Annual Sustainability Report 2017 2017 CONTENTS 1. INTRODUCTION 3 2. MESSAGE FROM THE MANAGEMENT 9 3. ABOUT US 12 4. STRATEGY AND MANAGEMENT 19 5. OPERATIONAL PERFORMANCE 33 6. FINANCIAL PERFORMANCE 40 7. SOCIAL AND ENVIRONMENTAL PERFORMANCE 47 8. GRI INDICATORS 67 9. GRI CONTENT SUMMARY 72 10. CORPORATE INFORMATION 81 11. CREDITS 81 INTRODUCTION 1. Committed to the principles of equality, accountability and corporate responsibility, we are publishing this Annual Sustainability Report with information related to our operational, financial and socio-environmental performance. |GRI 102-52| The content reflects the themes identified through the relevancy process (see the item below) and covers all of our operations For more from January 1 to December 31, 2017, unless otherwise indicated by information explanatory notes. |GRI 102-45, 102-46, 102-50| Write to This document follows the guidelines of the Global Reporting [email protected] Initiative (GRI) Standards: Core Option – first year adapted to the or contact us by phone at new format, replacing version G4. It also follows the criteria of the +55 (11) 3818-8150. Brazilian Association of Publicly Traded Companies (Associação Brasileira das Companhias Abertas – Abrasca), of International Questions and sug- Integrated Reporting Council (IIRC) guidelines and of the principles of gestions are impor- tant to improve this the United Nations (UN) Global Compact, to which we are a signatory. publication. Financial information was submitted to KPMG Auditores Independentes | GRI 102-53| for verification with other information being internally certified by our Management. |GRI 102-49, 102-54, 102-56| Annual Sustainability Report 2017 3 Aegea Relevance process | GRI 102-46, 103-1| THEMES Capitals (IIRC) Aspects (GRI) Indicators Global Location of impact Every year we revise topics considered (GRI) Compact |GRI 103-1| |GRI 102-47| Principles relevant by our stakeholders – which orient Inside the Outside the management and reporting of our performance. In organization organization 2014, we carried out this process through an online Attraction Human Training 404-1 6 X X consultation. The next year, we undertook a study of and retention and education 404-2 No relation of talent the industry context based on external and internal Diversity and 405-1 6 X equal opportunity documents as well as analyses of the competition, macro trends and stories put out by the national Equal remuneration 405-2 6 X press. In 2016, the relationship between “Themes” for women and men and “Capitals (IIRC)” was updated, in line with the Investments 412-2 1 X Business Model, which was drafted that year. In Compliance, Financial Anti-corruption 205-2 10 X X 2017, the topic of “Labor relations on the workforce ethics and Public policies 415-1 10 X X anti-corruption (health and safety)” was included, considering Unfair Competition 206-1 No relation X X measures demands from international investors and the 307-1 8 X X Compliance creation of the Occupational Health and Safety and 419-1 No relation X X Customer privacy 418-1 No relation X X Environment Department. Energy 302-1 7 and 8 consumption Manufactured and use for Energy X X and Natural operationalization 302-4 8 and 9 Economic and financial Financial Economic performance 201-1 No relation X X performance Management Manufactured of operational and Intellectual Water 303-3 8 X X efficiency Annual Sustainability Report 2017 4 Aegea THEMES Capitals (IIRC) Aspects (GRI) Indicators Global Location of impact (GRI) Compact |GRI 103-1| |GRI 102-47| Principles Inside the Outside the organization organization Risk management Financial and Economic performance (financial, Intellectual The relevant topics operational 201-2 No relation X X are revised annually and impacts on communities) in an effort to Protection of Natural Biodiversity constantly enhance our environmental, 304-2 8 X X communication with our water and biodiversity Effluents various stakeholders resources and waste 306-5 8 X X Labor/ Human Occupational 403-1 X management Health and Safety 403-2 X relations No relation (occupational 403-3 X health and safety) 403-4 X Respect for local Social and communities, Relationship Indigenous Rights 411-1 1 X X environmental To fulfill the principles of the Global Compact, education and Assessment 412-1 1 X programs to raise this report also includes information related to the awareness Local communities 413-1 1 X X following aspects: Customer Social and Effluents and waste 306-1 8 X X health and safety Relationship 306-3 ASPECTS (GRI) Indicators Global Compact Customer health (GRI) 416-2 No relation X X Principles and safety Investments 412-3 2 Product and 102-43 No relation X X Supplier human service labelling 102-44 414-1 2 rights assessment Universalization Manufactured, Indirect Forced or 203-1 No relation X X 409-1 4 of basic Social and economic impacts compulsory labor sanitation Relationship Water 303-1 7 and 8 X X Child labor 408-1 5 Annual Sustainability Report 2017 5 Aegea Stakeholder We performed internal work to update the map of stakeholders. Publics are identified based on engagement objectives, approaches and frequency of relations, as described in the table below: |GRI 102-40, 102-42, 102-43, 102-44| STAKEHOLDER GROUPS Approach to stakeholder engagement Engagement frequency and channels Context, main drivers and subjects raised Funders and investors We release information regarding the industry and - Earnings call (quarterly) We stay focused on managing sanitation business, the evolution of our business through events, phone - Face-to-face meetings (according to demand) with the aim of expanding and making feasible the conferences and face-to-face meetings, in Brazil and universalization of this service in Brazil. Given the support - Aegea Day, an event to discuss earnings and other abroad, in addition to identifying the main points of our objectives by investors and funders, we prioritize relevant topics (annual) of questions for us to enhance our communications transparency, equality, accountability and corporate materials for the market (Financial Statements, - Calls to respond to isolated issues responsibility. In this sense, in 2017, we expanded and Management Report, Presentations and others) and we (according to demand) restructured the Investor Relations area, launched the new provide clarifications for this public. - Participation in bank-organized events IR website, became more active participants in events and Supported by our Material Fact Disclosure Policy, in search (according to demand) increased the amount of interactions with investors and of transparency and equality in information provided to - Investor Relations website (updated periodically) funders. With this enhancement, we are better prepared to the market, we report on material events that impact - Filing of documents with the CVM meet the demands of these stakeholders. our business through Brazil’s Securities and Exchange (periodically, according to the Material Fact Disclosure Commission (CVM), the Investor Relations website, our Policy and CVM Instruction No. 358) mailing list and specific portals for reporting on material facts. Associations The market is in the midst of a change, with positive - Assessment and planning meeting (annual) Although basic sanitation was covered substantially by the movements being made towards development of the - Participation on the Board, Committee and Work Groups federal government in 2017, most people are unaware of the sanitation sector. One way that we further encourage (according to association agendas) industry and its impacts on society, meaning that associations this advancement is through our active participation in play an important role in its development. discussions and the support we provide to the market. - Sponsorship of events organized by the organizations where we are members (monthly average) We are one of the largest private sanitation companies and Moreover, we hold important positions in associations and we support and fortify the associations’ development in order are concerned with making industry organizations more to leverage fronts of action. Through our representation at relevant. In this sense, we promote occasional meetings to these trade associations, we contribute: understand and assess how we can contribute more and understand the direction in which the institution is moving. – reinforced work benefits in conjunction with private companies, whether in partnership with a government-run company or through a concession model; – explanation of how private companies can help at PPPs to accelerate universalization of sanitation and make our brand a reference in the market; – points of view and reinforcement of the need to update industry regulations; – strengthen our recall within the industry. Annual Sustainability Report 2017 6 Aegea |GRI 102-40, 102-42, 102-43, 102-44| STAKEHOLDER GROUPS Approach to stakeholder engagement Engagement frequency and channels Context, main drivers and subjects raised Government To serve this public and its demands, we reinforced our - Face-to-face meetings – (average of two per month) With the implementation in 2017 of the Office of the Vice decision-makers team by hiring a Vice President of Institutional Relations; we - Participation in market events – (average of one per month) President of Institutional Relations, we became more active expanded our action at trade organizations to gain a louder with government decision-makers, at the state as well voice and more relevance at these