517.53 72% Energy and energy efficiency G4-EN3, G4-EN6 MINING DIVISION / PROMOTE Our principal projects include transporting ore over a belt system in Cuajone, optimizing the haulage process by replacing the rail system to reduce the energy re- quired and minimize our use of fossil fuels. Also, the high-pressure grinding rolls (HPGR) system in Toquepa- la will significantly increase the energy efficiency of our milling processes. Over the last 3 years, we’ve reduced our energy usage in copper production by 8%, which means we are requiring less and less energy to produce a ton of copper in the Mining Division. Climate change G4-EN15, G4-EN16, G4-EN19, G4-EC2 Effects of climate change. Our efforts in the fight against climate change are focused on minimizing the ef- fects and risks on our operations, guaranteeing the safety of our collaborators and our neighbor communities. ELECTRICITY CONSUMPTION Mining Division, 2015-2017 Year Petajoules 2015 2016 2017 Petajoules 22.31 24.98 24.65 ENERGY CONSUMPTION Mining Division, 2017 Year Fuel Electricity Percentage 51.59% 48.41% FUEL CONSUMPTION DETAILED Mining Division, 2015-2017 Type Diesel Natural Gas Fuel Oil Coal Coke LP Gas Gasoline Percentage 64.74% 27.71% 3.94% 1.94% 0.93% 0.74% Energy consumption. In 2017, the Mining Division’s energy mix was comprised of Energy Efficiency. One of the principles of our environ- 51.59% fuel, primarily diesel and natural gas, and the remainder is supplied pow- mental strategy is energy efficiency, meaning the Mining The risks associated with climate change include in- er generated by third parties or other subsidiaries of Grupo México, as part of the Division is constantly striving to produce more with less. tense rains and droughts, and in this area we are de- 78 self-supply strategy. The total consumption of energy this year remained stable in To fulfill this commitment, we are working on redesign- veloping engineering projects to reinforce our water 79 terms of 2016, reporting an increase of a mere 0.5%. ing, converting and adapting equipment, improving and management systems and improve water reuse in our FUEL CONSUMPTION Mining Division, 2015-2017 Year 2015 2016 2017 Petajoules 24.76 25.68 26.34 reorganizing processes, and training our collaborators to production chain. optimize energy usage, making significant investments in these areas. Climate change represents a series of risks for our orga- nization which we are prepared to face. SUSTAINABLE DEVELOPMENT REPORT 2017 MINING DIVISION / PROMOTE PROCESSED ORE Mining Division, 2015-2017 Year 2015 2016 2017 Millions of tons 418.03 447.10 489.07 In 2017, we produced 16,271 tons of non-mine hazard- ous waste, 76% of which was recycled, reused or treated by third parties. In our efforts to optimize resources, we try to reincorpo- rate into our production processes the waste we gen- erate, through reuse and recycling. Such is the case of anodic muds from the electrowinning process, which we reincorporate as raw materials to recover lead and pre- our Infrastructure Division affiliates that generate electri- cal power through high-efficiency combined cycle power plants and the “El Retiro” wind farm. By replacing tra- ditional energy sources with more efficient and renew- able sources, in 2017 we reduced our emissions by over 552,000 tons of CO2eq. During the year, we also capitalized on the power gener- ated from our own energy sources. In Mexico, we capture smelter gases from the heat recovery boiler to gener- ate energy. In Peru, we generate power from renewable sources with two hydroelectric plants, with a joint capac- cious metals. ity of 9 MW. Materials G4-EN1, G4-EN2 Given the nature of our operations, we primarily process ore from deposits. Using pyrometallurgical and hydrome- tallurgical processes, we extract copper, zinc, silver, gold and molybdenum for sale. In 2017, we processed a total 489,070,000 tons of ore in three countries. Also, we give value to other waste, such as byproducts that can be used by third parties. In our quest for efficien- cy, we use a portion of the byproducts we generate, such as sulfuric acid, which we incorporate into the hydrome- tallurgical processes. 81 The three principal types of risk that affect us are reg- In 2017, our Scope 1 emissions were equivalent to and consuming energy from clean and renewable sourc- ulatory, physical and financial risks which, through our actions and projects, we have converted into challenges and opportunities for the business. 1,836,792 tons of CO2eq, and for Scope 2, we report 3,475,070 tons of CO2eq. This means that nearly 35% of our GHG emissions come from the direct consumption of es, and (iii) promoting the capture of greenhouse gases, including reforestation projects to increase carbon ab- sorption. Our mine operations have mitigated the indirect fuels and 65% are indirect emissions from energy con- GHG emissions by consuming clean energy supplied by Emissions. The Mining Division is proactive in adopting good practices in managing GHG inventories. We par- ticipate in different national and international programs, such as the GEI Mexico Program and the Carbon Disclo- sure Project. Also, in compliance with the National Emissions Regis- ter under the 2012 Mexican Climate Change Law, our sumption in our Mining Division. GREENHOUSE GAS EMISSIONS Mining Division, 2017 (Millions of tons CO2eq) Type Direct Emissions3 Indirect Emissions4 Percentage 1.84 3.48 GHG inventories are verified independently, action that In 2017, our mine operations in Mexico generated 1,508 we have been taking since before this was mandatory, tons of nitrogen oxide (NOx) and 17,208 tons of sulfur preparing us to face the regulatory risks associated with oxide (SOx); meanwhile in Peru, we generated 32,784 climate change. tons of SOx and the emissions we generated in the Unit- ed States were 186 tons of NOx and 17,238 tons of SOx. In the United States, our emissions are regulated by the Environmental Protection Agency (EPA), which requires Mitigating Greenhouse Gases. us to report emissions from fixed combustion sources. We are working to mitigate emissions, taking actions In Peru, we are not yet required to report our emissions. aimed at: (i) more efficient energy use; (ii) developing 80 However, we have a consolidated inventory of green- house gas emissions, which we present annually in this Sustainable Development Report and to the Carbon Dis- closure Project. 3 Direct Emissions: Include emissions from direct energy consumption, calculated according to the 2017 CRE emission factors and the 2017 CONUEE combustion factors. 4 Indirect Emissions: Include emissions from power consumption, calcu- lated according to the 2017 Mexican Power Board power consumption emission factors (0.582 tons of CO2/MWh), published by the CRE. SUSTAINABLE DEVELOPMENT REPORT 2017 MINING DIVISION / PROMOTE Waste management and spills G4-EN23, G4-EN24, G4-EN25, G4-MM3 Waste management. The majority of the waste pro- duced by the Mining Division is characterized as inert or low toxicity and of minimum risk to the environment. A large portion of this waste (72%) is overburden, the ma- terial generated when the deposit is opened, on remov- ing the layers of earth to reach the ore we process. This waste is considered sterile material, therefore its impact on the environment is minimal. Mine waste is disposed of in situ at our facilities, in waste-rock heaps, tailings dams and slag heaps. These infrastructure and engineering works adhere to the de- sign and operation set by environmental regulations. At the end of their operating life, the leaching systems will be converted into heaps which will be treated according to environmental regulations. We produced 16,271 tons of non-mine hazardous waste, 76% of which was recycled, reused and/or treated by third parties. A total of 3,939 tons of non-mine hazardous waste were transported from our operations to treatment centers or sent for disposal by certified specialists, complying with local regulations. Additionally, no non-mine hazardous waste was exported this year out of the countries where we operate. We also produce waste that is recycled and requires special handling, such as scrap metal and tires. Simi- larly, the degraded organic waste produced during the hydrometallurgical process is mixed with used oil and is used as fuel for blasting or sold to a third party as an alternative fuel. Soil management and biodiversity Restoration. The Grupo México Mining Division is com- G4-EN11, G4-EN12, G4-EN13, G4-EN14, G4-MM1, mitted to restoring the inactive lands at our sites in order G4-MM2 to guarantee the preservation of their ecological value. Management. The Grupo México Mining Division is In 2017, the Mining Division restored 109 km2 of lands. committed to identifying, understanding and managing the impacts on the sites or species in the areas where Biodiversity management in Mexico. Our Buenavista we operate. del Cobre is adjacent to the Sierra La Elenita, part of 1. Prevent and identify potential environmental impacts, the West Sierra Madre range, which has high biodiversity according to local regulations. value, and within the Bird Conservation Area. We have 2. Proper handling of large volume waste, disposing of this implemented plans to protect these areas and created in waste-rock heaps, tailings dams and slag heaps. the “El Mosco” Conservation Area and the Buenavista 3. Mitigate environmental impacts through compensation del Cobre Environmental Management Unit, which has an measures, such as the rescue and relocation of spe- eco-path that offers educational and recreational activi- cies, soil conservation, restoration and reforestation. ties along its 1.8 km trail, receiving approximately 5,000 4. Develop closure plans to restore and recover the visitors each year. environmental conditions after our mining rights are exhausted. As part of our biodiversity conservation efforts, our 5. Leave the areas where we had operations in the best Environmental Management Unit has 5.7 hectares of Spills. We have infrastructure and procedures in place at conditions possible, monitoring water bodies and im- enclosures, which have been conditioned to replicate Also, our smelting and refining processes include a com- our operations to ensure the safe storage and handling of plementing ongoing improvement actions according the natural habitats of threatened species or in danger prehensive waste management system, by which we can materials, products and byproducts. We have emergen- to local regulations. of extinction, including the Mexican Gray Wolf and the recover a portion of our metallurgic waste. cy response plans that are immediately activated in the Gould Turkey. 82 MINE WASTE Mining Division, 2017 Material Overburden Tailings Slag Tons 341,529,187 151,756,292 1,816,658 event of accidental spills, to reduce impacts. The protected land at our operations totaled 485 km2 in In 2017, there was no spill having significant adverse im- ecosystems with high biodiversity value or conservation 2017. Some of our operations are near or adjacent to 83 pact on the environment. areas for some species. We have specific actions and/ or biodiversity management programs in Mexico and the United States, for regulatory reasons and also as part of our commitment to sustainability. SUSTAINABLE DEVELOPMENT REPORT 2017 The strategy of the Environmental Management Unit fo- fauna have been identified at our operations and in the cuses on reproduction and release, and also regenerat- surrounding areas that we want to help protect, respect- ing ecosystems. This project clearly reflects our efforts to ing the environmental conditions and, where necessary, involve the community in the common challenge of pro- we relocate the flora and fauna that would be affected tecting our environment, and particularly the biodiversity with the expansion of our work areas. of Sonora. Biodiversity management in Peru. At our operations in Peru, we continue to make important investments and maintenance actions as part of our Ite Bay remediation Examples of this are our Mission mine (USA), where we relocated specimens of Pima Pineapple Cactus, and our Silver Bell mine (USA) with the Sonoran Desert Tortoise. program in Tacna. Protected species Over a 12 kilometer by 1,500 meter stretch of land, this successful contaminant removal program has created PROTECTED SPECIES UNDER IUCN CLASSIFICATION Mining Division, 2017 Category Vulnerable Low concern Insufficient information No. of Species 1 42 1 NOM-059-SEMARNAT CLASSIFICATION Mining Division, 2017 Category In danger of extinction Threatened Subject to special protection No. of Species 0 11 10 the largest wetland with the greatest diversity of water birds along the country’s coastline, and has also be- come a tourist attraction contributing to the local econ- omy. In 2017, the zone had more than 120 species of water birds and is home to an average 76,000 migra- tory and local birds. 84 Biodiversity management in the United States. Silver Bell is one of our sites that has biodiversity con- versation programs, like the Ironwood Forest National Monument. We have also been working to develop a wetland and mesquite forest, characteristic of the arid and semi-arid climates where we operate. Certain species of flora and MINING DIVISION / PROMOTE Reforestation. We have the largest tree production capacity in the mining industry in Mexico, producing 4,966,200 trees in 2017. Over the last 5 years, we’ve increased our annual tree production by 187%. We have 6 tree nurseries and greenhouses, producing local species for the reforestation and rehabilitation of ecosystems, including areas beyond our operations. On the one hand, these nurseries contribute to biodiversity and to enriching the flora and fauna, and on the other, they are natural carbon sinks, capturing CO2 from the environment. MINE CLOSURES MM10 Approach. Mining is a cycle. When the exploitation of a deposit reaches its end, we have closure plans in place to manage the operation. Also, these plans contain financial provisions to guarantee the preservation and restoration of the sites. These are additional elements to our fulfillment of environmental regulations and our cor- porate responsibility. Closure plans are prepared taking into account both environmental and social goals. In this regard, Grupo México surpasses the existing standards, executing closure plans that are in keeping with our sustainability strategy. In total, we have 19 closure plans for our Mining Division. 85 An example of the above are the efforts made at the old copper plant in San Luis Potosi, for which a remediation and urban reintegration plan was developed, following the highest standards of quality. SUSTAINABLE DEVELOPMENT REPORT 2017 This confinement, which has been carried out in partnership with the local authorities, will create a space for urban reintegration projects and real estate development for commercial and residential zoning and recreation for the benefit of the community. COMPLIANCE Environmental certifications In 2017, we maintained ISO 14001:2004 for four of our mines, 12 Clean Industry and 4 environmental quality certifications given by the Mexican Environmental Protection Agency (PROFEPA). ENVIRONMENTAL QUALITY AND CLEAN INDUSTRY CERTIFIED FACILITIES Mining Division, 2017 Facility Light Smelter Equipment Shop Central Smelter Maintenance Shop Smelter auxiliary services Dust and effluent treatment plant Precious Metals plant Oxygen plant 1 Oxygen plant 2 Oxygen plant 3 Supply Maintenance Shop Lime Plant Guaymas Ocean Terminal Cooper rod continuous casting plant Hydrometallurgical plant - La Caridad Mine concentrator services - La Caridad Concentrator - La Caridad Industrial Minera México - central shop 86 Fines and sanctions G4-EN29 Certification Environmental Quality Clean Industry Environmental Quality Clean Industry Clean Industry Clean Industry Clean Industry Clean Industry Environmental Quality Clean Industry Environmental Quality Environmental Quality Clean Industry Clean Industry Clean Industry Environmental Quality No Mining Division subsidiary received any significant fine or sanction in 2017 for violations of environ- mental regulations in the regions where we operate. TRANSPORTATION DIVISION TRANSPORTATION DIVISION GR OW The Transportation Division has three guiding principles: Safety, Service and Pro- ductivity. Safety is a precondition that prevails at all levels, with the goal of zero accidents. Regarding service, our commitment is to improve the experience of our customers and to go beyond their expectations. This conviction is directly tied to the goal of being more productive, maximizing our efficiency in every process. STRUCTURE OF THE DIVISION AND PRINCIPAL SUBSIDIARIES G4-7 The Transportation Division of Grupo México is represented by its subsidiary GMéxico Transportes S.A.B. de C.V. (GMXT), comprised of: Ferrocarril Mexicano, S.A. de C.V. (Ferromex) Ferrosur, S.A. de C.V. (Ferrosur) Intermodal México, S.A. de C.V. (IMEX) Texas Pacifico LP, Inc. (TXP) Florida East Coast Holdings Corp. (FEC) Raven Transport, Inc. 88 TRANSPORTATION DIVISION / GROW SIGNIFICANT CHANGES IN THE ORGANIZATION G4-13 Grupo México Transportes initial public offering. In November 2017, Grupo México Transportes announced the release of an initial public offering on the Mexican Stock Exchange under listing code GMXT. The offering was over-subscribed 2.5 times the base offering, reflecting the company’s solid financials and growth potential. This transaction was a major milestone for GMXT, being the largest Mexican public offering in the last 5 years, and the largest transportation offering in Latin America, which will help to drive the long term growth strategy of the Transportation Division and will strengthen our presence in the local capital markets. Acquisition of the Florida East Coast Railway (FEC). The Grupo México Transportation Divi- sion continues to expand its presence in the United States with the acquisition of the Florida East Coast Railway (FEC) covering the east coast of Florida, which represents the fourth largest economy in the United States with a GDP of US$800 billion. The US$2.100 billion purchase is an important strategic addition to the offering of transportation services in North America. This transaction will strengthen the Transportation Division in terms of the diversification of products transported and markets served. 89 SUSTAINABLE DEVELOPMENT REPORT 2017 PRINCIPAL SERVICES AND MARKETS G4-4, G4-8, G4-9 Services. Grupo México delivers railroad freight transportation, multimodal and auxiliary services through its Transportation Division. RAILROAD TRANSPORTATION MULTIMODAL AND AUXILIARY SERVICES • Presence in 24 Mexican states and • Door to door freight services 2 US states • Coverage in 12 Mexican states • Coverage of more than 80% of the • 10 terminals Mexican GDP • 502 trucks, 3,850 container trailers • 11,146 km rail network • 1,222 chassis and 33 cranes • Fleet of 862 locomotives and 34, 380 cars The Transportation Division connects to five border points with the United States, with nine ocean terminals connecting to the rest of the world. There is also a rail ferry service that runs between Coa- tzacoalcos, Veracruz and Mobile, Alabama. CONTRIBUTION BY SEGMENT TONS-KILOMETER 1 Agriculture 2 Minerals 3 Intermodal 4 Chemical 5 Steel products 6 Energy 7 Cement 8 Automotive 9 Industrial 2017 21,081 9,964 5,731 5,058 4,865 3,996 3,458 2,678 2,275 TRANSPORTATION DIVISION / GROW 9 8 7 6 5 4 3 1 2 In 2017, Transportation Division sales were US$2.049 billion, a 16% increase over 2016, with record EBITDA of US$880 million, 14% higher than the year before. INVESTMENTS AND PROJECTS G4-EC7, G4-EC8 Markets served. The customers served by the Transportation Division are active in the agricultural, In the 19 years Ferromex has been in operation, we have invested US$6.455 billion in the Transpor- automotive, cement, energy, mining, steel, chemical, intermodal and consumer goods industries. tation Division. These investments have been used for capacity development of the railroad infrastruc- ture, to increase the fleet and for track maintenance, among other projects. Among other things, 80% The volumes transported in 2017, in tons-kilometer, were 7% higher than in 2016. This growth was of the concessioned lines have been reconstructed, doubling the volume of freight transported, making 90 primarily driven by the intermodal, agriculture and mineral segments. Mexico more competitive. 91 We invested US$2.386 billion in 2017, which includes the purchase of the FEC and various infrastruc- ture projects and operations, highlighting the following: Tunnel gauge expansion. The tunnel gauge expansion project in the Tepic zone of the Guadalaja- ra-Nogales corridor and Mexicali was completed in 2017, with double-stack container trains beginning SUSTAINABLE DEVELOPMENT REPORT 2017 TRANSPORTATION DIVISION / GROW to pass through this Pacific region starting October 2017. This project represented a challenge be- cause of its technical complexity and it was completed without major interruption of the rail service. CUSTOMER RELATIONS G4-PR5 Quality Policy. We work under the mission to deliver a safe, efficient and reliable transportation ser- Piedras Negras South yard expansion. The construction of the Piedras Negras South yard was vice, contributing to strengthening the connectivity and competiveness of the markets we serve. We completed, increasing capacity 230% to receive, classify and dispatch trains, facilitating the growth in have the vision of being the best option for transporting freight. border traffics at this crossing. Intensive refurbishment of track and bridges. In 2017, the overhaul of the “TA” line on the No- Our philosophy and values follow the guiding principles of Safety, Service and Productivity. gales - El Tajo corridor was completed, giving the line the capacity to move longer and heavier trains, Customer Satisfaction. We conduct a monthly customer satisfaction review of our principle vari- with higher-powered locomotives and better fuel performance, and with this, increasing the volume of ables, including transit time, meeting delivery times for cars, car interchanges, and follow-up on traffic in the Cananea and El Tajo zone. complaints, among others. This information is reviewed quarterly with customers. The Customer Sat- isfaction Index (CSI) in December 2017 was 89.2%, which reflects ongoing improvement and is our Bypasses. We began construction of the Celaya (24.5 km) and Monterrey (36 km) bypasses, which motivation to perform better. will reduce greenhouse gas emissions in these urban areas and will also reduce accidents at level crossings and improve the urban mobility, while increasing train speeds, decreasing fuel consumption and reducing vandalism in the urban areas. Reconfiguration of the Monterrey yard. The reconfiguration of the Monterrey yard was started, which will double the capacity to receive, classify and dispatch trains. PRINCIPAL RESULTS OF THE INFRASTRUCTURE PROJECTS AND OPERATIONS: • Fuel savings (8%) 92 • Reduced risk of accidents • 20.8% increase in train speed, delivering freight in shorter times • Strengthening strategies to combat the theft of goods and train vandalism • Decreased theft of goods and damage to equipment and facilities 93 SUSTAINABLE DEVELOPMENT REPORT 2017 PRO MOTE WORKFORCE AND LABOR PRACTICES Workforce G4-9, G4-10 We closed 2017 with a workforce of 11,230 collaborators distributed through the Northern, Pacific and South-Cen- tral regions of Mexico, and also the subsidiaries IMEX, Texas Pacífico and Florida East Coast. 95% of our collaborators hold permanent contracts, which gives our workforce stability. COLLABORATORS BY AGE GROUP Transportation Division, 2017 Age group 18-24 25-34 35-44 45+ Total Collaborators 505 3,403 2,572 4,750 11,230 Freedom of association G4-11, G4-LA4, G4-LA8 We have 8,586 unionized employees in the Transpor- tation Division, representing 76% of the workforce. We guarantee freedom of association and maintain ongoing dialog with our collaborators and union representatives, discussing issues of labor conditions and workplace health and safety, which are reviewed regularly. Transportation Division, 2015-2017 Year 2015 2016 2017 Collaborators 9,769 10,077 11,230 94 COLLABORATORS BY REGION Transportation Division, 2017 Region Corporate Field Intermodal Texas Pacífico Florida East Coast Total Collaborators 403 8,928 610 62 1,256 11,230 TRANSPORTATION DIVISION / PROMOTE Equal opportunity and non-discrimination G4-LA12, G4-HR3 Equal opportunity The Transportation Division promotes labor inclusion and continuation of employment without discrimi- nation and under equal opportunity. There is a cross-disciplinary approach to gender, where both men and women have access to well-paid positions, in decent and safe working conditions. The activities of the railroad transportation sector are predominantly performed by men. In 2017, 96% of our workforce were men. However, at the corporate level, 33% of collaborators were women. PARTICIPATION OF WOMEN BY COLLABORATOR CATEGORY Transportation Division, 2017 Organizational Level Senior Management & Supervisors Senior Technicians Junior Technicians Specialists Assistants Total Total Collaborators 390 374 982 898 8,586 11,230 No. of Collaborators that are Women 64 71 183 157 28 503 % Women 16.41 18.98 18.64 17.48 0.33 4.48 Non-discrimination. In the Transportation Division, and throughout Grupo México, we respect the rights of our collaborators. We fight discrimination, respecting the principles under which the company operates. The most important instrument is our Code of Ethics, which establishes respect for human 95 dignity and the rejection of any type of discrimination. We do not discriminate on the basis of ethnic origin, gender, age, disability, social condition, political affiliation, health condition, religious beliefs, immigration status, opinions, sexual preference or marital status. SUSTAINABLE DEVELOPMENT REPORT 2017 Reporting and suggestions line. The Transportation Division has an online mechanism for sugges- tions and reporting known as “ayúdanos a ser mejores” (help us improve),1 where people can send us their comments and questions. It should be noted that this mechanism is not exclusive to employees, it is also open to customers, suppliers and to the general public. The internal audit department receives firsthand all the information submitted and channels this to the appropriate area for attention. Base salary and wage equality G4-EC5, G4-LA13 The Base Salary includes the basic wage, productivity bonuses, cash benefits and profit sharing, where applicable. During 2017, the average Base Salary in the Transportation Division was equal to more than 12 times the local minimum wage. There is no difference in base salary between men and women. The company follows a technical assessment system that looks at functions and responsibilities, not the person. Also, there is a salary table that reviews performance without distinction of gender. BASE SALARY WOMEN TO MEN RATIO Senior Management & Supervisors 0.95 1.00 1.00 1.00 Senior Technicians 0.98 0.86 0.62 1.00 Junior Technicians 1.00 0.95 1.12 0.94 Specialists 1.00 0.89 NA NA Assistants NA 1.00 1.00 NA 1.00 0.97 0.95 1.00 1.00 96 Region Corporate Field Intermodal *Texas Pacífco *Florida East Coast *Salaries in US$ 1 https://www.ferromex.com.mx/contacto/denuncias.jsp TRANSPORTATION DIVISION / PROMOTE Attracting and retaining personnel G4-LA1 In an environment where there are different reasons for changing jobs, we’ve been working to reduce our turnover rate, offering benefits above those required by law, training and career development plans. In 2017, there were 375 new hires in the Transportation Division. NEW HIRES Transportation Division, 2015-2017 Region Corporate Field Intermodal Texas Pacífico Florida East Coast Age groups Gender 18-24 7 24 15 7 4 25-34 37 150 75 5 14 35-44 5 22 27 3 13 45+ 7 3 3 2 13 Male 29 178 113 15 37 Female 27 21 7 2 7 TURNOVER RATE* Transportation Division, 2015-2017 TURNOVER RATE BY GENDER* Transportation Division, 2015-2017 Year 2015 2016** 2017 Percentage 7.2% 11.2% 7.17 % *The turnover rate includes dismissals, retirements and deaths. **426 people were laid off during an organizational restructu- ring and they were not replaced. Gender Male Female Separations 719 86 Turnover Rate 6.7% 17.1% *This indicator should be read taking into account that most collaborators are men. 97 TURNOVER RATE BY AGE GROUP Transportation Division, 2017 Age Group 18-24 25-34 35-44 45+* *This figure includes retirements. Percentage 6.3% 6.9% 4.8% 8.7% SUSTAINABLE DEVELOPMENT REPORT 2017 TRANSPORTATION DIVISION / PROMOTE Performance review G4-LA11 In 2017, all non-unionized personnel were reviewed. This process aims to assess the performance of employees during the year, to identify areas of opportunity and training needs to then set goals for the next year. STAGES OF THE PERFORMANCE REVIEW Transportation Division Definition of goals Carried out at the beginning of the year, based on criteria known to the collaborator and their supervisor. Follow-up on goals Supervisors follow up with each collaborator during the year. Annual performance review The collaborator is reviewed at the end of the year and asked for written comments on weaknesses and areas of opportunity. WORKPLACE HEALTH AND SAFETY Occupational Safety G4-LA5, G4-LA6 Approach. One of the greatest challenges in our industry is fostering a culture of accident prevention and leadership in workplace safety. The Grupo México Transportation Division is committed to dedicat- ing resources and efforts to create safe workplace environments for our 11,230 collaborators. 99 Employee benefits G4-LA2 We offer the following benefits above those required by law to contribute to the wellbeing of our collaborators: Unionized personnel Administrative personnel - Savings fund - Assistance for school supplies - Vouchers for basic foodstuffs - Life insurance - Incentives to get involved in sports - Sports facilities for railroad employees - Travel expenses, where applicable - Holidays according to the union calendar - Assistance for funeral expenses - Transportation service - Life insurance - Grocery vouchers - Savings fund - Major medical insurance - Pension plan - Cafeteria service - Transportation service - Personal loans - Loan for computer equipment - Parking TRAINING AND CAREER DEVELOPMENT Training G4-LA9, G4-LA10 The railroad transportation sector demands a highly specialized type of training for personnel. Because of this, the Transportation Division offers a comprehensive training program that seeks to continually improve the performance of our collaborators. 98 In 2017, we provided 386,505 training hours, with an average 34 hours per collaborator. TRAINING HOURS Transportation Division, 2015-2017 Year 2015 2016 2017 Thousands of hours 309 310 387 SUSTAINABLE DEVELOPMENT REPORT 2017 As part of this strategy, we have health and safety committees in the different levels of the organization, which ensure the improvement of all work areas. 11% of our personnel participate directly in these committees, representing 100% of our collab- orators. The types of health and safety committees that were active in 2017 were: • Safety Committee • Safety Subcommittee • Health and Safety Commission In addition to the operation of these committees, at the end of 2017, we started the implementation of a Zero Tolerance Program, a behavior system that seeks to establish best practices in workplace safety to generate a culture of prevention in the company. This plan was developed following a review of accidents in recent years to identify their causes and establish control measures. The initiative will be audited to measure its effectiveness. We run an ongoing awareness campaign on safety measures among employees via corporate screens and screen savers on staff computers. Performance: The accident rate was reduced 27% in 2017, compared with 2016. 10 0 Also of note is that 3, 683 collaborators were trained in occupational health and safety, providing a total 34,594 man/hours of training on these topics in 2017. INCIDENT RATE (IR) Transportation Division, 2015-2017 4.00 3.00 2.00 1.00 0.00 5 1 0 2 5 3 . 3 6 1 0 2 7 9 . 2 7 1 0 2 6 1 . 2 No. of incapacitating accidents x 200,000 IR = Total man hours worked SEVERITY RATE (SR) Transportation Division, 2015-2017 1.50 1.00 0.50 0.00 5 1 0 2 0 3 . 1 6 1 0 2 9 0 . 1 7 1 0 2 5 1 . 1 SR = No. of days lost x 1,000 Total man hours worked 101 SUSTAINABLE DEVELOPMENT REPORT 2017 The safety of our personnel is our top priority, therefore we deeply regret the loss of one collaborator in 2017. In response to this incident, the company supported the collaborator’s family, offering assistance to expedite the processing of the life insur- ance, and also covered the funeral expenses. Initiatives aimed at guaranteeing a safe workplace have been strengthened, through training and safety programs. 2018 Goals. Our goal is to complete the year with no fatalities and to reduce our occupational accident rate to below 1.80. Occupational health G4-LA7 Approach. To foster a healthy workplace and to change risky behaviors and conducts observed in our collaborators, we have developed occupational health programs and we continually monitor our indicators in this area. OCCUPATIONAL HEALTH PROGRAMS FOR COLLABORATORS Comprehensive health monitoring programs. Periodical medical examinations. Monitoring and prevention programs for illnesses related to exposure to agents in the workplace (noise, vibration, welding smoke). Health promotion and education programs (high blood pressure, diabetes, nutri- tion, obesity, etc.). Vaccination campaigns (tetanus, hepatitis, influenza). Aptitude monitoring (physicals, alcohol and drug testing, fatigue). 10 2 Performance. In 2017, we experienced an increase in the number of occupational diseases, principally deafness and back problems, associated with the seniority and TRANSPORTATION DIVISION / PROMOTE OCCUPATIONAL DISEASE RATE (ODR) Transportation Division, 2015-2017 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00 5 1 0 2 3 3 . 0 6 1 0 2 6 5 . 0 7 1 0 2 8 1 . 1 No. of cases of occupational diseases x 200,000 ODR = Total man hours worked age of our train personnel. We are working on strengthening in-house campaigns on the correct use of personal protec- tive equipment and the correct performance of duties, preventing health risks. 103 2018 Goals. Our goal for 2018 is to reduce our occupational disease rate by 10%. SUSTAINABLE DEVELOPMENT REPORT 2017 COMMUNITY LINKAGE G4-SO1, G4-SO2 For the Grupo México Transportation Division it is essential that we maintain a relationship of respect and linkage with the residents of the communities through which our trains pass. To achieve this, we invest financial, technical and human resources in community projects. In keeping with this vision, Ferromex, Ferrosur and Intermodal México were recognized in 2017 as Socially Responsible Companies. This distinction recognizes our ongoing efforts to achieve specific goals in sustainable development respon- sibility to the community, customers and collaborators. LINES OF ACTION IN OUR COMMUNITY LINKAGE 1. Solidarity Dr. Vagón: “The Health Train”. Offers free medical services in remote communities where the train travels. Donations. Deliver and mobilize support in emergency situations following natural disasters. TRANSPORTATION DIVISION / PROMOTE Solidarity Doctor Vagón. The Health Train celebrated three years in operation in 2017, deliv- ering 266,440 free comprehensive medical services to 61,212 patients in 30 com- munities in 15 Mexican states, traveling a total 15,443 kilometers. Dr. Vagón is a train equipped with a mobile clinic. It has 13 cars with doctor’s offices, labs, specialization offices, pharmacy (audiometry, hearing devices and eyeglasses), dormitories and a cafeteria for the doctors that travel to these remote communities, delivering free health services. The Health Train is a project that involves a large number of people at Ferromex and Ferrosur to prepare the infrastructure and operations for the train to reach remote areas, for which special works projects are undertaken to accommodate the train. Ferromex Community Centers. Create spaces for recreation and the development of the communities through which Of note are the efforts of Dr. Vagón from September 14 to 26 in the municipalities of the train passes. 2. Support for Indigenous Communities Community transportation. Making passenger transportation services on the Chihuahua-Pacific (Chepe) railroad Ixtepec and Juchitan in Oaxaca in response to the state of emergency following the earthquakes. For this special project, the train was urgently mobilized from the north of the country, we provided 5,200 doctor’s visits and delivered 6,980 medications available to communities in Chihuahua and Sinaloa, contributing to the economic and social development of these and 24 hearing devices. Also, the train served as a first response center due to the communities. damage caused to various medical clinics in the state. Free transportation of goods. Transporting foodstuffs and supplies free of charge to vulnerable groups in the Sierra Tarahumara and anywhere else in the country in cases of emergencies due to natural disasters. 10 4 3. Interaction of the railroad with the community Roadworks. Projection and completion of works projects to improve roadways, with safety as a priority. Campaigns and workshops. Promote road safety at level crossings, and also through radio and television spots, and social networks. 4. Fostering tourism Donations. In response to the state of emergency that Mexico experienced after the September 2017 earthquakes, the Grupo México Transportation Division used 105 the rail network to transport foodstuffs, supplies and construction materials to the affected communities. We also transported heavy machinery and equipment to re- move debris, and donated specialized material for precision cuts, equipment that was very useful in accelerating the search and rescue efforts in various of the zones most Fostering tourism and job creation in the Sierra Tarahumara through the Chepe tourist train. affected in Mexico City. SUSTAINABLE DEVELOPMENT REPORT 2017 In 2017, more than 243 tons of foodstuffs and personal hygiene items were trans- ported to benefit 35,369 people. Additionally, computers were delivered to schools near the train lines in Puebla, Tlax- cala and Queretaro. These initiatives endeavor to aid youth to improve their quality of life and to have access to modern equipment to continue their learning. In December, the FEC runs the Santa Train to the Florida communities through which the train passes. In 2017, the train delivered 16,000 toys and books to children. Also, employees donated US$98,000 to the United Way, which supports education, financial stability and health programs. The Texas Pacífico railroad donated US$25,000 to the Red Cross to support efforts in Texas following Hurricane Harvey. Ferromex Community Centers. In 2017, Ferromex opened spaces for commu- nity activities, known as Centros de Integración Ferromex, in: Penjamo, Guana- juato and Cañada Morelos, Puebla, which were delivered to the municipalities for their operation. The municipal authorities are using these centers to offer different courses and workshops. Supporting indigenous communities 10 6 Community transportation. In 2017, we affirmed our commitment to the community by continuing to issue reduced rate cards to isolated low-income communities, whose only means of transportation is the train. With these cards, users pay only 20% of the ticket price to travel in economy class. This program operates in collaboration with the State Commission on Indigenous Peoples and the Chihuahua State Department of Social Development, and local agencies along the rail route. TRANSPORTATION DIVISION / PROMOTE REDUCED RATE PROGRAM 2017 New reduced rate cards delivered 1, 300 Valid reduced rate cards 33,958 Passengers transported 51,574 people The program will continue in 2018 and we expect to deliver 10,000 new reduced rate cards. This effort helps passenger train users to access medical services, educational institutions, commer- cial areas, in addition to arriving on time for their jobs outside of the Sierra. Free transportation of goods. As part of our social commitment in support of the communities of the Sierra Tarahumara, we offer free transportation of goods, which consists of basic foodstuffs and supplies donated by government agencies and charity organizations. In the state of Chihuahua, 311 tons of goods were transported, impacting 24,412 people in four Tara- humara communities: Creel, Temoris, Cuauhtemoc and Bahuichivo. Organizations benefited from the transportation of goods and supplies: • Mexican Red Cross • Casa del Migrante Santa María de Guadalupe • Consejo Asistencial Clínica Santa Teresitia • Banco de Alimentos Cuauhtémoc • Parishes • Banco de Alimentos de Cuauhtémoc A.C. • DIF Mexicali 107 SUSTAINABLE DEVELOPMENT REPORT 2017 Interaction of the railroad with the community Infrastructure development. In Mexico, we are working on projects aimed at improving road safety in the commu- nities through which the train passes. In 2017, construction began on split-level vehicle crossings and pedestrian crossings in Guanajuato, Veracruz, Coahuila, Sonora, Jalisco, Hidalgo, Puebla, Nayarit, Durango and Michoacan. These projects will increase road and pedestrian safety, modernize the urban infrastructure, and reduce traffic congestion. Of the projects mentioned, the construction of a vehicle overpass in Piedras Negras has been completed, representing an investment of US$1,057,083. We also began the construction of two bypasses, one in Celaya and another in Monterrey, which will improve safety in the nearby areas, reducing the risk of accidents and ease traffic. The budgeted investment for the bypass projects is US$148 million. These efforts, among others, are aimed at reducing the accident rates. The figures show we’re on the right path. 2018 Goals. Our goal this year is to maintain an accident rate below 0.30 for both companies. Training on accident prevention at level crossings. We are continually working with different groups and sec- tors to raise awareness on the importance of respecting the rules of the road at level crossings to prevent accidents. A radio and television campaign was conducted in cities in the states of Chihuahua, Guanajuato and Sinaloa, where 10 8 we have high accident rates. Also, informational talks were held with truck drivers in Jalisco, Durango, Guanajuato, Coahuila and Sonora, to discuss the Official Mexican Standards on signaling, to foster respect for level crossings, and to reduce accidents. In partnership with the Mexican Railroad Association and the Mexican Red Cross, “Cuidado con el Tren” (Watch Out for the Train) workshops were held in schools in areas near the train routes in states where we have higher accident rates. In DIVISIÓN TRANSPORTES / PROMUEVE FERROMEX ACCIDENT RATE (ACCIDENTS / BGTK) Transportation Division, 2012-2017 0.80 0.60 0.40 0.20 0.00 1.00 0.80 0.60 0.40 0.20 0.00 2 1 0 2 6 5 . 0 3 1 0 2 3 7 . 0 4 1 0 2 6 4 . 0 5 1 0 2 1 3 . 0 6 1 0 2 1 4 . 0 7 1 0 2 2 5 . 0 FERROSUR ACCIDENT RATE (ACCIDENTS / BGTK) Transportation Division, 2012-2017 2 1 0 2 4 9 . 0 3 1 0 2 5 5 . 0 4 1 0 2 2 5 . 0 5 1 0 2 7 7 . 0 6 1 0 2 9 3 . 0 7 1 0 2 9 4 . 0 109 SUSTAINABLE DEVELOPMENT REPORT 2017 2017, 36 schools were visited in seven states (Sinaloa, Chihuahua, Guanajuato, Que- retaro, Michoacan, Tamaulipas, Estado de Mexico), directly impacting 7,750 children. The Texas Pacífco and the FEC work closely with the organization “Operation Life- saver” on prevention campaigns and projects to eliminate accidents and incidents at level crossings. Fostering tourism Chepe and Chepe Express. The Transportation Division continues to support tourism in the Chihuahua-Pacific region through a diversification of services, in synergy with the state and federal authorities. The Chepe provides a tourism service through the copper canyons, offering visitors the opportunity to experience the Tarahumara culture and enjoy the natural resourc- es of this region. The train supports the regional economy and creates direct and indirect jobs. Due to the increased traffic and demand for passenger train services in recent years, a new service will be launched in 2018, Chepe Express, which will offer national and international tourists a unique luxury travel experience. 11 0 TRANSPORTATION DIVISION / PROTECT PROTE CT ENVIRONMENTAL MANAGEMENT AND PERFORMANCE Energy and energy efficiency Fuel savings. The Automatic Engine Start Stop (AESS) G4-EN3, G4-EN6, G4-EN27 system controls the engine start/stop system, reducing Energy consumption. Our energy supply is primarily fuels, fuel consumption when trains are stopped. This technol- particularly diesel, which we use to operate the locomo- ogy saved us 16,873,810 m3 of diesel, 38% more than tives. Diesel represents 96% of the total energy con- in 2016. sumed by our transportation operations. FUEL CONSUMPTION Transportation Division, 2017 Year 2015 2016 2017 POWER CONSUMPTION Transportation Division, 2017 Year 2015 2016 2017 Terajoules 18,552 16,794 19,908 Terajoules 107 107 127 DIESEL SAVINGS (AESS System & Manual Operation Millions of liters saved) Transportation Division, 2017 Year 2015 2016 2017 Millions of liters 15.13 12.25 16.87 111 SUSTAINABLE DEVELOPMENT REPORT 2017 Energy efficiency. Our Transportation Division strives Transportation Division, for which we have prepared ac- to move more with less, with initiatives that contribute to tion plans. improving energy efficiency by perfecting operating pro- cesses, which has improved fuel performance by 6% for At Grupo México, we identify the risks, and monitor and Ferromex and 3% for Ferrosur. implement initiatives to be better prepared to address FUEL PERFORMANCE (L/TGTK) Transportation Division, 2017 Year 2015 2016 2017 FERROMEX Transportation Division, 2017 Year 2015 2016 2017 L/TGTK 4.35 4.2 3.94 L/TGTK 6.24 6.25 6.08 damages to our facilities, from damages to the signaling systems to landslides and floods that could interrupt the railroad operation. We have specific action plans for different scenarios, aimed at minimizing the impact: • Action plans and dissemination of the measures to be used in the event of any natural phenomena. • Multi-year program to reinforce bridges, unpaved and paved roads, and drainage and natural water channels. In 2017 we started testing a trip optimizer system. This tool performs calculations to determine the optimal ton/ • Adjustments to train scheduling. liter and horsepower required per ton-Km/liter. From the analysis of the data, the system can automatical- All our infrastructure construction and expansion proj- ly control aspects such as the regulator and dynamic ects are designed according to technical criteria set 11 2 brake, to reduce fuel consumption, increase speed, and by the Mexican Water Board (CONAGUA) and the In- improve handling. ternational Boundary and Water Commission (IBWC), Climate Change to support and reduce the impacts of meteorological phenomena and the surface water flows in the railroad G4-EN15, G4-EN16, G4-EN19, G4-EC2 infrastructure and operation. Effects of climate change. Climate change is a growing risk, particularly for the operations of our TRANSPORTATION DIVISION / PROTECT Greenhouse Gas Emissions (GHG). The railroad releases only a quarter of the greenhouse gas emissions (GHG) that trucks release, per ton-kilometer transported, measured in millions of CO2 equivalents. In 2017, we emitted a total of 1,502,130 tons of CO2eq, 1.4% of which come from power consumption and the remaining 98.6% from the use of fossil fuels. GREENHOUSE GAS EMISSIONS (Millions of tons CO2eq) Transportation Division, 2017 Direct emissions2 Indirect emissions3 1.48 0.02 Mitigation of Greenhouse Gases. The Transportation Division has taken various important actions to reduce the consumption of diesel, including purchasing AC lo- comotives, installing operating and fuel optimization devices in locomotives, and im- proving operating practices. This, together with the use of renewable energy sources, led in 2017 to the mitigation of 51,998 tons of CO2eq, equal to taking 11,134 cars off the road for a year. MITIGATION ACTIONS Transportation Division, 2017 Initiatives Savings of 16,873,810 m3 of fuel due to the Automatic Engine Start Stop (AESS) systems Consumption of 11,913,923 KWh of renewable electricity from the Infrastructure Division’s “El Retiro” Wind Farm Total Tons CO2eq 45,064 6,934 51,998 113 2 Direct Emissions: Include emissions from direct energy consumption, calculated according to the 2017 SEMARNAT emission factors and the 2017 CONUEE combustion factors. 3 Indirect Emissions: Include emissions from power consumption, calculated according to the 2017 Mexican Power Board power consumption emission factors (0.582 tons of CO2/MWh), published by the CRE. SUSTAINABLE DEVELOPMENT REPORT 2017 TRANSPORTATION DIVISION / PROTECT Half of the Florida East Coast Holdings Corp. (FEC) locomotives have the flexibility to operate with produce alternative fuels, and lead batteries are used to make new accumulators. The Transportation diesel or LP gas, which helps us to optimize operating costs and reduce our environmental impact by Division does not generate significant waste requiring special handling. producing less greenhouse gas emissions. The railroad continues to be an excellent option for transporting freight, being four times more efficient in fuel consumption than trucks. This means that a single train, equal to 300 freight trucks, releases 75% less greenhouse gas emissions. In this manner, we are contributing to considerably reducing pollution and the effects of climate change. Materials G4-EN1, G4-EN2 The railroad operations of our Transportation Division use primarily track, sleepers and ballast. Of note is that we have a smelter slag reuse project, as a substitute for ballast. MATERIALS Transportation Division, 2017 Material Ballast (m3) Sleepers (pieces) Track (tons) Smelter slag used as ballast (m3) 2015 451,414 489,593 29,947 147,024 2016 337,016 664,814 33,788 110,878 2017 352,992 338,637 28,564 87,776 HAZARDOUS WASTE Transportation Division, 2017 Waste Oil Muds (water treatment plant) Alkaline batteries Other solid hazardous waste Tons 586.75 186.56 8.54 277.12 Our approach is the same with waste requiring special handling, some of which is reused and/or recy- cled, such as scrap steel, obsolete vehicles or machinery, and wood sleepers. Incidents with hazardous chemicals. We have mechanisms and procedures in place to prevent and take action in emergency situations involving hazardous chemical products. There are safety committees in place in nine Mexican states for the transportation of hazardous mate- rials. Firefighters, civil protection and local industrial sectors serve on these committees, which, among other things, conduct chemical drills and develop response mechanisms to protect the first responders (fire and/or civil protection) to accidents involving hazardous materials. Waste management and incidents involving hazardous chemical products We also have a contingency program, which defines the guidelines to prevent chemical accidents, G4-EN23, G4-EN24, G4-EN25 11 4 Waste management. We generated 1,059 tons of hazardous waste, which we manage in strict adherence to regulations for handling, storage and sending for recycling and/or final disposal. A large portion of this waste is reused by authorized third parties and the rest is sent for controlled confinement. This waste includes lubricant oil (58% of the total hazardous waste) which is used to restoration of environmental impacts, and return to normal operations. 115 SUSTAINABLE DEVELOPMENT REPORT 2017 ACTION PROTOCOL IN CASE OF CHEMICAL SPILLS Prevention The prevention actions the safety committee will take are defined. Response On the occurrence of an incident, the chemical emergency contingency plan is activated. Remediation With the emergency under control, the track is reported as clear and the dama- ges to the track and surrounding areas are surveyed. The damages to equipment and infrastructure are assessed and quantified, as well as the environmental restoration at the scene of the accident (as applicable). Spills. In 2017, we had a spill of 500 tons of copper concentrate in the Pacific region (PKT 183+800). The spill response protocol was activated immediately, removing and disposing of the concentrate in an environmentally safe way, without affecting the environment or the nearby communities. Water* G4-EN8, G4-EN9, G4-EN10, G4-EN22, G4-EN26 Water is primarily used in the Transportation Division for washing locomotives and cars, and also for the cooling systems. In 2017, we consumed 252,603 m3 of water. 74% of first use water came from underground sources, 23% from the city water supply and 4% from water trucks. There was a 16% decrease in water consumption this year, representing savings of 47,176 m3. We also have an awareness program to promote the efficient use of water among our collaborators. 11 6 WATER CONSUMPTION - UNDERGROUND Transportation Division, 2017 Year 2015 2016 2017 m3 148,568 163,661 185,777 TRANSPORTATION DIVISION / PROTECT WATER CONSUMPTION - SURFACE Transportation Division, 2017 Year 2015 2016 2017 m3 105,663 136,118 66,826 Biodiversity G4-EN11, G4-EN12, G4-EN13, G4-EN14 Most of our Transportation Division operations are not located in protected areas, with the exception of 25 ki- lometers of track that cross an area that was declared protected after the track was built.4 When our operations could impact the biodiversity by passing through zones declared protected, we comply with the requirements of the environmental authorities from the design stage, construction, to operation. We also have monitoring mechanisms in place for clearing vegetation and soil erosion and compaction. Nature (IUCN) classifications, have been found around our rail operations and projects. COMPLIANCE Environmental certifications In 2017, five of our sites maintained environmental quality certifications given by the Mexican Environmen- tal Protection Agency (PROFEPA) under this voluntary program that requires an environmental audit to review the company’s environmental risk processes and regu- latory compliance. SITES CERTIFIED IN ENVIRONMENTAL QUALITY Transportation Division, 2017 Shop and Fueling Zone in Tierra Blanca Shop and Fueling Zone in Veracruz Railcar Shop in Coatzacoalcos Shop and Fueling Zone in Orizaba Fueling Zone in Puebla We routinely monitor and assess potential impacts, to establish preventive and corrective measures. In this Fines and sanctions regard, we have restoration plans in place that include G4-EN29 reforestation and subsequent maintenance to ensure the Fines and sanctions. In 2017, no Transportation Di- 117 survival of specimens that are relocated. Also, fauna that vision subsidiary received any significant fine or sanction may be effected are rescued and relocated. for violations of environmental regulations in the regions where we operate. No protected species, according to the NOM-059-SEMAR- NAT-2010 or International Union for the Conservation of * The water consumption reported considers only the operations of Ferromex, Ferrosur and IMEX. We are working on consolidating the water consumptions in the United States. 4 The protected zones are located in the states of Baja California, Sonora, Sinaloa, Colima, Coahuila and Veracruz. SUSTAINABLE DEVELOPMENT REPORT 2017 INFRASTRUCTURE DIVISION INFRASTR UCTURE DIVISION / GROW GROW STRUCTURE OF THE DIVISION AND PRINCIPAL SUBSIDIARIES G4-7 The Infrastructure Division of Grupo México is represented by its subsidiary México Proyectos y Desarrollos, S.A. de C.V. (MPD), comprised of: México Compañía Constructora, S.A. de C.V. (MCC) Grupo México Servicios de Ingeniería, S.A. de C.V. (GMSI) Controladora de Infraestructura Petrolera México, S.A. de C.V. (PEMSA) Controladora de Infraestructura Energética México, S.A. de C.V. (CIEM) Concesionaria de Infraestructura del Bajío, S.A. de C.V. (CIBSA) PRINCIPAL SERVICES AND MARKETS G4-4, G4-8, G4-9 Customers and services. Through the Infrastructure Division of Grupo México, we offer engineering and construction services, power generation, and also onshore and offshore drilling as well as the leasing and operation of oil rigs; we also operate and maintain highways under concession. The Grupo México Infrastructure Division has more than 80 years experience and over 200 major projects completed in 24 Mexican states. Construction Engineering Services 119 • Public and private infrastructure • Comprehensive engineering services projects, including: hydroelectric and for industrial projects, principally in storage dams, highways, thermoelectric the mining, metals, chemical, petro- plants, railroad projects, mining proj- chemical and oil sectors. ects, manufacturing plants, petrochem- ical plants, and residential projects. SUSTAINABLE DEVELOPMENT REPORT 2017INFRASTRUCTURE DIVISION INFRASTR UCTURE DIVISION / GROW Drilling Power Generation in sales of US$302 million. This represents an 18% in- Mining sector projects. México Compañía Construc- • Drilling for the exploration of oil, wa- • Power generation through two natural crease over 2016. The subsidiary also reported EBITDA tora worked on the reinforcement and maintenance of ter and geothermal energy, including gas combined cycle power plants (La related services, such as direction- Caridad I and La Caridad II), with an al drilling, cementation and drilling installed capacity of 516 MW, and a fluids. 74 MW wind farm (El Retiro) with 37 of US$108 million. the containment walls of Tailings Dam No. 3 at the Mining Grupo México Autopistas reported a record US$35 mil- the work in phase 2 of a new tailings dam, guaranteeing lion in revenue from the Salamanca-Leon highway, and a 10-meter dam wall. This year, we completed work on Division’s Buenavista del Cobre site and also continued • Onshore and offshore drilling equip- wind turbines. an average weighted daily traffic of 11,970 vehicles, rep- the Quebalix IV dam, the construction of a contingency ment leasing (5 jack-up and 2 mod- ular rigs). Highway infrastructure operation • Operation and maintenance of the Salamanca-Leon highway, with an average daily traffic of 11,970 vehicles (2017). resenting a 23% increase in revenue over 2016. Traffic dam and a recovered water reservoir. was also 39% above the figure committed to the De- partment of Transport and Communications. We also worked on the construction to raise the dam wall on Tailings Dam No. 7 at the Mining Division’s La INVESTMENTS AND PROJECTS Caridad mine in Nacozari de García, Sonora. G4-13, G4-EC7, G4-EC8, G4-EN27 During 2017, Grupo México Servicios de Ingeniería Results. Infrastructure Division sales were US$582 million in 2017, 4% less than The Infrastructure Division has been contributing to the completed the detailed engineering for the Toquepala in 2016. EBITDA was US$233 million, representing a year-over-year decrease of development of the infrastructure in Mexico for over mine in Peru. 16%, principally attributed to the reduced usage of the PEMSA equipment due to eighty years. In 2017, we invested US$27 million in the suspension of various contracts and the reduction of the rig rates by PEMEX. projects. Some of our principal projects are described Railroad sector projects. México Compañía Con- México Compañía Constructora sales were US$138 million, a 13% increase over 2016, while Grupo México Servicios de Ingeniería reported an 8% year-over-year increase with sales of US$18 million. 12 0 following: structora continued to work on projects for the railroad industry, expanding all the tunnels along the "Plan de New Mexico City Airport. For the new Mexico City Barrancas" which will allow double-stack trains to travel airport, México Compañía Constructora built a 14 km on the Guadalajara-Tepic line. Construction is complete access rail line to carry the construction materials and on the expansion of the automotive terminal at Monter- 121 In 2017, Controladora de Infraestructura Petrolera México reported sales of US$111 part of the basic infrastructure for this megaproject. rey, which included reconfiguring the tracks in the main million, with EBITDA of US$47 million. The weighted operating efficiency for the rigs yard and a fueling zone was constructed at Rio Escon- this year was 95.8%. In terms of production and sales, 2017 was a record year for Controladora de In- Highway infrastructure. Regarding the Salaman- dido, Coahuila. ca-Leon highway, México Compañía Constructora com- pleted construction of the Leon access route and the fraestructura Energética México. The increased operation of the generating plant in inland port in Silao, Guanajuato. Nacozari, Sonora, due to increased demand from our self-supply partners, resulted SUSTAINABLE DEVELOPMENT REPORT 2017 Grupo México Servicios de Ingeniería was awarded the close contact with our customers, listening to their opin- Ferromex tender for the Celaya bypass project, a project ions through logs, notices, meeting minutes, complaint that will be two years in development. and suggestion boxes, website, email, among other me- dia. The information we gather is analyzed and used to Maintenance of the combined cycle power plant. develop strategies to enhance our experience and to im- In 2017, we made modifications to the “La Caridad I” prove the satisfaction of our customers and users. combined cycle power plant as part of a scheduled maintenance program, to improve the productivity and During its 11 years, México Compañía Constructora has profitability of the plant. “La Caridad II” will receive maintained ISO 9001 quality management certification. maintenance in 2018. PEMSA also holds ISO 9001 certification for its Carmen CUSTOMER RELATIONS G4-PR5 Sector administrative offices, cement plant and Sonora rig. Also, Concesionaria de Infraestructura del Bajío, as operator of the Salamanca-Leon highway, celebrates its second year with an ISO 9001 certified quality manage- Quality Management. In the Infrastructure Division, ment system. we are continually striving to deliver our services to the highest standards of quality. To achieve this, we maintain 12 2 I NFRASTR UCTURE DIVISION / PROMOTE PROMOTE WORKFORCE AND LABOR PRACTICES Workforce G4-9, G4-10 COLLABORATORS BY SUBSIDIARY Infrastructure Division, 2017 Subsidiary MCC GMSI CIEM PEMSA CIBSA Total Collaborators 2,159 382 75 531 215 3,362 COLLABORATORS BY AGE GROUP Infrastructure Division, 2017 Age Group 18-24 25-34 35-44 45+ Total Collaborators 531 1,058 1,121 652 3,362 Freedom of association G4-11, G4-LA4, G4-LA8 We have 2,229 unionized employees in the Infrastruc- ture Division, representing 66% of the workforce. We guarantee freedom of association and have mechanisms in place for ongoing dialog with our collaborators and their union representatives, discussing issues of labor conditions and workplace health and safety, which are In 2017, we had an average total workforce of 3,362 reviewed regularly. collaborators in our 5 principal subsidiaries. 84% of these collaborators have a permanent contract, which Equal opportunity and non-discrimination gives our personnel stability in their employment. G4-LA12, G4-HR3 COLLABORATORS Infrastructure Division, 2015 – 2017 Year 2015 2016 2017 Collaborators 2,556 3,292 3,362 Equal opportunity. As with the Mining and Trans- portation divisions, the workforce of the Infrastructure 123 Division is made up of mostly men. However, we are continually promoting a greater participation of women. In 2017, 11% of our workforce were women. SUSTAINABLE DEVELOPMENT REPORT 2017 PARTICIPATION OF WOMEN BY COLLABORATOR CATEGORY Infrastructure Division, 2017 Category Collaborators No. of Collaborators that are Women % Women Senior Management & Department Heads Technicians Specialists Assistants Total 150 823 313 2,076 3,362 15 179 66 102 362 10 22 21 5 11 Non-discrimination. At Grupo México, including the Base salary and wage equality Infrastructure Division, we respect the rights of our col- G4-EC5, G4-LA13 laborators. The Code of Ethics is our guiding reference, The Base Salary includes the basic wage, productivity fighting discrimination and operating with principles and bonuses, cash benefits and profit sharing, where ap- values. Our companies have zero tolerance for discrim- plicable. During 2017, the average Base Salary in the ination on the basis of ethnic origin, race, gender, age, Infrastructure Division was equal to more than 6.7 times disability, social condition, political affiliation, health the local minimum wage.2 condition, religious beliefs, immigration status, opinions, sexual preference or marital status. In terms of the base salary and the men to women ratio, we continue working to ensure equal pay across all pro- Any collaborator that is witness to or the victim of any fessional categories. form of discrimination is encouraged to report the in- 12 4 cident via the Grupo México reporting line. This formal mechanism is operated by a third party and offers a phone number, email and website to report incidents.1 No case of discrimination was reported in the Infrastruc- ture Division in 2017. I NFRASTR UCTURE DIVISION / PROMOTE Attracting and retaining personnel G4-LA1 During 2017, the average workforce of the Infrastructure Division was 3,362 collaborators, represent- ing a 36% increase over 2016 and a turnover rate of 21%.3 This turnover rate is due to the nature of the sectors in which the division is active, as our hiring is based on the demand and temporality of our projects. NEW HIRES Infrastructure Division, 2017 Subsidiary MCC GMSI CIEM PEMSA CIBSA Age groups 18-24 138 2 1 7 8 25-34 243 14 2 28 26 35-44 151 5 2 22 10 45+ 201 9 1 13 13 Gender Male 687 20 5 56 40 Female 46 10 1 14 17 TURNOVER RATE Infrastructure Division, 2015-2017 Year 2015 2016 2017 Percentage 16.2 15.4 21 125 1 For more information on our Code of Ethics and reporting procedure, see the section on Human Rights in the Corporate Governance chapter. 2 Considering the Base Salary (BS) and the Minimum Wage (MW), the BS/MW average is calculated weighting the BS and MW published in the Official Federal Gazette, based on the number of Infrastructure Division collaborators in each territory. The base Salary includes the basic wage, productivity bonuses, cash benefits and profit sharing, where applicable. 3 This rate does not include layoffs following the completion of short and medium term projects. SUSTAINABLE DEVELOPMENT REPORT 2017 I NFRASTR UCTURE DIVISION / PROMOTE Benefits for collaborators G4-LA2 Universidad I. The Universidad I project was launched During this first year, we launched Universidad I with in 2017, a virtual campus of the Infrastructure Division training and certification on the Code of Ethics, as part The Grupo México Infrastructure Division contributes to the wellbeing of our collaborators offering the following bene- that started to be developed in 2016. With the creation of the institutional programs track. We also proposed fits above those required by law: Salary-related Others Life insurance Major medical insurance Family protection insurance Savings fund Grocery vouchers Productivity bonus Pension fund Retirement plan Assistance for funeral expenses Transportation service Cafeterias for collaborators Scholarships for employees and their children Share purchase plan for employees TRAINING AND CAREER DEVELOPMENT G4-LA9, G4-LA10 Achieving a high level of quality through our broad range of services requires constant learning and training to develop a high degree of specialization. In 2017, we delivered a total of 25,1054 training hours, which translates into an average 22.15 training hours per collaborator. 12 6 We also helped our collaborators to develop their professional training, offering them financial assistance to pursue outside training or education. Additionally, we offer consulting to our personnel who are ending their professional ca- reers, through in-house training and planning sessions for retirement. 4 These training hours are delivered over the digital platform “Universidad I”; during this first phase only non-unionized personnel and middle management who had access to a computer participated. Unionized personnel will be included soon. of this platform, we will institutionalize the processes to adding 700 collaborators. At December close, we had professionalize the workforce, through useful content 501 students, including both unionized and adminis- according to the needs of each subsidiary. trative personnel. Our goal for 2018 is to reach 1,000 The goal of Universidad I is to promote a culture of students. self-training, focusing content on the needs of the sec- Success Factors. We’ve implemented the Success tors in which we participate and generating didactic Factors model to unify a framework of competencies models that ensure the effectiveness of the learning and for all the industries in which the Infrastructure Division its application in the real world. operates, considering our broad spectrum of activities. This model includes modules to manage remuneration This virtual university has three areas to achieve its stra- processes, recruitment and performance. tegic goals: Performance review - Institutional programs – covers the personal de- G4-LA11 velopment programs on institutional competencies, We have a talent development plan in the Infrastruc- and also training in the use of institutional tools as ture Division, which culminates with a personnel review well as occupational health and safety. process. This plan arose in 2016 to open opportunities for our collaborators, and also to increase productivity, - Technical programs – offers training programs on estimate potential, and to detect training needs and rec- general technical topics, specific technical skills for ognize talent. each sector in which we operate, and also the devel- opment of highly specialized skills and competencies. 127 - Special programs – furthering career plans and succession plans, and also support to complete bachelor and master’s degrees and diploma courses, in special cases. SUSTAINABLE DEVELOPMENT REPORT 2017 I NFRASTR UCTURE DIVISION / PROMOTE All our workforce is represented by 2% of collaborators, who serve on the health and safety commissions. Additionally, all our contractors are covered by the Health and Safety Management System. Certifications and Programs. In 2017, México Compañía Constructora main- tained its OHSAS 18001 management systems certification for the eleventh con- secutive year. Also, the PEMSA Carmen Sector administrative offices, cement plant and Sonora rig maintained their certification. We also maintained Ship and Port Facility Protection Certifications under the International Ship and Port Facility Code (ISPS Code) and Safety Management Certificates under the International Safety of Life at Sea Convention (SOLAS), accrediting our safety management in compli- ance with the Guidelines on Implementation of the International Safety Management (ISM). Additionally, we adhere to the Workplace Health and Safety Self-Manage- ment Program (PASST 1st level). Our Institutional Safety and Protection On Board Program fosters and strengthens a culture of safety on oil rigs. The core areas the program covers are fire evacuation and general rig evacuation procedures, handling spills, and also the procedure to follow in cases of man overboard. Performance. In 2017, our accident rate was 34% lower than in 2016, reporting only 11 incapacitating accidents. Also of note is that we closed 2017 with more than 1,557 days without an incapacitating accident at our “La Caridad I” and “La Caridad 129 II” combined cycle power plants. The talent development plan is comprised of the following elements: TALENT DEVELOPMENT PLAN Infrastructure Division Strategic Map for the Infrastructure Division We plan the goals for the company, identifying the cause-effect rela- tionship between the components of the strategy. Competencies Model Based on the structure used in the Mining Division, but adapted to the needs of the Infrastructure Division. Talent Platform SAP Success Factors and KHOR. During 2017, we made progress on the authorization of goals. In 2018, we will complete the evalu- ation phases: Training Setting goals Approval of goals Competency assessment Performance review OCCUPATIONAL HEALTH AND SAFETY 12 8 Occupational safety G4-LA5, G4-LA6, CRE6 Approach. For all Grupo México, including the Infrastructure Division, workplace safety is our high- est priority. In keeping with this level of commitment, we have established actions to guarantee the physical safety of our personnel and our contractors. Our Infrastructure Division has health and safety committees to ensure our worksites do not put our collaborators at risk. SUSTAINABLE DEVELOPMENT REPORT 2017 2018 Goals. In 2018, our goal is to maintain zero fatal accidents and to reduce our incapacitating accident rate by 10%. Occupational Health G4-LA7 Approach. In the Infrastructure Division, we’re committed to protecting the health of our personnel. We are also constantly looking to extend the culture of health pre- vention and safety to the families of our collaborators and to the community through education programs, consulting, risk control and prevention, and also the treatment of diseases and illnesses. COMMUNITY LINKAGE G4-SO1, G4-SO2, CRE7, G4-EC8 Casa Grande5 The Infrastructure Division strives to maintain strong ties with the community, iden- tifying together needs and opportunities to improve the quality of life of local res- idents. To achieve this, we’ve adopted and put into practice the Mining Division’s Casa Grande community development model. Social Inclusion and Impact Assessment. It’s important for the Infrastructure Division that our actions in the community be supported by studies, direct consul- 13 0 tations and reliable sources of information to contribute to the sustainable develop- ment of the communities that neighbor the operations of our subsidiaries. 5 For more information on the Casa Grande model and its management tools, see page 70 in the Mining Division chapter. INCIDENT RATE (IR) Infrastructure Division, 2015 – 2017 1.20 0.90 0.60 0.30 0.00 0.1 0.05 0.00 5 1 0 2 6 9 . 0 6 1 0 2 1 4 . 0 7 1 0 2 7 2 . 0 IR = No. of incapacitating accidents Total man hours worked x 200,000 SEVERITY RATE (SR) Infrastructure Division, 2015 – 2017 131 5 1 0 2 7 0 0 . 6 1 0 2 5 0 0 . 7 1 0 2 3 0 0 . SR = No. of days lost Total man hours worked x 1,000 SUSTAINABLE DEVELOPMENT REPORT 2017 I NFRASTR UCTURE DIVISION / PROMOTE We prepare social viability studies, shared value diag- Division endeavor to contract local personnel and pur- nostics and social impact assessments for our energy chase products and services from local suppliers, to gen- that women face in the region. The Mujeres Productivas project offers alternatives through workshops and programs to develop skills for self-employment. Also, in sector projects, as required by the Mexican Department erate economic spillover in the regions where we operate. 2017 in the Bajio region, we launched a sustainable school orchard project, which of Energy for energy and hydrocarbon projects. The goal created linkage with government agencies. is to identify the social and environmental impacts in the Principal actions 2017. We launched calls for social area of influence of a project, considering the identifi- projects in the neighbor communities to our Salaman- Through México Compañía Constructora, we implemented a program that fosters cation, characterization, prediction, and valuation of the ca-Leon Highway (OIBSA) and Ciudad del Carmen, the participation of contract companies in Cananea to establish a fund of in-kind potential consequences resulting from the project, to Campeche (PEMSA) operations. The projects received resources, the goal of which is to recover public spaces under an approach of com- take mitigation measures and develop social manage- were reviewed by the community committees, the mem- pany-community co-responsibility. ment plans. bers of which are volunteers from the community and the company. The successful projects received seed Humanitarian aid These types of studies are prepared considering our capital from the company and also support and consult- Donations and response to earthquakes. In response to the earthquakes oc- principal stakeholders in the areas impacted by the proj- ing for their implementation. The committees approved curring in Mexico in September 2017, the Infrastructure Division activated volunteer ect, which may include recognized community leaders, 6 projects for the Salamanca-Leon region and 7 for Ci- and socioemotional plans and put into operation donation collection centers, to re- charity organizations, government agencies, community udad del Carmen, 6 of which were launched this year. ceive basic needs items to deliver these to affected families in the state of Oaxaca. associations and organized groups, among others. Additionally, 9,240 people participated in 54 landmark Community committees were formed from these ac- and other productive projects at our community devel- tivities and are key to developing a community linkage opment centers in Juchitan de Zaragoza, Oaxaca and model. Through them, we can establish mechanisms Ciudad del Carmen, Campeche this year. for social participation, such as our invitations to submit project proposals to receive funding. Through Operadora de Infraestructura del Bajío (OIBSA), 13 2 in 2017 we supported the Mujeres Productivas (Produc- In this manner, we ensure different sectors of the com- tive Women) project, the goal of which is to improve un- munity are involved in decision making to favor their favorable conditions such as low education levels, lack economic, social and cultural development. of sources of employment, and various cultural aspects Also, as part of our actions to positively impact commu- nity development, the subsidiaries of the Infrastructure 133 SUSTAINABLE DEVELOPMENT REPORT 2017 I NFRASTR UCTURE DIVISION / PROTECT PROTECT ENVIRONMENTAL MANAGEMENT AND PERFORMANCE POWER CONSUMPTION Infrastructure Division, 2015 - 2017 Year 2015 2016 2017 Terajoules 3.43 7.24 4.38 unusual or unexpected climatological conditions. Such events can also damage or destroy the assets or pro- duction facilities, and cause personal injury and damag- es to the environment. Because of this, we have plans in place to respond to these types of events. GREENHOUSE GAS EMISSIONS Infrastructure Division, 2017 (Millions of tons CO2eq) Direct Emissions6 Indirect Emissions7 1.58 0.0007 Energy efficiency. We report a 3% year-over-year ef- The Infrastructure Division has continual monitoring sys- ficiency improvement in producing electrical power, re- Climate change is a global challenge. Added to this we tems in place for fixed-source NOx emissions. This sys- Energy and energy efficiency flecting the decreased heat rate of our “La Caridad I” are experiencing intensified weather phenomena, such tem ensures our emissions fall within the permitted limits. G4-EN3, G4-EN6 and “La Caridad II” combined cycle power plants. This as hurricanes, droughts and rains, which generate risks We reported 1,109 tons of these compounds in 2017. Energy consumption. During 2017, we consumed means we have optimized the fuel consumption needed to our Infrastructure Division operations. The accumula- 27,820 terajoules of fossil fuels and 4 terajoules of elec- to generate each MWh of electricity. tion of greenhouse gases (GHG) is triggering transfor- Mitigation of Greenhouse Gases. We contributed to tricity. 96% of the energy consumed by the Infrastructure mations in the weather and in response, we are working Division is the natural gas needed for our Controladora Energy generation. During 2017, CIEM reported a to reduce the emissions from our activities. de Infraestructura Energética México (CIEM) combined new record in generating energy from its combined cycle reducing CO2 emissions thanks to the diversification of our energy mix. The “El Retiro” wind farm, which started operations in 2014, has 37 wind turbines and most of cycle power plants. power plants, generating 3,630 GWh. This represents a Given the above, we’re looking at the viability of partic- the power produced feeds other Grupo México subsid- FUEL CONSUMPTION Infrastructure Division, 2015 – 2017 Year 2015 2016 2017 13 4 FUEL CONSUMPTION Infrastructure Division, 2017 Company MCC CIEM PEMSA CIBSA Terajoules 21,681 24,731 27,820 Terajoules 406.35 26,776 624.15 13.49 14% increase over 2016. ipating in different generation projects using renewable iaries. In 2017, the wind farm produced 177,473 MWh, The “El Retiro” wind farm in Juchitan de Zaragoza, Oaxaca, energies, principally solar and hydroelectric power. preventing the release of 103,268 tons of CO2eq, equal to taking 22,113 cars off the road for a year. reported a lower output this year due to decreased winds Greenhouse Gas Emissions (GHG). In 2017, the and the effects of the September earthquakes, which GHG emissions of the Infrastructure Division totaled We also have two combined cycle power plants, “La meant the power could not be discharged for a month, dropping from 206 GWh in 2016 to 177 GWh in 2017. 1,585,675 tons of CO2eq. Climate change G4-EC2, G4-EN15, G4-EN16, G4-EN19, G4-EN21, G4-EN27 Risks of climate change. The activity of the Infra- structure Division is subject to different risks, including 6 Direct Emissions: Include emissions from direct energy consumption, calculated according to the 2017 CRE emission factors and the 2017 CONUEE combustion factors. 7 Indirect Emissions: Include emissions from power consumption, calcu- lated according to the 2017 Mexican Power Board power consumption factors (0.582 tons of CO2/MWh), published by the CRE. Caridad I” and “La Caridad II”, which produced 3,630 GWh to supply power to various Grupo México subsid- iaries, achieving an emission intensity of 0.4143 tons of CO2eq per MWh, which is below the National Power Sector’s Emissions Factor, set by the power regulatory 135 board at 0.582 tons of CO2eq per MWh. SUSTAINABLE DEVELOPMENT REPORT 2017 Water G4-EN8, G4-EN9, G4-EN10, G4-EN22, G4-EN26 In 2017, our total water consumption was 4,973,093 m3, 86% of which was from underground sources. Most of this consumption is used in the operation of the cool- ing process of our combined cycle power plants. TOTAL WATER DRAWN Infrastructure Division, 2017 Source Underground Surface (fresh water) Surface (salt water) City water supply Water trucks TOTAL WATER CONSUMPTION Infrastructure Division, 2017 Subsidiary CIEM PEMSA CIBSA TOTAL m3 4,255,188 39,753 39,689 26,663 611,800 4,973,093 m3 4,296,755 671,538 4,800 4,973,093 In 2017, water discharges totaled 637,981 m3 for the whole of the Infrastructure Division. These discharges were handled according to federal regulations. 13 6 Materials G4-EN1 The many projects of the Infrastructure Division, particularly our well drilling and construction activities, require materials primarily for the construction and mainte- nance of work equipment. INFRASTR UCTURE DIVISIO N / PROTECT MATERIALS8 División Infraestructura, 2017 Material Inert rock Industrial products Drilling products Unit m3 ton m3 ton m3 Quantity 8,098,895 174.63 121.03 618.20 30.22 Waste management and spills G4-EN23, G4-EN24 Waste management. In 2017 we disposed of a total 342 tons of solid hazardous waste and 454 m3 hazardous liquids, which were managed in strict adherence of regulations during the phases of handling, storage and sending for recycling or final disposal. We also produced 6,520 tons of non-hazardous solid waste, some of which was reused or recycled by third parties. WASTE Infrastructure Division, 2017 Material Hazardous waste Muds (water treatment plant) Non-hazardous waste Waste requiring special handling Unit Solids (ton) Liquids (m3) Solids (ton) Solids (ton) Solids (ton) Quantity 342.46 454.05 6,080.99 278.38 161.11 137 Spills. During 2017, an area of 434 m2 was impacted by spills due to accidents involving highway users. The spill response procedures were activated, taking ap- propriate actions and cleaning to prevent any environmental impact. 8 “Industrial products” includes maintenance supplies, such as oils, antifreeze, degreasing agents, grease, paint, solvents, and does not include replacement parts. “Drilling products” include cements, additives and other chemicals needed for well drilling cementation. SUSTAINABLE DEVELOPMENT REPORT 2017 Biodiversity G4-EN11, G4-EN12, G4-EN13, G4-EN14 The operations of the Infrastructure Division are generally situated in areas with little biodiversity value. In addition to holding all required permits, we ensure our opera- tions have no impact on the local flora and fauna. Only the administrative offices of our drilling subsidiary in Ciudad del Carmen are located in a protected area, without any significant effect due to the type of activity conducted there. All Infrastructure Division projects adhere to regulations, preparing environmental impact assessments as necessary. This means conducting a complete analysis of our planned worksites, and also acknowledging our impacts and identifying the species with which we share the space, and setting an action plan. PROTECTED SPECIES NOM-059-SEMARNAT CLASSIFICATION Infrastructure Division, 2017 Category In danger of extinction Threatened Subject to special protection No. of Species 0 5 15 In 2017, we had no project in areas where there are protected species, according to the International Union for the Conservation of Nature (IUCN) classification. INFRASTR UCTURE DIVISION / PROTECT COMPLIANCE Environmental certifications During 2017, México Compañía Constructora maintained its ISO 14001 manage- ment system certification for the eleventh year. The Carmen Sector administrative offices, cement plant and the Sonora rig, of the subsidiary PEMSA, also maintained their certification. PEMSA also has 8 Clean Industry certifications and the “La Caridad” combined cycle power plant received this certification for the first time. These certifications are given by the Mexican Environmental Protection Agency (PROFEPA), under this voluntary program that requires an environmental audit to review the company’s environmental risk processes and regulatory compliance. CLEAN INDUSTRY CERTIFICATIONS Infrastructure Division, 2017 “La Caridad” combined cycle power plant “Zacatecas” jack-up rig “Campeche” jack-up rig “Chihuahua” jack-up rig “Sonora” jack-up rig “Tabasco” jack-up rig “Veracruz” jack-up rig Cement plant Carmen Sector offices 13 8 139 Fines and sanctions G4-EN29 No Infrastructure Division subsidiary received any significant fine or sanction from the environmental authorities in 2017. SUSTAINABLE DEVELOPMENT REPORT 2017 INDEPENDENT ASSURANCE REPORT INDEPENDENT ASSURANCE RE PORT CARTA DE VE R IFICACIÓN 14 0 141 SUSTAINABLE DEVELOPMENT REPORT 2017CARTA DE VERIFICACIÓN INDEPENDENT ASSURANCE REPORT INDEPENDENT ASSURANCE RE PORT INDEPENDENT ASSURANCE REPORT 14 2 143 SUSTAINABLE DEVELOPMENT REPORT 2017 GRI CONTENT INDEX G4-32 General Standard Disclosures Indicator Description Pages Independent verification Strategy & Analysis G4-1 G4-2 Organizational Profile G4-3 G4-4 G4-5 G4-6 Letter from the President Description of the key elements, risks and opportunities Name of the organization Primary brands, products and services Location of the organization’s headquarters Countries where the organization operates G4-7 G4-8 G4-9 G4-10 G4-11 G4-12 G4-13 G4-14 Nature of the ownership and legal status Markets served Size/Scale of the organization Workforce Employees covered by collective bargaining agreements Supply chain Significant changes in the organization Precautionary principle 14 4 G4-15 G4-16 Material aspects & coverage G4-17 G4-18 G4-19 G4-20 G4-21 G4-22 G4-23 Social, environmental and economic programs and initiatives Association memberships Organizational structure Definition of content Material aspects Inside back cover Coverage of each material aspect within the organization Limits on each material aspect outside the organization Consequences of the restatement of information from previous reports Significant changes in the scope and coverage of each material aspect in terms of previous reports Participation of Stakeholders G4-24 G4-25 List of the organization’s stakeholders Procedure for identifying stakeholders • • 4 4 9 9, 49, 88, 119 9 back cover 9, 10, 11, 12, 13, 14, 15 9, 49, 88, 119 9, 49, 88, 119 49, 56, 90, 94, 119, 123 56, 94, 123 57, 94, 123 31 49, 87, 121 We cover the pre- cautionary principle by complying with all applicable legislation 30 30 Inside back cover Inside back cover Inside back cover Inside back cover Inside back cover Inside front and back cover Inside back cover 27, 28, 29 27, 28, 29 GRI CONTENT INDEX 27, 28, 29 27, 28, 29 Inside front cover Inside front cover Inside front cover Inside front cover Inside front cover Inside front cover 18, 20 145 G4-26 G4-27 Report Profile G4-28 G4-29 G4-30 G4-31 G4-32 G4-33 Corporate Governance G4-34 G4-35 Communication with stakeholders Key issues for stakeholders Reporting period Date of the last report Reporting cycle Point of contact for questions regarding the report or its content Location of the basic content of the report Independent assurance 20 20 20 20 Governance structure of the organization Process by which the highest governance body delegates its authority to senior management and certain employees for economic, environmental and social issues Executive-level positions for economic, environmental and so- cial matters, and whether position holders report directly to the highest governance body Consulting processes between stakeholders and the highest go- vernance body on economic, environmental and social matters Composition of the highest governance body and its committees 20 20 Reference whether the person that presides over the highest governance body is also an executive officer Processes and criteria for nominating and selecting the highest governance body and its committees Processes by which the highest governance body avoids and manages conflicts of interest; reference to whether conflicts of interest are disclosed to stakeholders Roles of the highest governance body and senior management in the development, approval and updating of the organization’s mission statements, values, strategies, policies and goals Measures to develop or improve the collective knowledge of the highest governance body on economic, environmental or social matters 20 20 22 G4-36 G4-37 G4-38 G4-39 G4-40 G4-41 G4-42 G4-43 SUSTAINABLE DEVELOPMENT REPORT 2017 G4-44 G4-45 G4-46 G4-47 G4-49 G4-50 G4-51 G4-52 G4-53 Performance review process for the highest governance body with regard to the governance of economic, environmental and social issues, and measures adopted based on results Role of the highest governance body in the identification and management of economic, environmental and social risks and opportunities; reference whether stakeholders are consulted Role of the highest governance body in reviewing the effectiveness of the organization’s risk management processes for economic, environmental and social matters Frequency of the highest governance body’s review of the economic, environmental and social impacts, risks and opportunities Process for communicating critical concerns to the highest governance body and senior management Nature and number of critical concerns that were communica- ted to the highest governance body, and mechanisms used to address and resolve them Remuneration policies for the highest governance body and senior management Processes for determining remuneration Reference to the consideration of the opinion of stakeholders regarding remuneration 20 20 20 20 20 20 20 20 20 Ethics & Integrity G4-56 G4-57 G4-58 14 6 Values, principles, standards and norms of the organization Internal and external mechanisms for seeking advice on ethical and lawful behavior, and matters related to organizational integrity Internal and external mechanisms for reporting concerns about unethical or unlawful behavior and matters related to organizational integrity 18, 22 22 22 • GRI CONTENT INDEX Independent verification • • • • 147 Material Aspect DMA / Indicators Water DMA G4-EN8 G4-EN9 G4-EN10 DMA G4-EN11 G4-EN12 Biodiversity & the environment G4-EN13 G4-EN14 MM1 MM2 DMA G4-LA9 G4-LA10 G4-LA11 Training & career development Specific Standard Disclosures Description Management approach Total water consumption by source Water sources significantly affected by drawing water Percentage and total volume of water recycled and reused Management approach Operational sites owned, leased, managed, adjacent to, covering or located in or outside protected areas of high biodiversity Description of the most significant impacts of activities, products and services on biodiversity in protected areas and areas of high biodiversity value outside protected areas Protected or restored habitats Number of IUCN Red List species and national conservation list species with habitats in areas affected by operations, by level of extinction risk Size of land (owned or leased and managed for production or extraction activities) affected or restored Biodiversity management plans Management approach Average hours of training per year per employee by gender and employee category Skills management and ongoing training pro- grams that support the employability of emplo- yees and assist them in managing their career ending Percentage of employees receiving regular performance and career development reviews, by gender and employee category Pages 76, 116, 136 76, 116, 136 76, 116, 136 76, 116, 136 83, 117, 138 83, 117, 138 83, 117, 138 83, 117, 138 83 83 62, 98, 126 62, 98, 126 62, 98, 126 64, 99, 127 SUSTAINABLE DEVELOPMENT REPORT 2017 DMA G4-EC5 G4-LA1 G4-LA2 G4-LA4 G4-LA12 Commitment & workplace climate G4-LA13 G4-HR3 G4-HR4 MM4 Management approach Ratio between the basic wage, by gender, and the local minimum wage where there are sig- nificant operations Total number of new hires and employee tur- nover by age group, gender and region Benefits provided to full-time employees that are not provided to temporary or part-time em- ployees, by significant locations of operation Minimum notice periods for operational chan- ges and possible inclusion of these in collecti- ve bargaining agreements Composition of governance bodies and break- down of employees by employee category, gender, age group, minority group members- hip and other indicators of diversity Ratio of basic salary of women to men, by ca- tegory and significant locations of operation Number of incidents of discrimination and co- rrective actions taken Operations and suppliers identified in which the right to exercise freedom of association and collective bargaining may be violated or threatened, and measures taken to support these rights Number of strikes and closures lasting over one week, by country • • 56, 94, 123 59, 96, 124 59, 97, 125 61, 98, 126 57, 94, 123 58, 95, 123 59, 96, 124 58, 95, 123 23 No strikes in 2017 • GRI CONTENT INDEX • DMA G4-HR1 G4-HR2 G4-HR5 Human rights G4-HR6 G4-HR7 G4-HR8 G4-HR9 MM5 DMA G4-EC1 G4-EN31 Economic performance Management approach Number and percentage of significant invest- ment agreements and contracts that include human rights clauses or that have undergone human rights screening Employee training hours on policies and proce- dures on aspects of human rights that are re- levant to operations, including the percentage of employees trained Operations and suppliers identified as having significant risk for incidents of child labor, and measures taken to contribute to the effective abolition of child labor Operations and suppliers at significant risk of incidents of forced labor, and measures taken to contribute to the elimination of all forms of forced labor Percentage of security personnel trained in the organization’s human rights policies or proce- dures that are relevant to operations Number of incidents of violations involving ri- ghts of indigenous peoples and actions taken Number and percentage of operations that have undergone human rights screening Total operations located at or near indigenous communities Management approach Direct economic distributed Details of environmental expenditures and investments value generated and 56, 94, 123 23 23 23 23 23 23 23 23 31 31 31, 77 14 8 149 SUSTAINABLE DEVELOPMENT REPORT 2017 DMA G4-EN22 G4-EN23 G4-EN24 G4-EN25 G4-EN26 MM3 DMA G4-EN15 G4-EN16 G4-EN19 G4-EN21 DMA G4-SO3 Effluents & waste Emissions Ethics & integrity G4-SO4 G4-SO5 DMA G4-EN33 15 0 Management of the supply chain Management approach Total water discharged by quality and destination Total weight of waste by type and treatment method Total number and volume of significant spills Weight of transported, imported, exported or treated waste considered hazardous under the Basel 2 Convention Annexes I, II, III and VIII, and percentage of waste shipped internationally Identity, size, protected status and biodiversi- ty value of water bodies and related habitats significantly affected by the organization’s dis- charges of water and runoff Total overburden, rocks, tailings and muds that present a potential risk Management approach Direct greenhouse gas emissions (Scope 1) Indirect greenhouse gas emissions (Scope 2) Reduction of greenhouse gas emissions NOx, SOx and other significant air emissions Management approach Number and percentage of operations asses- sed for risks related to corruption and signifi- cant risks identified Communication and training on anti-corruption policies and procedures Confirmed incidents of corruption and actions taken Management approach Significant actual and potential negative en- vironmental impacts in the supply chain and actions taken 82, 114, 137 77, 136 82, 114, 137 82, 114, 137 82, 114, 137 77, 116, 136 82 79, 112, 134 79, 112, 134 79, 112, 134 79, 112, 134 134 22 22 22 22 31 31 • • • • • • • • DMA G4-EC2 Risk management & legal G4-EN29 compliance DMA G4-LA12 Corporate governance Innovation, continuity and operational efficiency DMA G4-EN1 G4-EN2 G4-EN3 G4-EN6 G4-EN27 86, 117, 139 79, 112, 134 86, 117, 139 Management approach Financial implications and other risks and opportunities for the organization’s activities due to climate change Monetary value of significant fines and to- tal number of non-monetary sanctions for non-compliance with environmental laws and regulations Management approach Composition of governing bodies and break- down of employees by employee category, gender, age group, minority group and other indicators of diversity Management approach Materials used by weight or volume Percentage of materials used that are recycled 81, 114 Internal energy consumption Reduction of energy consumption Mitigation of the environmental impact of pro- ducts and services 76, 109, 132 81, 114, 136 78, 111, 134 78, 111, 134 121, 134 20 20, 58, 95, 123 GRI CONTENT INDEX • • 151 SUSTAINABLE DEVELOPMENT REPORT 2017 DMA G4-EC7 G4-EC8 G4-SO1 G4-SO2 G4-SO11 MM6 MM7 MM8 MM10 CRE7 DMA G4-PR5 DMA G4-LA5 G4-LA6 G4-LA7 G4-LA8 CRE6 Management approach Development and impact of infrastructure in- vestments and services supported Significant indirect economic impacts and their scope Percentage of operations with implemented development programs, impact assessments and community engagement Operations with significant actual and potential negative impacts on local communities Número de reclamaciones sobre impactos sociales que se han presentado, abordado y resuelto mediantes mecanismos formales de reclamación. Number and description of significant dispu- tes over the use of lands, and local community and indigenous community rights Use of grievance mechanisms to resolve disputes Number (and percentage) of sites where the organization operates artisanal and small-sca- le mining Number and percentage of operations with mine closure plans Number of people voluntarily and involuntarily displaced and/or relocated due to the develop- ment and end result of works, by project Management approach Results of surveys measuring customer satisfaction Management approach Percentage of employees represented in for- mal joint management-worker health and sa- fety committees, established to help monitor and advise on occupational health and safety programs Type and rates of injury, occupational diseases, days lost and absenteeism, and total number of work-related fatalities, by region and gender Workers with high incidence or risk of occupa- tional diseases Health and safety topics covered in formal agreements with unions Percentage of the company that operates un- der certified health and safety management systems, developed according to internationa- lly recognized standards 70, 104 52, 71, 91, 121 52, 71, 91 70, 71, 104, 130 70, 104, 130 75 23 23 23 85 130 55, 93, 122 55, 93, 122 65, 99, 128 65, 99, 128 65, 99, 128 65, 102, 130 57, 94, 123 65 • • • • • • • • • Community relations Customer relations 1 5 2 Occupational health & safety
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