Annex A to the SEC Form 17-A: SRC Sustainability Report Contextual Information Company Details Name of Organization
Seafront Resources Corporation (SPM or SRC)
Location of Headquarters
7F JMT Bldg. ADB Avenue, Ortigas Center, Pasig City
Location of Operations Report Boundary: Legal entities (e.g. subsidiaries) included in this report*
Pasig City, Metro Manila; Bataan, Philippines This report mainly covers SRC’s business as a Holding Company and its investment in Hermosa Ecozone Development Corporation (HEDC).
Business Model, including Primary Activities, Brands, Products, and Services
SRC, as a holding company, owns investments in shares of stocks of HEDC and in various shares of stocks of companies listed in the Philippine Stock Exchange.
Reporting Period
January 1 to December 31, 2019
Highest Ranking Person responsible for this report
Milagros V. Reyes - President
Materiality Process Explain how you applied the materiality principle (or the materiality process) in identifying your material topics As a holding Company, SRC has very minimal operations. Its sustainability focus was to ensure that its investment in capital market and business venture would yield optimum values for its shareholders. For this report, the material topics that were identified were those relating to economic impact and how the Company mitigates risks and recognizes opportunities. In succeeding Sustainability Reports, the following additional steps will be employed to identify other material topics: a) Identification – this involves discussion on sustainability issues and how the Company can focus its efforts on crafting its sustainability agenda; b) Prioritization – this entails determination and prioritization of the material topics based on the relevance and degree of impact to business’ operations; and c) Validation – this pertains to the process of gathered pertinent data to further deliberate on the topic and validate results. SRC 2019 Sustainability Report
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ECONOMIC Economic Performance Direct Economic Value Generated and Distributed Disclosure Direct economic value generated (revenue)* Direct economic value distributed: a. Operating costs b. Taxes given to government
Amount 34,208,296 2,216,330 2,062,991 153,339
Units PhP PhP PhP PhP
* Direct economic value generated (revenue) and operating costs includes SRC’s revenues and operating costs from its investments in capital markets and in Hermosa Ecozone Development Corporation (HEDC).
Direct Economic Value Discussion on Impact, Risks, and Management Approach Seafront Resources Corporation (SPM or SRC) was registered with the Securities and Exchange Commission (SEC) on April 16, 1970 as an oil exploration and production company. On October 18, 1996, the Company amended its Articles of Incorporation which provides for the revision of its primary purpose from engaging in the business of oil exploration and production into a holding company. On January 31, 1997, the Company entered into a Project Shareholders’ Agreement with five other companies led by Investment and Capital Corporation of the Philippines and Penta Capital Investment Corporation to develop 500 to 600 hectares of raw land in Hermosa, Bataan into a new township consisting of industrial estates, residential communities, a golf and country club and a commercial center. HEDC started its land development in 2002 and has developed a total of 162 hectares in the Industrial Area. The remaining 323 hectares is allocated for Leisure Area. Initial sale of lot was at Php1,400/sqm in 2007. Sales started to pick up from 2017 to 2019. As of December 2019, HEDC sold a total of 717,439 sqm lots for a gross revenue of Php1.953B since it started selling in 2007. HEDC has already declared and paid a total of Php469M in dividends, wherein SRC received it’s share in the amount of Php52.62M. SRC’s management and administration are done by its affiliate Company, PetroEnergy Resources Corporation (PERC). PERC oversees the financial, treasury, legal, and administrative functions of SRC. As a holding company, SRC has very minimal to no environmental and social impact. However, its generated economic value, which include taxes paid to government, indirectly contributes to social development projects of host local government units where it operates. SRC recognizes the following risks and implements several management approaches to mitigate the identified risks. (1) Political, Economic, and Legal Risks in the Philippines As an emerging market, the Philippines is exposed to various political and economic risks that may affect the Company. Over the years, the country was met with political instability brought by mass demonstrations, military coup, and election-related issues. These scenarios undeniably affect the Philippine economy resulting in negative impact such as decline in Peso, higher interest rates , increased unemployment, greater volatility and lower value of stock market, lower credit rating of the country, and SRC 2019 Sustainability Report
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the reduction of the country’s foreign currency reserves. Any negative impact may also pose a negative effect to SRC’s financial performance. (2) Equity Partnership Risk The Company entered into a Project Shareholder’s Agreement with five other companies led by Investment and Capital Corporation of the Philippines and Penta Capital Investment Corporation to develop 500-600 hectares of raw land in Hermosa, Bataan. Into a township consisting of industrial estates, residential communities, a golf and country club and a commercial center. This situation may involve special risks associated with the possibility that the equity partner (i) may have economic or business interests or goals that are inconsistent with those of the Company; (ii) take actions contrary to the interests of the Company; (iii) be unable or unwilling to fulfill its obligations under the Project Shareholder’s Agreement; or (iv) experience financial difficulties. These conflicts may adversely affect the Company’s operations. (3) Financial Risk The main financial risks arising from the Company’s financial instruments are liquidity risk, market risk and interest rate risk. Liquidity risk is the risk that the Company is unable to meet its financial obligation when due. The Company has substantial investments in shares of stock which are not listed in the Philippine Stock Exchange and may not be readily convertible to liquid assets necessary to meet any potential additional liquidity requirements of the Company. Market risk is the risk of loss on future earnings, on fair values or on future cash flows that may result from changes in market prices. The value of a financial instrument may change as a result of changes in interest rates, foreign currency exchanges rates, commodity prices, equity prices and other market changes. The Company’s market risk emanates from its holdings in debt and equity securities. The Company’s exposure to market risk for changes in fixed interest rates relates primarily to the Company’s money market placements and debt securities. To mitigate these risks, SRC closely monitors global and national economic and political issues that may have impact to the Company. In addition, it also establishes and cultivates good relationship and mutual respect among its partners to ensure that equity risk is mitigated. To manage its financial risks, SRC continuously monitors its cash position and overall liquidity position. The Company maintains a level of cash and cash equivalents deemed sufficient to finance operations and to mitigate the effects of fluctuation in cash flows. SRC also closely monitors the prices of its debt and equity securities as well as macroeconomic and entityspecific factors which could directly or indirectly affect the prices of these instruments. In case of an expected decline in its portfolio of equity securities, the Company readily disposes or trades the securities for replacement. Discussion on Opportunities To further improve the economic value of SRC, the Company recognizes other opportunities in capital market by building up on its reputation as a profitable holding company. SRC also expects to increase its direct and indirect economic impact when HEDC is fully developed and operated. SRC 2019 Sustainability Report
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Climate-related risks and opportunities As a holding Company, SRC is not directly at risk of climate-related threats. However, the SRC Board of Directors is tasked to primarily manage the overall risks and opportunities by establishing the Board Risk Oversight Committee (BROC). At present the Company has no formal climate-related risk strategies and metrics. Nonetheless, the Company will consider adopting a formal enterprise risk management program.
Procurement Practices Proportion of spending on local suppliers Disclosure Percentage of procurement budget used for significant locations of operations that is spent on local suppliers
Quantity
Units
N/A
%
Quantity
Units
N/A*
%
N/A
%
N/A
%
N/A
%
Quantity
Units
0
#
0
#
0
#
The current operations of SRC does not involve spending on local suppliers.
Anti-corruption Training on Anti-corruption Policies and Procedures Disclosure Percentage of employees to whom the organization’s anticorruption policies and procedures have been communicated to Percentage of business partners to whom the organization’s anticorruption policies and procedures have been communicated to Percentage of directors and management that have received anti-corruption training Percentage of employees that have received anti-corruption training *SRC has no employees.
Incidents of Corruption Disclosure Number of incidents in which directors were removed or disciplined for corruption Number of incidents in which employees were dismissed or disciplined for corruption Number of incidents when contracts with business partners were terminated due to incidents of corruption Anti-Corruption SRC’s Board of Directors participate in annual seminar on Corporate Governance to be abreast of the best practices in corporate governance. No corruption incidents were reported in 2019.
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ENVIRONMENT Over the years, SRC’s investee, HEDC follows best practices in environmental management and adheres to the highest environmental protection standards. It likewise implements waste reduction and proper disposal protocols to ensure that impact to environment is managed and mitigated. HEDC also encourages and welcomes locators who are into the renewable energy business. In 2016, an all-Filipino solar company, YH Green Energy Company, started to generate electricity from its 14.5 MW utility scale solar power project located in HEDC. This project does not only contribute to power stability in the country, but most importantly help combat GHG emissions. SRC is currently consolidating the data on resource and environmental management of HEDC and will report on these in the succeeding Sustainability Reports.
Resource Management Energy consumption within the organization: Disclosure Energy consumption (renewable sources) Energy consumption (gasoline) Energy consumption (LPG) Energy consumption (diesel) Energy consumption (electricity)
Quantity
Units GJ GJ GJ GJ kWh
Water consumption within the organization Disclosure Water withdrawal Water consumption Water recycled and reused
Quantity
Units m3 m3 m3
Materials used by the organization Disclosure Materials used by weight or volume Renewable Non-renewable
Quantity
Units kg/liters
Ecosystems and biodiversity (whether in upland/watershed or coastal/marine) Disclosure Quantity Operational sites owned, leased, managed in, or adjacent to, (identify all sites) protected areas and areas of high biodiversity value outside protected areas Habitats protected or restored IUCN1 Red List species and national conservation list species with (list) habitats in areas affected by operations
Units
ha
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Environmental impact management Air Emissions GHG Disclosure Direct (Scope 1) GHG Emissions Energy indirect (Scope 2) GHG Emissions Emissions of ozone-depleting substances (ODS) Air pollutants Disclosure NOx SOx Persistent organic pollutants (POPs) Volatile organic compounds (VOCs) Hazardous air pollutants (HAPs) Particulate matter (PM)
Quantity
Units Tonnes CO2e Tonnes CO2e Tonnes
Quantity
Units kg kg kg kg kg kg
Quantity
Units kg kg kg kg kg kg
Quantity
Units kg kg
Quantity
Units Cubic meters %
Quantity
Units PhP
Solid and Hazardous Wastes Solid Waste Disclosure Total solid waste generated Reusable Recyclable Composted Incinerated Residuals/Landfilled Hazardous Waste Disclosure Total weight of hazardous waste generated Total weight of hazardous waste transported
Effluents Disclosure Total volume of water discharges Percent of wastewater recycled
Environmental compliance
Non-compliance with Environmental Laws and Regulations Disclosure Total amount of monetary fines for non-compliance with environmental laws and/or regulations No. of non-monetary sanctions for non-compliance with environmental laws and/or regulations No. of cases resolved through dispute resolution mechanism
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SOCIAL This section is not applicable directly to SRC since the Company has no employees.
Employee Management Employee Hiring and Benefits Employee data Disclosure Total number of employees2 a. Number of female employees b. Number of male employees Attrition rate3 Ratio of lowest paid employee against minimum wage Employee benefits List of Benefits
Y/N
Quantity
Units # # rate ratio
% of female employees who availed for the year
% of male employees who availed for the year
SSS PhilHealth Pag-ibig Parental leaves Vacation leaves Sick leaves Medical benefits (aside from PhilHealth)) Housing assistance (aside from Pagibig) Retirement fund (aside from SSS) Further education support Company stock options Telecommuting Flexible-working Hours (Others)
Employee Training and Development Disclosure Total training hours provided to employees a. Female employees b. Male employees Average training hours provided to employees a. Female employees 2
Quantity
Units hours hours hours/employee 7 of 11
Employees are individuals who are in an employment relationship with the organization, according to national law or its application (GRI Standards 2016 Glossary) 3 Attrition are = (no. of new hires – no. of turnover)/(average of total no. of employees of previous year and total no. of employees of current year)
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b. Male employees
hours/employee
Labor-Management Relations Disclosure % of employees covered with Collective Bargaining Agreements Number of consultations conducted with employees concerning employee-related policies
Quantity
Units % #
Diversity and Equal Opportunity Disclosure % of female workers in the workforce % of male workers in the workforce Number of employees from indigenous communities and/or vulnerable sector*
Quantity
Units % % #
*Vulnerable sector includes, elderly, persons with disabilities, vulnerable women, refugees, migrants, internally displaced persons, people living with HIV and other diseases, solo parents, and the poor or the base of the pyramid (BOP; Class D and E).
Workplace Conditions, Labor Standards, and Human Rights Occupational Health and Safety Disclosure Safe Man-Hours No. of work-related injuries No. of work-related fatalities No. of work related ill-health No. of safety drills
Quantity
Units Man-hours # # # #
Quantity
Units #
Labor Laws and Human Rights Disclosure No. of legal actions or employee grievances involving forced or child labor
Do you have policies that explicitly disallows violations of labor laws and human rights (e.g. harassment, bullying) in the workplace? Topic Y/N If Yes, cite reference in the company policy Forced labor Child labor Human Rights
Supply Chain Management
Do you have a supplier accreditation policy? If yes, please attach the policy or link to the policy: _________________________ Do you consider the following sustainability topics when accrediting suppliers? Topic Y/N If Yes, cite reference in the supplier policy Environmental performance Forced labor Child labor SRC 2019 Sustainability Report
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Human rights Bribery and corruption
Relationship with Community Significant Impacts on Local Communities Operations with significant (positive or negative) impacts on local communities (exclude CSR projects; this has to be business operations)
Location
Vulnerable groups (if applicable)*
Does the particular operation have impacts on indigenous people (Y/N)?
Collective or individual rights that have been identified that or particular concern for the community
Mitigating measures (if negative) or enhancement measures (if positive)
Customer Management Customer Satisfaction Disclosure Customer satisfaction
Score
Did a third party conduct the customer satisfaction study (Y/N)?
N/A
Health and Safety Disclosure Quantity Units No. of substantiated complaints on product or service N/A # health and safety* No. of complaints addressed # *Substantiated complaints include complaints from customers that went through the organization’s formal communication channels and grievance mechanisms as well as complaints that were lodged to and acted upon by government agencies. Marketing and labelling Disclosure Quantity Units No. of substantiated complaints on marketing and N/A # labelling* No. of complaints addressed # *Substantiated complaints include complaints from customers that went through the organization’s formal communication channels and grievance mechanisms as well as complaints that were lodged to and acted upon by government agencies.
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Customer privacy Disclosure Quantity Units No. of substantiated complaints on customer privacy* # No. of complaints addressed # No. of customers, users and account holders whose # information is used for secondary purposes *Substantiated complaints include complaints from customers that went through the organization’s formal communication channels and grievance mechanisms as well as complaints that were lodged to and acted upon by government agencies.
Data Security Disclosure No. of data breaches, including leaks, thefts and losses of data
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Quantity 0
Units #
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UN SUSTAINABLE DEVELOPMENT GOALS Product or Service Contribution to UN SDGs Key products and services and its contribution to sustainable development. Key Products and Societal Value / Potential Negative Services Contribution to UN SDGs Impact of Contribution Investment in stocks and capital market
SRC’s investment in HEDC contributes to SDG 9 by helping companies finance projects that will boost manufacturing industries and infrastructure
Absence of risk management program may consequently result in negative impact to financed businesses and investments
Management Approach to Negative Impact SRC closely monitors the various economic, political, and financial risks that may affect the Company.
* None/Not Applicable is not an acceptable answer. For holding companies, the services and products of its subsidiaries may be disclosed.
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