SUSTAINABLE DEVELOPMENT TURNING COMMITMENT INTO REALITY ABOUT THIS REPORT We are pleased to present the Executive Summary of our eighth Sustainable Development Report; an example of trans- parent communication that Grupo México has prepared yearly since 2006. The report sets forth the performance of the Mining, Transportation, and Infrastructure Divisions in the three countries where we operate (Mexico, Peru, and the United States). The results of our economic, environmental, and social management are presented from a sustainability perspective, as are the most relevant activities from January through December 2013. The report was written according to the guidelines of the G3 version of the Global Reporting Initiative (GRI) and the mining supplement and based on the Principles of Inclusivity, Materiality, and Responsiveness defined by AccountAbil- ity AA1000APS (2008). Also, for the fifth time, we report the progress made within the framework of the UN Global Compact principles. Throughout the report, the business units and subsidiaries are indicated, and the mechanisms used to measure perfor- mance, calculate indicators, methodologies, and changes to information in terms of previous reports are mentioned. The information contained in the full version of the report was verified by an independent firm, according to the scope set in the Verification Letter. The report was also reviewed by the GRI, receiving the highest grade, “A+ GRI Checked”, for the fifth year in a row. We want to hear from you. Your valuable feedback contributes to our continual improvement. Please send comments to: [email protected]. For more information and to consult the 2013 Sustainable Development Report, and/or previous reports, visit our website: www.gmexico.com. 2 3 CONTENTS ABOUT THIS REPORT 03 LETTER FROM THE PRESIDENT 07 ABOUT GRUPO MÉXICO 14 OUR COMPANY 17 WHERE WE OPERATE 22 OUR SUSTAINABLE FOCUS 24 ENERGY AND CLIMATE CHANGE 31 GENERATING SHARED VALUE 36 EcoNOMIC VALUE GENERATED AND DISTRIBUTED 39 GRUPO MÉXICO: SHARING VALUE 40 GRUPO MÉXICO FOUNDATION 42 MINING DIVISION 58 2013 PERFORMANCE AND 2014 GOALS 60 OUR PEOPLE 62 OUR COMMUNITIES 74 OUR ENVIRONMENTAL COMMITMENT 88 TRANSPORTATION DIVISION 102 2013 PERFORMANCE AND 2014 GOALS 104 OUR PEOPLE 106 OUR COMMUNITIES 118 OUR ENVIRONMENTAL COMMITMENT 128 INFRASTRUCTURE DIVISION 140 2013 PERFORMANCE AND 2014 GOALS 142 OUR PEOPLE 144 OUR COMMUNITIES 152 OUR ENVIRONMENTAL COMMITMENT 158 LETTER FROM THE PRESIDENT For more than 70 years, Grupo México has evolved and diversified, becoming a stable and sustainable international company for which the environment remains a top priority. Continual improvement has generated added value for our personnel and investors, as well as for the communities with which we interact in Mexico, the United States, and Peru. With world-class business units and advanced technology, our mining, railroad, and infrastruc- ture operations allow us to contribute to the social and economic wellbeing and development of thousands of people in different regions. We produce minerals for industry, transport freight over long distances, and develop public and private infrastructure projects, including oil wells and power plants, among others. Our commitment to the environment, workplace safety, and community development reflect our principles. They are visible in actions such as working and operating to the best industry stan- dards and practices, with minimal environmental impact and the training necessary to ensure the safety of our employees, customers, suppliers, and communities. Every year, our Sustainable Development Report shares the highlights of the Mining Division, the fifth largest copper-producing company worldwide in 2013, and the Transportation Division, which operates the largest multimodal freight service in Mexico. For the first time, this reports In 2013, we doubled our production includes the Infrastructure Division, comprised of a construction company that dates back to capacity to 4 million trees at our 1936 and the origins of Grupo México, a drilling company that serves the Mexican oil industry, nurseries and greenhouses. and our energy unit, which includes a wind farm and two combined cycle power plants, produc- Greenhouse at Buenavista del Cobre, Cananea, Sonora. ing clean energy to power our operations. 7 Our wind farm project will reduce emissions by 120,000 tons of CO2 annually, equivalent to taking 22,000 vehicles off the road. Wind Farm, Oaxaca. Grupo México has been listed on the Mexican Stock Exchange (BMV) since 1966 and is one of In keeping with United Nations efforts on climate change, in Mexico, we have been reporting the first companies on the Prices and Quotations Sustainability Index (IPC Sustainability Index). our greenhouse gas emissions (GHG) voluntarily since 2005, receiving in 2013 the highest We are known for our performance and best practices in corporate governance, business ethics, distinction awarded by the Federal Government through the Department of the Environment social performance, and environmental commitment, all of which will continue leading us. and Natural Resources (SEMARNAT), the GEI3, for successfully reducing verified emissions. We comply with this requirement every year for our operations in the United States, according to its MINING DIVISION relevant regulation. In 2013, we continued working actively and responsibly on sustainability issues and would like, therefore, to mention some of the activities conducted by the Mining Division to fuse our eco- To do our small part in combating global warming, we are continually working to improve our nomic and environmental goals with the social wellbeing of our communities. energy mix, developing and implementing different energy efficiency projects; in 2013 we achieved considerable energy savings, equivalent to 275 terajoules, and we invested in projects Our commitment to the environment has led us to invest over US$193 million in actions for the that will help us transition to cleaner energy sources in the short term. sustainable use of natural resources and to reduce emissions and waste released into the en- vironment. We’ve also focused efforts on certifying the mining operations under internationally In Mexico, our major mining expansion project is located in the state of Sonora and is being recognized standards such as ISO14001:2004. developed according to best environmental practices, allowing us to grow sustainably and ex- tend the life of our operations, with the resulting benefit for our people and their communities. 8 9 To compensate for the environmental impact of the expansion, we’ve doubled tree production TRANSPORTATION DIVISION capacity at our nurseries and greenhouses to four million, so that in the near future, our refor- This year was characterized by the slow growth of the Mexican economy, which translated estation efforts will aid in the carbon sequestration effect. into reduced freight volumes, particularly for grains, the main segment in this market. Even with this restriction, ITM made record investments totaling US$414 million to modernize the In the United States, we are proud to have the Arizona state government recognize our perfor- infrastructure and expand operating capacity. mance in the flora and fauna conservation program, waste management, and environmental emergencies. As part of our commitment to the community, we continued to issue reduced rate cards to benefit the low-income population, a program that is implemented through the Chihuahua Of the Mining Division’s 2013 environmental investments, 49% were made in Peru, principally in state government Tarahumara office and the municipalities along the routes in Chihuahua and energy eco-efficiency projects, air quality improvement, and waste management, among others. Sinaloa. We currently have a registry of 35,000 cards given to local indigenous people and low-income residents. We transported 77,030 passengers at the reduced rate and are proud Our commitment to the community prevails over the lines of action that guide what we do. In to have carried 1,145 tons of freight free of charge, in 21 railway cars containing supplies to 2013, we invested a total of nearly US$45 million in community development programs, activ- benefit isolated communities. In 2013, 189,429 passengers boarded our Tequila Express and ities, and projects, 62% of which was allocated to major community infrastructure and equip- El Chepe trains, strengthening tourism and local economies, directly and indirectly. ment projects. Under our Community Development Plan, we conducted more than 3,000 social development and educational activities in 13 of the communities where we operate, increasing We continually promote best occupational health and safety practices among our employees our participation by 4% compared with 2012 and benefiting nearly 100,000 people. In addition, and contractors and created nearly 10,000 direct, full-time jobs in 2013. As part of Grupo we provided 10,000 hours of courses to a total of 2,000 people in the communities that neigh- México, this Division is conscious of having top personnel and specialists to optimize safety bor our Mining Division operations. and efficiency in transporting passengers and products for our customers. To achieve this, we have taken various measures, such as implementing the “My House” and “5’s” programs, For the third year in a row, we have enjoyed labor peace and stability, doubling our efforts to which has resulted in a reduction in accident severity and