Our Value Creation

Our Business Model

Guided by our mission, purpose, values, governance processes, and the Board, FPH nurtures its various businesses by providing the following support: 

Our business model is supported by our governance processes, a key component in orchestrating the subsidiaries and helping them meet their goals. For FPH, the important elements of our corporate governance framework are strategy, culture, policies and procedures, leadership development, monitoring and reporting, and communication.

External Environment

The external environment of FPH is shaped indirectly by megatrends happening in the global setting. We discuss its direct effects on our businesses as it affects the local context of the country.

Global Trends

Shifts in global economic power, coupled with inevitable demographic shifts and social change compounded by resource scarcity due to climate change, continued to indirectly affect and shape the operations of FPH and its subsidiaries in 2019. 

Climate change and resource scarcity
With current patterns of global consumption and production, the world is on its way to a world that is more than two (2) degrees Celsius warmer. At this point, irreversible environmental changes would occur that would threaten the way we live and how we do business. In fact, according to the Climate Change Commission (CCC), the Philippines is estimated to lose 6% of its gross domestic product (GDP) annually by 2100 if the country disregards climate change risks ¹ . A special report in October 2018 indicated that, based on most recent data, this two-degree threshold poses greater risks than previously believed and that what we need is to reduce global warming by 1.5 degrees Celsius ².

Rapid urbanization
As economies continue to grow, they also evolve into a more urbanized population. This global transition presents emerging cities with opportunities to become powerful engines for inclusive development and, at the same time, poses sustainability challenges to businesses and governments.

Demographic shifts and social change
According to the UN Population Division’s (UNPD) World Population Prospects, the global population is projected to grow by more than a billion, bringing the total to more than eight (8) billion people by 2030³.In 2020, this estimate is already at 7.8 billion⁴.This entails more young people to educate, more jobs to provide a growing workforce, and more senior citizens to take care of.

Technology 
Technological breakthroughs, such as artificial intelligence (AI), blockchain, the internet of things (IoT), and three-dimensional (3D) printing, among others, are disrupting businesses and societies globally. The pace of how technology evolves presents opportunities for innovation at an unprecedented rate. On the other hand, the multidimensional changes brought about by new technologies also create new risks and magnify exposure to existing ones.

Shifts in global economic power
The rise and fall of global powers, and the continuous growth of emerging economies, are set to change global power dynamics. This would have significant impacts on macroeconomic, political, and regulatory environments.

¹ CCC (2017). Climate change and the Philippines. Executive Brief.12 pp
² IPCC (2018). Global Warming of 1.5C. Summary for Policymakers. 32 pp
³ UN Department of Economic and Social Affairs (2015). The World Population Prospects Revision. Retrieved from https://www.un.org./en/development/desa/publications/world-population-prospects-2015-revision.html
⁴ UN Department of Economic and Social Affairs (2019). World Population Prospects. Retrieved from population.un.org/wpp/

Local Context

In addition to these global forces, the following developments in the country also influence how we create value. A more robust Philippine economy has paved the way for rapid urbanization and infrastructure development. However, this has been met with challenges to deliver social needs, supplement scarce resources, and navigate an ever-changing political landscape. 

Robust Philippine economy
According to PricewaterhouseCoopers’ (PwC) The World in 2050, the Philippine economy is projected to be the 19th largest economy globally, moving nine (9) places up from being the 28th in 2016 ⁵ .The growing Philippine economy is mainly driven by strong consumer demand amid a growing middle class. This expansion is supported by a large, continuously increasing working-age population and a healthy fiscal position.

Energy, water, and food nexus 
With increased consumption in a growing economy such as the Philippines, we are faced with the challenges imposed by the scarcity of interdependent resources such as energy, water, and food. In the last few years, we have experienced concrete manifestations of this problem, particularly with the persistent red and yellow alerts of the Luzon grid, the Metro Manila water shortage, and the rice crisis.

Urbanization and infrastructure
The rapid urbanization that comes with economic growth highlights the need for adequate infrastructure to support the expansion of cities. However, the Philippines still lags behind its Southeast Asian peers in terms of infrastructure competitiveness and spending. To address this, the government launched the “Build, Build, Build” Program, with the goal of accelerating infrastructure development in the country. 

Social needs
There is an increasing need for stronger social protection to promote inclusive development. Continuous improvement of social services is needed to tackle the country’s problems, such as income inequality, regional disparities, poor living standards, and limited access to quality basic services, among others. 

Governance
Recent years have been characterized by a changing political landscape. With deepening populist and nationalist sentiments, people all over the world - as well as in the Philippines - are increasingly holding government institutions accountable for corruption, a weak rule of law, and inequitable development.

⁵ PwC (2017).The World in 2050. Retrieved from https://www.pwc.com/gx/en/issues/economy/the-worldin-2050.html

Risk Management

FPH’s Enterprise Risk Management (ERM) system involves a proactive, holistic enterprise-wide view of all risk factors, coming from internal and external sources, in relation to the organization’s objectives. In turn, appropriate strategies, initiatives, and action plans are formulated to ensure consistency and alignment with corporate goals. These elements are intended to reflect the high level of quality, competencies, and capacity of the Management and our employees, and the technology and capital that are deployed in unison by the company to manage its risks and sustain its business. 

The ERM includes the following processes, namely: (1) risk identification, (2) risk analysis, (3) risk mitigation, and (4) risk monitoring and reporting. By doing so, the ERM system helps to identify the interdependency and interaction of risks and opportunities across the organization, and provides the tools to rationalize its multiple risk management activities. 

FPH subsidiaries have their own respective active risk management systems in place that are aligned with the ERM system of the parent company. Moreover, for each major risk identified, appropriate risk owners are clearly assigned. These risk owners have the responsibility to further evaluate, monitor, manage, and report their assigned risks, including the application of risk management solutions daily. 

To ensure FPH’s ERM system remains robust, the Senior Management, with the help of line management, proactively drives the implementation of the ERM system. In particular, the Chief Risk Officer (CRO), together with the ERM Group personnel, serves as the process champion in ensuring that a fully functioning ERM system is in place across the organization. 

Finally, the Board Risk Oversight Committee (BROC) provides constant guidance and oversight to check on the company’s critical strategic, operational, and project risks, 

particularly those that are significant enough to impact the organization’s objectives. Changes to FPH’s risk policies and procedures are done as often as deemed necessary. 

Based on this process, the following strategic and operational risks have been identified, namely:

On the other hand, we have identified opportunities that will be further assessed by relevant groups in the company. Potential benefits include increased demand for energy and energy solutions, stronger push for infrastructure projects, and improved delivery of social and consumer needs across various socio-economic groups.

Our Chosen Path

In pursuing our mission and purpose, we will unlock the potential of diverse talents to create a mission-driven organization that makes work fulfilling, fun, and that gives people a deep sense of belonging. 

Our businesses will become multiple pathways toward a decarbonized and regenerative future: 

Outcomes

In support of FPH’s goal to improve peoples’ lives and futures, we steer our subsidiaries to contribute to a world fit for the future. As a Group, we have the resolve to protect the planet, which is the ultimate source of all the needs of both man and business. There are many ways to reach this goal and, for us, we believe that the single most important action we can take is to urgently promote a low-carbon economy. We achieve this through the provision of clean power and by having a diversified portfolio for the betterment of the Filipinos and our host countries beyond our shores. As a conglomerate, this strategy informs how we set our direction and invest in our businesses, executed through our business model. 

With the way we have chosen to conduct our business, our growth continues to decarbonize our country. Hopefully, in the years to come, this will also help in the planet’s regeneration, which positively feeds back to society and the economy’s prosperity.

FPH’s ability to create financial capital primarily rests on the performance of its business segments. By providing the necessary capitals to its subsidiaries, we enable them to preserve and expand their manufactured capital, through which most of the businesses generate their revenue. We also invest in their natural, intellectual, human, and social capital to support their businesses. As a result, they generate benefits for our different stakeholders, such as our employees, partners, host communities, and the planet. 

Through the transformation of our capitals, we currently enjoy the following outcomes: 

Financial

Consolidated net income increased by PhP4.4 billion or 22% (from PhP20.2 billion to PhP24.6 billion) primarily driven by: (1) the stronger revenues of the Group that resulted into higher operating margins, (2) reversal of net foreign exchange loss in 2018 to net foreign exchange gain in 2019, and (3) higher other non-recurring gains (net) during the year.

 The Group’s consolidated revenues for the year ended December 31, 2019 increased by PhP8.2 billion, or 7%, from last year’s PhP125.4 billion to PhP133.6 billion, mainly on account of the following: 

Increase in electricity sales driven by: 

• Growth in EDC’s revenues resulting from higher revenue contributions from the Palinpinon and BacMan power plants, on account of higher average selling prices complemented by the full-year normalized operations of Unified Leyte and Tongonan power plants in 2019;
• San Gabriel’s higher dispatch in 2019, reflecting full-year revenues from its Power Supply Agreement (PSA) with Meralco versus a mixture of spot market sales and Meralco PSA in 2018;
• FG Hydro’s higher generation and better spot market prices, particularly during the first half of 2019;
• Sta. Rita and San Lorenzo gas plants coming mostly from higher average gas prices in 2019, at USD8.90 per one million British thermal unit (MMBtu), compared to USD8.60/MMBtu in 2018;

A slight decrease in real estate sales due to lower construction accomplishment of Rockwell’s Proscenium and The Vantage projects following their substantial completion in 2018. This was partially offset by FPIP’s higher industrial sales; increase in revenue from contracts and services for First Balfour resulting from incremental revenues from percentage completion of its major projects, which include the Cebu Cordova Link Expressway (CCLEX) and the NovalichesBalara Aqueduct project (NBAQ4), and Thermaprime’s new drilling contract with the Philippine Geothermal Production Company (PGPC); and increase in revenue from the sales of electrical distribution transformers by First Philec. 

More details are discussed in the Financial Analysis and Statement uploaded on our website (www.fphc.com). 

Operational 

Our energy segment produced and sold 22,297 gigawatt hours (GWh) of energy, a 6.7% increase from last year’s 20,895 GWh. This increase was primarily due to the San Gabriel natural gas plant shifting to producing baseload power, as opposed to mid-merit and peaking, to meet the increased energy demands of our clients as a result of a Power Supply Agreement (PSA) with Meralco. This increase was also the result of the optimization of our geothermal plants, which involved maintenance and upgrades, to better facilitate the efficient use of steam by the turbines and reduce overall power consumption. 

Under residential and commercial real estate, Rockwell Land had a total of 11 properties under development at the close of the year. It sold a total area of 478,833 sq. m. across various residential properties under development. It leased and sold a total area of 929,834 sq. m. from existing properties and commercial establishments. 

For industrial real estate, FPIP constructed 9,714 sq. m. of Ready-Built Factories (RBFs), which were completely leased at the close of the year. This brings the total space of RBFs to 109,777 sq. m., with an occupancy rate of 100%. 

For manufacturing, First Philec sustained its production of transformers, having produced a total of 1,365,548 KVA compared to last year’s 1,353,725 KVA. 

These are discussed further in the section on operational capital performance on page 60. 

Environmental 

Natural capital directly provides our manufactured capital the needed materials, resources, and ecosystem services, while it indirectly supports our human and social capitals. As such, we are conscious of the natural resources we draw on, how our business activities impact the environment, and how we can contribute to maintain, and even restore, the environment we work in.

On the other hand, our social and human capital subsists within the realm of natural capital. In protecting and restoring our natural capital, we protect from physical hazards not only our facilities and other manufactured capital, but also our social and human capital in the area. At the same time, in protecting our natural capital beyond the business fence, we forge relationships with communities, strengthening our social capital. Assured of our holistic approach, we reap the support of both human and social capitals to fortify our ability to protect and restore our natural capital. In our forested worksites, we have close to 145 upland communities that help us preserve the tropical forests in our energy concessions. 

In 2019, we transformed a total of 280 million gigajoules of raw energy from natural gas, steam, hydro, wind, and solar sources to 22,297 GWh of power for our clients. We also used a total of 4,310 tonnes of other physical materials to sustain the operations of our energy segment, a 12.8% increase from our materials used in 2018. However, the increase in materials used translates to more electricity produced. Our other business segments consumed a total of 118,583 tonnes of materials in the provision of their products and services, as well as in the creation and maintenance of more manufactured capital, thereby increasing their materials used by 41.8% compared to 2018. 

From all their operations in 2019, FPH’s businesses disposed a total of 11,923 tonnes of wastes and emitted 5,769,937 tonnes of carbon dioxide equivalent (tCO2 e), a 23.1% and 0.7% increase from 2018, respectively. This increase in residuals was a result of increased activities and an extended scope of wastes accounted for. In 2019, our power companies avoided 15.9 million tCO₂e compared to producing the same amount of energy using coal, an increase from the 14.6 million tCO₂e avoided in 2018.

Emissions from our non-energy business segments increased by 27.4%, to 52,730 tCO₂e from 41,386 tCO₂e in 2018, driven by the increased activities and projects of our construction and energy services segment.

 In return for the use of natural resources, we have protected 127,608 hectares of natural forests in our energy concessions, reforested 100 hectares of denuded areas, maintained 1,118 hectares of indigenous tree plantations, and established a new vegetative material reproduction (VMR) facility to continue generating indigenous planting materials. In 2019, our VMR facilities produced a total of 144,248 seedlings. Through the forests we protected and the areas we reforested, we have sequestered a total of 3,964,927 tCO₂.

These are discussed further in the section on natural capital performance on page 67. 

Human Resources 

Human capital is what mobilizes the transformation of all other capitals towards the creation and preservation of value, for the company as well as the institutions beyond our business fence. As such, we make significant investments in programs for caring for and developing our human resources, namely on learning and development, executive learning, team development, leadership, people management, employee engagement, and sustainability embedding. These are discussed further in the section on human capital performance on page 79.

Intellectual 

The intellectual capital of FPH arises from our overall organizational knowledge, systems, and procedures. In 2019, FPH embarked on a journey of rethinking how strategy is done and executed throughout our businesses. We are transitioning to a new process, one that re-establishes and strengthens the identities of our businesses, better aligns them with the central strategy of FPH, and builds up their capabilities, culture, and resources for a more in-depth and meaningful execution of our strategy. This process of transition will continue in the next few years.

On the operational level, major activities in 2019 included streamlining of processes related to information security and stabilizing transactional systems. The digitization and automation of various transactional systems across information technology (IT), procurement, finance, supply chain management, and human resources (HR) services enabled our workforce to focus on more strategic functions. These are discussed further in the section on intellectual capital performance on page 89.

Social and Relationships 

Within the company, significant social capital is generated in partnership with our internal and external networks. We engaged a total of six (6) internal and 14 external networks in 2019. Our internal networks, manifested by our centralized councils, helped increase efficiency, bring down costs, and drive intellectual outcomes. From their activities in 2019, we achieved greater efficiencies for our human and manufactured capitals and secured around PhP107 million in cost reductions. 

From our external partners, we were able to gain new knowledge. Through our partnerships with like-minded individuals and organizations, we advance our causes in climate change, sustainability, water security, marine biodiversity protection, social assessment, corporate governance, and human rights in business. These are discussed further in the section on social and relationships capital performance on page 91. 

OUTLOOK

In the years to come, we foresee that the country’s sustained economic growth, coupled with technological disruptions and continued exposure to the effects of climate change, will influence and impact our capacity to create value for our different stakeholders. 

Opportunities to support the service and infrastructure needs of the developing economy 

Sustained economic growth will require support from key industries. With presence in these key industries, FPH remains committed to further develop its classleading platforms in energy, real estate, manufacturing, and construction and to continuously create new innovative businesses to bolster economic growth. 

Continuous exposure to effects of climate change 

The Philippines needs to address the impacts of climate change and resource scarcity to fulfill its growth potential. Guided by the Lopez values, FPH will continue to promote responsible ways to do business.

Preparing to capture the opportunities of technological developments

As businesses and societies face constant disruptions driven by new advancements in technology, organizations within the FPH Group will remain alert and agile to seize opportunities fueled by these technological advancements.

 In response to and preparation for these developments, we have taken steps to conduct studies and plans to guide our respective businesses, such as a climate scenario analysis and an IT roadmap, among others. 

Materiality, Standards, and References

 Our varied businesses hold a diverse set of stakeholders. These are our customers; our co-creators, such as our employees, partners, suppliers, and service providers; the planet; our host and neighboring communities; our investors; the government; civil society; and non-governmental organizations (NGOs). This stakeholder diversity compels us to assess our performance through multiple standards; this way, we can fully address the specific needs and expectations of our different stakeholder groups. 

Thus, we have identified the following sustainability indicators to assess our performance: 

To help determine the sustainability parameters for our diverse stakeholder groups, we analyzed relevant indicators from various organizations, standards and frameworks, credit-rating agencies, and government benchmarks. We validated our list of indicators with our shareholders and other stakeholders through the Investor Relations Group and the Sustainability Technical Working Groups (TWG) of FPH and its subsidiaries. 

As a result, the four most relevant standards and references used in this report are: 

While these relevant standards and references help address the requirements of our different stakeholders, they also complement each other. By preparing the report in accordance with the GRI Standards, we can cover and manage the impacts of our business to the planet and its people. The SASB indicators, on the other hand, reflect the impacts of external factors to the business. By employing multiple standards and references, the report focuses on our value to our shareholders and, at the same time, gives attention to the contributions of the business to the overall well-being of the planet and its people. 

After conducting a rigorous materiality assessment, we arrived at the following core sustainability issues. These were derived from a materiality matrix that assessed the significance of certain impacts vis-à-vis the influence of our stakeholders’ actions and decisions. 

Material Topics Identified 

Our Financial Performance

Management Approach

Financial capitals are our sources of funds to produce goods and provide our services. Financial management is based on maximizing stakeholder value to support current and future economic performance. 

Our approach to managing our financial capital aims to adopt strategies that increase financial returns and avoid, mitigate, or remediate risks. This is done through a cyclical process that involves the following:

We regularly conduct risk assessments of our financial capitals, including those of our subsidiaries, and then develop appropriate measures to avoid, mitigate, or remediate these risks with guidance from Management and the Board. 

Results are reported on a quarterly and annual basis through consolidated financial statements, which are prepared in accordance with Philippine Financial Reporting Standards that are effective in a given year. The annual consolidated financial statements by management are audited in accordance with Philippine Standards on Auditing by the independent external auditors duly appointed by the stockholders. The same annual consolidated financial statements are reviewed and approved by the Board of Directors prior to issuance to the stockholders. 

In November 2018, the Board resolved to include sustainability as part of its fiduciary duties to give attention to sustainability issues that pose a risk to our financial values. Thus, sustainability-related externalities that may adversely affect the ability of our businesses to create revenues are considered in assessing the status of our financial capitals. 

Guided by the conglomerate’s management approach, our subsidiaries modify their processes based on the peculiarities of their operations.

Distribution of Financial Capital

Throughout 2019, our financial capital has been distributed and transformed to other capitals in the following fashion: 

This year there was a modest reduction of investments as processes have been streamlined and projects were completed. These supported our healthy revenue which increased by 6.5% in 2019. 

Financial Implications of Climate Change

Climate change can influence the state of both our financial capital and manufactured capital. In 2019, the Philippines had its share of extreme weather events consisting of a mild El Niño and 17 typhoons, which is lower than the average of 20 typhoons per year. 

Of the 17 typhoons that hit the Philippines in 2019, three (3) were considered extreme, two (2) of which directly affected the sites of our energy projects. Fortunately, there were no fatalities. Additionally, there were no landslides or major equipment damage resulting from the onslaught of these typhoons, in part due to the climate resiliency plans put in place in our energy projects after the devastating effects of Super Typhoon Yolanda (International name: Haiyan) in 2013. Of our 30 power plants, four (4) were affected by extreme weather events in 2019, namely:

Burgos Wind Project 

During the first half of 2019, a mild El Niño was experienced in the site of EDC’s Burgos Wind Project. This resulted in calmer winds and lower electricity generation. Experience from climate change events such as this one has been incorporated into our succeeding power generation forecasts.

Santa Rita Natural Gas Plant 

In December 2019, Typhoon Tisoy (International name: Kammuri) hit the Santa Rita Natural Gas Plant. One (1) of the four (4) units of the 1,000-megawatt gas plant was shut down as part of its typhoon preparedness protocol. This helped minimize the typhoon’s potential direct and consequential damage to the power plant, thus mitigating its adverse commercial impact on our operations.

Bacon-Manito and Leyte Geothermal Projects 

In December 2019, EDC’s Bacon-Manito Geothermal Project was also affected by Typhoon Tisoy. The onslaught of the said typhoon broke the blades of one of the cooling towers. In the same month, EDC’s Leyte Geothermal Project was struck by Typhoon Ursula (International name: Phanfone). The typhoon caused minimal damage to the cladding and louvers of one of the project’s cooling towers, which was easily repaired. These equipment damages were swiftly addressed through the Spare Parts Redundancy Program. While both geothermal projects are in mountainous areas, no landslides impacted the projects due to their respective Natural Catastrophe Resiliency Plan.

Financial Risks from Procurement Practices 

To address potential financial risks that can arise from our procurement practices, the conglomerate has initiated discussions on the following basic aspects of a sustainable supply chain with the Lopez Group Procurement Council: 

Principles on procurement of the United Nations Global Compact (UNGC) 

Sustainability risk mapping to assess “hotspots” in the supply chain 

Accreditation criteria for suppliers and other service providers 

This discussion will continue in 2020 to install the necessary corporate protocols to prevent financial risks from our procurement activities.

Our Operational Performance

Management Approach

Our manufactured capital consists of the physical, material, and technological assets (e.g. equipment, tools, buildings with their life support systems, and other infrastructure assets) that are available to the company for use in the provision of products and services to customers, and for the general fulfillment of the company’s purpose. Management of manufactured capital includes the acquisition of high-quality assets, optimum utilization of assets, and the maintenance of an efficient and dependable fleet to ensure value preservation and the high economic performance, safety, reliability, and cost-effectiveness of our operations. We regularly conduct risk assessments of our manufactured capital and develop appropriate measures to address risks with guidance from the Management and the Board. All these activities will maximize our use of our manufactured capital and contribute to the profitability of FPH’s diverse businesses. 

Guided by the conglomerate’s management approach, our subsidiaries modify their processes based on the peculiarities of their operations. 

Manufactured Capital for Public Service 

FPH has a history rooted in the delivery of public service. Through the decades, we have progressed our businesses along the vein of developing utilities and infrastructure for the country. As such, our manufactured capital is one of the most significant among the various capitals we utilize to create value, not just for the company, but also for national economic development. Each of our segments plays a specific role to achieve this goal. 

Energy 

FPH’s energy segment, comprising of First Gen and EDC, has a total installed capacity of 3,492 MW, with power plants spread across Luzon, Visayas, and Mindanao. Bulk of the energy produced is harnessed from natural gas and geothermal power plants, whose reliability to generate electricity 24/7 allows them to dedicate most of the energy they produce as baseload power. Among the natural gas plants, Avion generates power for mid-merit and peaking. Of the geothermal plants, Nasulo and Palinpinon II in Southern Negros provide ancillary services, or the reserves to be dispatched if deemed necessary by the National Grid Corporation of the Philippines (NGCP), to maintain the energy reliability of the national grid. Our ability to provide the various energy needs of the national grid is a testament to the reliability, efficiency, and flexibility of our power plants. 

Breakdown of Power Plant Capacity 

Stringent monitoring and maintenance programs for our power plants are in place to ensure their overall condition and performance. Risk assessments and reviews are conducted regularly, assessing operational risks, strategic risks, and mitigation strategies, among other aspects, to continue smooth, reliable, and efficient operations. We also maintain strong relationships with partners involved in our plant operations. 

Scheduled maintenance activities are carried out in the power plants periodically. In particular, the natural gas and geothermal power plants have regularly scheduled minor and major outages, lasting for a span of 5-10 days and 15-37 days, respectively, with the duration of major outages dependent on the maintenance activities done. During these outages, inspection, cleaning, and replacement of worn or damaged parts are done to ensure the good running condition of the units. Effective preventive maintenance has allowed our baseload plants to operate at peak efficiencies, as shown in the table below. 

Residential and Commercial Real Estate

Rockwell Land creates communities that seamlessly blend residences, workspaces, and lifestyle hubs. Rockwell Land currently owns and manages 14 residential properties and six (6) commercial properties, with nine (9) residential and two (2) commercial developments undergoing construction, which will expand its geographic reach outside Metro Manila. 

Rockwell Land’s objective of preserving and maintaining its buildings to enhance the value of its properties is aligned with its vision to create admired communities beyond ordinary. Its preventive maintenance programs for all the basic life support systems of its buildings—which include electrical, water, elevator, air-conditioning, fire protection, and fire detection and alarm systems—are plotted and executed on a 52-week calendar basis. All other building facilities and amenities are regularly checked and monitored to ensure they operate at optimum levels, with surroundings kept clean, safe, and secure. 

The relentless training of its property management teams, who handle daily operations and engage with various contractors and service suppliers, contributes to the overall quality of building maintenance efforts. 

Rockwell Land continues to build on its efforts in promoting the sustainability of its development projects, with two (2) LEED-certified commercial projects and four (4) projects running on renewable energy. 

Industrial Real Estate

With over 500 hectares of prime industrial land, FPIP is an industrial park located across Sto. Tomas and Tanauan, Batangas, strategically situated south of Manila. With a vision of providing its locators with first-world manufacturing experience, FPIP provides the infrastructure, utilities, and safety and security needs of its locators and their employees, which include: 

Infrastructure: Constructs ready-built factories (RBF) for its locators 

Energy: Dedicated 115kv substation and an underground electricity distribution system 

Water: Has 15 deep wells and a water distribution system, with a capacity of 13.7 million cu. m. annually 

Telecommunications: Set up a telecommunications infrastructure and an underground fiber-optic and copper-wire system 

Wastewater treatment: Has an effluent collection system and centralized treatment facility, with a capacity of 5.6 million cu. m. for sewage treatment and the secondary treatment of industrial wastewater 

Roads: Constructed a road network that spans the industrial park. 

Commercial center: Boasts of 17 leasable units, a covered court, and hotel facilities 

Safety and security system: Has fire trucks, an ambulance, closed-circuit televisions (CCTVs), and roving guard patrols 

In 2019, FPIP constructed a total of 9,714 sq. m. of ready-built factories, improved the park’s road network, and began the construction of a new deep well. 

Assets are checked and monitored regularly. FPIP practices predictive and preventive maintenance, including the cleaning and replacement of wearable parts regularly to ensure that the facilities and equipment are in good condition. 

Manufacturing

In the production of transformers, the manufactured capital of First Philec includes its assembly line, heavy equipment fleet, two operating plants, and its warehouse area. Manufactured capital is maintained with a set schedule for preventive maintenance and the strict monitoring of their condition daily. 

In 2019, First Philec’s Distribution Transformer Testing System was integrated with its Quality Assurance System for more streamlined operations. This also reduces human errors, as well as improves safety for technicians. Additionally, First Philec’s main operation site has been expanded. 

Construction

First Balfour supports nation-building by taking part in projects geared towards building and improving public utilities. Projects of First Balfour and their status as of December 31, 2019 include: 

More information on these projects may be found on the First Balfour website, https://firstbalfour.com. 

The engineering and construction services of First Balfour are made possible by the quality expertise of their personnel, investments in and thorough maintenance of their vehicle and equipment fleet, and the institutional systems that enable it to maintain its triple ISO certification and accreditation as a Quadruple A contractor. Particular to First Balfour’s manufactured capital, the management of these assets is a key business imperative and an essential element in achieving operational excellence. Implementation of an asset maintenance program improves asset utilization and profitability. This program ensures all equipment is up and running in good condition, preventing any unplanned downtime and expensive costs incurred from unanticipated equipment failure. Hence, investment in manufactured capital is a deliberate and ongoing process that aims to bolster First Balfour’s way to play as a solutions provider in the key markets it chooses to serve. 

Our Environmental Performance

Management Approach

Our natural capital consists of resources from the Earth that serve as raw materials for our businesses. Nature is also the source of environmental services that protect our employees, host communities, and facilities. These environmental services include the mitigation of extreme weather, water purification, and air detoxification, among others. Furthermore, we are aware that our businesses may positively or negatively affect nature, creating externalities that may have financial impacts on the company. Consistent with FPH’s sustainability strategy on system value, we recognize our dependence on natural resources. Therefore, it is our responsibility to preserve the planet’s integrity to ensure the continuous flow of nature’s goods and services for the present and future prosperity of society and our businesses. 

To preserve our natural capital, we protect the environment by complying with all national environmental laws and regulations. We also support all relevant international conventions entered by the Philippine government on natural resources management, land use, biodiversity, waste management, and sustainable development. 

In our operations, we adopt the Mitigation Hierarchy Principle, which prescribes the following actions, in order of importance: 

• Avoidance of activity to prevent potential adverse impacts
• Minimization of the intensity and duration of adverse impacts
• Restoration to re-establish the natural system’s composition, structure, and function
• Offsetting adverse impacts on operations
• Regeneration of ecological systems to help society and businesses thrive

To protect ecosystems, we adopt the Precautionary Principle, which prevents environmental degradation by ensuring that decisions which may affect the environment are studied well and are based on science. 

We have established Environmental Management Systems (EMS) that will identify and assess the environmental impacts of our activities. Corresponding programs are installed to enhance positive impacts and eliminate or minimize adverse impacts. We have Pollution Control Officers (PCOs) who oversee our compliance with environmental laws, standards, permit conditions, and other regulatory requirements and commitments. We regularly conduct a risk assessment of our natural capital and develop appropriate measures to address risks with guidance from Management and the Board. 

Guided by the conglomerate’s management approach, our subsidiaries modify their processes based on the peculiarities of their operations. 

Doing our Part to Address the Climate Change Crisis 

Since our initial assessment in 2016, climate change remains a major environmental risk for FPH and its subsidiaries⁶. FPH’s advocacy to address climate change in its operations are validated by experiences across the globe, as reported in the World Economic Forum’s (WEF) Global Risks Assessment for 2019⁷. For the first time in 15 years, the top five (5) global risks were related to the climate crisis, namely, extreme weather events, response failure, natural disasters, biodiversity loss, and man-made disasters⁸ .Discussed below is the status of FPH’s climate indicators. 

GHG Emissions 

The greenhouse gas (GHG) footprint of the conglomerate, inclusive of the effects of the energy management initiatives of its subsidiaries, amounted to 5,769,937 tonnes of carbon dioxide equivalent (tCO₂e) in 2019. The energy business segment produced 99.1% of the total GHG emissions of the conglomerate. With regards to Scope 1 and 2 emissions, there was a slight increase of 0.7% in GHG emissions compared to last year. The increase in emissions was primarily driven by the increased activity of the San Gabriel natural gas plant, which was contracted to produce baseload energy through a Purchase Power Agreement (PPA). Additionally, the full-year normalized operations of the Unified Leyte and Tongonan geothermal power plants, following their recovery from Typhoon Urduja in 2017 also contributed to the increase in emissions due to resumption of operation. 

Emissions from our real estate business and the Head Office decreased in 2019, primarily due to Rockwell Land’s ongoing transition to provide its buildings with electricity from renewable energy sources. Apart from this, the GHG emissions of our other business segments are directly influenced by their trends in energy use, which will be further explained in the section on energy consumption. 

⁶ FPH (2017). The 2016 FPH Sustainability Report
⁷ World Economic Forum (2020). The Global Risks Report. Retrieved from http://www3. weforum.org/docs/WEF_Global Risks _Report_2020.pdf
⁸ L. Elliot (2020). Climate crisis fills the top five places of the World Economic Forum’s risk report. The Guardian. Retrieved from https://www.theguardian.com/business/2020 jan/15/climate-crisisenvironment-top-fiveplaces-world-economic-forum-risks-report.

*The Scope 3 emissions of our non-energy business segments are still being established.
**Total figures may differ from the 2018 FPH Sustainability Report due to changes in the scope of businesses reported on

Understanding our Exposure to Climate Risks

In 2019, we began focusing on the fundamentals to manage our climate risks. At this initial stage, we considered the following measures: 

Climate Governance

Climate change is our priority concern. This is reflected in our Corporate Sustainability Policy, which states our commitment to low-carbon operations. This concern is also covered by our Enterprise Risk Management (ERM) Program. Currently, we are in the process of including climate change in our project impact assessments, project management, and monitoring. We adhere to the National Climate Change Action Plan (NCCAP), as well as to international conventions related to climate change such as the United Nations (UN) Framework Convention on Climate Change, the UN Forest Principles, and the UN Convention on Biological Diversity.

In 2018, the FPH Board recognized sustainability as a fiduciary concern. Regarding climate change as a major sustainability issue, oversight is provided by the Board Risk Oversight Committee (BROC). 

At the Management level, the FPH Risk Management Group, led by the Chief Risk Officer (CRO), identifies jointly with the subsidiaries the corresponding climate risks, risk owners, and treatments. These are submitted to the BROC for guidance. The implementation of the approved risk management program and budget are monitored by the Management. 

Climate Strategy

Since 2016, FPH subsidiaries have identified climate change as a major risk. In the past, the issue was addressed through energy management and carbon sequestration activities. However, for 2019, the conglomerate took a more systematic approach by disaggregating the climate issues per subsidiary. Following the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), a climate change scenario analysis was initiated during the last quarter of 2019 and will be completed in mid-2020. The resulting climate impacts, risk management measures, as well as opportunities, if any, will be identified next year. 

The climate change scenario analysis was undertaken to better capture our local climate context and to develop our strategy and measures with greater accuracy. In collaboration with the Oscar M. Lopez Center for Climate Change Adaptation and Disaster Risk Management Foundation (OML Center), the study will synthesize local climate data, such as rainfall, temperature, and sea level rise, for all the business units of FPH subsidiaries. This will be done in Representative Concentration Pathways (RCP) prescribed by the Intergovernmental Panel on Climate Change (IPCC), specifically the 4-degree Celsius and 2-degree Celsius scenarios. Where possible, the analysis for the 1.5-degree Celsius threshold shall be discussed based on available data. The climate change prediction will be for the years 2035 and late 2065, since climate change is observed on a decadal scale. For our energy businesses which have installed their climate resiliency programs ahead of our non-energy business segments, the study will help enhance their climate resiliency plans. 

Carbon Reduction Efforts 

In 2019, we began the process of reviewing our GHG emissions in relation to the products and services provided by our different businesses. We also initiated the embedding of sustainability in all our processes to make the conglomerate more resilient to business disruptions that may be caused by global and local risks. We were further inspired to take this path after the April 2019 forum of Andrew Winston, the author of The Big Pivot. Winston, who was invited by our Chairman, Federico R. Lopez, to engage FPH leaders, is a valuable resource person on global megatrends, helping leaders build resilient and profitable companies that can thrive in a disruptive world. 

Our efforts to tackle climate change have progressed over the years. It started with our call for a low-carbon economy in 2009, which progressed to the identification of climate change as one of the company’s biggest risks and led to our subsequent commitment to not invest in coal in 2016. We also declared our support for the COP 21 global goals and the 1.5-degree Celsius threshold challenge of the government in 2018. Our efforts to contribute to carbon mitigation continued in 2019 through the following:

• Since our energy business segment contributes 99.1% of our GHG footprint, we started to study the long-term GHG emissions profile of our energy businesses in 2019. This study investigates their potential to reduce the emissions intensity of the country, as well as to explore options to offset the company’s carbon footprint.
• As mentioned, we started a climate change scenario analysis for all our business units. Such studies are important investments for FPH as we expect climate impacts to continue to affect us in the years to come. The effects of climate change are already locked in due to the long residence time of GHGs, leading to what scientists call “committed warming” in the next decades⁹.
• We continue to protect and nurture carbon storage in our business units where possible. The amount of carbon sequestered by the natural forests and reforested areas in the geothermal reservations protected by First Gen, through its subsidiary, the Energy Development Corporation (EDC), have reached a total of 3.96 million tCO₂. Additionally, the green spaces established across our other business sites have sequestered 750 tCO₂.
• We are participating in policy discussions on carbon offsets that are sponsored by the Department of Environment and Natural Resources (DENR). The agency has crafted its carbon policies in 2019, which are expected to be issued in 2020. The policies under consideration are the Carbon Accounting Verification and Certification System and Carbon Rights. Based on current policy discussions, the available areas for potential carbon offset that can be claimed by the company may be limited to public lands in forest reservations, less the park areas and ancestral lands which can be claimed by other stakeholders. Due to the ongoing discussions, FPH will forego estimating the carbon neutrality status of the company until the carbon offset rules are issued.

Other Emissions Affecting Air Quality 

In addition to GHGs, we also diligently monitor other emissions from our energy projects as these can potentially affect the air quality around the project sites. Our other significant emissions, and the corresponding standards to which they are regulated, are provided below. 

Measured concentrations of relevant pollutants emitted by our power plants were compared with the Philippine Air Quality Guidelines under DENR Administrative Order No. 2000-81. All First Gen emissions are within the allowable limits prescribed by the national government. 

⁹ Four Twenty Seven (2019). Demystifying climate scenario analysis for financial stakeholders. Retrieved from http://427mt.com/wp-content/uploads/2019/Demystifying-Scenario-Analysis_427_2019. pdfenvironment-top-fiveplaces-world-economic-forum-risks-report.

In terms of absolute emissions, the amount of potential pollutants from our power plants are shown below. The Philippines has yet to establish a national standard for the amount of emissions that can be emitted in a year. 

Materials Used

In 2019, the overall amount of materials used by FPH reached 2.0 billion tonnes, a 14.75% increase from the previous year. About 99.89% of the materials used are from renewable sources, such as the steam that goes through our geothermal plants and the water that goes through our hydro plants. Both these materials used are returned to their origins: spent geothermal steam is reinjected to replenish the geothermal reservoirs, while the water fed to the hydropower plants flows back to its river source. On the other hand, of the total non-renewable materials used, 94.37% was natural gas. 

Within our properties, we promote the efficient use of resources, as well as make them adhere to green building standards. As of 2019, we have secured the following green building certifications: 

• 8 Rockwell – Gold LEED Certified
• RBC Sheridan – Silver LEED Certified, compliant to the Green Building Regulations of Mandaluyong City
• First Balfour Head Office – BERDE Certified

Energy Consumption

Our energy consumption consists of raw energy sources to generate electricity (fuel for our heavy equipment, vehicle fleet, and power generators) and purchased energy from the grid. 

Overall energy consumption by our energy business segment decreased in 2019, driven by a reduction of energy consumption in our renewable energy projects. Despite this reduction, these projects were able to generate more electricity this year for their clients. 

Our real estate business segment’s energy consumption increased in 2019, primarily from emergency power produced by on-site generator sets (gensets) due to power outages and an increase in shuttle services provided. Our construction and energy services business segment also posted a significant increase in energy consumption as First Balfour implemented more projects in 2019. Its subsidiary, ThermaPrime, also had rigs in full operation. 

On the other hand, our manufacturing business segment used less fuel for its fleet due to new components in their assembly line, which removed the need to move items around using heavy equipment. They also implemented new policies regarding the use of heavy equipment. 

However, the FPH Head Office consumed more energy in 2019 as it accommodated more employees, as well as conducted renovations. 

Water Use 

The energy business segment remains to have the highest water consumption in the Group, with volume increasing by 6.8% in 2019. This is mainly due to the increase in water flow through the Pantabangan-Masiway Hydroelectric Power Plant, as well as the increase in water consumption due to the drilling of new wells in the Leyte geothermal project. However, well drilling is a one-time activity that increases the reliability of the geothermal project. In Pantabangan, water flow was 15.87% higher than last year, which enabled a 22.78% increase in the energy production of the hydroelectric power plant. 

In the real estate business segment, there was a major increase in water use as Rockwell Land protected its properties from water shortages, which occurred from March through August 2019, during the El Niño season. This required the properties to ensure that its water storage tanks were filled throughout this period. 

For the manufacturing business segment, First Philec maintained the amount of water they use, albeit slightly decreasing. For the construction business segment, First Balfour’s water use decreased by half, partly due to the water shortage of 2019 and their water conservation initiatives. Water consumption at the FPH Head Office increased as the company accommodated more occupants. 

Wastes and Waste Management 

Given the scale of our operations, it is inevitable that our diverse businesses will yield a significant amount of wastes and effluents. In this section, we discuss how we handle and treat both the solid and liquid waste streams of our operations, most of which are non-hazardous. 

Solid Waste 

About 93.7% of the solid wastes from our operations are non-hazardous, while the remaining 6.3% are hazardous. Waste disposed in 2019 was 23.1% higher due to the various activities of our businesses. The wastes are disposed of through third-party contractors. Pending treatment by government-accredited haulers, wastes are stored for a limited time, as allowed by law. However, we made sure that we are compliant with the labeling and protection protocols of the government under Republic Act No. 6969, also known as the “Control of Toxic Substances and Hazardous and Nuclear Wastes Act.”

 In our energy business segment, less waste was disposed of due to less construction activities as the previous year coupled with the implementation of waste plans across all sites. In our real estate businesses, there was an expanded scope of disposed waste accounted for. Under our manufacturing business segment, more waste was disposed of in 2019 due to the encountered difficulties in scheduling appropriate hauling services the previous year. In our construction business, more waste was generated as First Balfour’s subsidiary, ThermaPrime, had a second rig in full operation compared to the previous year. 

Effluents

Wastewater produced by our businesses are appropriately treated before their release, compliant with national regulations. All our business segments produce domestic wastewater, while our energy business segment has various types of effluents. The following table presents the different wastewater treatment processes of our business segments, as similarly presented in our 2018 Sustainability Report. There has been no change in the way wastewater is managed. All our businesses are compliant with regulations regarding effluent treatment and management. 

Biodiversity 

FPH pursues environmentally restorative practices in and beyond its sites of operation. Except for our energy subsidiaries, all our business segments are in built-up urban areas. 

In our non-energy business segment, we promote greening our spaces. Rockwell Land allocates ample green spaces in their project designs, while FPIP is currently establishing a vertical forest park for its locators and their employees. Our subsidiaries are also established partners of the EDC BINHI Greening Legacy Program. 

The natural gas projects of First Gen are within the vicinity of a protected habitat, the Verde Island Passage. First Gen aids in protecting the passage by supporting the marine patrols who guard 1,554 hectares across 35 sites in the Batangas Bay. Additionally, First Gen’s geothermal projects are located within 127,608 hectares of public forests across four geothermal reservations. First Gen’s renewable energy subsidiary, EDC, protects these forests by patrolling hotspot areas, providing alternative livelihoods to forest dwellers, and by restoring open patches in the forests through the BINHI program. 

Under the EDC BINHI program, 96 premium rare native tree species were identified to be rescued and propagated. In 2015, all 96 priority native tree species were found in the wild, and now serve as the key to preserving their species. These rescued native tree species are propagated through EDC’s Vegetative Material Reproduction (VMR) facilities, with the resulting seedlings planted with the help of EDC BINHI’s partners across the country. 

The EDC BINHI program contributes to the conservation of forest biodiversity through the following activities: 

• Propagating premium, rare native tree species for reforestation
• Establishing arboreta in strategic locations to raise public awareness
• Conducting population surveys of selected native tree species to further inform government biodiversity measures

EDC is a partner of the DENR’s Biodiversity Management Bureau (DENRBMB). Through this partnership, EDC joined the Adopt-A-Wildlife Species Program of the agency and committed to conducting the population survey of 35 critical native tree species. This served as the first country update on the number of critical native tree species in the wild. EDC completed the population survey of the first 10 species in 2017, the next 10 species in 2018, and the last 15 species in 2019. Of the 35 critical native tree species, EDC reported that: (a) four (4) species need greater protection; (b) three (3) species have the same conservation status; and (c) 28 species have improved in biodiversity status. The findings of the study will be used by the national government to properly redirect their resources to better protect more critical native tree species. 

To date, the accomplishments of the EDC BINHI program program are listed below. 

Last year, EDC was also tapped as the first and only partner of the Botanic Gardens Conservation International (BGCI) for its Global Tree Assessment (GTA) program. The BGCI is part of the International Union for Conservation of Nature (IUCN), an organization that formulates measures for the protection of the environment through data gathering, research, field projects, advocacy, and education. The partnership involves the conduct of conservation status assessments for 800 Philippine endemic tree species for the period of two (2) years. The partnership’s memorandum of agreement (MOA) was signed by FPH, EDC, and BGCI last May 22, 2019. This partnership is a testament to the growing recognition of EDC BINHI’s contribution in the conservation of Philippine native trees.

Our Human Resource Performance

Recruitment Management Approach

Our human capital consists of the knowledge, skills, and experience of the company’s manpower. It is important for employees to align with the company’s purpose and governance, and to understand the company’s strategy and contribute to its execution and improvement. The Lopez values drive the culture of the company, which are manifested in how our people treat all our other capitals. 

We are committed to developing our most important asset, our people, to benefit from their rich experiences and expertise within the company, create a common culture across the organization, and integrate various human resource systems. We focus on competencies that serve as our basis for hiring, training, managing performance, and rewarding our employees. 

We recognize the need for continuous human development across all levels in the organization. FPH has a training policy, as well as an annual performance engagement process and development plan that identifies and tracks the competencies of employees, so they are empowered to take charge of their own development. Our Human Resources Group (HRG) regularly conducts employee satisfaction surveys to improve its services to our employees. 

We comply with national labor laws and general labor standards, as well as international labor conventions entered by the Philippine government. The company has adopted specific social safeguards policies consisting of prescriptions on the following areas: (a) human rights; (b) gender equality and diversity; (c) responsible asset protection, including people; and (d) corporate social responsibility (CSR) to cover our internal stakeholders. We regularly conduct a risk assessment of our human capital and develop appropriate measures to address risks with guidance from the Management and the Board. 

Guided by the conglomerate’s management approach, our subsidiaries modify their processes based on the peculiarities of their operations. 

Human Capital

FPH businesses thrive because of the commitment and dedication of our 3,786 employees across the Group. Our employees, who put their hearts and minds in their work, also share our vision of solving the grand problems of society and the planet. FPH believes that the world we pass on to our children is in our hands. We do our share, and our employees are precisely equipped for this challenge. 

Employees Across the Group

In 2019, 63% of our permanent employees were male while 37% were female, for a ratio of 1.7 male to 1 female. The ratio is explained by the nature of our businesses. Majority of our employees in the energy, construction, and manufacturing segments are male. 

Recruitment and Organizational Development

Because of the continuous growth of our businesses, particularly the increase in projects of our real estate and construction arm, we welcomed 720 new employees during the year. To strengthen its recruitment and talent mobility, FPH mobilizes and taps into its internal talent pool and leverages the use of technology. 

Compensation and Benefits

FPH complies with the prescribed benefits of the country’s labor laws, particularly salary and remuneration based on levels, 13th month pay, leave benefits, and mandatory government contributions. Because we value our employees, we provide additional benefits in the form of bonuses, allowances, and individual and group insurances, among others. To allow a healthy balance of work and personal life, there is greater flexibility in work hours and arrangements, clothing policies, and paid time off. 

Consistent with the FPH Corporate Code of Conduct and Ethics, remuneration is based on merit, qualifications, competencies, and efficiency. Remuneration is reviewed by the Compensation and Remuneration Committee on a regular basis. 

Talent Management

For FPH to continuously develop and keep its best talents, FPH employees undergo the regular life cycle assessment, from planning, tracking and feedback, to performance review and appraisal. In 2019, 100% of our employees received regular performance and career development reviews. For career growth, employees have their own Individual Development Plans (IDPs) based on core competencies, whether they are individual contributors or people managers. 

Learning and Development

FPH promotes the personal and professional growth and development of all our employees. Our learning and development programs have four (4) main themes, namely: 

Based on the outcomes of our learning and development programs conducted in 2019, FPH provided 29.1 hours of training per employee, on average. This is slightly lower than the average training hours in 2018 at 33.5 hours. Formal training involving training hours only accounts for 10% of FPH’s employee development programs. Employees are also provided with learning experiences through work exposure and learning from peers.

Average Training Hours

 In terms of training hours by rank and by gender, we have the following outcomes:

In the absence of a local benchmark, we used the 2019 Industry Training Report¹⁰ to compare our data. For a middle-sized organization of 1,000 - 9,999 employees, a category where FPH belongs, the average staff training hours was 33.90 hours. The FPH record was variable but close to the benchmark. 

We pay special attention to the continuous education of our leaders, from our assistant managers to our executives, through the Executive Learning Program. It helps provide common tools and a common language across the Group, accelerate learning, broaden perspectives, foster collaboration, and ultimately, contribute to the delivery of results. Insights from the program eventually find their way into our subsequent strategy and planning discussions. 

To support the strategic directions of the company, our leaders engaged in more learning sessions in 2019 than in 2018. These learning sessions included “Building Organizational Agility,” “Agile Project Management,” and “Big Pivot,” among others. 

Human Rights of Employees

Underpinning our approach to human capital is our corporate value of social justice and our recognition that any activity, including business activities, can potentially affect human rights. FPH’s human rights mechanisms apply both to our internal stakeholders, such as employees, and external stakeholders, such as host communities. 

Our respect for human rights, except those that are outside company control, are embedded in specific company policies. Human rights related to non-discrimination, equal opportunity, diversity, gender, labor relations, and health and safety are covered by appropriate FPH policies. Below is a matrix presenting the human rights embedded in our company policies, except those that can only be granted by the State. The company can address 22 out of the 30 universal human rights, as it does not have jurisdiction over the following human rights: rights number 8 (remedy of national tribunals), 9 (free from arbitrary arrest and detention), 11 (presumption of innocence in penal offense), 13 (right to movement in the country), 14 (right to seek asylum), 15 (right to nationality), 21 (right to take part in government activities), and 28 (right to social and international order). 

¹⁰ Training Magazine Network (2019). Training Industry Report. Retrieved from https://trainingmag.com/sites/default/files/2019_industry_report.pdf

Mapping Human Rights in FPH Policies

Employee Relations and Engagement

Strengthening Human Rights Programs 

In connection with the human rights safeguards policy of the company, we strengthened our Anti-Sexual Harassment (ASH) procedures and promoted Gender Equality and Diversity (GED) awareness. 

Employee Engagement 

To support employees and to keep them motivated, we embarked on the development of a culture roadmap composed of activities that encourage participation in collaborative platforms that require cooperation, assistance, and volunteerism among employees. The general program for employee engagement, called Uplift / Unwind, includes activities with spiritual, mental, physical, and social dimensions such as company outings, learning sessions, recreational workshops, year-end parties, and sports and wellness club activities, among others. In addition to these, we also have specific programs on the following:

Occupational Health and Safety 

As manifested in our Environment, Safety, and Health (ESH) Policy, we recognize that, in the pursuit of our business objectives, we shall provide exemplary service to customers, help protect the safety and health of our employees and the host communities affected by our operations, as well as preserve and enhance the environment. 

FPH implements an ESH system, which is an integral part of its performance in the development and management of its businesses, particularly in power generation, construction and engineering, manufacturing, and real estate development. 

Work-related hazards and risks are identified through various tools and frameworks such as Job Hazard Analysis, Hazard Identification Tool, and Hazard Identification, Risk Assessment, and Control (HIRAC). 

As a result of these practices, there were no fatalities and highconsequence work-related injuries among the employees and workers managed by the organization. 

HR Systems and Analytics 

FPH has recently adopted a Human Capital Management System (HCMS) that enables real-time business insights, automated workflows and process analytics, and employee ownership of personal data. The system is currently being rolled out in phases to enroll one to two subsidiaries at a time. The system also makes it easier to track employee statistics and performance, sift through the various skills and talents of our employees, and effectively follow employee career development. Among the business processes aligned in this system are: 

• Employee Data Management
  Collecting, maintaining, and updating employee data
• Recruitment
  Initiating and processing job requisitions, managing interviews, and onboarding of the new employee
• Benefits Administration
  Initiating and approving reimbursements, and tracking of benefits balances
• Learning
  Managing training requests and approvals, and curating online learning materials tailored to employees’ development needs and interests
• Talent and Performance Management 
  Setting performance goals, enabling continuous feedback, evaluating performance and potential, and managing succession

Our Intellectual Capital Performance

Management Approach

Our intellectual capital arises from our overall organizational knowledge, systems, procedures, intellectual properties or licenses, and research that help us achieve the successful development of our projects and new businesses, the effective and efficient management of existing assets, and the streamlined operations of the various companies. 

Guided by the conglomerate’s management approach, our subsidiaries modify their processes based on the peculiarities of their operations. 

Fleetwide Initiatives 

The diverse nature of our subsidiaries calls for differentiated software and applications, depending on the specific needs of the business. The software and applications of our energy businesses provide the scientific backbone for its operations. In energy marketing, we use software-enabled demand forecasting techniques and trading strategies developed in-house. Our real estate businesses, on the other hand, use specific software for design, building management, and township planning. Even in construction, specific software informs our processes, from winning bids to executing plans, while relevant software also helps our manufacturing business in materials planning, preparing the bill of materials, and executing product design. 

However, there are also opportunities for standardization and synergy that generate business value for the company. Whenever practical, the Group subscribes to a common information technology (IT) platform. This helps reduce costs and improve corporate agility, all while instilling a sense of oneness across the conglomerate. 

Specific functions in FPH with opportunities for synergy have the following characteristics: 

Our current platform, the SAP Enterprise Resource Planning (ERP), covers the functions of Finance, Budget Consolidation, Sales and Distribution, and Supply Chain Management, which in turn covers warehousing, materials planning, and vendors planning. 

We have identified the key areas that have synergistic functions, and we are currently progressing on the following initiatives: 

Information Technology (IT) Shared Services

Our IT Shared Services was created to handle three main functions, namely: (1) Business Process Outsourcing (BPO), which covers payroll, accounting, and core human resources (HR) services; (2) IT Services, primarily infrastructure support and applications, including networks, central computing, and enduser computing; and (3) IT-Operational Technology Security. This improved business support through IT Shared Services allows our businesses to focus on their individual functions. At the same time, this helps reduce the cost of IT operations and improve the delivery of IT services, thereby strengthening our business continuity. 

Finance Shared Services 

The centralization of our finance services ensures the reliability and timeliness of our financial reporting. This also enables our employees to focus on value-adding financial activities rather than heavily transaction-based activities such as accounting, billing, and invoicing operations. 

Human Resources Shared Services 

The centralization of our human resources (HR) system improves our focus on talent and the key motivators for our employees, and increases workforce effectiveness. The roll-out of the system not only provides up-to-date cross-company HR data, but also performs precise workforce planning, competency-based management, and improved succession planning to help enhance the mobility of human resources across our business units. 

Supply Chain Optimization 

The optimization of the supply chain across our subsidiaries generates efficiency by minimizing travel time and miscommunication, reducing cycle time, and promoting cross-company logistics. 

Greening of Data Operations 

Data centers are large consumers of electricity and are, therefore, also large emitters of carbon dioxide that contribute to global warming. For greater efficiency, and to further “green” our operations, FPH is transitioning its computer workload into the cloud. 

Combining human knowledge and skills and the use of computer modeling software ensures optimal technical and economic performance, which ultimately translates to improved profitability for the company.

Outcomes Contributing to Sustainable Development Goals

Positive outcomes resulting from the transformation of our capitals contribute not only to the protection of the planet, but also to the prosperity of society. Ultimately, these positive outcomes support the attainment of the Sustainable Development Goals (SDGs), also known as the Global Goals, which serve as the blueprint for achieving a better future for all. 

The SDGs support the 5Ps, namely: 

• Protection of the planet and climate for future generations
• Ending poverty of all forms
• Prosperous and fulfilling lives
• Peace and just society
• Partnerships to fulfill all the goals

To contribute to the SDGs, we focus on the source of the problems, which are the instabilities of the planet and society. Our approach is to maintain the planet’s integrity for it to continue providing the goods and services necessary for people and businesses to thrive. Through our select business activities, we contribute to four (4) goals: