Ayala Corporation - 2013 Sustainability Report by Drink

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SECTION TITLE

ABOUT THE COVER BETTER At Ayala, doing better for our companies and for our stakeholders has always been crucial to the way we do business. We believe that pushing ourselves furtherâ&#x20AC;&#x201D;financially, environmentally, and sociallyâ&#x20AC;&#x201D;allows us to become the kind of company we have always envisioned ourselves to be: a company that does not rest on past achievements, but continues to innovate and respond to the changing needs of its stakeholders. A strong and sustainable business means going beyond simply doing well for ourselves. It means making life better for all.

TABLE OF CONTENTS ABOUT THE COVER........................................................................................2 ABOUT OUR REPORT.....................................................................................4 ABOUT AYALA................................................................................................6 JOINT MESSAGE FROM THE CHAIRMAN AND THE PRESIDENT........................8 ONE GROUP................................................................................................10 CREATING SHARED VALUE...........................................................................12 LISTENING AND ENGAGING.........................................................................18 CORPORATE GOVERNANCE.........................................................................22

ONE COMMUNITY.......................................................................................32 ONE TEAM..................................................................................................42 ONE PLANET...............................................................................................52

LEADING BY BEING BETTER........................................................................62 LOOKING FORWARD....................................................................................64

G3.1 CONTENT INDEX.................................................................................66 EXTERNAL ASSURANCE..............................................................................79 GRI APPLICATION LEVEL CHECK STATEMENT...............................................81

ACKNOWLEDGEMENT AND CONTACT DETAILS.............................................82 2012 SUSTAINABILITY REPORTS.................................................................84

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Ayala Triangle Gardens is an urban oasis in the middle of the Philippinesâ&#x20AC;&#x2122; premier business district

ABOUT OUR REPORT

elcome to Ayala Corporationâ&#x20AC;&#x2122;s 2012 Conglomerate Sustainability Report.

Transparency and accountability are integral to the way we do business, and this belief extends to our sustainability practices. We began our yearly reporting from a group perspective in 2008 to engage our stakeholders by communicating our sustainability commitments and obtaining feedback on our performance. We do this so we can do better year after year. (3.3)

ABOUT OUR REPORT

Reporting Period and Framework This report covers the Ayala group’s sustainability performance data from January 1 to December 31, 2012. The report has been prepared according to the Global Reporting Initiative (GRI) Guidelines based on a B+ Level. To comply with this level’s requirements, we report on 71 indicators across the economic, social, and environmental categories, an increase of 29 indicators from last year’s report. As part of our standard reporting, we also referred to the AA1000 AccountAbility Principles Standard 2008 on inclusivity, materiality, and responsiveness. In our effort to report according to international best practices, we implemented the following key sustainability initiatives for the 2012 report: ••Commissioned TÜV Rheinland for external assurance in addition to obtaining verification from the GRI on the Application Level. The GRI statement and assurance report are found starting on page 79; ••Implemented a more systematic data gathering and verification system; ••Conducted a formal stakeholder engagement focused on sustainability issues; and ••Began the transition to the newly launched GRI version, with this report containing Standard Disclosures from the GRI Sustainability Reporting Guidelines Version 4. To assess our performance, we include 2011 data, where available. Comparing data allows us to see how we can improve on our targets and helps us manage the impacts of our growth. (3.1, 3.5, 3.13)

Reporting Scope and Boundaries The report includes highlights from Ayala Corporation and its subsidiary companies and covers Philippine operations only. Specifically, ••Ayala Corporation (Ayala) — covers our operations as a holding company; ••Ayala Land, Inc. (Ayala Land) — covers performance data of the parent company and its subsidiaries namely Alveo Land Corporation, Ayala Property Management Corporation, Cebu Holdings, Inc., and Makati Development Corporation;

••Bank of the Philippine Islands (BPI) — includes the performance of the parent company and its subsidiaries; ••Globe Telecom, Inc. (Globe) — covers the head office and operations nationwide; ••Manila Water Company, Inc. (Manila Water) — covers the East Zone operations only; ••Ayala Automotive Holdings Corporation (Ayala Auto) — includes 19 Ayala-owned Honda and Isuzu dealerships; ••LiveIt Investments, Ltd. (LiveIt) — includes the operations of LiveIt and its investee companies namely Affinity Express, Integreon, Stream Global Services, and HRMall; ••Integrated Micro-Electronics, Inc. (IMI) — covers its Philippine-based operations, specifically its manufacturing site in Laguna Technopark; and ••Ayala Foundation, Inc. (Ayala Foundation) — covers the operations of the head office and its activities nationwide. Detailed discussions are in the sustainability reports of each of these companies and may be downloaded from their respective websites. Reported financial economic performance consolidates all Ayala subsidiaries and their sub-subsidiaries. For the social performance, only Ayala Land and LiveIt report on their sub-subsidiaries’ data. For the environmental performance, only Ayala Land reports on its sub-subsidiaries’ data. We also included highlights of AC Energy and AC Infrastructure to give our readers a more comprehensive picture of Ayala’s contributions to key national development goals on infrastructure development and energy security. (3.6, 3.7) Moving forward, we aim to expand the coverage of our future reports to include operations outside the Philippines.

Reporting Feedback We welcome your feedback on this report and on Ayala’s sustainability performance. Please contact us at sustainability@ayala.com.ph. (3.4) ■

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Tower One and Exchange Plaza, Ayalaâ&#x20AC;&#x2122;s headquarters in Makati City

A ABOUT AYALA

yala Corporation is one of the oldest and most respected business groups in the Philippines. It has a diversified business portfolio that includes real estate development, banking and financial services, telecommunications, water and wastewater service infrastructure, electronics manufacturing services, automotive dealership, international real estate investments, business process outsourcing, transport infrastructure, and power. (2.2)

A public company listed in the Philippine Stock Exchange (PSE:AC), Ayala ended 2012 with a market capitalization of more than P300 billion, making it the second-largest listed Philippine conglomerate. With headquarters in the Makati Central Business District, Ayala has established presence nationwide and employs more than 42,000 people in its groupwide operations. Its subsidiaries are members and partners of various relevant industry associations and these are identified in their respective 2012 reports. (2.4, 2.8, 4.13, LA1)

A B O U T AYA L A

Ayala enhances its position of leadership in key lines of business by leveraging its portfolio of assets, brand equity, and competitive advantages: •• Ayala Land is the Philippines’ largest fully integrated property developer and one of the most successful developers of prime commercial spaces in the country. •• BPI is one of the largest Philippine banks and has a lead position in intermediation capacity, corporate and consumer lending, remittances, and electronic banking. •• Globe is a major provider of telecommunications services in the Philippines, formed out of a partnership between Ayala and Singapore Telecom. •• Manila Water is the sole provider of water and wastewater services in the East Zone of Metro Manila and now has existing operations in other parts of the Philippines and the Asian region. •• IMI is a leading electronics manufacturing services provider in the Asian region and has operations in Europe and North America. •• Ayala Auto is a leading vehicle dealership network of both Honda and Isuzu brands in the Philippines. Recently, it was appointed as the local distributor of Volkswagen AG passenger vehicles. •• LiveIt is the holding company for Ayala’s investments in the business process outsourcing (BPO) sector. •• AG Holdings, Ltd. is the holding company for the Ayala group’s property investments in the United States and Asia. •• AC Energy Holdings, Ltd. and AC Infrastructure Holdings Corporation are Ayala’s holding companies for investments in the power and renewable energy sector and in transport infrastructure projects, respectively. •• Ayala Foundation is the social development arm of Ayala with programs in education, youth leadership, sustainable livelihood, and arts and culture.

Ayala’s Ownership Structure Ayala's current principal shareholders are Mermac, Inc. and Mitsubishi Corporation. As of December 31, 2012, 70.19% of the total outstanding shares of the company was held by Philippine entities. We continue to strive for sustainable growth. Our subsidiaries are at the forefront of our efforts: expanding into underserved markets, contributing to community economic development, and innovating solutions that respond to the evolving needs of our customers. (2.3, 2.6)

Awards and Recognitions of Ayala Throughout the years, Ayala has been consistently recognized for its efforts to uphold sound and ethical business practices. In 2012, it received awards and citations from prestigious local and international organizations and publications:

Institute of Corporate Directors •• Platinum Plus Awardee, 7th Corporate Governance Scorecard

FinanceAsia (Best Managed Companies Poll – Philippines) •• Ranked 1st – Best Managed Company •• Ranked 1st – Best Corporate Governance •• Ranked 1st – Best Corporate Social Responsibility •• Ranked 2nd – Best Investor Relations

Alpha SouthEast Asia Magazine •• Ranked 1st – Strongest Adherence to Corporate Governance •• Ranked 1st – Best Strategic Corporate Social Responsibility •• Ranked 1st – Best Annual Report

Philippine Dealing System Group (7th PDS Awards Night) •• Innovative Corporate Bond Issue of the Year – P10-Billion Fixed-Rate Multiple-Put Bonds Due 2021 (The country’s first listed multiple-put bond issue)

WWF Philippines •• 2012 Environmental Leadership Award

Our operating companies are also recognized for their significant achievements in numerous areas of their business, including corporate governance, management, financial performance, investor relations, business innovation, product and service excellence, people management, and environmental sustainability programs. Their specific awards can be found in their sustainability and annual reports. (2.10) ■

Equity ownership of Ayala as of YE 2012

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Jaime Augusto Zobel de Ayala and Fernando Zobel de Ayala

DEAR FELLOW STAKEHOLDERS:

JOINT MESSAGE FROM THE CHAIRMAN AND THE PRESIDENT

Over the past few years we have reiterated our overarching philosophy within our group companies to align our business strategies and objectives with national development goals. This is of strategic importance to us because we believe businesses simply cannot prosper in a deteriorating society, much less in an environment that is constantly degraded. As a group of companies operating across various sectors of our economy, we realize the imperative to create value not just for our businesses, but also for the communities where we operate and the broader environment that we impact. This fundamental philosophy lies at the center of our sustainability initiatives. It anchors our journey towards establishing a holistic framework for measuring the economic, social, and environmental dimensions of our businesses. It is this framework that will ultimately guide us in developing long-term sustainability programs and practices that will be more deeply embedded in our operations and our business models.

JOINT MESSAGE FROM THE CHAIRMAN AND THE PRESIDENT

Refining Our Groupwide Sustainability Policy

The Way Forward

Essential to the development of this framework is our underlying policy towards sustainability. This year we took a more vigorous review of our groupwide sustainability policy across seven key components. These covered our current operations, our products and services, the supply chain, our human resource practices, our community involvement, our overall management approach, and our approach to expanding our businesses.

In the coming year, we look to make greater strides on our sustainability initiatives. We aim to establish measurable targets for each of our business units' environmental and social performance, which should in turn complement our financial targets and growth plans. The entire Ayala group is also working on the integration of environmental and societal risks as part of the existing Enterprise Risk Management system to ensure that we manage broader sustainability risks in our business processes. We also aim to develop a unified strategy for improved internal and external stakeholder participation and engagement to ensure that we implement improvements in innovation, learning, and sustainability performance.

As we refined our sustainability commitment in each of these components, we identified several sustainability focus areas. On the environmental front, we are putting greater focus on optimizing our energy and water consumption and controlling our solid waste and greenhouse gas emissions. We endeavor to move beyond mere regulatory compliance towards global best practices and standards. Our sustainability focus areas involving the social dimension centers on taking more innovative approaches to increase customer value and enhance customer experience, as well as engaging communities and customers particularly those with limited access to essential goods and services. A vital component of this is ensuring the well-being of our own employees as we strive to create an environment that promotes their professional and personal growth. Finally, as we align our sustainability efforts along these social and environmental dimensions, we remain focused on ensuring we achieve our financial targets as defined by our business plans and strategies. The disciplined review of our sustainability policy has enabled us to measure the current trajectory of our performance across the triple bottom line metrics. It likewise set a baseline from which we can set more specific and measurable targets and further improve on our monitoring and reporting standards.

In order to further leverage on group synergies and widen the reach and benefits of Ayala’s sustainability programs, we will undertake initiatives that engage our supply chain in developing sustainable solutions. At the holding company level, we will provide impetus for our subsidiaries to create more strategic community development initiatives that mutually capitalize on our subsidiaries’ strengths and expertise. We are excited by the developments on our sustainability initiatives and commitments, and look forward to the achievements and opportunities that will come with embedding sustainability further in our businesses. The progress of these sustainability initiatives would certainly not be possible without the collaborative efforts of our Sustainability Council. We thank them for the leadership and guidance they continue to provide the group. We also thank our customers, suppliers, and business partners and all our stakeholders across the group for their continued engagement and support in achieving our common vision of creating shared value. ■

Improvement in Reporting Standards This year, we are encouraged to see the significant improvement in reporting standards across all our business units. At the conglomerate level, we increased our reported indicators by 69%, from 42 to 71 indicators. This is also the first time we are reporting an externally assured report which was obtained from the TÜV Rheinland Group, a global leader in independent testing and assessment services, and a Global Reporting Initiative (GRI) Application Level Checked report rated B+. This year as well, we have taken the required initial steps to transition fully to the GRI Version 4, the newest reporting guidelines. Over time we aim to constantly improve our reporting by increasing the number of performance indicators, particularly when these are material to our companies. Transparency is important to us and practicing this type of reporting allows us to discuss our progress on our sustainability goals with our stakeholders in a systematic manner.

Fernando Zobel de Ayala President and Chief Operating Officer

Jaime Augusto Zobel de Ayala Chairman and Chief Executive Officer

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Clockwise from top left: A Globe â&#x20AC;&#x153;tech coachâ&#x20AC;? assists a customer; an LED engine designed by IMI subsidiary PSi Technologies; a Stream call center agent; Evoliving center in NUVALI; the Honda emblem; a BPI Express Assist machine; scholars of the Center of Excellence in Public Elementary Education; Manila Water meters; wind turbines in Bangui, Ilocos Norte

ayalaâ&#x20AC;&#x2122;s success is the result of trust

that has been built and nurtured over time. Given the size, scale, and diversity of our businesses, Ayala has the unique position of being able to truly create long-term value for a greater number of stakeholders. Moving as one, we respond better to the evolving demands of the Filipino public and support national development. Ayala is guided by a vision of a successful business that contributes to the improvement of all aspects of society. Integrating the goals of economic advancement, environmental responsibility, and social inclusivity, we strengthen our legacy of leadership, promote responsible business, and remain committed to the Filipino people.

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Tubig Para sa Barangay (Water for the Community) improves quality of life by providing access to potable, reliable, and affordable water service

CREATING SHARED VALUE

e developed our Sustainability Policy in 2008 to address growing concerns for the environment, human resource management, supply chain, and social performance. In doing so, we incorporate sustainability practices in our operations and business strategies, and improve them as we enter new and evolving markets and growth areas. In 2012, we reviewed our Sustainability Policy to further improve its appropriateness and relevance while ensuring business viability and access to new markets. We also conducted our Sustainability Summit to bring to fore opportunities for the conglomerate to respond to the economic, environmental, and social development challenges of the country while strengthening our operations. Close to a hundred Ayala officersâ&#x20AC;&#x201D;including members of the Sustainability Council and the Management Committeeâ&#x20AC;&#x201D;and representatives from partners Mitsubishi Corporation and

C R E AT I N G S H A R E D VA L U E

Ayala has a legacy of leadership that continues to shape industries while remaining relevant and committed to the national development agenda of the country.

NorthWind Development Corporation attended the event. Climate change adaptation and risk mitigation were key topics given the vulnerability of the country to climate-related disasters and the need for local responses. The best practices of a global brand were also presented at the summit. The Summit encouraged greater synergy within the Ayala group of companies for better reach, productivity, and impact. We are in the process of developing sustainability performance targets to discuss in detail next year’s report. (4.8)

Enhancing Lives, Building a Nation Our focus on sustainability drives our subsidiaries to innovate and build their successes on models that empower more and more Filipinos, including traditionally unserved, underserved, and marginalized markets and communities. Ayala Land continues to lead in sustainable land use and development as it successfully creates communities that stimulate economic activity and catalyze inclusive growth. Its rich history of building large-scale, master-planned, mixed-use, and sustainable communities allows it to develop land in a manner that protects the environment and fosters social cohesion. In 2012, Ayala Land launched 67 projects with a total value of P100 billion, a 17% increase from 2011, and acquired more than 800 hectares of land in key areas such as Taguig, Valenzuela, Alabang, Tarlac, Bulacan, Pampanga, Cavite, and NUVALI. It continued to increase income distributed to suppliers, partners, employees, government, community

and stockholders by 23% from P39 billion in 2011 to P48 billion in 2012. In 2012, Ayala Land published its first A+ Integrated Annual and Sustainability Report and received the Asian CSR Award in Environment and Value Chain Management from the Asian Institute of Management. As one of the leading and oldest financial institutions in the country, BPI continues to contribute to the growth of the Philippine economy, especially at the grassroots level. Because it operates in an emerging market, BPI considers greater financial inclusion an integral part of its business strategy. Through BPI-Globe BanKO, the bank granted 55 loans worth P2.5 million to microfinance institutions in 2012, and increased the BanKO cardholder base to 280,000. BPI also supports and builds local businesses through BPI Ka-Negosyo, increasing its accredited franchisors to 61 in 2012 from 19 in 2011. Loans in the franchise portfolio grew by 309%. The bank’s partnership program with the International Finance Corporation known as the Sustainable Energy Finance Fund granted loans worth P4.2 billion in 2012 and saved 645,774 tons of carbon emissions. BPI also enhanced its services to overseas Filipinos (OFs) through branch and representative office openings in Milan and the United Arab Emirates, partnerships in East Asia, and an alliance with Remitly.com in North America. This gives OFs more options to send their hard-earned money to families in the Philippines. The bank also reported P36 billion in total economic contributions to society, with 69% to suppliers, government, charitable contributions, and employees’ salaries. Backed by its commitment to competitiveness in a dynamic, aggressive telecommunications industry, Globe continues to invest in technology that transforms the lives of its 35.5 million subscribers. The company focuses on innovative solutions for a better and faster mobile and data experience, enhancing everyday communications that meet diverse lifestyles and needs. The launch of the Long Term Evolution service, its Network Modernization and IT Transformation Program, and the customizable My SuperPlan were among the major efforts to provide customers with better service and value. It laid out an additional 12,000 kilometers of fiber optic cables nationwide to boost current capacity, completed the changeout of close to 90% of cell sites all over the country, and published its second B+ Annual and Sustainability Report in 2012.

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Ayala’s Policy on Sustainability We commit to creating shared value and improving the impact of our businesses on society and the environment in the following ways: (4.8, 4.1-1)

In our operations, we are committed towards optimizing energy and water consumption and controlling solid waste and greenhouse gas (GHG) emissions. We integrate environmental parameters into business operations and establish green practices in the workplace and facilities. As a step forward, we move beyond regulatory compliance, applying best practices and adopting global voluntary standards on environmental and social responsibility. In our products and services, we implement innovative approaches to increase customer value and enhance customer experience; empower more customers, including those who do not have access to essential goods and services; and improve the quality of life of people, businesses, and communities. Our product development will explicitly address environmental and social factors and we will continuously look for ways to design our products and services for lower environmental impact. In our supply chain, we will ensure that our suppliers are aware of our Sustainability Policy. We will establish social and environmental parameters in the accreditation of our suppliers and will prefer suppliers that observe sustainability practices. We will also use our buying volume to aid community development by providing opportunities to entrepreneurs and cooperatives. In our human resources practices, we will continue to put prime importance on our employees’ well-being. We will ensure that our employees work in the safest and healthiest environments and create a vibrant work environment that encourages professional and personal growth. We will actively promote sustainability initiatives in the workforce to create a positive momentum for sustainable business practices.

In our community involvement, we will provide, with our best capacity, the resources needed to promote quality education, vibrant micro-enterprises, cultural rootedness, and a healthy environment for our communities to foster economic advancement and nation-building. In our management approach, we will continue to promote sustainability in our business operations by improving our economic value while managing our impact on the environment and society. We will practice good governance and be responsive to stakeholders’ inputs and expectations on sustainability. We will continuously pursue opportunities to improve our operating efficiencies and satisfy our shareholder requirements. In our business viability, we will keep broadening our presence in the local market while diligently exploring new business opportunities. We will undertake valueenhancing initiatives by leveraging on synergies within the Ayala group or through strategic partnerships to achieve better margins, reduce costs, and increase efficiency. We will continue to make value-accretive investments in sectors critical to economic development. We are committed to creating shared value. Adopted by the Ayala Group Management Committee on the 28th day of September 2012 at the Tower One, Ayala Triangle, Ayala Avenue, Makati City, Philippines.

Above photos, left to right: An Amaia housing unit; BPI opens the country’s first solar-powered branch; the North Rizal Water System Project; a livelihood project in NUVALI; GNPower plant in Bataan

C R E AT I N G S H A R E D VA L U E

Ayala Foundation commits to creating communities where people are productive, creative, self reliant, and proud to be Filipinos.

Globe aligned its Bridging Communities program into five pillars and initiated programs on good governance, social entrepreneurship, environment conservation, education, and volunteerism. Its employee-volunteers were especially lauded by the Department of Social Welfare and Development and Philippine President Benigno Aquino III for their efforts in relief operations during Typhoon Pablo in Mindanao. The country’s growing population places greater demands on limited water sources and highlights the need to manage the increasing volume of wastewater. In 2012, Manila Water extended its distribution network with a total of 38,167 new water service connections. It delivered 427.3 million cubic meters to its customers, treated 77.39 million liters per day of wastewater, and desludged 52,514 septic tanks. Emphasizing an inclusive and cooperative approach to business, Manila Water uplifts the lives of over 6.2 million Filipinos, 30% of which are at the base of the pyramid. The Tubig Para Sa Barangay program (TPSB) is a sustainable model of water service delivery for the urban poor. In 2012, a total of 9,776 new water service connections under TPSB program were installed to benefit 15,578 families. This brought total water service connections to 204,421 and total urban poor residents beneficiaries to 1.7 million. The complementary Lingap program helped nine public institutions and 322 beneficiaries. Manila Water expects its subsidiaries to also embed sustainability into their operations. This year, Boracay Island Water Company, Clark

Water Corporation, and Laguna AAAWater Corporation launched their sustainability reports and are developing their sustainability frameworks. This is also the second year of the company’s reporting according to ISO26000 guidelines, an international framework on integrating CSR into the business. In 2012, the company grew its economic contribution to the Philippines with an increase of 48% in taxes, licenses, and concession fees to the government to P119.31 million and a 17% rise in wages and benefits paid to employees to P1.36 billion, while community contributions were up fivefold to P13.68 million. As one of the top 30 electronic manufacturing services providers in the world, IMI is committed to providing high quality, innovative, and sustainable solutions in the electronics industry. Its performance continues to improve despite uncertainties in the global economy with products that are relevant, cost efficient, and regulatory compliant. Operations strive to minimize impact on the environment and protect its employees and contractors. IMI steps up its sustainability practice through environment, health, and safety programs, green manufacturing technologies, and clean technology business ventures. IMI’s presence in the Philippines, China, Singapore, the United States, Mexico, Bulgaria, and the Czech Republic enables the company to respond to customer needs in regional and international markets. As a member of the United Nations Global Compact, IMI submitted a Communications of Progress report in November 2012 along with a re-commitment letter to the United Nations Secretary General

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WWF Philippines CEO Lory Tan speaks at Ayala’s Sustainability Summit in 2012

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Ayala’s Board of Directors meets with shareholders to discuss the company’s performance in 2012

signed by its company president Arthur R. Tan. It states that “IMI is committed to making the Global Compact and its 10 principles part of the strategy, culture, and day-to-day operations of the company and engaging in collaborative projects which advance the broader development goals of the United Nations.” IMI follows the guidance and requirements stipulated by international standards such as the Electronic Industry Citizenship Council, ISO 26000, GRI, and the Social Accountability 8000 in its operations. LiveIt supports the gains that the business process outsourcing (BPO) sector contributes to the national economy by investing in innovative global BPO companies with the potential for industry leadership. Its investee companies—Stream, Integreon, Affinity Express, and HR Mall—grew their revenues within range of 2% to 49%, or US$9 to US$860 million, in 2012. Through the Global Services Management Institute Inc., it invests in the education sector and helps enhance employability of the Filipino workforce. It provides high quality, affordable education and addresses the growing demand for skilled and highly qualified professionals.

Ayala Auto, collaborating with Isuzu and Honda, continues to demonstrate the importance of engaging customers through focused programs that educate and empower motorists and vehicle owners. Ayala Auto offers technical support and training on preventive maintenance and basic troubleshooting and its education campaigns on road safety. As the corporate social development arm of Ayala, Ayala Foundation commits to creating communities where people are productive, creative, self reliant, and proud to be Filipinos. Its program pillars are Education, Youth Leadership, Sustainable Livelihood, and Arts and Culture. In 2012, it integrated the culture and arts division of Ayala Museum with the Filipinas Heritage Library, and began implementation of a three-year USAID-funded project Strengthening the Capacity of Civil Society Organizations in the Philippines, which is designed to “strengthen local civil society and private sector capacity to improve aid effectiveness and sustainability.” It supported The Entire Nations (TEN) Moves program by serving as its secretariat and raising P49.2 million to fund for the construction of public elementary classrooms.

C R E AT I N G S H A R E D VA L U E

FINANCIAL HIGHLIGHTS (EC1)

Company

Net Income 2011

% Y-O-Y Net Income 2012

2011

2012

Revenues

% Y-O-Y Revenues

2011

2012

2011

2012

Ayala

9.4

10.6

(16)

107.5

125.1

Ayala Land

7.1

44.2

54.5

12.8

16.3

41.76

47.4

Globe

9.8

6.86

(30)

77.76

82.7

Manila Water

4.3

5.4

14.6

0.095

0.213

(68)

124

8.8

9.99

(23)

3.3

5.4

(31)

575.5

661.8

BPI

Ayala Auto IMI

Values in billion pesos, except IMI in million US$

Company

LiveIt

Share of EBITDA 2011 23.5

2012

% Y-O-Y Share of EBITDA 2011

31.9

2012 36

Share of Revenues 2011

2012

317.7

343.3

% Y-O-Y Share of Revenues 2011

Values for LiveIt in million US$

Financial Highlights In 2012, Ayala strengthened its core businesses, enhanced the profitability of international ventures, and made new investments as a platform for continued growth. Ayala posted a consolidated net income of P10.6 billion in 2012. The 13% growth over 2011 reflects the robust performance of the Ayala group of companies and reinforces Ayala’s aggressive growth agenda. The Ayala group spent P149 billion in capital expenditures, reflecting a 127% annual increase over figures in 2011, and is the highest capex on record. The group took advantage of the opportunity to invest aggressively in areas that are high value and strategic over the long term. Majority of its investments supported growth in its real estate, telecommunications, and water and wastewater businesses. At the holding company level, Ayala continued to fine tune its portfolio to maximize profit and actively pursue value-creation opportunities. Investments grew to P108.6 billion, in line with initiatives in the power sector and the increased stake in BPI from 33% to 44%. Ayala

is also focused on new growth platforms, with a target US$1 billion in equity investments in power and transport infrastructure businesses over the next five years. It established a pipeline of power platforms in conventional and renewable technologies, and is exploring opportunities in the road, rail, and airport spaces. These investments have the potential to generate group synergies and enhance the value of the group’s businesses. A full discussion of our financial performance can be found in the Ayala Corporation 2012 Annual Report. ■

2012 8

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Manila Water conducts â&#x20AC;&#x153;Lakbayanâ&#x20AC;? tours with various stakeholders to educate them on the processes involved in water treatment and distribution

LISTENING AND ENGAGING

e have a responsive approach to business. Our stakeholders are our partners; thus, stakeholder engagement and materiality assessments are critical components of our sustainability agenda.

Stakeholder Engagement Ayala conducts regular engagements to understand and address stakeholders' needs and expectations. Insights gained from these engagements shape the development and provision of better products and services, strengthen business strategy, enhance market position, and improve performance. In line with international best practices, we commissioned a third-party, nonprofit organization, Philippine Business for the Environment (PBE), to perform a formal stakeholder engagement on sustainability issues. We used one-on-one interviews and focus group discussions. We aim to continue

LISTENING AND ENGAGING

assurance process to ensure accuracy and consistency.

Our stakeholders are our partners in our sustainability agenda; thus, we constantly listen to their feedback and engage them in our initiatives.

The group refers to and is guided by international standards such as the World Resources Institute and World Business Council for Sustainable Development’s Greenhouse Gas Protocol, the International Energy Agency, the Philippines' Department of Energy, and the Global Reporting Initiative in the calculation of environmental performance data. We are committed to implementing best practices and international standards to improve our reporting. Stakeholder inputs were gathered mostly through telephone interviews and focus group discussions, and answers were carefully recorded and analyzed.

Materiality Assessment

this engagement on a yearly basis as a standard process to check on feedback and comments from various stakeholders, and to ensure inclusivity and responsiveness. This year, we did not engage with suppliers through this exercise but our subsidiaries have regular engagements with them using other means. For this report, we identified our stakeholder groups to include: ••customers ••government ••employees ••shareholders ••benefactors ••local communities ••joint venture partners and suppliers Their feedback is summarized in the table on page 21. Detailed discussions of each subsidiary’s stakeholder engagement plans are available in the individual reports. The Investor Relations Team engages separately with our shareholders. For more information, please refer to the Corporate Governance section. (4.14, 4.15, 4.16, 4.17)

Data Collection and Analysis Data disclosed by Ayala in this report were collected and monitored by the relevant managers and teams within the Ayala group of companies led by the sustainability heads of each company, using database forms and spreadsheet questionnaires. Data sources may come from actual counts, monitoring programs, and utility bills where appropriate. This data is pre-verified before the external

Materiality study plays a similarly significant role in Ayala’s sustainability. It assists us in developing our strategic roadmap, helps align stakeholder expectations, and prioritizes those concerns that are significant to the business. In developing the 2012 report, we linked and analyzed material aspects of our businesses with the outcomes of our stakeholder engagement. We defined material issues as those that could substantially influence the company’s ability to give added value, potentially erode our reputation, and pose risks if not addressed proactively. This combined process revealed the top five common priority areas among our diversified businesses and stakeholder views: ••Environmental Responsibility, ••Product Quality, ••Economic Development, ••Community Development, and ••Overall Compliance with Labor, Health and Safety, and Corporate Governance standards. These findings are consistent with our Sustainability Focus Areas identified in our 2012 Sustainability Policy. We then aligned our reporting and sustainability strategy with the focus areas. ■

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Materiality Assessment: Sustainability Focus Areas

LISTENING AND ENGAGING

Stakeholder Engagement Sustainability Priorities

Stakeholder Group

Interest Areas •• Develop products for the bottom of the pyramid •• Serve as a model of an environmentally responsible business,

CUSTOMERS

•• •• •• ••

Stability of the company Service quality and protection Product safety Employee welfare

specifically in solid waste management practices •• Collaborate with local government units and assist in

environmental protection activities at the grassroots level •• Develop infrastructure in far-flung communities •• Implement more community development programs •• Improve on communicating issues in community development to

keep the top-level management informed

Health and safety Job creation/local employment Environmental responsibility Compliance with local and national laws, standards, and regulations

GOVERNMENT

•• •• •• ••

EMPLOYEES

•• Job security •• Professional advancement •• Compliance with local and

BENEFACTORS

LOCAL COMMUNITIES

JOINT VENTURE PARTNERS

national laws, standards, and regulations

•• •• •• ••

Educational programs Social impact measurement More environmental programs Compliance with local and national laws, standards, and regulations

•• Educational, livelihood, and

leadership development programs •• Poverty alleviation

•• Good corporate governance •• Business responsiveness to

issues and incidents concerning operations •• Succession planning •• Service quality

•• Influence supply chain by helping them address compliance issues •• Collaborate with related industries for more impactful and more

responsive community programs, including educational campaigns on environmental protection •• Prioritize local hiring •• Go beyond compliance especially where community development is concerned

•• Engage more deeply with staff and the community on

environmental and social issues •• Create and emphasize employee volunteer programs that are

sustainable and not one-time engagements

•• Remain compliant with laws and regulations •• Benefactors provide Ayala the flexibility to choose programs to

implement in order to create the best impact to as many beneficiaries as possible

•• Increase environmental programs •• Improve performance metrics •• Provide more capacity-building programs to the residents of our

partner communities •• Explore creative and innovative ways to help the small producers

that we have trained to enter the mainstream market, in particular by connecting them to the supply chain of our subsidiaries

•• Ayala has a strong environmental focus but, moving forward, the

company should transform this into environmental advocacy given its size and capability to execute

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AYALA’S BOARD OF DIRECTORS (Left to right): Yoshio Amano, Antonio Jose U. Periquet, Jaime Augusto Zobel de Ayala, Fernando Zobel de Ayala, Xavier P. Loinaz, Ramon R. del Rosario, Jr., and Delfin L. Lazaro

A CORPORATE GOVERNANCE

s a responsible corporate citizen, Ayala is committed to the principles of risk management, integrity, fairness, accountability, and transparency. Good corporate governance is fundamental to Ayala’s business approach, to the creation of value for all our stakeholders, and to our long-term growth.

Delivering on Our Commitments Ayala’s governance framework is based on the Philippine Corporate Code, the Securities Regulation Code, the Revised Code of Corporate Governance, and the requirements of the Securities and Exchange Commission (SEC). The Company fully complies with the Code of Corporate Governance. Independent reviewing bodies have consistently recognized Ayala’s commitment to good governance. In 2012, the Ayala group garnered top citations in the 7th Corporate Governance Scorecard Project of the Institute

C O R P O R AT E G O V E R N A N C E

Specific duties of the Board include: ••Setting the vision and overseeing the implementation of the company’s strategic objectives, risk management strategy, corporate governance, and corporate values;

The Board of Directors plays a key role in integrating sustainability into the governance framework of the company.

••Ensuring growth of the business in a sustainable way and the creation of long-term value for all our stakeholders; ••Exercising prudent leadership and upholding the company’s integrity as it continues to make progress toward its long-term business goals; ••Establishing mechanisms for performance monitoring and evaluation; ••Establishing internal control mechanisms and effective risk management as critical components of the corporate governance strategy; and

of Corporate Directors in partnership with the SEC and the Philippine Stock Exchange (PSE). Ayala, together with Ayala Land and Manila Water, received the Platinum Plus Award given to companies who have been part of the Gold Circle for four consecutive years. Over the years, readership polls of regional publications including FinanceAsia, Asiamoney, Euromoney, and Corporate Governance Asia have ranked corporate governance in Ayala and subsidiaries as among the Philippines’ best. Ayala executives were also recognized for their leadership qualities and achievements. The Asian Corporate Director Recognition Awards recognized Jaime Augusto Zobel de Ayala as an outstanding corporate director for promoting high standards of business ethics while meeting the expectations of our shareholders in growing Ayala’s business. Aurelio Montinola III received the Management Association of the Philippines’ Management Man of the Year 2012, while Antonino Aquino was identified as Best Executive by AsiaMoney.

Board of Directors The Board of Directors serves a vital role in corporate leadership and in establishing and maintaining high standards of governance for Ayala. They hold a position of trust and represent the best interests of the company, our shareholders, and other stakeholders.

••Ensuring compliance with all relevant laws, regulations, and as far as possible best business practices. The nature of the Board’s responsibilities requires that directors have a broad range of competencies, experience, and skills. A director must own at least one share of the capital stock of the company, must have attained a college degree or its equivalent, or must have adequate understanding and sufficient experience and competence in managing a business. The Board is composed of seven directors elected by stockholders during the annual meeting. A director serves on the Board for one year, or until a successor is elected and qualified according to the company’s By-Laws. (4.10)

Ayala has three independent directors, comprising 43% of the Board’s membership: Ramon R. del Rosario, Jr., Xavier P. Loinaz, and Antonio Jose U. Periquet. This exceeds the SEC requirement of two independent directors, or 20% of Board membership. In order to fulfill their responsibilities, Board members are given access to accurate, relevant, and timely information. All papers for Board meetings are provided to the Board at least five business days in advance of the meeting.

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Ayala Corporation Board of Directors Profile JAIME AUGUSTO ZOBEL DE AYALA

FERNANDO ZOBEL DE AYALA

Filipino, 53, director of Ayala Corporation since May 1987. He has been the Chairman and CEO of Ayala Corporation since April 2006, and also holds the following positions: Chairman of Globe Telecom, Inc., Bank of the Philippine Islands, and Integrated Micro-Electronics, Inc.; Co-Chairman of Ayala Foundation, Inc.; Vice Chairman of Ayala Land, Inc. and Manila Water Company, Inc.; Co-Vice Chairman of Mermac, Inc.; Director of Alabang Commercial Corporation, Ayala International Pte Ltd., and AC Energy Holdings, Inc.; Chairman of Harvard Business School Asia-Pacific Advisory Board, and Children’s Hour Philippines, Inc.; Vice Chairman of the Asia Business Council, Makati Business Club, and Asia Society Philippine Foundation, Inc.; Member of The Asia Society, Eisenhower Fellowships, Harvard University Asia Advisory Committee, Harvard Business School Social Enterprises Initiative Advisory Board, Harvard Global Advisory Council, Mitsubishi Corporation International Advisory Committee, JP Morgan International Council, International Business Council of the World Economic Forum, Asia Pacific Basin Economic Council, Philippine Economic Society, World Wide Fund for Nature Philippine Advisory Council, Pacific Basin Economic Council, and Toshiba International Advisory Group; and Philippine Representative for APEC Business Advisory Council.

Filipino, 52, director of Ayala Corporation since May 1994. He has been the President and Chief Operating Officer of Ayala Corporation since April 2006. He is also: Chairman of Ayala Land, Inc., Manila Water Company, Inc., AC International Finance Ltd., Ayala International Pte Ltd., Ayala DBS Holdings, Inc., Alabang Commercial Corporation, AC Energy Holdings, Inc., and Hero Foundation, Inc.; Co-Chairman of Ayala Foundation, Inc.; Co-Vice Chairman of Mermac, Inc.; Director of Bank of The Philippine Islands, Globe Telecom, Inc., Integrated Micro-Electronics, Inc., LiveIt Investments, Ltd., Asiacom Philippines, Inc., AG Holdings Limited, Ayala International Holdings Limited, AI North America, Inc., Vesta Property Holdings Inc., Honda Cars Philippines, Inc., Isuzu Philippines Corporation, Pilipinas Shell Petroleum Corp., and Manila Peninsula; Member of The Asia Society, World Economic Forum, INSEAD East Asia Council, and World Presidents’ Organization; Chairman of Habitat for Humanity’s Asia-Pacific Capital; Campaign Steering Committee; Vice Chairman of Habitat for Humanity International; and Member of the Board of Trustees of Caritas Manila, Pilipinas Shell Foundation, Kapit Bisig para sa Ilog Pasig Advisory Board, and National Museum.

YOSHIO AMANO

DELFIN L. LAZARO

Japanese, 55, director of Ayala Corporation since April 2012. He is the General Manager of Mitsubishi Corporation-Manila Branch; Chairman of International Elevator & Equipment Inc., and MCPL (Philippines) Inc.; Director of Isuzu Philippines Corporation, Imasen Philippines Manufacturing Corp., Kepco Ilijan Corporation, UniCharm Philippines Inc., Trans World Agro-Products Corp., Philippine Resins Industries, Inc., PhilNewEnergy, Inc., Philippine Integrated Energy, Inc., Japanese Chamber of Commerce & Industry of the Philippines (JCCIPI), The Japanese Association Manila Inc., and Manila Japanese School.

Filipino, 66, has served as member of the Board of Ayala Corporation since January 2007. He also holds the following positions: Chairman of Philwater Holdings Company, Inc., Atlas Fertilizer & Chemicals, Inc., and AYC Holdings, Inc.; Chairman and President of Purefoods International Ltd., and A.C.S.T. Business Holdings Inc.; Director of Ayala Land, Inc., Globe Telecom, Inc., Integrated Micro-Electronics, Inc., Manila Water Company, Inc., Ayala DBS Holdings, Inc., AC Energy Holdings, Inc., Ayala International Holdings, Ltd., Bestfull Holdings Limited, AG Holdings, AI North America, Inc., Probe Productions, Inc., and Empire Insurance Company.

RAMON R. DEL ROSARIO, JR.

XAVIER P. LOINAZ

Filipino, 68, independent director of Ayala Corporation since April 2010. He is the President and Chief Executive Officer of Philippine Investment Management (PHINMA), Inc.; President, Chief Executive Officer and Vice Chairman of PHINMA Corp.; Chairman of Araullo University, University of Iloilo, University of Pangasinan, Cagayan de Oro College, United Pulp and Paper Co., Inc., Microtel Inns and Suites (Pilipinas), Inc., Microtel Development Corp., TransAsia Oil & Energy Development Corporation, CIP II Power Corp., Fuld & Co., Inc., Fuld & Co (Philippines),Inc., PHINMA F&A Outsource Corp., and Toon City Animation, Inc.; President of Atlas Holdings Corp.; Vice President of Trans-Asia Oil & Energy Development Corporation, PHINMA Property Holdings Corp., and PHINMA Foundation; Director of Holcim (Philippines), Inc., Trans-Asia Power Generation Corp., Union Galvasteel Corp., and South Luzon Thermal Energy Corp.

Filipino, 69, independent director of Ayala Corporation since April 2009. He is an independent director of Bank of the Philippine Islands, BPI Family Savings Bank, Inc., BPI Capital Corporation, BPI Direct Savings Bank, Inc., BPI/MS Insurance Corporation, and Globe Telecom, Inc.; Chairman of XPL Manitou Properties, Inc. and Alay Kapwa Kilusan Pangkalusugan; Vice Chairman of XPL MTJL Properties, Inc.; Trustee of PETA, BPI Foundation, Inc., and E. Zobel Foundation.

ANTONIO JOSE U. PERIQUET Filipino, 51, independent director of Ayala Corporation since September 2010. He is the Chairman of Pacific Main Holdings, Inc., Campden Hill Group, and Regis Financial Advisers; Director of Strait Wine Company, Inc. and ABS-CBN Holdings; Independent Director of BPI Capital Corporation, DMCI Holdings, Inc., Philippine Seven Corp., Bank of the Philippine Islands, and BPI Family Bank; and Trustee of Lyceum of the Philippines University.

BOARD OF DIRECTORS COMMITTEE MEMBERSHIP AND MEETINGS HELD DIRECTOR

PERSONNEL AND COMPENSATION

NOMINATION

FINANCE

CHAIRMAN

MEMBER

Fernando Zobel de Ayala

MEMBER

Yoshio Amano °°

MEMBER

Jaime Augusto Zobel de Ayala

EXECUTIVE

Ramon R. Del Rosario, Jr. °

MEMBER CHAIRMAN

Delfin L. Lazaro

MEMBER CHAIRMAN

MEMBER

MEMBER CHAIRMAN

Xavier P. Loinaz °

CHAIRMAN

Antonio U. Periquet °

Number of meetings in 2012

AUDIT AND RISK

° Independent Director, °° Non-executive Director Note: Six Board meetings, with average attendance of more than 90%, were held in 2012.

MEMBER

C O R P O R AT E G O V E R N A N C E

Board Committees The Board has established committees to provide support in the performance of its function and to aid in good governance. While we do not have specific committees on the environment and society, all Board members are actively engaged in the identification and management of triple bottom line impacts given the alignment of the company’s strategic objectives to national development goals. Executive Committee Chaired by Jaime Augusto Zobel de Ayala, the Executive Committee supports the Board of Directors in the review and approval of resolutions that drive business strategy and operations of the company. In accordance with the authority granted by the Board, or during the absence of the Board, the committee acts by majority vote of all its members on specific matters within the competence of the Board of Directors as may from time to time be delegated to the Executive Committee in accordance with the corporation’s By-Laws, except with respect to: i. approval of any action for which shareholders’ approval is also required; ii. the filling of vacancies on the Board or in the Executive Committee; iii. the amendment or repeal of By-Laws or the adoption of new By-Laws; iv. the amendment or repeal of any resolution of the Board of Directors which by its express terms is not so amendable or repealable; v. the distribution of cash dividends; and vi. the exercise of powers delegated by the Board exclusively to other committees, if any.

Nomination Committee Chaired by independent director Ramon R. del Rosario, Jr., the Nomination Committee supports the Board in the management of the process of nominating individuals to the Board. Members of the Nomination Committee are responsible for ensuring that only qualified directors are nominated for election during the annual stockholders’ meeting. They are in charge of selecting nominees for Board positions, and must guarantee that they choose a mix of competent individuals who are able to exercise independent judgment and add value to the Board in the exercise of its functions. Because of the company’s investments in strategic economic, environmental, and social sustainability, the Nomination Committee ensures that nominated directors have the experience and expertise that will allow them to provide direct oversight on these major initiatives. (4.7, 4.10) In 2012, the Nomination Committee was tasked with evaluating the qualifications of all persons nominated for positions in the company requiring Board appointment and approved the final list of nominees for directors for election at the 2012 annual stockholders’ meeting. Personnel and Compensation Committee Ramon R. del Rosario, Jr. also chairs the Personnel and Compensation Committee, which supports the Board in the determination of executive compensation and remuneration. This committee establishes formal and transparent policies and procedures for determining the salaries of officers and directors and oversees the pay for senior

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The Board of Directors meets regularly to decide on critical issues concerning the company

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The committee has primary responsibility for making a recommendation on the appointment, reappointment, and removal of the independent auditors, and the appropriate audit fees. It also recommends the appointment and dismissal of the chief audit executive to the Board. The committee ensures the quality, integrity, and independence of the audit process and, as such, maintains free and open communications with the company’s independent auditors, internal auditors, and management. In 2012, the committee recommended the appointment of Sycip Gorres Velayo & Co. (SGV) as Ayala’s independent auditor and approved SGV’s audit fees. It reviewed and approved the 2012 consolidated audited financial statements as well as the 2012 SGV and Internal Audit workplans.

Board Meetings

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Members of the Management Committee oversee the business performance of the Ayala group

management and other key personnel. The committee is also responsible for reviewing and strengthening the policy provisions on conflict of interest, and salaries and benefits. (DMA-LA)

In 2012, the Committee approved the performance bonus and merit increases for the year, as well as the Executive Stock Ownership Plan. Finance Committee Delfin L. Lazaro chairs the Finance Committee, which is responsible for reviewing and evaluating the financial affairs of the corporation from time to time. The committee oversees the company’s financial policy and strategy, including capital structure, dividend policy, acquisitions, and divestments, and makes the appropriate recommendations to the Board of Directors. The committee also has oversight responsibility over the company’s Treasury activities, and reviews and approves changes in Treasury policies. It is responsible for evaluating the financial affairs of the Company on a regular basis and carrying out such other duties as may be delegated to it by the Board of Directors. (DMA-EC) Audit and Risk Committee Chaired by independent director Xavier P. Loinaz, the Audit and Risk Committee assists the Board in the oversight of the integrity of the financial statements of the Company and the financial reporting process, the effectiveness of internal controls and risk management process, the performance of the internal audit function and the independent auditors, and the compliance with legal and regulatory requirements.

Board meetings are held quarterly or more frequently if circumstances or decisions require. Six meetings were held in 2012 and the average attendance was more than 90%, the details of which are in the Annual Report. Non-executive directors are Board members who are not officers or consultants of the company. The remuneration package for non-executive directors includes a retainer fee and per diem for every Board and committee meeting attended: 1) retainer fee of P1.2 million; 2) per diem of P200,000 for each Board meeting attended; 3) per diem of P100,000 per Audit and Risk Committee meeting attended; and per diem of P50,000 for other committee meetings attended. None of the non-executive directors has been contracted and compensated by Ayala for services other than those provided as director. Directors holding executive or management positions do not receive director’s fees. (4.5)

Management Management is accountable to the Board of Directors for the effective overall management and all operations of the company. Jaime Augusto Zobel de Ayala currently serves as Chairman and Chief Executive Officer (CEO) of the parent company. Fernando Zobel de Ayala is the President and Chief Operating Officer (COO). He also serves as Vice Chairman of the Board. The roles of Chairman and CEO and President and COO are complementary and help ensure greater accountability and balance of power. Both the Chairman/CEO and the President/COO are executive directors of the Company, and are members of the Management Committee as well. Among the checks and balances laid down to ensure that the Board gets the benefit of independent

C O R P O R AT E G O V E R N A N C E

views are: (1) the powers and responsibilities of the Chairman and of the CEO are specified and separate in the By-laws; (2) only two of the seven directors are executive directors and the powers and responsibilities of directors are clearly delineated from the powers and responsibilities of management; and (3) three of the seven directors are independent directors. (4.2) In addition to the various Board-level committees, Ayala has put in place a Management Committee to guide the critical decision-making and key governance processes of the company. The Management Committee is composed of key executives and responsible for monitoring business performance and issues relevant to the longterm economic viability of the company and to social and environmental sustainability. Ayala’s senior executives are subject to a performance-based compensation scheme. An additional incentive to management is

The Management Committee monitors business performance not only on economic but also social and environmental sustainability.

the stock option plan for officers covering 3% of the company’s authorized capital stock, as approved by the Board. The total annual compensation includes basic pay and other taxable income including guaranteed bonus, performance-based incentive, and the exercise of stock options. (4.5)

Living by Our Values Through our corporate values of integrity, long-term vision, empowering leadership, and commitment to national development, Ayala has earned its strong position of trust among its stakeholders. The corporation has adopted as basic operating principles the primacy of the person, shared values, and the empowerment of people. (DMA-HR) Ayala adheres to a high level of moral conduct and fair dealings with its shareholders, customers, employees, and business partners. Our Code of Ethical Behavior, which is in

accord with our policies on human resources and embeds the core values we strive to maintain, guides the way we work in all aspects. All directors, officers, and employees are mandated to abide by the company’s Code of Conduct and business practices that are aligned with the company’s principles, as set forth in the Manual of Corporate Governance, the Articles of Incorporation, and By-Laws. (4.6) Our Manual on Corporate Governance also includes a policy on Conflict of Interest as part of Ayala’s commitment to transparency and integrity. Transactions by and with the company must be consistent with our values and the interest of the Corporation. Ayala has established a process for reviewing, approving, and monitoring related-party transactions to determine whether they are in the best interests of the company, conducted at arms’ length, and at market rates. Actual or potential conflict of interest on the part of directors is fully disclosed. Directors do not participate in the discussions and voting of matters under consideration by the Board where there might be an appearance of a conflict of interest. A director who has a continuing conflict of interest of a material nature should either resign or, if the Board deems appropriate, be removed from the Board. Ayala has a policy on insider trading to ensure compliance with disclosure rules and government regulations. The policy covers directors, key officers, consultants and advisers, all other employees who are made aware of undisclosed material information from time to time until such information has been publicly disclosed, and members of the immediate families of key officers and covered

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Independent directors Xavier P. Loinaz and Ramon R. del Rosario, Jr. form part of the Audit and Risk Committee

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Financial information and other required documents filed with the SEC and the PSE are made available for viewing on our website. (4.4) Our Investor Relations and Corporate Communications teams manage the different information requirements of the investing public whose voice and opinion may be heard through meetings and inclusion of relevant, legitimate topics in the agenda. Information is shared regularly through periodic reports.

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The Ayala group is consistently recognized for high standards of corporate governance, social responsibility, and management

persons. These individuals are prohibited from the buying and selling of the Company’s securities during trading blackout periods. The company also has a strict Anti-Money Laundering policy that complies with the provisions of the Anti-Money Laundering Law.

Communicating with Our Stakeholders We recognize, uphold, and protect the rights of our stakeholders and ensure open and transparent communications with them. Board meetings are held on a quarterly basis, or as often as may be necessary. Our Corporate Secretary is responsible for managing the flow of information to the Board and ensures that the directors are apprised of their duties. Ayala provides multiple channels for communicating with shareholders. Our primary channels for shareholder communications are the Ayala website (www.ayala.com.ph), PSE announcements, annual reports, and annual stockholders’ meetings. We ensure equitable treatment of all our shareholders, including minority shareholders. We provide our shareholders with regular updates on the group’s performance and make sure that they are informed about the notice and agenda of any meetings that are held. The annual stockholders’ meeting provides a unique opportunity for our stakeholders to participate in the corporate governance process by exercising their voting rights and interacting with Ayala’s Management and the Board.

Our employees are our primary stakeholders and the company and the Board welcome their feedback and recommendations. The company maintains an informal labor management council, which is a regular venue for engaging employees in such dialogue. Its membership consists of union officers and representatives, as well as representatives from the human resource department. The company has formed various work councils to gather feedback from the employees and get an equal representation from the group of companies. The Chief Finance Officer also serves as the Chief Risk Officer (CRO) and Chief Sustainability Officer, testifying to the integration of risk management with sustainability in strategic planning. He is supported by the Group Sustainability Program Director and Group Risk Management Director, the Ayala Group Sustainability Council, and the Ayala Group ERM Council, reporting directly to the Chairman of the Board of Directors and the CEO. (4.4)

Managing Risks Risk is inherent in our business; thus, the effective management of risk is vital to the strategic and sustained growth of the company and the Ayala group. The group adopts a formal risk management process as an essential element of sound corporate governance and an integral part of good management practice. It is designed primarily to have a structured and disciplined approach of aligning strategy, processes, people, technology, and knowledge with the purpose of evaluating and managing the uncertainties the conglomerate faces as it creates value for all stakeholders. (4.11) Institutionalized in 2002, the Company’s integrated Enterprise Risk Management (ERM) framework is primarily designed to be a key enabler to the strategic and sustained growth of the company and the Ayala group, and to support the vision of conglomerate-wide practice of risk management. ERM policies

C O R P O R AT E G O V E R N A N C E

and programs in place are in accordance with internationally recognized standards and frameworks. These are periodically reviewed and improved to adapt to changes in the business and operating environment, and be responsive to emerging and changing risks.

Our CRO is the ultimate champion of enterprise risk management of the group and oversees the entire risk management function. The Group Risk Management Unit provides support to the CRO and is responsible for overall continuity of the risk management process and programs.

Ayala has adopted a six-step process to risk management:

The Audit and Risk Committee provides oversight to the risk management process in compliance with the Audit and Risk Committee Charter. The CRO and the Group Risk Management Unit submit risk management reports to the committee on a quarterly basis, focusing on the implementation of risk management strategies and action plans for the identified top risks of the Ayala group, any emerging risks, and developments in risk management.

•• Identify risk drivers or sources •• Measure the price of failure or possible value creation opportunities •• Formulate strategies to manage risks; present these to the risk owners and other stakeholders to obtain approval •• Assess current capabilities to implement the risk management strategies •• Identify detailed action plans and resources required; present the action plans to the risk owners, the Management Committee, and the Audit and Risk Committee for approval; carry out planned activities •• Monitor implementation of risk mitigation strategies; update stakeholders on status of implementation; evaluate the effectiveness of strategies and improve if needed

The Board monitors the effectiveness of risk management through the regular updates on strategic and operational risks facing the group from Management and reports from the Audit and Risk Committee. The company’s internal auditors monitor the compliance with risk management policies to ensure that an effective control environment exists within the entire Ayala group.

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focusing on adaptation as a key strategy in its response to climate change. Detailed discussions on the risk management initiatives of our companies can be found in their respective annual and sustainability reports. (DMA-HR, DMA-LA, EC2)

Ayala's 2012 Risk Management Approach Risk management is a constantly evolving process, and our companies are focused on how best we can respond to new and changing conditions. The practice of sustainability is much the same way. In order to improve, we acknowledge that we must keep learning.

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Ayala group internal auditors meet annually for professional development

The following are the criteria used in assessing the effectiveness of the risk management process: i. Governance and Organization ii. Risk Management Strategy iii. Reporting and Communication iv. Tools and Technology v. Culture and Capability

Ayala’s executive leadership team and board members play a vital role in maintaining the success of our organization and guiding the company to new levels of growth and achievement. Risk discussions in new business development, strategy execution, and synergy initiatives take place at various levels of the organization, including the Board oversight and Management Committee levels. The risk management process involves carefully assessing our levels of risk exposure in relation to our investment portfolio and acquired businesses as part of our due diligence. Our companies review organizational structure, leadership, talent management, and development programs to adapt to new needs, business models, and strategies. Corporate Strategy and Development and Strategic Human Resources (HR) regularly discuss new business development plans and collaborate with the group HR Executive Committee in order to strengthen Ayala’s pool of talent and leadership. (4.11) Our risk management approach is intended to establish safeguards against issues that can disrupt operations and to ensure strategic and sustained growth. We have taken measures to reduce operational risks, such as those related to human rights and labor issues. Over the past five years, our companies have also experienced first-hand the impact of climate change on our businesses and recognize that we must be prepared for the risk of extreme climate events. A climate-resilient business is a sustainable business and Ayala will be

Last year, Ayala Land’s Internal Audit Division hosted the annual Ayala Group Internal Auditors’ Network (AGIAN) Conference. With the theme “The Way Forward: Adding Value, Driving Transformation,” 34 Internal Audit professionals from 12 companies within the Ayala group participated in the three-day conference to discuss stakeholders’ increasing expectations, changing risk landscapes, and other developments, and how the Ayala Group Internal Audit Organizations can respond in order to meet various challenges. Delegates to the conference discussed key trends in the internal audit profession, as well as the capacity building necessary to develop strategic thinking, entrepreneurial mindset and innovation, customer and people orientation, and excellence in execution. Our companies are also prioritizing ethics and business integrity, implementing vendor audits, and enhancing conflict of interest policies. Constant communication from the Board and senior management serve to reinforce and nurture the risk management culture at Ayala and will remain a key differentiator, adding value to the group. ■

C O R P O R AT E G O V E R N A N C E

Risk Management Approach RISK EXPOSURE

Strategic

RISK MANAGEMENT POLICY

►►We will use our risk management capabilities to maximize the value from our assets, business portfolio and other business opportunities, and to encourage innovation

OBJECTIVE

►►Aid in leading sustainable development and in the management of economic, environmental, and social responsibility issues ►►Further enhance shareholder value through greater competitiveness and an improved capacity to take risk ►►Pursue strategic growth opportunities with greater speed, skill, and confidence

►►Ayala operates in an everchanging environment and, as a holding company, it must (a) manage risks inherent to its day-to-day operations and (b) recognize the risks that are inherent to the companies in its portfolio

Operational

►►Everyone in the organization needs to be involved in active risk management ►►By embedding the risk management process into the day-to-day operations, the Ayala group fosters a culture of risk management and enables sound decision-making at all levels of the organization

Governance and Internal Controls

►►Risk management is a fundamental element of effective corporate governance and an integral part of sound management practice in Ayala.

►►Ensure the company operates in a sustainable manner ►►Avert potential losses or adverse impact ►►Balance risk and reward ►►Eliminate and/or minimize operational loss ►►Optimize risk management cost

►►Implement sound and effective corporate governance model and internal control mechanisms to achieve the goals and objectives of the Company and manage the consequences of any crisis situation

RISK ASSESSMENT, MONITORING, AND MEASUREMENT

►►Structured and periodic strategic planning process and portfolio strategy review ►►Monitoring of achievement of strategic targets ►►Continuous monitoring of existing, as well as of new and emerging risks through the business unit risk management champions and the office of the Chief Risk Officer

►►Business planning and budgeting ►►Monitoring of actual results versus objectives ►►Identified key risk indicators and metrics to measure the effectiveness of the risk mitigation strategies

►►Annual risk assessment and regular reporting to the Audit & Risk Committee ►►Regular discussion at the management and Board committee meetings and with the Board of Directors ►►Periodic review of governance structures and policies, and internal controls

RISK MANAGEMENT AND CONTROL (STRUCTURES, PROCEDURES, ACTIONS TAKEN)

►►Investment in processes and technologies to support the requirements of new businesses ►►Rigorous portfolio analytics and reviews including resource allocation and strategy ►►Portfolio and strategic initiatives visibility and discussions at various governance committees ►►Development of formal policies and processes

►►Regular review of financial and operations metrics and reporting to senior management, and management and Board committees ►►Monthly and annual portfolio analysis/review ►►Regular review and update of policies to remain relevant

►►Compliance with the mandates of the Company’s Manual on Corporate Governance to ensure the presence of organizational and procedural controls supported by an effective management information system and risk management reporting system ►►Compliance with laws and regulations ►►Regular benchmarking with industry best practices and development of continuous improvement program to strengthen the Company’s practices and policies

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Clockwise from top left: An eco-bag maker supported by Alay sa Komunidad; students benefiting from Text2Teach; Iraya Mangyan with handwoven baskets; Ayala Young Leaders; teachers participate in an Enabling Education Communities workshop; schoolchildren drink potable water provided by Lingap Eskwela; a young reader gains access to OurLibrary

ayala works with society to create

shared value because business thrives in communities that are healthy, productive, and successful. We always operate as a responsible corporate citizen and as a good neighbor to ensure that no one is left behind in the journey towards progress. New products and services satisfy the needs of a broader market, while development projects seek to promote equitable growth. We are committed to making life better for our customers and the communities in our areas of operation, especially those at the base of the pyramid. As a Filipino company with a tradition of excellence in business performance and a legacy of nation building, Ayala is proud to serve our country and our people.

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Nito baskets, trays, and jars crafted by the Iraya Mangyan showcase their heritage and artistry

s part of our triple bottom line approach, Ayala aligns business success with the goals of the country. The Ayala group works with a broad spectrum of communities, from the areas where we operate to our program beneficiaries, suppliers, and customers. (DMA-SO, SO10)

Given Ayala’s nationwide market presence, we encourage our subsidiaries and affiliates to help stimulate local economies through local sourcing and job creation. They practice corporate social responsibility and undertake social development programs that are strategically aligned with their respective business goals and focus on the country’s priority issues of quality education, livelihood and capacity building, micro-enterprises, and a healthy environment. (EC6, EC7) We work with local communities and leverage on the talent and resources available. Where there are indigenous groups in our areas of operation, we respect their rights and help preserve and promote their culture and heritage. Consultations with the council of elders, local government, and the community shape interventions that are consistent with beliefs, norms, and actual needs. We value relationships and harness them in consortium building and privatepublic partnerships to support the country’s development.

Transparency and accountability foster a strong sense of trust in the Ayala brand and our way of doing things. Ayala practices good corporate citizenship and complies with all laws, regulations, and standards. We protect human rights throughout our activities and the privacy, health, and safety of our customers and contractors. We conduct ourselves with the utmost integrity and uphold justice and fairness in our engagements with our stakeholders.

Making Business Inclusive Inclusivity is a priority in Ayala. We continue to innovate products and services to meet the needs of our diverse markets, particularly the largely underserved bottom of the pyramid. (SO1, DMA-SO, SO10)

In 2012, Manila Water received the prestigious G20 Challenge on Inclusive Business Innovation Award from the International Finance Corporation, the investing arm of the World Bank. The company was one of only 15 winners selected from hundreds of nominees globally. The G20 Challenge identifies, showcases, and supports innovative business models that serve low-income communities and have the potential for replication across developing countries. When Manila Water entered the market in 1997, it was founded on the principles that access to safe

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Inclusivity is a priority at Ayala. Beyond philanthropy, we support innovative and strategic projects to uplift the life of the community. drinking water and sanitation services are basic human rights. Thus, its business model integrates the needs of the marginalized communities within its concession area. Ayala Land’s BellaVita brand launched its Cavite and Laguna projects in late 2012, catering to lowincome communities, specifically minimum-wage earners. The company offers payment schemes to address the financial realities of the mass market so that quality housing is within their reach. The BellaVita project includes an open-air retail space called Fiesta Market to stimulate local enterprise and formalize the retail activities of small informal entrepreneurs.

Globe partnered with the Department of Social Welfare and Development (DSWD) by introducing financial literacy to the beneficiaries of the Conditional Cash Transfer (CCT) program. The CCT is a national social development strategy that provides conditional cash grants to extremely poor households to improve their health, nutrition, and education. Using the Globe Bridging Communities SIM card, BPI Globe BanKO allows beneficiaries to open an account for an initial deposit of P50. Savings in their mobile phone accounts can be converted to prepaid load, offering CCT beneficiaries additional income through retail sales. In just nine months, 3,603 savings accounts were opened by DSWD CCT beneficiaries with an average increase of 79% in savings from their initial deposit.

Facilitating Prosperity for All Ayala’s community work goes beyond philanthropy. We commit to supporting innovative and strategic projects that help improve their standard of living in partner communities. (SO1, DMA-SO, SO10) Ayala Land’s Alay sa Komunidad, a long-term community development program, collaborates with members of the local community living in or adjacent to its operations to ensure that the development projects have a positive impact on the neighboring communities. Its livelihood thrust integrates the local communities into Ayala Land

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BPI Globe BanKO harnesses mobile technology to bring financial services to unbanked Filipinos

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For the Globe-CCT program, low-income families ending their five-year participation received sustainable livelihood opportunities from Globe through a partnership with Microventures Foundation, Inc. (MVF). The joint project offered a 10-day capacity building program that covered leadership and business skills formation to CCT beneficiaries. The program helps them transition to self reliance once the cash support from the government ends. In particular, Globe and MVF trained them how to successfully operate their own neighborhood stores and provide them with direct access to wholesale markets to make the stores sustainable and profitable. Kickstart Ventures Inc., a Globe subsidiary launched in 2012, provides Filipino technology startups the financial and training requirements to gain market access. By the end of 2012, Kickstart invested in 10 startups, becoming the most active incubator in the country.

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Community partners are given access to market for their products

supply chain whenever possible. It implements a local hiring policy at the barangay level for its various developments, providing employment in the community. It brings skills experts to share their knowledge and increase the employment chances of members of the local area at an Ayala Land development site and nearby industries. In NUVALI, the target for hiring locally—particularly from host barangays Sto. Domingo in Sta. Rosa and Canlubang in Calamba, Laguna—increased from 70% to 90% and this was achieved in 2012. These communities have become a regular supplier of NUVALI pavers and food services for the construction group, paper weaving for corporate gifts, food service for various events, and manpower for employment and special projects. Alay sa Komunidad won an Anvil Award of Excellence for Community Programs in 2012. (EC7) Cebu Holdings expanded the concept of its volunteer program Agbayay sa Pag-asenso into a broader community development program in 2012. It conducted a four-week livelihood training series on product design and development with its partner design agency RedApple Creatives, Inc. The series covered important modules on color theories and application, product research and development, and product marketing. Targeting the women of its partner community Barangay Luz, the twice-weekly program helped develop quality products from recyclables collected at the Ayala Center Cebu and Cebu Business Park. At the end of the training, the participants produced candle holders encased in woven boxes made out of used paper gathered from the company’s offices, which were then used as corporate gifts. Lessons from this exercise help shape similar livelihood programs in 2013.

Globe’s My Fair Share program generated P4.1 million worth of revenues for its community producers last year. A partnership between Globe and social enterprise Gifts & Graces tapped the beneficiaries of Kaibhan Women’s Association, an NGO based in Bulacan, to produce highquality eco-bags following fair trade principles. The partnership integrates the NGO and its beneficiaries into Globe’s value chain by providing them access to market for their products. Globe also launched the Kape’t Buhay Program in partnership with Bote Central, Inc. Kape’t Buhay provided farmers from 21 communities with a community roasting business unit that improved their capacity by allowing them to roast their own beans. It organized seminars on business skills development, planning, and bookkeeping to help the farmers increase their earning potential throughout the coffee chain production. At present, the various coffee vending machines located in Globe offices in Metro Manila use the coffee beans from the Kape’t Buhay Program. Ayala Foundation, supported by the Philippines– Australia Community Assistance Program of AusAID, enrolled 104 members of the IrayaMangyan indigenous community in various skills-training courses offered by the Technical Education and Skills Development Authority. In addition, 29 out-of-school youth from the group were enrolled in DepEd’s Alternative Learning System. BPI expanded its support to jeepney drivers as part of a Department of Energy (DoE) program called Pantawid Pasada. The DOE used BPI’s ExpressLink real-time funds transfer system to offer fuel subsidy via DoE pre-loaded prepaid cards to 220,000 jeepney drivers in at least 50% of the retail petrol stations nationwide. Banking and Payments Asia, a leading regional journal for retail banking and payments, recognized this initiative with the Trailblazer Award in 2012.

ONE COMMUNITY

Investing in the Future Ayala has always believed in the Filipino youth. We help make Filipino students competitive by providing access to effective teaching materials and technology-enabled learning environments. (SO1, SO10)

Ayala’s innovative and strategic projects improve the standard of living in partner communities.

Globe turned over the Global Filipino School (GFS) program to Bilar National High School in Bohol last year. Globe’s GFS initiative transforms public high schools into ICT centers of excellence. It equips GFS model schools with wired and wireless Internet connection and multimedia peripherals, and houses them in an energy-efficient, environment-friendly building. Complementing GFS is Globe’s Global Filipino Teachers Program, an intensive 54-hour, six-day training program for teachers on the use of integrated communications technology in classroom instruction and projectbased learning approaches. Both programs build a community of education leaders who are trained in mentoring, collaborative learning, effective

BPI Foundation continued to provide free entrepreneurship sessions for promising business owners to have access to free learning and forge partnerships among them. Last year, the foundation also expanded the reach of the Show Me, Teach Me program for micro-, small-, and medium-scale enterprises (MSMEs) to the six key areas of Tuguegarao, San Fernando in La Union, Bacolod City, Dipolog, General Santos, and Zamboanga. It also partnered with Philippine Trade Training Center and conducted two-day sessions on topics such as “Starting and Maintaining a Business,” “Finding the Right Market,” “Basic Product Costing and Pricing,” and “Basic Business Recording.” Participating MSMEs averaged 45 to 60 per city and included entrepreneurs from various sectors, including persons with disabilities, overseas Filipinos, senior citizens, and the youth. This program received the citation Special Award for Enterprise Development Category in the 2nd Marketing Association of the Philippines CSR Leadership Challenge 2011. Manila Water integrates small- and mediumscale enterprises (SMEs) into its supply chain by allotting a minimum of 20% of its budget that can be contracted to them. The program also allows for certain exemptions in its supplier accreditation. Its complementary livelihood and development program, Kabuhayan Para Sa Barangay, awarded a total of P6.3 million to 10 cooperatives that are now part of the Manila Water supply chain. While 90% of materials are purchased locally, 80% of these are manufactured abroad. However, to allow for better after-sales support and generate business and employment for the country, Manila Water requires its foreign suppliers to partner with local companies or to set up local representative offices.

leadership, and ICT tools for student assessment and school management. Participated in by Globe and Ayala Foundation, Text2Teach, an innovative mobile teaching program, started its fourth phase last year and rolled out to public elementary schools across the country. During the first three phases of the program, Text2Teach-enabled schools reached 552, benefitting 40,000 students and 1,800 school heads, teachers, and Department of Education (DepEd) officials. The fourth phase targets 850 new schools between 2012 and 2014. A total of 187 newly developed education videos and 455 lesson guides on Math, Science,

Community cooperatives are empowered to become part of the supply chain of Ayala companies ▼

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Handicapped Center Lourdes (HCL) with donations of basic necessities and household items. HCL takes care of children with multiple disabilities, provides them with a family through a live-in staff, and teaches them basic daily living activities such as eating, bathing, and personal hygiene.

Building the Country’s Talent Pipeline Ayala implemented projects that enhanced the country’s talent pool and met the demands of the Philippine industry, particularly the services sector, with our “From Education to Employment” platform. (SO1) LiveIt’s Professional Employment Program (PEP) works with a network of employers, including Ayala subsidiaries, to give students a solid academic foundation and increase their employability.

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LiveIt’s Professional Employment Program prepares college students for employability and helps improve the country’s talent pool

English, and Values Education for fifth- and sixth-grade levels complemented the basic DepEd curriculum. Teacher-training programs and capacity building for local government and DepEd officials complement the distribution of the Text2Teach equipment and educational materials. Text2Teach is the Philippine name of the global BridgeIT program conceptualized in 2002 by Nokia, Pearson, the United Nations Development Programme, and the International Youth Foundation. Ayala Foundation provides community leadership training for young Filipino leaders through the Ayala Young Leaders Congress (AYLC) and Leadership Communities (LeadCom) project. Both programs empower this vital sector to serve as catalysts of change in their communities. In 2012, 80 student leaders from around the country participated in the 14th year of the AYLC. LeadCom implemented the program in the following areas: Baguio/Benguet, Isabela, and Albay in Luzon; Samar and Capiz in the Visayas; and Bukidnon, Cagayan de Oro, Camiguin, and Davao in Mindanao. In each of these areas, Ayala Foundation built partnerships with at least five schools and trained 80 to 100 youth leaders and 20 facilitators in a three-day servant-leadership camp on how to develop and implement community development projects. A total of 50 schools, 191 facilitators, and 712 student-leaders benefitted from the program. A supplemental two-day citizenship workshop also equipped participants with the necessary knowledge and skills for implementing and sustaining a community project. As part of Integreon’s Joy of Giving program, the BPO company's associates in Manila visited the

Delivered four days per week at four hours per day for one semester, PEP uses the constructivist approach where students learn by doing. Technology-enabled for scalability, PEP also has student testing and counseling to ensure a good job match. PEP graduates are equipped with the essential service-sector skills such as excellent conversational English, effective and efficient business communication, solid computer literacy, broadly applicable support skills, and industryspecific knowledge. They also receive training on work values such as reliability, thoroughness, and persistence. Success metrics of PEP graduates include: 95% employment just 90 days after graduation versus less than 65% for those who do not complete the program. The average wage for PEP graduates is 25% higher than the norm, and over 15% of PEP graduates obtain supervisory or specialist-level positions. Affinity Express launched its On-the-Job Training Program for the immediate employment of college graduates. Six college senior students majoring in Multimedia, Digital Arts, and Fine Arts participated in the pilot program of 10 to 12 weeks. They received training on creative and technical competencies, and on process requirements such as quality control and operations management, from Affinity’s senior designers and functional trainers. Affinity Express also participated in the Business Process Outsourcing Association of the Philippines (BPA/P) Careers for Street Youth to help disadvantaged young adults become productive by providing them employment opportunities through proper training, mentoring, and job matching. Beginning with a rigorous selection and interview process, the program provided selected youths with two weeks of coaching and soft-skills training including time management, teamwork, and confidence. To date, there have been 27 BPA/P Careers graduates available for back office operations or support staff positions like clerks, receptionists, messengers, service crew,

ONE COMMUNITY

sales clerk, office assistants, and other related competencies. Beneficiaries from Barangays Singkamas and Bagong Silangan in Makati City and Quezon City, respectively, also learned résumé writing and job interviewing. About 90% of the first batch of graduates is now employed and the second batch of street-youth selection and training has commenced. Integreon’s Manila office partnered with Children’s Hour in support of the BPA/P Careers for Street Youth and donated P222,000 to support the initiative. Ayala Auto partnered with Don Bosco Technical Institute, Laguna State Polytechnic University, University of Makati, Partido State University, and Technical Education and Skills Development Authority (TESDA) Tacloban for an on-the-job program that leads to the employment of their students and graduates. In 2012, Honda Cars Makati Inc. and Isuzu Automotive Dealership Inc. hired a total of 75 students as OJTs followed by the hiring of seven as regular associates/ technicians and contractual technician.

Ayala’s arts and culture programs contribute to a stronger, more cohesive community of Filipinos.

Instilling Pride in the Filipino Ayala contributes to a stronger, more cohesive sense of community through initiatives that instill pride in being Filipino. Ayala Foundation’s Arts and Culture division, consisting of the Ayala Museum and Filipinas Heritage Library, develops programs that focus on the country’s rich historical and cultural heritage. Various exhibitions, educational programs, and special events drew a total of 83,892 visitors, a 6% increase from 79,000 visitors in 2011. Apart from the permanent exhibitions, the museum presented programs that celebrated the artistic achievements of Filipino artists and strengthened its links with the international art community. Among the special exhibitions hosted by the Ayala Museum included “Fernando Zobel in the 1960s,” “Ganito Kami Noon: Amorsolo Portraits of the Filipino,” “Timeless: Swiss Landscapes by Manuel

Baldemor,” “Sharaku Interpreted by Japan’s Contemporary Artists,” and “Conectados,” a multimedia art exhibit featuring artists from Spain, Mexico, and the Philippines. Also significant is the inclusion of the “Dioramas of Philippine History” in the Google Art Project, making the Ayala Museum the first Filipino art institution to participate in the global art project. For its part, the Filipinas Heritage Library (FHL) served more than 2,000 researchers and visitors last year. It continued implementing its OurLibrary program, which facilitates the development of community libraries in neglected areas. In 2012, FHL and its project partners completed two community libraries and signed two memoranda of agreement for additional community libraries in Lucena City and Tayabas City. The community library in Infanta, Quezon, was completed with the help of BPI Foundation and the local government unit. Together with the National Book Development Board, FHL also organized the Third Manila International Literary Festival, attended by 245 participants and featured lectures and panel discussions by some of the world’s most respected writers, publishers, editors, and literary agents. In August 2012, BPI opened the BPI Museum Zamboanga in Mindanao, a lifestyle museum that showcases information and artifacts on the culture and life ways of Zamboangueños from the end of the Spanish colonial period up to the beginning of the American period. Period pieces, archival photographs, and commemorative materials are available for public viewing, depicting the gentility and elegance of Zamboanga culture and society at that time. Similar to the BPI Museum Cebu inaugurated in 2011, BPI Museum

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The multimedia exhibit “Conectados” brings art to public spaces

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Filipinas Heritage Library provides access to a broad range of Filipiniana

Zamboanga is located in a national historic landmark. BPI Museum Cebu displays Philippine historic and banking memorabilia that date back to 1861 and serves as a venue for Cebuano artists to showcase their works.

adhere to these codes whenever we promote our products and services. Our companies complied with marketing standards and did not receive any fines for breaching products and services regulations in 2012. (PR3, PR4, PR5, PR6, PR7, PR8, PR9)

Connecting with Customers

Ayala Auto continued to monitor customer feedback, receiving numerous commendations on the performance of its personnel as they live up to the company motto of “Customer Ko, Mahalaga!” ("My Customer is Important!"). Numerous sustainability initiatives were also offered to customers as part of its value-added service, including seminars on defensive and eco-friendly driving, preventive maintenance, basic troubleshooting, road safety, and fuel efficiency/saving tips.

Customer care has always been part of the way we do business. We respond to our customers by providing high quality products and services and implementing specific customer relations programs to enhance our customers’ experience. In the CEO Panel of the 2012 ICT Summit, held under the theme “Transforming Together: One Ayala,” customer knowledge and customer focus through improved analytics were key messages. (DMA-PR)

In general, we saw an increase in customer satisfaction surveys for our subsidiaries. Keeping our customers well informed and providing them with accurate and timely data about our products and services are crucial to customer satisfaction. Our subsidiaries adhere to internal policies, government and industry standards, and voluntary codes regarding marketing, advertisements, promotions, sponsorships, and advocacies, which are discussed in the individual reports of the subsidiaries. Training of employees, internal checking mechanisms, licensure requirements, and regulatory compliance all ensure that we

Globe implemented the First Contact Resolution program in 2012 to monitor its response to customers who contact the company within seven days of logging their concern. This program has led to reduced call volumes and increased customer satisfaction levels. Results show improvements by six to seven points in its first six months, with postpaid subscribers resolution increasing from 79% to 85%. Globe also re-launched its Talk2Globe Hotline by providing subscribers with the option to communicate in their language of choice: English, Taglish, and Visayan. This is in fulfillment of Globe’s objective to respond to the customer need for easier and

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Providing high quality products and services enhances our customers’ experience.

better communication mechanisms, specifically in their preferred language. Manila Water launched a customer-centric initiative in September 2012 with the read-and-bill system, allowing the water bill to be issued to the customer right after each meter reading.

Protecting Our Customers We listen and respond to our customers’ concern for their health, safety, and well being in their use of our products and services. Ayala Land makes sure that its development projects are subjected to impact assessments and that metrics cover people development data. These are covered in government-issued environmental clearance certificates. Similarly, Cebu Holdings promotes and ensures customer safety through environmental metrics, compliance, and operational control measures throughout its project development process. A detailed discussion of Manila Water’s water life cycle process, which covers all the stages from securing raw water supply to the distribution of clean potable water, is reported in the 2012 report of the subsidiary. These companies did not receive significant fines for non-compliance with laws, regulations, and voluntary codes concerning the provision and use of products and services. (PR1, PR2) ■

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Clockwise from top left: Analysts at Manila Waterâ&#x20AC;&#x2122;s world-class laboratory; A Globe employee volunteers for relief operations; BPI officers attend a volunteer management workshop; An Ayala Land architect visits an Amaia site; an IMI engineer checks equipment; Ayala group athletes proudly display their medals

we believe that ayalaâ&#x20AC;&#x2122;s greatest strength lies in our people. Integrity,

responsibility, and accountability guide the way our people work. They commit to upholding our core values and share the companyâ&#x20AC;&#x2122;s vision of national growth and development while supporting our business objectives. Working as a group, we build on the unique strengths of our subsidiaries and explore opportunities for synergy because it is through shared goals and commitments that we can achieve more and do better.

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Ayala Olympics encourages camaraderie and sportsmanship among peers in the conglomerate

ecause our people are critical to our success, Ayala maintains an environment that encourages innovation, high productivity, and teamwork.

Ayala maximizes the potential of our employees by providing them with training and resources to develop their skills and an environment that encourages personal growth. We identify, prepare, and train future leaders to enable succession planning and help secure our companies’ stability and success. We uphold equal opportunity in career development and base our remuneration on performance and contribution to the growth of our business. We practice non-discrimination in terms of compensation and pay employees above the standard entry-level wage defined by the Department of Labor and Employment. We maintain a workplace where our employees are able to address and resolve their concerns, protecting labor-management relations, and upholding openness and fairness. Throughout the Ayala group, we comply with all labor and human rights laws, including health and safety standards, and ensure that our employees abide by the company’s Code of Ethical Behavior and Code of Conduct in all their dealings. (4.8, DMA-LA, EC5, LA14)

Ayala's Strategic Human Resource Group serves as the lead organization in policy direction. The Ayala Group Human Resources (HR) Council, composed of key HR decision makers and policy makers, creates synergy among Ayala companies to realize greater cost efficiencies and develop innovative programs that add value to the business. It also sets the strategic agenda and direction to make HR development more responsive and reflective of Ayala’s corporate values. In 2012, the Ayala Group HR Summit focused on roles and challenges facing HR practice in light of the conglomerate’s rapid market and geographic expansion and Ayala’s entry into new industries. Attended by 300 Ayala HR professionals, the event featured discussions by international HR experts and Ayala group CEOs on innovative people practices, effective employee engagement, and skills and career development opportunities. Similarly, the Ayala group harnesses technology as an effective means of creating and strengthening the synergies among the subsidiaries. Last year's ICT Summit emphasized the value of working more cohesively given our targets of growth and expansion. It also featured new ICT trends, best practices among the subsidiaries, and networking opportunities. More than 600 technology specialists and business executives of the Ayala companies and over 200 representatives from the

ONE TEAM

Our people are critical to our success. Integrity, responsibility, and accountability guide the way they work. various technology sponsors attended the one-day event.

Prioritizing Health and Safety Throughout our subsidiaries, organizational structures, policies, and programs that protect the health and safety of our employees, contractors, and community members are in place. Issues on employee welfare and working conditions are addressed at the joint management-and-labor committees on health and safety and Collective Bargaining Agreement discussions. We implement strict work safety programs especially in operations with high health and

safety risks, such as work with heavy machinery or hazardous materials, and follow the requirements of international standards of Occupational Health and Safety Management System (OHSAS 18001). Some of the group’s subsidiaries like Ayala Land’s property management arm Ayala Property Management Corporation (APMC) and construction subsidiary Makati Development Corporation (MDC), Globe’s Valero Telepark, and Manila Water are all OHSAS certified. They also undergo periodic audits, multipartite monitoring, and safety inspections to ensure compliance with procedures, standards, and legal requirements. Ayala mandates all regular employees to undergo annual physical examinations and routine health checkups. They receive timely information on prevention of serious diseases so that they are better informed and more proactive about protecting their health and those of their family members. Permanent employees are entitled to competitive health and medical benefits, including parental leaves. In 2012, the retention percentage of all BPI, Cebu Holdings, and Manila Water employees who availed of parental leaves was 100%. (LA8, LA15)

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Chief executives of Ayala companies meet annually with the group’s HR professionals to discuss emerging issues and trends

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Workforce by Region (LA1) Region

Ayala

As of December 31, 2012

Ayala Land

BPI

Manila Water

Globe

Ayala Auto

LiveIt

IMI

Ayala Foundation

Total

Luzon

1,355

10,939

4,857

1,278

903

11,151

4,520

104

35,196

Visayas

110

890

668

330

3,887

5,887

Mindanao

577

347

993

1,493

12,406

5,872

1,278

1,270

15,038

4,520

110

42,076

Total

Workforce by Employment Type (LA1) Employment Type

Ayala

Senior Management

Middle Management Rank and File Total

Ayala Land

As of December 31, 2012 BPI

Globe

Manila Water

365

Ayala Auto

171

374

4,437

2,911

940

1,069

7,798

2,596

243

1,158

1,493

12,406

5,872

1,278

1,270

15,038

In 2012, Ayala Land reached almost 50 million safe man-hours, with 100% of its employees represented in joint management-and-labor health and safety committees. One of MDCâ&#x20AC;&#x2122;s important construction projects last year, the United States (U.S.) Embassy Manila New Office Annex Project (MNOX), reached more than 10 million man-hours without any record of Lost Time Accident throughout its three-year construction period. The project also adhered to the standards of the U.S. State Departmentâ&#x20AC;&#x2122;s Bureau of Overseas Buildings Operations, the U.S. Life and Safety Code, the

LiveIt 46

IMI

Ayala Foundation

Total

104

877

1,264

387

10,460

13,728

4,029

30,739

4,520

110

42,076

American Disabilities Act, and the International Building Code. Lessons on safety programs and practices from the MNOX construction project enhanced existing occupational health and safety programs in all Ayala Land construction and development sites. A Safety Officer ensures that all field personnel receive proper orientation on safety programs and implement them throughout operations, including the mandatory use of Personal Protective Equipment, safety glasses, and dust masks. (LA6, LA7)

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Cebu Holdings conducted its regular Work Environment Measurement inspections and annual evacuation drill in its existing properties and projects. The earthquake drill involved, for the first time, all establishments at the Cebu I.T. Park and Cebu Business Park, with a total of 13,200 workers from 44 buildings and four construction sites. Supported by the local government, Bureau of Fire Protection, and rescue units such as the Central Command of the Philippine Army, Philippine National Units, City Traffic Operations Management, Emergency Rescue Unit Foundation, and Philippine Red Cross, the drill successfully oriented the community on mass emergencysituation response. Cebu Business Park’s security personnel underwent a special training on emergency response and were tested during the drill. A post-drill evaluation identified areas of improvement such as physical endurance for emergency rescue, the proper handling of victims, and crowd control, among others. Manila Water received the Safety Milestone Award from the Department of Labor and Employment’s (DOLE) Bureau of Working Conditions and the Gawad Kaligtasan at Kalusugan from DOLE’s Occupational Safety Health Center in 2012. The awards recognized Manila Water’s excellent record of occupational health and safety, optimum productivity, and zero accidents at the workplace. The company’s laboratory services also received an award of distinction for best practices that ensure safety in the workplace. Manila Water reported zero injury, occupational disease, and lost day rates, and a 0.03 absentee rate for 2012. (LA7)

Globe reported a 5.04% employee incident rate, mostly attributed to vehicle driving-related incidents last year. There was no change in the rate of accident per employee at 0.08%. (LA7) IMI continued to implement its Integrated Environment, Health, and Safety (EHS) Program. In 2012, IMI Laguna Site 1 achieved more than 3.1 million safe man-hours, while the IMI Laguna Site 2 achieved 10.2 million safe man-hours. (LA7) Finally, members of our security personnel continued to be trained on Ayala’s policies and existing security procedures, including protecting the rights of our employees, customers, contractors, and communities. In 2012, the Ayala Group Corporate Security Council (AGCSC) conducted the annual Program Exchange Training (PET) with the San Francisco Police Department through the efforts of the Philippine National Police (PNP) and the Philippine Embassy in San Francisco. PET exposed the AGCSC to the Field of Law Enforcement Expertise of the San Francisco Police through seminar workshops, exchange of ideas, and actual discussions. These covered Bomb Identification and Detection, Emergency and Disaster Response, Cybercrimes, Fraud Identification and Prevention, State of the Art Technology, and Forecasting Social Development and Anticipation of Critical Events. Individual data on the human rights training of our security forces are found in the subsidiaries’ reports. (HR8, LA6)

Preparing Our Future Leaders Ayala and its subsidiaries have year-round leadership training programs customized to the needs of our businesses, which are further

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The Ayala group’s security personnel attend a training program with members of the San Francisco Police Department

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Employee Turnover By Gender (LA2) Company

2011

Ayala Ayala Land

2012

104

144

BPI

447

753

440

812

Globe

331

302

268

Manila Water

461

202

126

156

134

Liveit

191

453

1,795

6,157

IMI

100

671

125

819

Ayala Auto

Ayala Foundation TOTAL

1,441

2,467

3,431

8,388

Employee Turnover By Age Group (LA2) Company Ayala

2011 < 30

2012

30-50

50 <

< 30

30-50

50 <

112

124

BPI

723

304

173

709

347

196

Globe

273

377

225

330

204

286

Ayala Auto

189

137

182

106

LiveIt

435

193

7,232

712

IMI

421

347

437

504

2,188

1,485

235

8,960

2,336

523

Ayala Land

Manila Water

Ayala Foundation Total

discussed in the individual reports. The following are last year’s leadership training highlights. (LA11) In 2012, BPI launched its BPI Leadership Excellence Acceleration Program (BPI LEAP), a scalable and innovative leadership program that builds capabilities pivotal to business success. In partnership with Harvard Business Publishing (HBP), a wholly owned subsidiary of Harvard University, BPI LEAP was the first HBP-delivered large-scale executive development program over the Internet. It taps Harvard Business School thought leaders and professors in shaping the expertise of its top executives in sustainability and leadership. Using real-time interactive videoconferencing, the program connects multiple sites and enables the participation of bank managers outside Metro Manila. A total of 800 BPI leaders have been part of the program since inception. Now a benchmark in training and development, BPI LEAP uses the leaders-teaching-leaders model, with its executives facilitating follow-ups to help participants apply their learning to challenges faced by the bank.

In 2012, the People Management Association of the Philippines (PMAP) awarded BPI LEAP with the PMAP People Program of the Year for being “relevant, unique, innovative, and cutting-edge.” PMAP is the premier organization of people managers in the country. (LA11) Given BPI LEAP’s success, Ayala adopted it for the conglomerate in 2010. The Ayala Leadership Acceleration Program (Ayala-LEAP) covers Strategic Visioning and Execution, Customer Centricity, Innovation and Growth, and Leading for Transformation and Engagement, which were identified as key enablers of the conglomerate’s strategic goals. Ayala conducts the program across all subsidiaries using online group collaboration, virtual seminars with Harvard Business School faculty and experts, self-study, and face-to-face classroom discussions. With two additional cohorts in 2012, a total of 200 executives have completed Ayala-LEAP. Ayala also launched the Emerging Ayala Leaders Program (EAGLE) in 2012 to train 88 middle managers from across the group. Ayala-LEAP and EAGLE

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Employee Turnover By Region (LA2) Company Ayala Ayala Land BPI

As of December 31, 2012 Luzon

Visayas

Mindanao

230

1,135

Globe

516

Manila Water

547

Ayala Auto LiveIt IMI Ayala Foundation TOTAL

209

6,199

1,753

944

9,798

1,936

Total Percentage Of Employees Who Have Undergone Formal Performance Or Development Reviews (LA12) Company

2011

2012

Ayala

100%

Ayala Land

100%

BPI

67%

53%

Globe

94%

92%

Manila Water

75%

Ayala Auto

100%

LiveIt

100%

IMI

100%

Ayala Foundation

100%

participants develop projects that address burning issues in their respective companies, propose concrete and workable solutions to their CEOs, and lead in their implementation. iLeadGlobe is part of Globe’s Integrated Leadership Development Program that includes a series of training for all employee levels: Executive Development Program for the next generation of senior leaders, Fast Tracker Program for the mid-career talents, and Young Leaders Program for emerging talents. The company partnered with the Asian Institute of Management (AIM) and the Ateneo de Manila Center for Continuing Education for the training of eligible employees interested in developing their leadership and management skills. IMI consolidated its human resource development programs when it institutionalized IMI University in 2012. It conducted 127 training programs, 67% of which were facilitated by in-house experts. IMI also re-launched the Technical Ladder Program that aims to provide a career path for technical and non-management personnel. The Technical Ladder Program is one of two career development paths that monitor professional growth.

Ayala companies continue to provide different types of training to enhance the competencies and capabilities of our employees.

Creating a Strong Corporate Culture Creating a corporate culture that embodies our values and fosters quality performance is crucial to our business. Globe continued its on-boarding program The Globe Way Series to introduce and strengthen the company’s corporate culture, core values, and ideals, which resulted in increased levels of employee satisfaction, promoting positive customer interactions and business growth. Similarly, its Culture Change Workshop for Leaders helps participants understand Globe’s value system and equips them with skills required for change management, especially in the dynamic, highly competitive telecommunications industry. The workshop enables business group leaders and managers to develop the best methods for sharing and strengthening the Globe culture among their team members within the context of transformation. (DMA-HR, DMA-SO)

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In 2012, BPI Foundation registered a total of 32 BPI BAYAN programs on social services, education, livelihood, health, and the environment nationwide and logged 16,000 volunteer hours. A search for the Most Outstanding Volunteer Groups rewards projects that excel in terms of relevance, effectiveness, initiative, resourcefulness, innovativeness, extent of employee participation, and sustainability. BPI BAYAN contributed to the high employee engagement rating of 82%, a result higher than the Global Financial Services norm in a survey conducted by Towers Watson. Globe’s i-Give program mobilizes employees to serve as volunteers during relief operations, raise funds for Globe’s Bridging Communities projects, and serve as mentors to the youth, teachers, micro-entrepreneurs, barangay leaders, and non-government organizations. Using the “volunteaming” concept, five Globe employees from any office nationwide work on projects in their preferred communities and receive funding from Globe’s Bridging Communities CSR program. Through Globe’s i-Give, employees grow more aware of the issues of immediate communities and respond to residents’ actual needs. In 2012, 1,715 Globe employees or 30% of the total workforce reached out to different communities, logged 7,943 volunteer hours, and raised P778,410 for various partner NGOs, beneficiary communities, and advocacies. Last December, Globe also launched i-Volunteer, an online volunteer-matching facility that offers volunteering opportunities outside Globe-initiated programs on a nationwide scale. (DMA-SO)

Fostering Teamwork and Camaraderie

Supporting Employee Volunteerism Ayala encourages employee volunteerism and engagement for social development. (DMA-SO) BPI’s Bayanihan para sa Inang Bayan (BPI BAYAN) is a nationwide volunteer program that provides employees with a venue to give back to the community, build responsive development programs, and enhance team work. They undertake community scanning to determine the most pressing needs in partner communities and ensure the relevance of BPI BAYAN programs. Employee volunteers document the baseline information and measure program benefits against the baseline data.

Given Ayala’s shared vision, we believe in the importance of all employees seeing themselves as members of one family. Last year, the group held the 2012 Ayala Olympics, a quadrennial event with 285 athletes in 18 sporting events and attended by almost 10,000 officials and employees from the various subsidiaries. Manila Water emerged as the overall champion, followed by BPI and Ayala Land in second and third place, respectively. The Ayala Olympics instills the important values of healthy competition, teamwork, and excellence among all employees in a friendly environment. ■

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Average Training Hours (LA10) Company

2011 Average Hours (By Rank) Rank And File

Ayala 1

Middle Mgt

2012 Average Hours (By Rank)

Senior Mgt

Rank And File

Middle Mgt

2012 Training Hours

Senior Mgt

Total Hours

Average Hours

2012 Ave. Hours by Gender Male

Female

8.13

24.70

13.12

12.92

15.98

4.95

1,343.00

12.67

13.38

11.96

Ayala Land

24.00

27.00

34.00

24.95

20.84

9.92

35,080.16

23.56

23.99

23.13

BPI

65.00

91.00

226.00

46.36

51.74

55.30

600,552.00

48.42

47.76

48.81

Globe

27.00

43.00

23.00

106.50

37.60

4.40

387,524.80

66.00

69.89

62.15

1.02

11.42

22.35

10.91

50.34

25.45

38,958.50

44.37

58.88

29.86

21.00

16.00

24.00

27.40

20.30

20.00

33,917.80

26.81

31.00

19.30

409.08

229.70

588.46

6.63

2.01

11.24

Manila Water Ayala Auto LiveIt IMI 1

—

137.38

18.25

14.00 1,909,596.00

6.00

13.00

10.00

4.87

22.21

11.43

29,948.00

Does not include consultants

Composition Of Governance Bodies And Breakdown Of Employees Per Category According To Gender And Age Group (LA13) % Male

% Female

% Under 30

% 30 to 50

% Over 50

Board of Directors

100

Management Committee

Ayala has 7 members on its Board of Directors, and 14 members in the Group Management Committee

Globe employees are briefed on the protection of Taal Lake

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Clockwise from top left: A Globe cell site camouflaged as a palm tree; IMI builds solar panel manufacturing capability; biking enthusiasts raise funds for the reforestation of the Cordillera; El Nido Resorts meet sustainability standards; eco-tourism thrives in El Nido and Kan-irag Nature Park; Centex Batangas students plant tree saplings

we all share one planet, and ayala recognizes that we share in

the responsibility of caring for it. Our commitment to doing things better extends to environmental performance. Given our groupâ&#x20AC;&#x2122;s size and reach, we believe that the programs initiated by our subsidiaries have a significant positive impact on the environment in the areas where we operate. More efficient and judicious use of resources not only makes business sense; it also helps ensure a better environment for tomorrow.

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Anvaya Cove provides a sanctuary for the olive ridley turtle, locally known as the pawikan

he Ayala group commits to managing the impacts of business on the environment by monitoring resource use and consumption and reducing emissions and waste. Our companies continue to develop environmental management strategies and comply with all national laws and regulations relevant to environmental protection, going beyond regulatory compliance where possible and observing best practices and global standards. Beyond our operations, Ayala works in partnership with various stakeholders, organizations—suppliers, customers, government, and civil society—to mainstream business practices that foster broader environmental responsibility. (DMA-EN)

aspect in 2012, from P39 million to P78 million. Ayala Land’s TDD strategy includes proper site assessment and an approach to project design that respects the environment’s natural features and unique characteristics. These principles and best practices are now being compiled in Ayala Land’s Book of Standards in Sustainability (BoSS). Managers from its construction, design, and project development units spearhead the development of the BoSS.

Championing environmental sustainability, Ayala subsidiaries allot a percentage of their total budget to managing their impacts and improving their environmental performance, with the total figure registering P4.3 billion from Ayala Land, Cebu Holdings, Globe, and Manila Water. The amount is broken down in the individual reports of the four subsidiaries. (EN21, EN30)

As part of its Green Transformation initiative, Globe overhauled many of its base transceiver stations (BTS), replacing traditional cooling equipment and, where possible, shifting to renewable energy, such as solar energy. The BTS sites are an essential component of Globe’s business, enabling wireless communication between the network and its subscribers. Globe is also deploying a Facilities Management System (FMS) to monitor its energy consumption and the environmental conditions in its regional operational centers. It planned to finish The Globe Tower in Bonifacio Global City, Taguig in 2013 as a LEED-standard building. The move will consolidate several Globe office branches, which are located across Metro Manila.

Ayala Land minimizes land and water resource disturbance in its project planning. It has strengthened its technical due diligence (TDD) and significantly increased its investments in this

Manila Water is implementing an Integrated Management System in 15 of its facilities. Manila Water adopts international best practices, aligning its facility management with ISO standards for

Environmental Stewardship Within Our Operations

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Ayala subsidiaries allot a percentage of their total budget—a total of P4.3 billion in 2012—to manage their impacts and improve their environmental performance. quality management, environmental management and occupational health and safety. Building on this strong management foundation, Manila Water aims to incorporate an Energy Management System into its IMS, with the goal of achieving ISO 50001 certification by 2013. IMI minimizes exposure to hazardous waste and other potential negative incidences with its Integrated Environment, Health, and Safety (EHS) Program. The company is fully compliant with the Department of Environment and Natural Resources’ Republic Act (RA) 6969 Toxic and Hazardous Act and the RA 9003 Ecological Solid Waste Management Act. In 2012, IMI Laguna

attained 97.8% recycling recovery of all wastes generated because of its implementation of the 3R (Reduce-Reuse-Recycle) program in the disposal of its chemicals for manufacturing processes, waste segregation, and waste composting. IMI also turns over hazardous recyclable wastes to accredited agencies such as ABS-CBN Foundation’s Bantay Kalikasan. For our group’s environmental performance, we improved on direct energy and water consumption, registering decreases despite business growth. Subsidiaries make sure to identify in their individual reports all water sources, whether groundwater source or bodies of water, that may be significantly affected by their business operations because of the volume of withdrawal as well as the volume and quality of discharges. These water sources are monitored to ensure against any negative impacts. In terms of indirect energy use, there was an increase, registering a rise in our greenhouse gas emissions. These are mainly attributed to the expansion of our operations in retail, construction, and water distribution activities. (EN9) We are committed to monitoring our use of resources so that we can manage our consumption relative to our growth and, where possible, decrease them.

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The Globe Tower in Bonifacio Global City is built according to LEED standards

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Direct Energy Consumption In Gigajoules (EN3) Year

Ayala

Ayala Land

BPI

Globe

Manila Water

Ayala Auto

IMI

Total

2012

209.86

139,296.16

7,478.25

57,300.00

12,642.29

5,489.80

5,909.08

228,325.44

2011

54.06

132,986.79

4,231.07

56,900.00

64,150.81

6,469.14

1,081.19

265,873.06

Pertains to non-renewable primary sources; there were none for renewable primary sources Direct Energy Consumption (Gigajoules) Per Earnings (Billion Peso EBIT) Year

Total Ayala Group (gigajoules)

Group EBIT (billion pesos)

Total/EBIT (gigajoules per billion pesos)

2012

228,325.44

23.20

9,841.61

2011

265,873.07

19.70

13,496.10

Indirect Energy Consumption In Million KWH (EN4) Ayala Land

BPI

Globe

Manila Water

Ayala Auto

IMI

Ayala Foundation

Year

Ayala

2012

0.386

434.90

62.37

316.67

92.81

4.37

40.71

1.93

954.146

2011

0.340

149.74

53.42

302.77

80.30

4.50

42.76

2.00

635.830

Total

Pertains to electricity consumed; there were none for other uses Indirect Energy Consumption (Million KWH) Per Earnings (Billion Peso EBIT) Year

Total Ayala Group (million KWH)

Group EBIT (billion pesos)

Total/EBIT (million KWH per billion pesos)

2012

954.15

23.20

41.13

2011

635.83

19.70

32.28

Due to the intensity of their use of materials such as cement, steel, and water in their businesses, Ayala Land, Cebu Holdings, and Manila Water annually keep track of the amount or volume of their consumption and reports these figures in their individual reports. While we reported an increase in our wastes, around 50% were recycled or reused. We also saw a rise in our carbon reduction efforts even as our absolute emission figures increased. (EN1)

Offering Environmentally Responsible Products and Services The Ayala group of companies is committed to offering environmentally sustainable products and services to our customers by developing new technologies or adopting greener standards. (EN6) Ayala, through Ayala Land’s property management arm, APMC, implemented energy conservation initiatives in Tower One and Exchange Plaza, where its head office is located. In 2012, it undertook a lighting upgrade project that involved the replacement of 36-watt fluorescent lamps with 28watt eco-efficient TL5 light bulbs, which improved

the lighting level while saving 12,298 KWh or P116,000 per month. It also installed motion sensors and controllers in its escalators, which saved 1,584 KWh every month or monthly savings of P13,369. (EN18) Aligned with Ayala Land’s commitment to green buildings, four out of the 14 Leadership in Energy and Environment Design (LEED) Certified buildings in the country are Ayala Land-developed or managed properties. The LEED Certification serves as the U.S. Green Building Council’s guarantee that the project complies with the standards of the LEED rating system, and demonstrates environmental stewardship and social responsibility. As one of the early adopters of green building standards in the Philippines, the company is at the forefront of environmental design and project execution. One of the significant achievements of 2012 was the completion of the US Embassy Manila’s New Office Annex (MNOX) Project by MDC. The MNOX Project is a compound that includes the Consular Affairs Office (NOX-1), the NOX-2 Building for nonconsular operations, the NOX-3 Veteran Affairs

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Clinic, the Marine Security Guards Quarters, as well as a parking facility and utility building. The MNOX Project complies with the LEED standards, with NOX-1 achieving LEED Gold Certification and NOX-3 obtaining LEED Green Certification. The certification for NOX-2, which was completed in 2013, is still being reviewed. Ayala Land’s new business hotel brand, Seda, incorporates the company’s sustainable design principles, such as energy saving features and the use of environmentally responsible materials. The hotel was launched in 2012 and has branches in the cities of Taguig and Cagayan de Oro, and will soon open in Davao. BPI expanded the coverage of its Sustainable Energy Financing (SEF) Program in 2012, particularly to government institutions and the academe. BPI signed a Memorandum of Agreement with the Climate Change Commission, the Department of Budget Management, the Department of Energy, and the University of the Philippines, to help government institutions transition to energy-efficient buildings. It released P4.2 billion worth of sustainable energy loans and

leases in 2012. Total outstanding loans as of the end of last year reached P7.35 billion. These SEF projects saved a total of 89,821 MWh per year of energy, produced 630,742 MWh per year of clean energy, and abated carbon emissions by 645,774 tons per year. IMI launched its low-cost, high-performance light emitting diode (LED) engine at the Electronica 2012 trade show in Germany. The LED engine is designed specifically for the lighting requirements of the automotive and industrial sectors. This LED engine also meets the needs for low-cost incandescent replacements and features twice the current LED lifespan, without increasing the cost. PSi, IMI’s subsidiary, designed the LED engine for higher thermal conductivity and greater ability to withstand higher thermo-mechanical stress. IMI also partnered with the Renewable Energy Test Center (RETC), a California-based provider for photovoltaics (PV) and renewable energy products in 2009. IMI Energy Solutions, a division of IMI USA, was established in 2010 to develop and manufacture solar panels and other related

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Endemic plants flourish in Cebu’s Kan-irag Nature Park

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Water abstraction by source from Manila Water is 419.69 (raw water) and 3.34 (ground water) in billion liters GHG Emissions CO2 Equivalent (Tons) (EN16) Year

Ayala

Ayala Land

BPI

Globe

Manila Water

Ayala Auto

IMI

Total

2012

247.42

246,632.88

28,080.50

172,185.00

57,307.00

2,978.12

20,155.06

527,585.98

2011

198.00

84,321.00

27,675.00

136,502.00

56,776.00

3,130.10

14,758.00

323,360.10

technologies. In 2012, IMI began working with nine solar panel development companies.

Enriching Biodiversity Aligned with our environmental commitments, we make sure to maintain and enhance the biodiversity of the areas where we operate. (DMAEN, EN11, EN12, EN13, EN14, EN15)

Given the nature of its business, Manila Water has been helping protect La Mesa Watershed since 1999, and continues to expand its work in other watershed areas, particularly Ipo and Marikina Watersheds. Apart from being critical to sustaining water supply, these watershed areas also have significant biodiversity value. Manila Water works with the watershed communities and a wide range of external partners who help implement activities focused on increasing forest cover and improving species diversity. Increasing forest cover reduces soil erosion and decreases surface runoff, resulting in improved water quality and supply. In 2012, Manila Water was actively involved in the preparation of the Upper Marikina Watershed Management Plan. The company took the lead in formulating the Comprehensive Watershed Management Plan, which was approved by the Department of Environment and Natural Resources and the Protected Area Management Board of the Upper Marikina River Basin Protected

Landscape. In partnership with Fostering People’s Education, Empowerment and Enterprise, Inc. (FPE), Manila Water successfully rehabilitated a 500-hectare denuded area within the watershed. By the end of 2012, Manila Water, FPE, and five people’s organizations in the watershed completed the reforestation of the last remaining 85 hectares. It also continued to implement its Adopt-a-Watershed program with numerous partners from the corporate sector, civil society, and academe to plant 14.75 hectares or approximately 5,900 native seedlings. To date, the Adopt-a-Watershed program has reforested a total of 149 hectares. Manila Water’s joint program with Metropolitan Waterworks and Sewerage Services and Maynilad Water to rehabilitate and protect the Ipo Watershed helped reforest 560 hectares from 2010 to 2011. This received the support of ABS-CBN Foundation-Bantay Kalikasan and six community-based groups within the watershed. Ayala Land’s standard practice has been to monitor its performance within or adjacent to areas of high biodiversity of their developments, such as Bataan, Palawan, Laguna, and Quezon City. The company implements a policy of minimal land disturbance, tree preservation, and enhancing open spaces and preserving ecosystem functions even if these areas have not been

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Includes Scope 1 & 2 emissions. Data also includes Scope 3 emissions when available. Production Of Waste (Tons) (EN22) Year

Ayala Land

BPI

GLO

Ayala Auto

IMI

Total

Percentage sent to landfill

2012

32,783.91

215.67

111.79

181.88

1,206.50

34,499.74

2011

24,617.00

296.00

114.31

9.61

561.90

25,598.42

Manila Waterâ&#x20AC;&#x2122;s wastes are reported in cubic meters as biosolids. For 2012, they reported 18,243 cubic meters.

Climate change adaptation at Ayala combines biodiversity conservation, watershed management, and the use of ecosystemappropriate native species for its developments.

declared protected areas. Last year, it adopted a policy on using ecosystem-appropriate native plants and trees in its project sites. Cebu Holdings, in partnership with the Cebu Uniting for Sustainable Water (CUSW), has implemented a rapid assessment flora and fauna study at the Kan-irag Nature Park since 2011. The park is a 71-hectare area located within the Central Cebu Protected Landscape. The flora inventory indicates that the forest in Kan-irag is regenerating. A total of 16 tree species were found in the study site. Majority of these are pioneer species that are typically found in a young regenerating forest. Enrichment planting using lowland endemic forest species will help increase plant diversity in the area. Kan-irag Nature Park is also host to endemic fauna. Various bird and bat species are found, such as the black shama, the Cebu flowerpecker, and the Cebu hawk owl. The current study found 25 bird species within the established transect area.

The Kan-irag inventory contains baseline information against which Cebu Holdings will compare future assessments and guide future projects within Kan-irag Nature Park. The study also serves as the basis for the reforestation plan that aims to develop Kan-irag as a forest corridor that will connect to larger forest areas in Cantipla and Tabunan. As vegetation improves, there is great hope that the number of species found in the park will increase, making it a haven for Cebuâ&#x20AC;&#x2122;s biodiversity.

Rising to the Challenge of Climate Change With climate change felt more evidently in the Philippines, we develop new and innovative responses that improve the resilience of our business, communities, and the country. (EC2) Manila Water was among the first companies to formulate a policy response to climate change in 2007. In 2012, Manila Water revised its policy to better align with the national governmentâ&#x20AC;&#x2122;s climate change adaptation strategy. One of the key adaptation initiatives is the climate proofing of facilities, which involves incorporating design principles specific to climate change risks, particularly the risk of extreme storm and flooding events. The Olandes Sewage Treatment Plant (STP) was designed to adapt to the risk of flooding, due to its proximity to the Marikina River. Although the Olandes STP was inundated during Typhoon Ondoy in 2009, the electro-mechanical components were undamaged and remained functional. Manila Water is developing new guidelines to mainstream climate-proof design principles in its facilities, ensuring that it is able to guarantee reliable service at all times, especially during natural disasters. BPI partnered with World Wide Fund for Nature (WWF) Philippines for the long-term, multi-

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2 012 S U S TA I N A B I L I T Y R E P O R T

Members of Barangay Luz’s garbage collection team are trained on the proper management of hazardous waste

city study “Business Risk Assessment and the Management of Climate Change Impacts” to assess the impact of climate change on business in areas of high vulnerability. The study aims to guide city planners and decision-makers when developing strategies that help them cope with and adapt to the impact of climate change. In 2012, BPI and WWF shared the results and recommendations of the second phase of the study, which focused on Cagayan de Oro, Dagupan, Laoag, and Zamboanga. These cities were selected based on the high incidence of storms, floods, droughts, and other extreme climate events in the past decade.

Working with Others on Environmental Efforts The environmental challenges we face as a society require working with others. Our collaborative efforts ensure that we maximize environmental benefits from our initiatives. (EN18, EN26) BPI engages its suppliers through its program on greening the supply chain. Last year, BPI entered into a Memorandum of Understanding with the Green Philippines Islands of Sustainability (GPIoS), signifying its commitment to cascading greater environmental awareness to its partners in the supply chain. Participating in GPIoS gives them the opportunity to receive relevant training and

capacity building to implement more efficient and environmentally responsible systems. Manila Water is also a participant in GPIoS. From an initial 13 companies, there are now 24 suppliers and contractors who are actively engaged in the program. Manila Water also provided other training opportunities to its supply chain. Suppliers and contractors were trained in hazardous waste management and cleaner production. Engaging with its customers, Globe expanded on its Cellphone Takeback Program, which started in 2011. The 2012 program allowed more customers to participate, gathering more mobile phones for recycling and recovery. A total of 3,850 units of old and defective cell phones were collected by Globe’s partner recycler, TES-AMM Singapore, saving 36 cubic meters of landfill space. (EN27) To engage the private sector and support Cebu City’s waste reduction strategy, particularly the processing of biodegradable and recyclable materials, Cebu Holdings partnered with Barangay Luz in the North District of Cebu City in 2007 to collect biodegradable wastes from CHI-managed buildings and offices in Cebu Business Park. Being a busy commercial area, Barangay Luz was challenged by the urbanization and the high volume of waste generated by the growing population. The Barangay Luz partnership

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Engaging the public through awareness programs enables the success of our waste management efforts.

helped establish Tugkaran, a green space and composting facility in the Cebu Business Park. The composting facility processes collected biodegradable waste from Ayala Center Cebu. This partnership facilitates the implementation of national laws on solid waste and promotes livelihood and employment. The program is in compliance with the Republic Act 9003 or the Solid Waste Management Act of the Philippines. (EN22)

Manila Water launched Toka Toka in 2012, an innovative public awareness program on water and wastewater. Toka Toka takes a different angle on water education, being the first environmental movement in the Philippines focused on used water and its effect on rivers and waterways. Water is everyone’s concern, therefore its main message is that we all have a stake —“toka”— in reviving the rivers. The program is part of Manila Water’s extended environmental responsibility and is aligned with the company’s strategy to educate and engage the public on wastewater issues. (EN21) ■

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Manila Water officers and project partners ride boats in the Pasig River to raise public awareness of and participation in the river revival program

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eadership drives Ayala’s sustainability journey. Our pioneering companies and leaders have advocated sustainability and they serve as the group’s benchmark in guiding our initiatives and practices. At Ayala, we are constantly raising the bar on our economic, social, and environmental efforts toward a more sustainable future. In 2005, Manila Water published its first sustainability report and consequently pioneered the practice of sustainability reporting in the Philippines. Ayala Land followed suit and started the trend of sustainability reporting in the real estate industry. Groundbreaking sustainability initiatives for both companies were led by Tony Aquino, former CEO of Manila Water and current President and CEO of Ayala Land. He has led efforts in embedding sustainability in the company’s operations through an understanding of its stakeholders, particularly the underprivileged communities.

ANTONINO T. AQUINO

LEADING BY BEING BETTER

When asked about his personal perspective on sustainability, Tony Aquino emphasizes business continuity and the common good. Quoting a textbook definition of sustainability, he described it as “what you do today must consider what the future will be; you should not sacrifice the future for short-term goals.” Apart from ensuring that a business can continue moving forward, sustainability also means responding to the needs of people. “We want to make sure that everything we do will be something good for all concerned: our shareholders, the communities we serve, and the greater number of Filipinos,” said Aquino. The aim for both Manila Water and Ayala Land was to find the perfect alignment among the three sustainability goals - environmental, social, and business objectives. This approach, according to Aquino, not only makes it possible to do good for others, but also leads to better business results. For Manila Water, sustainable business began with the basics. “You have to make sure that you give 24/7 water supply. The target is clear on social and environmental goals—meeting the needs of people and providing clean and affordable water,” Aquino said. The business goals were eventually achieved soon after, observes Aquino, “Once you improve the

LEADING BY BEING BETTER

lives of the people, achieving the business objective becomes easier.” Aquino recognizes that Ayala Land is probably best known for its high-end residential and office projects and shopping centers, nonetheless he points out how the company is contributing to the growth and development of the country through its wide range of property developments. “Ayala Land implements hundreds of projects every year. For instance, in a construction project, we provide employment for hundreds of people and are contributing to the economic well-being of the country.” Ayala Land ensures that its master-planned communities provide a responsive integrated mix of products that are relevant to the needs of their various users. “Many of the business process outsourcing (BPOs) companies are located within Ayala developments because we are able to provide the environment that they need.” Beyond generating employment, Ayala Land also recognizes that sustainability is about providing people with spaces that uplift the spirit, and offer Filipinos a sense of pride. Through high-quality developments, it provides people the opportunity to enjoy well-managed and well-designed spaces that promote environmental responsibility and social cohesion. “I think that it is important that we provide these green spaces, especially now, when people don’t have much access to public parks”, says Aquino. Many companies have adopted a mindset that supports the principle of sustainability. Aquino believes that sustainability is a natural inclination. “I believe that everybody wants to do good. We do this because it’s the right thing to do.” With Manila Water, it was about harnessing the basic intention to deliver what would be beneficial to more people, exploring opportunities, and evolving along the way. With Ayala Land, it was about ensuring that at every stage of the land development cycle, economic, social, and environmental impacts are considered and the best practices in sustainability are applied. Today, with more and more people talking about inclusive growth, Ayala Land has already started developing products that cater to a broader market segment considering factors such as financing and livelihood, as part of the development process. The company is also

"We want to make sure that everything we do will be something good for all concerned: our shareholders, the communities we serve, and the greater number of Filipinos." pursuing opportunities that will expand its presence geographically to reach more people. It now has developments in new key centers across the country where it can push for sustainable growth. For Aquino, the spirit of sustainability is in looking for creative ways to respond not only to business challenges but to social ones as well. “Sustainability will take root better if the goals are intertwined— environmental, social, and business goals. We become weak if we focus only on one objective.” Thus, he looks forward to fully integrating sustainability into the business supply chain. Both Ayala Land and Mania Water work with host communities in the creation of livelihood programs and integrates local enterprises to their supply chain. Despite the highlights and achievements, Aquino maintains that there is still much to learn as society and technology continue to evolve. “Sustainability is a work in progress,” he says. He believes much can be learned from the customers themselves. “We are moving towards understanding our customers better. We need to engage them to appreciate life as we Filipinos know it and while it continues to evolve.” Manila Water and Ayala Land are examples of how sustainability can translate to gains on a number of levels. Their practices show that sustainability makes good business sense. ■

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LOOKING FORWARD

As the Ayala group transitions to a more strategic sustainability agenda, we continue to regard our stakeholders as partners. Our employees, suppliers, communities, and customers inspire us to keep innovating products, services, and processes. We commit to more frequent and focused engagements with them so that we remain relevant and responsive to their evolving needs. This is also our way of helping educate the general public and getting them involved in the practice of sustainability.

SECTION TITLE

We also commit to further harness the scope and diversity of our businesses to the countryâ&#x20AC;&#x2122;s advantage. We choose to work with responsible partners and catalyze sustainable performance throughout our supply chains. In doing these, we broaden markets and expand the reach of our growth, create widespread benefits, and contribute to a more inclusive approach to development.

We have moved forward in our conglomerate sustainability reporting, obtaining external assurance and thus achieving a B+ Level with the Global Reporting Initiative (GRI). We have taken the required initial steps to fully transition to GRIâ&#x20AC;&#x2122;s G4 Guidelines. We do this to understand the impact of our businesses, guide our strategies and operations, and strengthen our resolve to be more accountable, responsible, and better corporate citizens. â&#x2013;

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G3.1 Content Index STANDARD DISCLOSURES PART I: Profile Disclosures PROFILE DISCLOSURE

DESCRIP TION

LE VEL OF REPORTING

REPORT SECTION AND PAGE NUMBER

1. STRATEGY AND ANALYSIS 1.1

Statement from the most senior decision-maker of the organization.

FULLY

•• JOINT MESSAGE FROM THE CHAIRMAN AND THE PRESIDENT, p. 8-9 •• JOINT MESSAGE FROM THE CHAIRMAN AND THE PRESIDENT, p. 8-9 •• Enhancing Lives, Building a Nation, p. 13-16 •• Managing Risks, p. 28-30

1.2

Description of key impacts, risks, and opportunities.

FULLY

•• ANTONINO T. AQUINO: LEADING BY BEING BETTER, p. 62-63 •• LOOKING FORWARD, p. 64-65 •• Please also refer to the Ayala Corporation Annual Report (AC AR) which is available online at www.ayala.com.ph/press_room_ annual_report.php, p. 10-17

2. ORGANIZATIONAL PROFILE 2.1

Name of the organization.

FULLY

•• ABOUT AYALA, p. 6 •• ABOUT AYALA, p. 6-7

2.2

Primary brands, products, and/or services.

FULLY

•• Enhancing Lives, Building a Nation, p. 13-16 •• AC AR, p. 2-6

2.3

Operational structure of the organization, including main divisions, operating companies, subsidiaries, and joint ventures.

FULLY

2.4

Location of organization’s headquarters.

FULLY

2.5

Number of countries where the organization operates, and names of countries with either major operations or that are specifically relevant to the sustainability issues covered in the report.

FULLY

2.6

Nature of ownership and legal form.

FULLY

•• ABOUT AYALA, p. •• Ayala’s Ownership Structure, p. 7 •• ABOUT AYALA, p. 6-7 •• CONTACT DETAILS, p. 83

•• ABOUT AYALA, p. 6-7

•• ABOUT AYALA, p. 7 •• Ayala’s Ownership Structure, p. 7 •• AC AR, p. 52

2.7

Markets served (including geographic breakdown, sectors served, and types of customers/beneficiaries).

FULLY

•• ABOUT AYALA, p. 6-7 •• AC AR, p. 2-6 •• ABOUT AYALA, p. 6-7

2.8

Scale of the reporting organization.

FULLY

2.9

Significant changes during the reporting period regarding size, structure, or ownership.

FULLY

Awards received in the reporting period.

FULLY

2.10

•• Financial Highlights, p. 17 •• The report includes 9 major subsidiaries and sub-subsidiaries as indicated in Reporting Scope and Boundaries, p. 5. •• JOINT MESSAGE FROM THE CHAIRMAN AND THE PRESIDENT, p. 8-9 •• AC AR, p. 18-25, 47 •• Awards and Recognitions of Ayala, p. 7 •• AC AR, p. 55

G R I G 3 .1 C O N T E N T I N D E X

G3.1 Content Index STANDARD DISCLOSURES PART I: Profile Disclosures PROFILE DISCLOSURE

DESCRIP TION

LE VEL OF REPORTING

REPORT SECTION AND PAGE NUMBER

3. REPORT PARAMETERS 3.1

Reporting period (e.g., fiscal/calendar year) for information provided.

FULLY

•• Reporting Period and Framework, p. 5

3.2

Date of most recent previous report (if any).

FULLY

•• The previous report was released in 2012 covering the period JanuaryDecember 2011.

3.3

Reporting cycle (annual, biennial, etc.)

FULLY

•• ABOUT OUR REPORT, p. 4

3.4

Contact point for questions regarding the report or its contents.

FULLY

•• Reporting Feedback, p. 5

3.5

Process for defining report content.

FULLY

3.6

Boundary of the report (e.g., countries, divisions, subsidiaries, leased facilities, joint ventures, suppliers). See GRI Boundary Protocol for further guidance.

FULLY

•• Reporting Scope and Boundaries, p. 5

3.7

State any specific limitations on the scope or boundary of the report (see completeness principle for explanation of scope).

FULLY

•• Reporting Scope and Boundaries, p. 5

3.8

Basis for reporting on joint ventures, subsidiaries, leased facilities, outsourced operations, and other entities that can significantly affect comparability from period to period and/or between organizations.

FULLY

3.9

Data measurement techniques and the bases of calculations, including assumptions and techniques underlying estimations applied to the compilation of the Indicators and other information in the report. Explain any decisions not to apply, or to substantially diverge from, the GRI Indicator Protocols.

FULLY

•• Data Collection and Analysis, p. 19

3.10

Explanation of the effect of any re-statements of information provided in earlier reports, and the reasons for such restatement (e.g., mergers/acquisitions, change of base years/ periods, nature of business, measurement methods).

FULLY

•• There have been no major re-statements of information. EN3 has been re-stated in gigajoules from million liters in 2011 in order to align with the EN3 definition; however there is no significant effect from this re-statement.

3.11

Significant changes from previous reporting periods in the scope, boundary, or measurement methods applied in the report.

FULLY

•• Please refer to 3.10

3.12

Table identifying the location of the Standard Disclosures in the report.

FULLY

•• G3.1 Content Index, p. 66-78

3.13

Policy and current practice with regard to seeking external assurance for the report.

FULLY

•• Reporting Period and Framework, p. 5

•• Reporting Period and Framework, p. 5 •• Materiality Assessment, p. 19

•• Ayala’s Ownership Structure, p. 7 •• Reporting Scope and Boundaries, p. 5

4. GOVERNANCE, COMMITMENTS, AND ENGAGEMENT •• Board of Directors, p. 23-24

Governance structure of the organization, including committees under the highest governance body responsible for specific tasks, such as setting strategy or organizational oversight.

FULLY

4.2

Indicate whether the Chair of the highest governance body is also an executive officer.

FULLY

4.3

For organizations that have a unitary board structure, state the number and gender of members of the highest governance body that are independent and/or non-executive members.

4.1

•• Board Committees, p. 25-26 •• AC AR, p. 48-50 •• Management, p. 26-27 •• Board of Directors , p. 23-24

FULLY

•• AC AR, p. 49 •• There are three independent directors, all of whom are male.

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G3.1 Content Index STANDARD DISCLOSURES PART I: Profile Disclosures PROFILE DISCLOSURE

DESCRIP TION

LE VEL OF REPORTING

Mechanisms for shareholders and employees to provide recommendations or direction to the highest governance body.

FULLY

4.5

Linkage between compensation for members of the highest governance body, senior managers, and executives (including departure arrangements), and the organization’s performance (including social and environmental performance).

PARTIALLY

4.6

Processes in place for the highest governance body to ensure conflicts of interest are avoided.

FULLY

4.7

Process for determining the composition, qualifications, and expertise of the members of the highest governance body and its committees, including any consideration of gender and other indicators of diversity.

FULLY

4.8

Internally developed statements of mission or values, codes of conduct, and principles relevant to economic, environmental, and social performance and the status of their implementation.

FULLY

4.9

Procedures of the highest governance body for overseeing the organization’s identification and management of economic, environmental, and social performance, including relevant risks and opportunities, and adherence or compliance with internationally agreed standards, codes of conduct, and principles.

FULLY

4.4

4.10

Processes for evaluating the highest governance body’s own performance, particularly with respect to economic, environmental, and social performance.

REPORT SECTION AND PAGE NUMBER

•• Communicating with Our Stakeholders, p. 28 •• AC AR, p. 54 •• Board Meetings, p. 26 •• Management, p. 26-27 •• Living by Our Values, p. 27-28 •• AC AR, p. 48, 50, 52 •• Board of Directors, p. 23-24 •• Nomination Committee, p. 25 •• Ayala’s Policy on Sustainability, p. 14 •• Living by Our Values, p. 27-28 •• ONE TEAM, p. 44 •• AC AR, p. 44, 55 •• Finance Committee, p. 26 •• Management, p. 26-27 •• Managing Risks, p. 28-30 •• Board of Directors, p. 23

PARTIALLY

•• Board Committees, p. 25-26 •• Board Meetings, p. 26 •• Ayala’s Policy on Sustainability, p. 14

4.11

Explanation of whether and how the precautionary approach or principle is addressed by the organization.

•• Management, p. 26-27

FULLY

•• Managing Risks, p. 28-30 •• Risk Management Approach, p. 31 •• AC AR, p. 50-51

4.12

Externally developed economic, environmental, and social charters, principles, or other initiatives to which the organization subscribes or endorses.

FULLY

•• Delivering on Our Commitments, p. 22-23 •• AC AR, p. 55 •• ABOUT AYALA, p. 6-7 •• Please refer to data reported by our subsidiaries available at www.ayala.com.ph/CSR_GRI.php

Memberships in associations (such as industry associations) and/or national/international advocacy organizations in which the organization: * Has positions in governance bodies; * Participates in projects or committees; * Provides substantive funding beyond routine membership dues; or * Views membership as strategic.

FULLY

4.14

List of stakeholder groups engaged by the organization.

FULLY

•• Stakeholder Engagement, p. 18-19

4.15

Basis for identification and selection of stakeholders with whom to engage.

FULLY

•• Stakeholder Engagement, p. 18-19

4.16

Approaches to stakeholder engagement, including frequency of engagement by type and by stakeholder group.

FULLY

•• Stakeholder Engagement, p. 18-19

4.13

•• BPI Integrated Annual and Sustainability Report (IASR), p. 8 •• Cebu Holdings IASR p. 117 •• The Ayala Corporation is a holding company and does not participate in industry associations.

G R I G 3 .1 C O N T E N T I N D E X

G3.1 Content Index STANDARD DISCLOSURES PART I: Profile Disclosures PROFILE DISCLOSURE

4.17

DESCRIP TION

Key topics and concerns that have been raised through stakeholder engagement, and how the organization has responded to those key topics and concerns, including through its reporting.

LE VEL OF REPORTING

FULLY

REPORT SECTION AND PAGE NUMBER

•• Stakeholder Engagement, p. 18-21

STANDARD DISCLOSURES PART II: Disclosures on Management Approach (DMAs) G3.1 DMAs

DMA EC

Aspects

DMA EN

Aspects

DMA LA

Aspects

DESCRIP TION

LE VEL OF REPORTING

REPORT SECTION AND PAGE NUMBER

Disclosure on Management Approach EC Economic performance

FULLY

•• Ayala’s Policy on Sustainability, p. 14

Market presence

FULLY

•• Board Committees, p. 25-26

Indirect economic impacts

FULLY

•• Managing Risks, p. 28-30 •• ONE TEAM, p. 44

Disclosure on Management Approach EN Materials

FULLY

Energy

FULLY

•• Ayala’s Policy on Sustainability, p. 14

Water

FULLY

•• ONE PLANET, p. 54

Biodiversity

FULLY

Emissions, effluents and waste

FULLY

•• Environmental Stewardship Within Our Operations, p. 54-56

Products and services

FULLY

Compliance

FULLY

Overall

FULLY

•• Enriching Biodiversity, p. 58-59 •• Working with Others on Environmental Efforts, p. 60-61

Disclosure on Management Approach LA Employment

FULLY

•• Ayala’s Policy on Sustainability, p. 14

Labor/management relations

FULLY

•• Stakeholder Engagement, p. 21

Occupational health and safety

FULLY

•• Board Committees, p. 25-26

Training and education

FULLY

Diversity and equal opportunity

FULLY

Equal remuneration for women and men

FULLY

•• Managing Risks, p. 28-30 •• Communicating with Our Stakeholders, p. 28 •• ONE TEAM, p. 44 •• Prioritizing Health and Safety, p. 45-47 •• Preparing Our Future Leaders, p. 47-49

DMA HR

Aspects

Disclosure on Management Approach HR Investment and procurement practices

FULLY

Non-discrimination

FULLY

Freedom of association and collective bargaining

FULLY

•• Ayala’s Policy on Sustainability, p. 14

Child labor

FULLY

•• Living by Our Values, p. 27-28

Prevention of forced and compulsory labor

FULLY

Security practices

FULLY

Indigenous rights

FULLY

Assessment

FULLY

Remediation

FULLY

•• Managing Risks, p. 28-30 •• ONE COMMUNITY, p. 33-34 •• Creating a Strong Corporate Culture, p. 49

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G3.1 Content Index STANDARD DISCLOSURES PART II: Disclosures on Management Approach (DMAs) G3.1 DMAs

DMA SO

Aspects

DMA PR

Aspects

DESCRIP TION

LE VEL OF REPORTING

REPORT SECTION AND PAGE NUMBER

Disclosure on Management Approach SO Local communities

FULLY

•• Ayala’s Policy on Sustainability, p. 14

Corruption

FULLY

•• ONE COMMUNITY, p. 33-34

Anti-competitive behavior

FULLY

•• Creating a Strong Corporate Culture, p. 49

Compliance

FULLY

•• Supporting Employee Volunteerism p. 50

Disclosure on Management Approach PR Customer health and safety

FULLY

Product and service labeling

FULLY

Marketing communications

FULLY

Customer privacy

FULLY

Compliance

FULLY

•• Ayala’s Policy on Sustainability, p. 14 •• Managing Risks, p. 28-30 •• Connecting with Customers, p. 40-41 •• Protecting Our Customers, p. 41

STANDARD DISCLOSURES PART III: Performance Indicators PERFORMANCE INDICATOR

DESCRIP TION

LE VEL OF REPORTING

REPORT SECTION AND PAGE NUMBER

ECONOMIC ECONOMIC PERFORMANCE

EC1

EC2

•• Enhancing Lives, Building a Nation, p. 13-16

Direct economic value generated and distributed, including revenues, operating costs, employee compensation, donations and other community investments, retained earnings, and payments to capital providers and governments.

PARTIALLY

Financial implications and other risks and opportunities for the organization’s activities due to climate change.

PARTIALLY

•• Financial Highlights, p. 17 •• AC AR, p. 8-9, 26, 28, 30, 32, 34, 36, 38 •• Managing Risks, p. 28-30 •• Rising to the Challenge of Climate Change, p. 59-60 •• General Standard Employee Benefits, p. 50

EC3

EC4

Coverage of the organization’s defined benefit plan obligations.

Significant financial assistance received from government.

PARTIALLY

FULLY

•• Subsidiaries within the Group offer different types of benefit plans, some of which include fully covered benefit plans with contributions from the Company. •• We participate in private-public partnerships in the Philippines. However, we are not a Philippine government controlled or owned corporation and do not receive assistance from such arrangements.

MARKET PRESENCE •• ONE TEAM, p. 44

EC5

Range of ratios of standard entry level wage by gender compared to local minimum wage at significant locations of operation.

PARTIALLY

EC6

Policy, practices, and proportion of spending on locally-based suppliers at significant locations of operation.

PARTIALLY

•• General Standard Employee Benefits, p. 50 •• ONE COMMUNITY, p. 34 •• Making Business Inclusive, p. 34-35

G R I G 3 .1 C O N T E N T I N D E X

G3.1 Content Index STANDARD DISCLOSURES PART III: Performance Indicators PERFORMANCE INDICATOR

DESCRIP TION

LE VEL OF REPORTING

REPORT SECTION AND PAGE NUMBER

•• ONE COMMUNITY, p. 34

EC7

Procedures for local hiring and proportion of senior management hired from the local community at significant locations of operation.

•• Facilitating Prosperity for All, p. 35-37

PARTIALLY

•• AC AR, p. 57-60 •• All members of the Board and senior management team are Filipinos, with the exception of one member of the Board who is of Japanese nationality.

INDIRECT ECONOMIC IMPACTS

EC8

EC9

Development and impact of infrastructure investments and services provided primarily for public benefit through commercial, in-kind, or pro bono engagement.

FULLY

Understanding and describing significant indirect economic impacts, including the extent of impacts.

FULLY

•• Enhancing Lives, Building a Nation, p. 13-16 •• Offering Environmentally Responsible Products and Services, p. 56-58 •• LOOKING FORWARD, p. 64-65 •• AC AR, p. 10-17

ENVIRONMENTAL MATERIALS •• Environmental Stewardship Within Our Operations, p. 54-56

EN1

Materials used by weight or volume.

PARTIALLY

•• Please refer to data reported by our subsidiaries available at www.ayala.com.ph/CSR_GRI.php •• Ayala Land IASR, p. 68 •• Cebu Holdings IASR, p. 81 •• Manila Water Sustainability Report (SR), p. 52-53

ENERGY EN3

Direct energy consumption by primary energy source.

PARTIALLY

•• Direct Energy Consumption in Gigajoules, p. 56

EN4

Indirect energy consumption by primary source.

PARTIALLY

•• Indirect Energy Consumption in Million KWH, p. 56

EN5

Energy saved due to conservation and efficiency improvements.

FULLY

•• Offering Environmentally Responsible Products and Services, p. 56-58

EN6

Initiatives to provide energy-efficient or renewable energy based products and services, and reductions in energy requirements as a result of these initiatives.

PARTIALLY

•• Offering Environmentally Responsible Products and Services, p. 56-58

EN7

Initiatives to reduce indirect energy consumption and reductions achieved.

FULLY

•• Environmental Stewardship Within Our Operations, p. 54-56 •• Offering Environmentally Responsible Products and Services, p. 56-58

WATER •• Water Consumption (million cu. meters), p. 58.

EN8

Total water withdrawal by source.

FULLY

•• Except for Manila Water, water for all operations was sourced from water utilities.

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G3.1 Content Index STANDARD DISCLOSURES PART III: Performance Indicators PERFORMANCE INDICATOR

DESCRIP TION

LE VEL OF REPORTING

REPORT SECTION AND PAGE NUMBER

•• Environmental Stewardship Within Our Operations, p. 55

EN9

Water sources significantly affected by withdrawal of water.

PARTIALLY

•• Please refer to data reported by our subsidiaries available at www.ayala.com.ph/CSR_GRI.php •• Ayala Land IASR, p. 71 •• Cebu Holdings IASR, p. 84-85 •• Manila Water SR, p. 52-53

BIODIVERSITY EN11

Location and size of land owned, leased, managed in, or adjacent to, protected areas and areas of high biodiversity value outside protected areas.

PARTIALLY

EN12

Description of significant impacts of activities, products, and services on biodiversity in protected areas and areas of high biodiversity value outside protected areas.

PARTIALLY

EN13

Habitats protected or restored.

PARTIALLY

EN14

Strategies, current actions, and future plans for managing impacts on biodiversity.

PARTIALLY

EN15

Number of IUCN Red List species and national conservation list species with habitats in areas affected by operations, by level of extinction risk.

PARTIALLY

•• Enriching Biodiversity, p. 58-59

EMISSIONS, EFFLUENTS AND WASTE EN16

Total direct and indirect greenhouse gas emissions by weight.

FULLY

•• GHG Emissions CO2 Equivalent (Tons), p.58 •• Please refer to data reported by our subsidiaries available at www.ayala.com.ph/CSR_GRI.php

EN17

Other relevant indirect greenhouse gas emissions by weight.

PARTIALLY

•• BPI IASR, p. 77 •• Cebu Holdings IASR, p. 93 •• Globe IASR, p. 103 •• Scope 3 emissions have been reported where this data is available. •• Environmental Stewardship Within Our Operations, p. 54-56

EN18

Initiatives to reduce greenhouse gas emissions and reductions achieved.

FULLY

•• Offering Environmentally Responsible Products and Services, p. 56-58 •• Working with Others on Environmental Efforts, p. 60-61 •• Reductions in GHG Emissions CO2 Equivalent (tons), p. 59

EN21

Total water discharge by quality and destination.

PARTIALLY

•• Environmental Stewardship Within Our Operations, p. 54-56 •• Working with Others on Environmental Efforts, p. 60-61 •• Please refer to data reported by our subsidiaries available at www.ayala.com.ph/CSR_GRI.php •• Ayala Land IASR, p. 71 •• Cebu Holdings IASR, p. 89 •• Manila Water SR, p. 67

G R I G 3 .1 C O N T E N T I N D E X

G3.1 Content Index STANDARD DISCLOSURES PART III: Performance Indicators PERFORMANCE INDICATOR

DESCRIP TION

LE VEL OF REPORTING

REPORT SECTION AND PAGE NUMBER

•• Environmental Stewardship Within Our Operations, p. 54-56 •• Working with Others on Environmental Efforts, p. 60-61 •• Production of Waste (Tons), p. 59

EN22

Total weight of waste by type and disposal method.

PARTIALLY

•• Please refer to data reported by our subsidiaries available at www.ayala.com.ph/CSR_GRI.php •• Ayala Land IASR, p. 72 •• Cebu Holdings IASR, p. 88 •• Manila Water SR, p. 52-53, 68-69

EN24

EN25

Weight of transported, imported, exported, or treated waste deemed hazardous under the terms of the Basel Convention Annex I, II, III, and VIII, and percentage of transported waste shipped internationally.

PARTIALLY

Identity, size, protected status, and biodiversity value of water bodies and related habitats significantly affected by the reporting organization’s discharges of water and runoff.

PARTIALLY

•• Please refer to data reported by our subsidiaries available at www.ayala.com.ph/CSR_GRI.php •• Manila Water SR, p. 68-69

•• Enriching Biodiversity, p. 58-59

PRODUCTS AND SERVICES •• Ayala’s Policy on Sustainability, p. 14

EN26

EN27

Initiatives to mitigate environmental impacts of products and services, and extent of impact mitigation.

FULLY

•• Offering Environmentally Responsible Products and Services, p. 56-57 •• Working with Others on Environmental Efforts, p. 60-61

Percentage of products sold and their packaging materials that are reclaimed by category.

PARTIALLY

•• Working with Others on Environmental Efforts, p. 60

Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations.

FULLY

•• There were no significant fines in 2012; however Honda Cars Pasig received minor fines.

COMPLIANCE EN28

OVERALL •• Environmental Stewardship Within Our Operations, p. 54-56

EN30

Total environmental protection expenditures and investments by type.

PARTIALLY

•• Please refer to data reported by our subsidiaries available at www.ayala.com.ph/CSR_GRI.php •• Ayala Land IASR, p. 63 •• Cebu Holdings IASR, p. 60 •• Globe IASR, p. 104 •• Manila Water SR, p. 69

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G3.1 Content Index STANDARD DISCLOSURES PART III: Performance Indicators PERFORMANCE INDICATOR

DESCRIP TION

LE VEL OF REPORTING

REPORT SECTION AND PAGE NUMBER

SOCIAL: LABOR PRACTICES AND DECENT WORK EMPLOYMENT •• ABOUT AYALA, p. 6-7

LA1

Total workforce by employment type, employment contract, and region, broken down by gender.

PARTIALLY

•• Workforce by Gender, p. 46 •• Workforce by Region, p. 46 •• Workforce by Employment Type, p. 46

LA2

LA3

Total number and rate of new employee hires and employee turnover by age group, gender, and region. Benefits provided to full-time employees that are not provided to temporary or part-time employees, by major operations.

•• Employee Turnover by Gender, p. 48

PARTIALLY

•• Employee Turnover by Age Group, p. 48 •• Employee Turnover by Region, p. 49

FULLY

•• General Standard Employee Benefits, p. 50 •• Prioritizing Health and Safety, p. 45-47 •• General Standard Employee Benefits, p. 50

LA15

Return to work and retention rates after parental leave, by gender.

PARTIALLY

•• Please refer to data reported by our subsidiaries available at www.ayala.com.ph/CSR_GRI.php •• BPI IASR, p. 97 •• Cebu Holdings IASR, p. 106 •• Manila Water SR, p. 32-33

LABOR/MANAGEMENT RELATIONS LA4

Percentage of employees covered by collective bargaining agreements.

FULLY

•• Percentages of Employees Covered by Collective Bargaining Agreements, p. 50

OCCUPATIONAL HEALTH AND SAFETY •• Prioritizing Health and Safety, p. 45-47

LA6

Percentage of total workforce represented in formal joint management-worker health and safety committees that help monitor and advise on occupational health and safety programs.

PARTIALLY

•• Please refer to data reported by our subsidiaries available at www.ayala.com.ph/CSR_GRI.php •• Ayala Land IASR, p. 82 •• Cebu Holdings IASR, p. 105 •• Globe IASR, p. 78 •• Manila Water SR, p. 38 •• Prioritizing Health and Safety p. 45-47

LA7

Rates of injury, occupational diseases, lost days, and absenteeism, and number of work-related fatalities by region and by gender.

PARTIALLY

•• Please refer to data reported by our subsidiaries available at www.ayala.com.ph/CSR_GRI.php •• Ayala Land IASR p. 82-84 •• BPI IASR, p. 98 •• Globe IASR, p. 78 •• Manila Water SR, p. 38-39

G R I G 3 .1 C O N T E N T I N D E X

G3.1 Content Index STANDARD DISCLOSURES PART III: Performance Indicators PERFORMANCE INDICATOR

DESCRIP TION

LE VEL OF REPORTING

REPORT SECTION AND PAGE NUMBER

•• Prioritizing Health and Safety, p. 45-47

LA8

Education, training, counseling, prevention, and risk-control programs in place to assist workforce members, their families, or community members regarding serious diseases.

•• Please refer to data reported by our subsidiaries available at www.ayala.com.ph/CSR_GRI.php

PARTIALLY

•• Ayala Land IASR, p. 83, 85 •• BPI IASR, p. 98 •• Cebu Holdings IASR, p. 105 •• IMI IASR, p. 32 •• Manila Water SR, p. 38-39

TRAINING AND EDUCATION

LA10

Average hours of training per year per employee by gender, and by employee category.

FULLY

•• Average Training Hours, p. 51

•• Preparing Our Future Leaders, p. 47-49

LA11

Programs for skills management and lifelong learning that support the continued employability of employees and assist them in managing career endings.

•• Please refer to data reported by our subsidiaries available at www.ayala.com.ph/CSR_GRI.php

PARTIALLY

•• Ayala Land IASR, p. 85 •• BPI IASR, p. 92 •• Globe IASR, p. 80 •• IMI IASR, p. 32 •• Manila Water SR, p. 33, 35-36

LA12

Percentage of employees receiving regular performance and career development reviews, by gender.

FULLY

•• Total Percentage of Employees Who Have Undergone Formal Performance Or Development Reviews, p. 49

DIVERSITY AND EQUAL OPPORTUNITY •• Please refer to LA1.

LA13

Composition of governance bodies and breakdown of employees per employee category according to gender, age group, minority group membership, and other indicators of diversity.

FULLY

•• Composition of Governance Bodies And Breakdown of Employee Per Category According to Gender and Age Group, p. 51 •• AC AR, p. 56-57

EQUAL REMUNERATION FOR WOMEN AND MEN LA14

Ratio of basic salary and remuneration of women to men by employee category, by significant locations of operation.

•• ONE TEAM, p. 44

FULLY

•• General Standard Employee Benefits, p. 50

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G3.1 Content Index STANDARD DISCLOSURES PART III: Performance Indicators PERFORMANCE INDICATOR

DESCRIP TION

LE VEL OF REPORTING

REPORT SECTION AND PAGE NUMBER

FULLY

•• There were no incidents of discrimination reported in 2012.

FULLY

•• There were no significant risks for freedom of association and collective bargaining in 2012. We have policies to protect freedom of association and collective bargaining in accordance with Philippine laws.

FULLY

•• There were no significant risks for child labor identified in 2012. We have a strict policy against child labor in accordance with Philippine laws.

FULLY

•• There were no significant risks for forced labor identified in 2012. We have a strict policy against forced labor in accordance with Philippine laws.

SOCIAL: HUMAN RIGHTS NON-DISCRIMINATION HR4

Total number of incidents of discrimination and corrective actions taken.

FREEDOM OF ASSOCIATION AND COLLECTIVE BARGAINING

HR5

Operations and significant suppliers identified in which the right to exercise freedom of association and collective bargaining may be violated or at significant risk, and actions taken to support these rights.

CHILD LABOR

HR6

Operations and significant suppliers identified as having significant risk for incidents of child labor, and measures taken to contribute to the effective abolition of child labor.

PREVENTION OF FORCED AND COMPULSORY LABOR

HR7

Operations and significant suppliers identified as having significant risk for incidents of forced or compulsory labor, and measures to contribute to the elimination of all forms of forced or compulsory labor.

SECURITY PRACTICES •• Prioritizing Health and Safety, p. 47

HR8

Percentage of security personnel trained in the organization’s policies or procedures concerning aspects of human rights that are relevant to operations.

PARTIALLY

•• Please refer to data reported by our subsidiaries available at www.ayala.com.ph/CSR_GRI.php •• Ayala Land IASR, p. 82 •• BPI IASR, p. 99 •• Globe IASR, p. 78 •• Manila Water SR, p. 39

INDIGENOUS RIGHTS HR9

Total number of incidents of violations involving rights of indigenous people and actions taken.

FULLY

•• There were no incidents of violations involving rights of indigenous people reported in 2012.

ASSESSMENT •• Please refer to 4.8

HR10

Percentage and total number of operations that have been subject to human rights reviews and/or impact assessments.

PARTIALLY

Number of grievances related to human rights filed, addressed and resolved through formal grievance mechanisms.

FULLY

•• We did not conduct any formal human rights reviews and impact assessments in 2012, however we have policies to protect and promote human rights.

REMEDIATION HR11

•• There were no grievances related to human rights filed, addressed, or resolved in 2012.

G R I G 3 .1 C O N T E N T I N D E X

G3.1 Content Index STANDARD DISCLOSURES PART III: Performance Indicators PERFORMANCE INDICATOR

DESCRIP TION

LE VEL OF REPORTING

SO1

Percentage of operations with implemented local community engagement, impact assessments, and development programs.

FULLY

SO9

Operations with significant potential or actual negative impacts on local communities.

FULLY

SO10

Prevention and mitigation measures implemented in operations with significant potential or actual negative impacts on local communities.

REPORT SECTION AND PAGE NUMBER

SOCIAL: SOCIETY LOCAL COMMUNITIES •• ONE COMMUNITY, p. 34 •• Making Business Inclusive, p. 34-35 •• Facilitating Prosperity for All, p. 35-37 •• Investing in the Future, p. 37-38 •• Building the Country’s Talent Pipeline, p. 38-39

FULLY

•• All operations implement community engagement, assessments, and programs.

CORRUPTION SO2

Percentage and total number of business units analyzed for risks related to corruption.

PARTIALLY

SO3

Percentage of employees trained in organization’s anticorruption policies and procedures.

PARTIALLY

SO4

Actions taken in response to incidents of corruption.

•• Please refer to 4.8 •• No business units were analyzed for risks related to corruption in 2012; however we implement anti-corruption policies in accordance with our Code of Conduct.

FULLY

•• There were no reported incidents of corruption during 2012.

Total number of legal actions for anti-competitive behavior, anti-trust, and monopoly practices and their outcomes.

FULLY

•• There were no legal actions for anti-competitive behavior, anti-trust, and monopoly practices during 2012.

Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with laws and regulations.

FULLY

•• There were no significant fines or non-monetary sanctions during 2012.

ANTI-COMPETITIVE BEHAVIOR SO7 COMPLIANCE SO8

SOCIAL: PRODUCT RESPONSIBILITY CUSTOMER HEALTH AND SAFETY •• Protecting Our Customers, p. 41

PR1

Life cycle stages in which health and safety impacts of products and services are assessed for improvement, and percentage of significant products and services categories subject to such procedures.

PARTIALLY

•• Please refer to data reported by our subsidiaries available at www.ayala.com.ph/CSR_GRI.php •• Ayala Land IASR, p. 75, 83 •• Cebu Holdings IASR, p. 111 •• Manila Water SR, p. 52 •• Protecting Our Customers, p. 41

PR2

Total number of incidents of non-compliance with regulations and voluntary codes concerning health and safety impacts of products and services during their life cycle, by type of outcomes.

PARTIALLY

•• Please refer to data reported by our subsidiaries available at www.ayala.com.ph/CSR_GRI.php •• Ayala Land IASR, p. 88 •• Globe IASR, p. 49 •• Manila Water SR, p. 42-44

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G3.1 Content Index STANDARD DISCLOSURES PART III: Performance Indicators PERFORMANCE INDICATOR

DESCRIP TION

LE VEL OF REPORTING

REPORT SECTION AND PAGE NUMBER

PRODUCT AND SERVICE LABELING •• Connecting with Customers, p. 40-41

Type of product and service information required by procedures, and percentage of significant products and services subject to such information requirements.

PR3

PARTIALLY

•• Please refer to data reported by our subsidiaries available at www.ayala.com.ph/CSR_GRI.php •• Ayala Land IASR, p. 87 •• Cebu Holdings IASR, p. 111 •• Globe IASR, p. 49 •• Manila Water SR, p. 49 •• Connecting with Customers, p. 40-41

PR4

Total number of incidents of non-compliance with regulations and voluntary codes concerning product and service information and labeling, by type of outcomes.

FULLY

•• There were no incidents of noncompliance in 2012.

PR5

Practices related to customer satisfaction, including results of surveys measuring customer satisfaction.

FULLY

•• Connecting with Customers, p. 40-41

MARKETING COMMUNICATIONS •• Connecting with Customers, p. 40-41

Programs for adherence to laws, standards, and voluntary codes related to marketing communications, including advertising, promotion, and sponsorship.

PR6

•• Please refer to data reported by our subsidiaries available at www.ayala.com.ph/CSR_GRI.php

PARTIALLY

•• Ayala Land IASR, p. 87 •• Cebu Holdings IASR, p. 111 •• Globe IASR, p. 49 •• IMI IASR, p. 33 •• Manila Water SR, p. 49

Total number of incidents of non-compliance with regulations and voluntary codes concerning marketing communications, including advertising, promotion, and sponsorship by type of outcomes.

PR7

•• Connecting with Customers, p. 40-41

FULLY

•• There were no incidents of noncompliance concerning marketing communications in 2012.

CUSTOMER PRIVACY •• Connecting with Customers, p. 40-41

Total number of substantiated complaints regarding breaches of customer privacy and losses of customer data.

PR8

FULLY

•• There were no substantial complaints regarding customer privacy and customer data reported in 2012.

COMPLIANCE Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services.

PR9

•• Connecting with Customers, p. 40-41

FULLY

•• There were no significant fines for non-compliance of laws concerning use of products and services received in 2012.

For cross references to subsidiaries, we refer to the 2012 Integrated Annual & Sustainability Report (IASR) or Sustainability Report (SR) of the particular subsidiary.

Fully reported

Partially reported

TOTAL

Change from 2011: 29 (69% increase)

EXTERNAL ASSURANCE

External Assurance

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External Assurance

G R I A P P L I C AT I O N L E V E L C H E C K S TAT E M E N T

GRI Application Level Check Statement

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ACKNOWLEDGEMENT Project Managers

Consultants

Delfin C. Gonzalez, Jr. Catherine Hufana-Ang

Drink Communications Philippine Business for the Environment SusDev Global Ltd.

Editorial Team Corporate Communications Corporate Strategy and Development

Concept, Design, and Layout Medium3

2012 SUSTAINABILITY COUNCIL Ayala Corporation

Bank of the Philippine Islands

John Eric T. Francia Delfin C. Gonzalez, Jr. John Philip S. Orbeta

Florendo Maranan Diane Faith Figueroa

Catherine Hufana-Ang Emily de Lara Guillermo Luz Norma Torres

Cebu Holdings, Inc. Vera Alejandria Noel Alicaya Fraulein Quijada

AC Energy Holdings, Inc.

Globe Telecom, Inc.

Ronald Goseco Princess Marie Tayag

Ma. Yolanda Crisanto Carmela David Kristel Or

Ayala Foundation, Inc. Maria Lourdes Heras-de Leon Nature Marie Calderon Jin Paul De Guzman

Ayala Land, Inc. Jorge Marco Anna Maria Gonzales Suzette Naval

Ayala Automotive Holdings Corporation Jenara Rosanna Ong Patricia Adrias

Integrated Micro-Electronics, Inc. Frederick Blancas Maribeth Gamao Jerry Jaquilmo Eleanor Misa Nancy Talucod

LiveIt Investments, Ltd. Fatima Agbayani

Manila Water Company, Inc. Ferdinand Dela Cruz Carla May Kim Dianna Karenina Felisario

Photographs used in this report were submitted by the Ayala Sustainability Council

I TI L E A C K N O W L E D G E M E N T A N D C O NSTEACCTTI ODNE T A S

CONTACT DETAILS Our key sustainability officers are:

Delfin C. Gonzalez, Jr.

Managing Director and Chief Finance Officer Chief Sustainability Officer

Catherine Hufana-Ang

Head, Group Risk Management Program Director for Sustainability For general inquiries on the sustainability initiatives of the Ayala group, you may email sustainability@ayala.com.ph. Inquiries on specific sustainability projects may be directed to the following:

Ayala Corporation

Bank of the Philippine Islands

Corporate Strategy 34F Tower One, Ayala Triangle Ayala Avenue, Makati City (632) 908 3000 www.ayala.com.ph

Sustainability Office 16F BPI Building, 6768 Ayala Avenue corner Paseo de Roxas, Makati City (632) 845 5718 www.bpiexpressonline.com

Ayala Foundation, Inc.

Cebu Holdings, Inc.

10F BPI Building 6768 Ayala Avenue corner Paseo de Roxas Makati City (632) 752 1101 www.ayalafoundation.org

7F Cebu Holdings Center Cebu Business Park, Cebu City (6332) 231 5301 www.cebuholdings.com

Ayala Land, Inc. Corporate Communications 30F Tower One, Ayala Triangle Ayala Avenue, Makati City (632) 908 3000 www.ayalaland.com.ph

Ayala Automotive Holdings Corporation Honda Cars Makati, Inc. Central Marketing Services Magallanes Commercial Center, Makati City (632) 902 9393 www.hondamakati.com.ph

Isuzu Automotive Dealership, Inc. Central Marketing Services Alabang-Zapote Road corner Acacia Avenue Ayala Alabang, Muntinlupa City (632) 807 1788 www.isuzuautodealer.com.ph

Globe Telecom, Inc. Corporate Communications 26F The Globe Tower 32nd Street corner 7th Avenue Bonifacio Global City, Taguig 1634 www.globe.com.ph

Integrated Micro-Electronics, Inc. Strategic Planning and Marketing 103 Trade Avenue corner Technology Avenue Laguna Technopark, Bi単an, Laguna (632) 756 6840 local 3631 www.global-imi.com

LiveIt Investments, Ltd. 33F Tower One, Ayala Triangle Ayala Avenue, Makati City (632) 908 3455

Manila Water Company, Inc. Sustainable Development Department Corporate Strategic Affairs Group Basement, MWSS Administration Building 489 Katipunan Road, Balara, Quezon City (632) 917 5900 local 1565 (632) 981 8121 www.manilawater.com

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2012 SUSTAINABILITY REPORTS Our companiesâ&#x20AC;&#x2122; individual sustainability reports are available for download at www.ayala.com.ph and their respective websites

Ayala Land, Inc.

Cebu Holdings, Inc.

Bank of the Philippine Islands

2012 Integrated Annual and Sustainability Report A+

2012 Integrated Annual and Sustainability Report A Self-declared

2012 Integrated Annual and Sustainability Report B Self-declared

Globe Telecom, Inc.

Integrated Micro-Electronics, Inc.

2012 Integrated Annual and Sustainability Report B+

2012 Integrated Annual and Sustainability Report B Self-declared

Manila Water Company, Inc.

2012 Sustainability Report A Self-declared

SECTION TITLE

The Ayala Corporation 2012 Sustainability Report is printed on Cocoon; 250 gsm for the cover and 90 gsm for the inside pages. Cocoon is an innovative range of extra white certified FSC® 100% recycled papers, and is produced 100% ecologically using advanced technology — giving it the appearance and printing qualities of a paper made from virgin fiber, but with far superior environmental credentials. ArjoWiggins, the maker of Cocoon, is certified FSC® compliant, using only wood pulps from well-managed forests to reduce impact on the environment.

AYALA CORPORATION 34F Tower One, Ayala Triangle, Ayala Avenue, Makati City 1226 Philippines www.ayala.com.ph

AYA L A C O R P O R AT I O N

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