INTEGRATED REPORT 2015 We choose to grow solidly and sustainably_ INTEGRATED REPORT 2015
Main magnitudes Corporate Contribution Business Contents 1 2015 2 governance 3 to progress 4 Principle model 09 Financial highlights 19 Board of Directors 32 Economic impacts 40 Megatrends, opportunities and strategy 03 Letter from the 14 Income statements 22 Committees of the 35 Contribution to the local Chairman Board of Directors tax authorities 43 Relationships with our 15 Consolidated stakeholders 07 Company profile statement of financial 30 Executive Committee 37 Environmental impact and values position 47 Materiality analysis 38 Impacts of the Network 16 Non-financial 49 Reputation management indicators 51 Risk management 17 Share price performance 54 Sustainability governance and management 56 Ethics and compliance 58 Management of the supply chain
Focus on the Commitment Commitment Commitment to 5 customer 6 to our team 7 to society 8 the environment 9 Annexes 66 Customer promise 78 Human resources 87 Digital inclusion and 103 Environment 118 Principles for the innovation preparation of the Report 69 Digital trust 84 Occupational health 107 Circular economy and safety 100 Social and cultural action 120 Structure and scope of 110 Energy and climate change consolidation of the Report 113 Electromagnetic fields 123 Awards and 115 Green services acknowledgements KEY TO BROWSING THE DOCUMENT 124 GRI compliance tables 135 Compliance with the Global Compact Previous Next Contents Print Search this 136 Compliance with page page document TELEFÓNICA ANNUAL REPORT 2015 Sustainable Development The full Telefónica Annual Report 2015 consists of three documents, each of Goals which can be accessed on the corporate website: www.telefonica.com 137 Compliance with Human Rights 139 External validation
ON ALL DEVICES FURTHER INFORMATION The Telefónica Annual Report 2015 is available online, Access additional information and for smartphone and for tablet (via browsable and videos which may be of interest. INTEGRATED REPORT FINANCIAL REPORT CORPORATE GOVERNANCE REPORT AND interactive downloadable PDFs). REPORT ON REMUNERATIONS 2 INTEGRATED REPORT 2015
Letter from the Chairman_
Dear Shareholders, A KEY YEAR IN CONSOLIDATING At the close of 2015 we reached the figure of TRANSFORMATION AND RETURNING 322 million customers across the countries It is my great honour to address you for the TO GROWTH where we operate, increasing the number of first time as the Chairman of Telefónica, post fibre customers by 30%, tripling the number that I took over on April 8th with the support Over the last several years, Telefónica has been of LTE users and raising the number of and trust of the Company's Board of Directors. laying the foundation to capture the sector's smartphone and pay TV customers by 29% growth potential, undertaking an important and 12% respectively. Let me begin by expressing my deepest transformation process thanks to which the gratitude and appreciation to César Alierta, Company is now growing. Data monetisation has been and will remain my predecessor and architect of the greatest the great lever to boost revenue growth. It transformation in the more than 90-year 2015 has been a key year of progression along is especially significant that in 2015, for the history of this Company. Thanks to his vision the path to profitable, sustainable, long- first time in our history, traditional revenues and ability to think ahead, today Telefónica term growth, along with improvement in our - access and voice - accounted for less than is a world leader and an example of success, competitive position in the major markets 50% of the total. This bears witness to a very leadership, growth and profitability. of Europe and Latin America, our strategic different Telefónica where the core of our markets: Spain, Germany and Brazil. business is connectivity. We are at the beginning of a new stage full of expectations. Be certain that my ambition is to The fruits of the efforts the Company is making The Company has also continued to promote continue writing Telefónica's success story and as a whole are plain visible and have allowed several initiatives aimed at increasing José María Álvarez-Pallete move forward with the digital transformation us to return to organic growth in our major efficiency. Notable savings have come from Chairman & CEO of the Company. To achieve this, I have the best financial figures. synergies resulting from operation integration team in the industry, all the professionals who in Germany and Brazil and the efficiencies are part of this great Company. Revenue growth has accelerated to reach 4% generated by the simplification programme year-on-year, almost doubling that achieved in being implemented across all countries. As This letter gives me the opportunity to update 2014. This solid increase in sales is the result of a result, in 2015 operating income before you on the results achieved in 2015 and share better trends in Spain, an increase in average depreciation and amortisation (OIBDA) grew some thoughts about Telefónica's future. revenue per access for the second consecutive by 3.6% in organic terms with a stable margin year and the firm commitment to higher-value compared to last year. data services.
G4-1, G4-48 3 INTEGRATED REPORT 2015
ATTRACTIVE REMUNERATION FOR “The 2015 results are very solid and are an excellent starting SHAREHOLDERS point from which to continue forward in our transformation” For another year running, Telefónica has met its shareholder remuneration commitment which has always been and remains a clear priority for this Company. In 2015 we also strengthened our differential volume of investment in 2015. This implies that As for the Company's leverage, I can tell you asset platforms improving our position in key the ratio of investment over revenues amounts that we continue to increase our financial In 2016 we intend to propose a dividend markets. First of all, we have progressed in the to 17%, the highest level in the history of the flexibility. payment of 0.75 euros per share. A first tranche deployment of ultra-broadband with a view to Company. Spectrum included, total investment will be paid in the second semester of 2016, building high performance networks. In Spain reaches 9.6 billion euros. Considering all of this, it is safe to say that in accordance with the agreement proposed we have the most extensive fibre-to-the-home the 2015 results are very solid and are an to this General Shareholders' Meeting, and network with the highest number of connected Besides, operating cash flow has returned to excellent starting point from which to continue a second has been proposed in the second customers in all of Europe; in Brazil we have growth in organic terms for the first time in four forward in our transformation and capture the quarter of 2017. Also, in 2016 the Company reached over 17 million fibre premises passed years, rising nearly 2% despite the significant opportunities offered by the digital age. intends to propose the cancellation of 1.5% of and LTE penetration in Europe stands at 75% investment effort. shares of the Company´s own stock. and 43% in Latin America. Undoubtedly, Telefónica's growth will As a result of all of this, in 2015 we increased accelerate in 2016 by leveraging greater data In due time, the Company will propose the Secondly, we are radically transforming our underlying net profit per share by 22 cents to monetisation while maximising the efficiencies adoption of the appropriate shareholders systems through several different initiatives 1.12 euros. And the generation of free cash of integration and simplification and driving resolutions. such as the so-called Full Stack project. We are flow per share, excluding spectrum, was at our innovation and Big Data capabilities, key to also working hard toward simplification and 0.98 euros in 2015, allowing us to distribute a taking full advantage of the great potential of The remuneration announced for 2016 digitalisation. dividend of 0.75 euros per share as announced. the digital ecosystem. represents a yield of 8.1% at current share prices (9.31 euros on 08 April 2016), one of Promoting the best technology platforms, These results mean that, once again, we the highest yields per share among Euro including those linked to different services have been faithful to our commitments; Stoxx 50 companies and well above any of our such as television, the Internet of Things and commitments that we revised upwards competitors in the industry. This performance others, has required a significant increase in the last July. makes Telefónica shares a very attractive asset.
4 INTEGRATED REPORT 2015
A NEW WAVE OF EXPONENTIAL GROWTH At Telefónica we want to play a leading role in connections that give people the ability to COMMITMENT TO PROGRESS the industry, making this digital opportunity choose offering endless possibilities. This is the We live in a context of constant technological a reality. It is an opportunity that will create reason we exist and by putting people at the Our Company has always been characterised disruption never before experienced in history. new growth possibilities around three waves: centre we aspire to become an OnLife Telco. by its strong commitment to development Digitalisation is transforming everything at connectivity; the wave of digital services or and forward-looking societies. A commitment breakneck speed and this trend will continue over connectivity where much still remains to Differential platforms are the pillars on which that, beyond the direct and indirect impact of into the future at an even faster rate. The be done; and the third wave Big Data, in which we will build our future, offering customers our business in creating wealth in the countries scope of technology has grown exponentially we have already started to work. That is why a differential experience. This will allow where we operate —investment, job creation and its expansion to all corners of the world is we have built differential technology platforms, Telefónica to continue to grow and strengthen and tax contributions— has materialised accelerating. with an investment effort of nearly 40 billion its position in the digital ecosystem; an through a number of different programmes and euros from 2012 to 2015, which have given us ecosystem that requires a level playing field initiatives down through the years. But this is only the beginning. The digital the best ultra-broadband networks, the best to ensure the sustainability of the sector and disruption that will take place over the next systems and the best service platforms. guarantee respect for the rights of citizens, I would like to highlight the Company's focus decade will bring changes that we cannot even regardless of who their service provider is. Only on digital education through the Fundación imagine today: the arrival of 5G, which will allow We are using these assets to build a new then can we successfully address the evolution Telefónica. Thanks to these efforts we are speeds and exponential response times; the customer knowledge platform closely linked towards the new digital economy and capture ranked No. three in the world in terms of connection of all objects through sensors which to Big Data. This will certainly lead to a new its full potential. investment in education. We know that will spell extraordinary growth for the Internet wave of exponential growth in Telefónica education is the most powerful tool with which of Things; the explosion of Big Data resulting that we are going to lead because few sectors to reduce inequality and lay the foundations for from the sheer volume of data traffic and have the knowledge of their customers that the sustained growth of societies. the amount of information being shared; and the companies in our sector have today. This emerging trends that are starting to take shape knowledge gives us the chance to build a new such as augmented reality, virtual reality and relationship with our customers, giving them artificial intelligence. This will have an impact control over their personal data, ensuring on all sectors, radically transforming current visibility and control of their digital life and business models. guaranteeing transparency, privacy and “At Telefónica we are convinced that digital life is life itself security. Telecommunication companies are at the and that technology is an essential part of being human. centre of all of this disruption because At Telefónica we are convinced that digital This is the reason we exist and by putting people at the connectivity is the cornerstone around which life is life itself and that technology is an everything else revolves. essential part of being human. We provide the centre we aspire to become an OnLife Telco”
5 INTEGRATED REPORT 2015
Also I would draw attention to our commitment In 2015 Telefónica was among the nine This relationship of trust is even more relevant Dear shareholders, I am absolutely convinced to innovation: investment in R&D+i in 2015 leading companies in the world in terms of in the new digital world. A world where that with our vision, strategy and values we has nearly reached 6.6 billion and is further sustainability criteria according to the Dow traditional models no longer apply and new will reach all the goals that we have set for strengthened by Telefónica's support of Jones Sustainability Index (DJSI) and among rules and values are needed. ourselves. At Telefónica we are not satisfied open innovation, fostering its scope of action the world's best telcos for its transparent with what has been achieved so far; we aspire through Open Future. This programme management of climate change according to Values to respond to the demands and to more in order to continue writing the success covers a range of initiatives focusing on the Carbon Disclosure Project. concerns of our stakeholders. Very clear values story that this Company is today. Success entrepreneurship, innovation and investment about what is right and what is not, what we achieved through the efforts and dedication that the Company undertakes to develop talent We believe that it is important to keep our believe in and how we behave. of all the professionals who are part of this and which has been producing excellent results different stakeholders informed about our Company. since its launch. activity and to do that we use standard All of this requires a much higher level of publication criteria for non-financial ambition, greater courage and being very Before concluding, I would like to thank you All these efforts establish Telefónica as a information such as the GRI or the United demanding. Telefónica has to be a trusted personally and on behalf of the Board of leader in innovation in the industry and in the Nations Global Compact. Company, guarantor of customer security and Directors for all the support and trust you countries where we operate. privacy, bold in its transformation and with an have placed in us, especially in these new and Lastly, I would like to point out that at open mind to interact with its environment. exciting times. I am firmly convinced that We want to ensure access to digital life without Telefónica we are committed to promoting These are our values. together we will continue to make Telefónica leaving anyone behind. Reducing the digital a responsible business model capable of a great company which gets better every day; divide thanks to the connectivity we provide earning the trust of our customers, investors, something to be truly proud of. and improving people's lives through innovation employees and shareholders, and of the have become part of our corporate purpose as a society at large. Thank you very much, responsible Company.
“Telefónica has to be a trusted Company, bold in its transformation and José María Álvarez-Pallete with an open mind to interact with its environment. These are our values” Chairman & CEO
6 INTEGRATED REPORT 2015
Company profile and values_
Telefónica is one of the largest Our headquarters is in Madrid. We currently The list of the companies comprising the telecommunications companies in the world operate in 16 countries, without counting the Net income in 2015 Telefónica Group, with their name, main in terms of market capitalisation and number United Kingdom(1), and we have a customer corporate purpose, country, share capital, of customers. Supported by the best fixed, base of 322.3 million accesses in Spain, percentage of effective participation in mobile and broadband networks, as well Germany and Latin America, where most of our the Telefónica Group and the company or as an innovative range of digital and data growth strategy is focused. We are, therefore, companies through which their participation economy services, our Company is favourably one of the most international companies in 47,219 in the Group is obtained can be found in placed to meet the needs of our customers the sector, with close to 74% of our business MILLION EUROS Annex VI of the Report on Financial Studies. and capture growth in new businesses. being generated outside the domestic market. Movistar (in Spain and Latin America, In this document we present our Integrated We are sensitive to the new challenges except for Brazil), Vivo (in Brazil) and O2 (in Employees at 31 Corporate Report corresponding to the demanded by today’s society and, therefore, we Germany) are the main brand names around December 2015 2015 fiscal year, in which we include provide the means to facilitate communication which we structure our commercial offer. the progress made during the year, between people, providing them with the our strategy and our positioning. most secure and cutting-edge technology. We are a wholly private company and have 1,328,308 direct shareholders. We are listed 129,890 The content herein is complemented by We work every day with an innovative spirit on the continuous market of the Spanish stock EMPLOYEES updated information on our website, as and immense technological potential to exchanges, as well as the stock exchanges in well as the Annual Report on Corporate multiply our customers’ ability to choose London, New York, Lima and Buenos Aires. Governance and Director Remuneration, the in a world in which technology forms an Countries in which Consolidated Statement of Annual Accounts essential part of the human being. we operate and the corresponding Management Report for the period. The above documents are (1) Since the first quarter of 2015 the operations of Telefónica United Kingdom are reported as a discontinued operation linked to this one for easy reference. within the Group. Its assets and liabilities are classified as “held for sale” in accordance with the IFRS (International Financial Reporting Standards), as a result of the signing of At Telefónica we publish this Report on the definitive agreement to sell the Company in March 2015. 16 an annual basis and present it at each General Shareholders' Meeting. We provide the means to facilitate communication Market capitalisation at 31 December 2015 FURTHER INFORMATION between people, providing the most secure and Refer to the “Our Vision” section of our cutting-edge technology 50,921 corporate website. MILLION EUROS G4-3, G4-4, G4-5, G4-7, G4-9, G4-28, G4-29, G4-30 7 INTEGRATED REPORT 2015 1 Main magnitudes 2015_ INTEGRATED REPORT 2015
Financial highlights_ VENEZUELA + CENTRAL AMERICA 2015 GERMANY 2015
All economic data in millions of euros Revenue 1,373 Revenue 8,373 Revenue Provisioning Salary costs Payments Payments 450 133 110 317 2,671 672 164 2,230 Supported tax contributions Investment MEXICO 2015 Employees 6,760 Employees 8,738 Revenue 1,698 Local suppliers 1,745 Local suppliers 597 COLOMBIA 2015 Payments % local purchases 78% % local purchases 68% 604 129 25 266 Accesses (thousands) 24,423 Accesses (thousands) 48,363 Revenue 1,475 Employees 2,479 Payments Local suppliers 524 381 129 146 342 % local purchases 86% Employees 4,984 Accesses (thousands) 26,278 BRAZIL 2015 Local suppliers 478 % local purchases 77% Revenue 11,157 Accesses (thousands) 15,827 Payments 2,508 1,137 1,065 2,105 Employees 35,512 Local suppliers 2,045 ECUADOR 2015 % local purchases 100% Revenue 593 Accesses (thousands) 96,922 Payments 154 59 96 241 Employees 1,417 Local suppliers 281 URUGUAY 2015 % local purchases 66% Revenue 246 Accesses (thousands) 4,034 Payments 85 27 21 33 Employees 604 Local suppliers 301 PERU 2015 % local purchases 38% Revenue 2,828 Accesses (thousands) 1,752 Payments SPAIN 2015 777 326 208 491 Revenue 12,671 Employees 8,777 CHILE 2015 ARGENTINA 2015 Payments Local suppliers 1,054 3,460 5,804 561 1,827 % local purchases 68% Revenue 2,224 Revenue 4,129 Employees 38,130 Accesses (thousands) 22,231 Payments Payments Local suppliers 1,800 678 224 38 433 816 953 626 938 % local purchases 90% Employees 4,495 Employees 17,255 Accesses (thousands) 41,973 Local suppliers 639 Local suppliers 1,050 % local purchases 73% % local purchases 88% Accesses (thousands) 13,164 Accesses (thousands) 26,934
G4-6, G4-8, G4-EC9 Note: These figures refer to all activities conducted by Telefónica in each country as a whole, and not only to its business as an operator. Revenue and payments do not include intra-group activities. 9 INTEGRATED REPORT 2015
TOTAL ACCESSES Total accesses grew year-on-year by 2% REVENUE In the period from January-December revenue Millions in 2015 (-1% in organic terms), to reach Millions of euros totalled 47,219 million Euros and maintained a 322.3 millions. This increase was driven solid growth rate of 4.0% on the previous year in by Telefónica Latin America (+2%), which organic terms (+8.7% reported). Telefónica Latin accounts for 42% of the total, and was America headed the figures, reporting double 300 affected by a more restrictive calculation of the 40 digit growth, while Telefónica Brazil came in close 322 316 pre-paid accesses at Telefónica Brazil (which 47,219 behind, with growth accelerating to around 5%.
showed a net loss of 6.8 million customers). 30 43,458 200 The solid organic growth of value customers Mobile data revenue rose by 16.9% in organic
continues to stand out, notably: fibre (+30% 20 terms, and now account for 42% of mobile year-on-year), pay TV (+12%), smartphones service revenue due to the greater penetration of 100 (+29%) and LTE (3 times more). smartphones (+15 pp) and the growing importance 10 of LTE customers (+8 pp). Meanwhile, the rise in revenue from non-SMS data sequentially improved 0 0 by 1 pp to 27.8% in year-on-year organic terms 2014 2015 2014 2015 (+25.3% in 2015), accounting for 82% of data Note: For comparative purposes, the figure for 2014 is Note: For comparative purposes, the figure for 2014 is revenue (+5 pp year-on-year). We should also reported without the contribution of Telefónica United reported without the contribution of Telefónica United Kingdom, which has been considered a discontinuing Kingdom, which has been considered a discontinuing highlight the greater average use of data traffic asset since 1 January 2015. asset since 1 January 2015. among LTE customers (63% greater than a 3G customer), which was reflected in double-digit ARPU increases, and generates a more efficient use of the Network. 1,482 41,973
Spain 12,402 Spain 48,363 14,387 134,643 Germany Germany 2015 2015 Brazil Brazil LatAm. 7,888 LatAm. 96,921 11,060 Rest
10 INTEGRATED REPORT 2015
OIBDA In 2015, operating income before NET PROFIT In 2015 net profit stood at 2,745 million euros, Millions of euros depreciation and amortisation (OIBDA) Millions of euros although the underlying net profit amounted totalled 11,414 million euros and its year- to 5,787 million euros in 2015 (representing on-year growth rate accelerated in organic +29.7% year-on-year ) and the basic net profit terms (+3.6%) compared to 2014 figures. It is per share totalled 1.12 Euros (+23.9%), also in 3 12 noteworthy that, in underlying terms, OIBDA underlying terms. It is important to highlight totalled 14,926 million euros. The OIBDA margin that, in the latter months of the year, the 13,781 9 remained stable against 2014, as a result of the Company’s reported net profit was impacted 2 3,001 11,414
rise in the rate of revenue growth, the greater 2,745 by extraordinary factors. These factors included
6 containment of costs and the tangible benefits the provision for restructuring expenditures of the generation of synergies due to the (-3,212 million euros), the provision for future integration of the newly-acquired companies. 1 years of Fundación Telefónica (-325 million 3 euros), the provision for optimisation of the distribution Network in Spain (-30 million 0 0 euros), adjustments in the valuation of some 2014 2015 2014 2015 companies (-23 million euros), the final Note: For comparative purposes, the figure for 2014 is Note: For comparative purposes, the figure for 2014 is agreement on the purchase price of E-plus reported without the contribution of Telefónica United reported without the contribution of Telefónica United (+102 million euros), the result of the spectrum Kingdom, which has been considered a discontinuing Kingdom, which has been considered a discontinuing asset since 1 January 2015. asset since 1 January 2015. swap in Mexico (+79 million euros), the expiration of a payment obligation in Brazil (+98 million euros) and capital gains on the sale of property 2015 4,356 and phone towers (+100 million euros). 4 3,573
3 2,336
2 1,858
1 -710 0
-1 Spain Germany Brazil LatAm. Eliminations
11 INTEGRATED REPORT 2015
EMPLOYEES At the end of 2015 the Group had INVESTMENT In 2015 investment grew by 5.0% year-on-year People 129,890 employees, of which fewer than Millions of euros in organic terms, reaching 9,578 million euros 1% held management positions. The workforce (+10.3% in reported terms). This figure includes increased by 5% on the previous year. This 1,585 million euros of spectrum acquisition increase is heavily influenced by the acquisition (76% of the total in Germany). During 2015, 120 of GVT and DTS and the deconsolidation 8 the Company took another step forward in its 9,578 of O2 United Kingdom. Organic variation of ongoing investment plan aimed at the growth 8,681 90 the workforce, without taking into account 6 and transformation of networks and systems, 129,890 123,700 corporate movements, fell by 3.7% in devoting 75% of total investment thereto,
60 comparison with 2014. 95.8% of our workforce 4 excluding the acquisition of spectrum. have permanent employment contracts and people under 30 now account for 20% of 30 our workforce. 2
0 0 2014 2015 2014 2015 Note: For comparative purposes, the figure for 2014 is reported without the contribution of Telefónica United Kingdom, which has been considered a discontinuing asset since 1 January 2015.
739 356 Spain 1,827 Spain 38,130 46,771 Germany Germany 3,060 Brazil 2015 2015 Brazil LatAm. 2,230 LatAm. 8,738 Others Rest 35,512 2,105
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SUPPLIERS The total volume of purchases awarded during DEBT Net financial debt stood at Millions 2015 amounted to 23,797 million euros. Millions of euros 49,921 million euros in December 2015, The total number of suppliers contracted by reporting a year-on-year increase of Telefónica was 12,214 and we should highlight 4,834 million euros. The factors which drove Number of suppliers that 83% of these suppliers are local to the Net financial debt up the debt include: I) 6,934 million euros in different countries in which Telefónica operates. net financial investments including changes to the perimeter; II) shareholder remuneration 12 40 (dividends, treasury shares and hybrid coupons)
49,921 amounting to 4,188 million euros; III) spectrum
9 30 45,087 payments totalling 1,307 million Euros; 12,442 12,214 IV) payment of work-related commitments (721 million euros), mainly for early retirements 6 20 and v) other factors affecting the valuation of the liabilities totalling 1,185 million euros 3 10 (primarily due to the refinancing of commercial liabilities). Conversely, the factors which reduced
0 0 the debt include: i) the generation of free 2014 2015 2014 2015 cash before the spectrum payment totalling 4,821 million euros; ii) the increase of capital Volume of purchases of Telefónica S.A. totalling 3,003 million euros; iii) the contribution of minority interests to the Millions of euros increase of capital of Telefónica Brazil totalling 1,499 1,258 million euros and iv) the issuance of Spain 4,917 capital instruments amounting to 419 million euros. Germany 7,506 The debt ratio (net debt over OIBDA) for the last Brazil 12 months was 2.91x at the close of December 2015 2015. If the completion of the sale of O2 UK 3,537 LatAm. were taken into account, this ratio would be 2.38x.
Rest
6,338
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Income statements_
Millions of euros
2014 2015 Revenues 43,458 47,219
Internal expense capitalised 651 784 Notes: Operating expenses (30,783) (37,132) Since the first quarter of 2015 Telefónica’s operations in the UK have been reported as a discontinuing operation within the Telefónica Group, and its Supplies (11,750) (12,910) assets and liabilities are classified as “held for sale” in accordance with the Personnel costs (6,621) (9,800) IFRS, as a result of the signing of the definitive agreement for the sale of the company in March 2015. Similarly, the results for 2014 are reported in Other operating expenses (12,412) (14,422) accordance with the same criterion. Other net revenues (expenses) 189 284 The weighted average number of outstanding shares during the period is obtained by applying IAS 33 “Earnings per share”. Therefore, the weighted Result of disposal of fixed assets 269 275 average of treasury shares during the period do not count as outstanding Impairment and goodwill (3) (16) shares. Moreover, the denominators are adjusted with the transactions which entail a modification of the number of outstanding shares without Operating Income Before Depreciation and Amortisation (OIBDA) 13,781 11,414 an associated variation in the equity (as if they have occurred at the beginning of the first presented period) and for the “scrip dividend” for OIBDA Margin 31.7% 24.2% 2014 and 2015. Likewise, the ordinary shares which are issued for the Depreciation and amortization (7,430) (8,517) conversion of the imperatively convertible bonds issued on 24 September 2014 have been included in the calculation from that date onwards. Operating income (OI) 6,350 2,897 The net earnings per share from continued operations is obtained by Share of investment results by the equity method (498) (5) dividing the earnings in the fiscal year from continuied operations, including the results attributable to minority interests, adjusted for Net financial income (2,779) (2,581) the allocation to the year of the net coupon corresponding to the “Other equity instruments”, between the weighted average of ordinary Pre-tax income 3,074 311 outstanding shares during the period. Income tax (260) (13) The net earnings per share from discontinued operations is obtained by dividing the figure for earnings for the fiscal year from discontinued Earnings in the fiscal year from continued operations 2,814 298 operations, including the results attributable to minority interests, Earnings in the fiscal year from discontinued operations 439 2,582 between the weighted average of ordinary outstanding shares during the period. Profit for the year 3,252 2,880 The basic net earnings per share is obtained by dividing the figure for Results attributable to minority interests (251) (135) net income, adjusted for the allocation to the year of the net coupon corresponding to the “Other equity instruments”, between the weighted Net income 3,001 2,745 average of ordinary outstanding shares during the period. Weighted average number of ordinary shares outstanding (millions) 4,714 4,928 The data reported in 2014 and 2015 includes the adjustments for hyperinflation in Venezuela in both years. Net earnings per share from continued operations (euros) 0.50 (0.02) The consolidated results of the Telefónica Group consolidate the results of Net earnings per share from discontinued operations (euros) 0.09 0.52 GVT and DTS since 1 May 2015, consolidate the results of E-Plus since the fourth quarter of 2014 and deconsolidate the results of Telefónica Ireland Basic net earnings per share (euros) 0.60 0.51 since the third quarter of 2014.
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Consolidated statement of financial position_
Millions of euros
Dec-2014 Dec-2015 Non-current assets 99,448 91,398 Intangible 22,227 18,562 Goodwill 25,437 21,745 Tangible fixed assets and investment properties 33,156 30,549 Equity-accounted investments 788 74 Non-current financial assets 10,973 10,008 Deferred tax assets 6,867 10,460 Current assets 22,900 31,576 Stocks 934 1,360 Debtors and other accounts receivable 10,637 8,301 Current financial assets 2,932 2,971 Tax receivables 1,749 1,341 Cash and cash equivalents 6,529 2,599 Non-current assets held for sale 119 15,004 Net worth 30,321 27,556 Notes: Net worth attributable to parent company shareholders and other equity instruments holders 21,135 17,891 Since the first quarter of 2015 Telefónica’s operations in the UK have been reported as a discontinuing Net worth attributable to minority interests 9,186 9,665 operation within the Telefónica Group, and its assets and Non-current liabilities 62,318 60,549 liabilities are classified as “held for sale” in accordance Long-term financial debt 50,688 47,117 with the IFRS, as a result of the signing of the definitive agreement for the sale of the company in March 2015. Creditors and other long-term accounts payable 2,384 2,381 The data reported in 2014 and 2015 includes the Deferred tax liabilities 2,566 2,313 adjustments for hyperinflation in Venezuela in both Long-term provisions 6,680 8,738 years. The consolidated statement of financial position on 31 Current liabilities 29,709 34,869 December 2014 has been re-expressed as a result of the Short-term financial debt 9,094 12,953 completion of the assignation process of the purchase Creditors and other short-term accounts payable 16,951 14,235 price of E-Plus, which took place in the third quarter of 2015. Tax payables 2,026 1,769 (1) Figures in millions of euros. The net financial debt in Short-term provisions 1,595 1,971 September 2015 includes: Long-term financial debt + Liabilities associated with non-current assets held for sale 43 3,941 Creditors and other long-term accounts payable (1,073) + Short-term financial debt + Creditors and other short- Total Assets = Total Liabilities 122,348 122,974 term accounts payable (462) - Non-current financial Financial data assets (5,793) - Current financial assets - Debtors and other accounts receivable CP (321) - Cash and cash (1) Net financial debt 45,087 49,921 equivalents.
15 INTEGRATED REPORT 2015
Non-financial indicators_ Social Unit 2014 2015 Internal impacts (HR) Total number of employees at the end of the period People 123,700 129,890 TRACKING TABLE FOR THE TELEFÓNICA GROUP’S NON-FINANCIAL INDICATORS Voluntary turnover Percentage 7.6% 7.8% Employees younger than 30 years of age People 25,646 25,791 Percentage of women on the payroll Percentage 38.0% 37.7% Economic Unit 2014 2015 Percentage of women in management positions Percentage 20.6% 19.1% Impact on communities Number of employees with disabilities People 1,033 886 (1) Total average salary of women in comparison with that of men with no Number of direct, indirect and induced jobs People n.a. 1,228,096 Percentage 95.9% 96.5% (2) Purchases awarded locally Percentage 85.0% 84.7% difference in seniority: managers Total average salary of women in comparison with that of men with no Average period for payment to suppliers (2) Days 51 49 Percentage 96.4% 96.2% difference in seniority: middle management (2) Global tax contribution: taxes borne (3) Millions of euros 3,555 3,130 Percentage of employees covered by collective bargaining agreements Percentage 62.3% 70.4% Global tax contribution: total contribution (4) Millions of euros 12,057 11,454 Rating of overall work environment Points out of 100 79 79 Internal impact Number of training hours Thousands of hours 3,712.0 3,986.4 Number of audits of risk suppliers Units 1,395 1,577 Absenteeism rate (6) Units 5,113 6,565 Suppliers with improvement plans arising from the audits Units 520 608 Accident rate (7) Units 1.01 1.04 Ratio of standard entry level wage compared to local minimum wage (2) Times 2.16 2.15 External impacts Customer Evolution of mobile broadband penetration into our communities Percentage 33.6% 48.5% (5) Delivered traffic Tbytes/month 1,103,789 1,653,406 Prepay mobile customers Thousands 164,959.2 157,283.7 Customer satisfaction index Points out of 10 7.40 7.56 Payments for Universal Service(8) Millions of euros 350.6 324.2 Digital Trust Investment in social + cultural action Fundación/Sponsorships Millions of euros 130.1 116.6 Attendees at courses related to data protection People 62,950 49,352 Procedures initiated on data protection issues during the year Units n.a. 154 Environmental Unit 2014 2015 Number of fines confirmed for data protection issues during the year Units n.a. 78 Waste Anti-corruption Internal waste managed (operations, offices) Tonnes 20,838 23,423 (10) Number of trained active employees People 59,360 75,648 Customer waste (recycling and reuse) Tonnes 1,928 2,765 (11) Total communications processed in 2015 due to possible incidents Units n.a. 822 Energy Total number of identified incidents of corruption and bribery Units 0 0 Total energy consumption GJ 22,868,596 23,178,864 Number of disciplinary measures taken in consequence Units 0 0 Energy from renewable sources Percentage 15 16 Measures adopted as a result of the investigation Units 4 38 GHG emissions of complaints (dismissals) Direct emissions (scope I) tCO2eq 92,004 95,677 (1) Direct impact as own activity, indirect impact as an ecosystem of suppliers and impact induced as consumption for salary Indirect emissions (scope II) tCO2eq 1,880,938 1,908,230 income. (9) (12) (2) As these are local and non-consolidated indicators, data referring to the domestic market, Spain, is provided. Indirect emissions (scope III) tCO2eq 36,430 34,075 (3) Taxes paid by Telefónica to administrations of the various States in which it operates, which cause the Company to assume an Consumption effective cost. Water Thousands of m3 4,125 3,898 (4) Taxes managed by Telefónica that have been entered on behalf of other contributors as a result of the economic activity of (6) (Number of days lost due to absences during the period/total number of days worked during the period) x 200,000. the Company; that is, tax revenues obtained due to the economic value generated by this economic activity. (7) (Total number of accidents/total hours worked) x 200,000. (5) Information from the internal Corporate Management Control systems. (8) The figure from Brazil corresponds to 2014, as the 2015 figure is pending adjustments. (9) Business trips. (10) The increase is due to the incorporation of GVT into Telefónica and its cable waste. More than 90% of the total waste managed by the Telefónica Group is made up of cables used in network roll-out. (11) The increase is due to improvements in the reverse logistics processes which promote the circular economy and the reuse and recycling of equipment. (12) Scope III indirect emissions correspond to business trips. G4-EN8 16 INTEGRATED REPORT 2015
Share price performance_
European equity markets were very volatile led the fallers. The telecommunications sector 1 in 2015, with the year dividing into two parts. was up 8.5% over the year, 1.7 p.p. higher than The first part of the year, to August, saw the DJ Stoxx-600 (+6.8%), due to operators 0.75 improving macroeconomic indicators and experiencing a return to revenue growth in strong performance by exporting sectors, general terms and a better outlook for the
supported by a more competitive euro (as future, together with announced and expected 0.50 0.75 0.75 a result of ECB stimulus measures), driving consolidations. 18% markets upwards. However, uncertainty about economic growth in China and devaluation of The Telefónica share ended 2015 at 10.24 0.25 the Yuan (increasing volatility for all emerging euros per share, down 13.2%. This fall Total shareholder economy currencies and causing a collapse in is reduced to 7.9% when the dividends return 2012-2015 commodity prices) and expectations of interest distributed in the year (0.40 euros in cash and 0 rate increases by the US Federal Reserve 0.35 euros in scrip dividend) are included. 2015 2016 (with the first rise since January 2009 taking Dividend, euros per share place on December 16), dragged the markets In terms of individual shares, there were back from mid-August onwards. Against this noteworthy performances by Telecom Italia backdrop, the performance of European indices (+33.2%, driven by consolidation in the varied over the year: CAC-40, +8.5%; DAX, domestic market, expectations of corporate Other leading Spanish companies by stock At the Shareholders’ Office we ensure +9.6%; FTSEMIB, +12.7%; EStoxx-50, +3.8%; actions involving its Brazilian subsidiary TIM, market capitalization also struggled (Repsol that we maintain smooth and transparent Ibex-35, -7.2%; and FTSE-100, -4.9%. The and the entry of significant new shareholders) -34.9%, Santander -34.8% and BBVA -14.2%). communication with our private investors. As Ibex-35 underperformed its peers due to the and Deutsche Telekom (+26.0%, with a a result, in the past year we have attended greater exposure of some of its companies to positive performance in its domestic market At 2015 year end, Telefónica's stock market a total of 61,221 calls on the shareholder emerging economies, political uncertainty and and the possible divestment of its T-Mobile capitalization stood at 50,921 million euros, information line (900 111 004), with a the greater weight of exporting sectors in other subsidiary). In addition, BT finished the the eleventh largest telecommunications monthly average of 5,101 inquiries, and a European indices. year up 17.5%, Telefónica Deutschland company worldwide. The average trading further 3,338 inquiries via e-mail and post. rose by 10.8% and Orange was up 9.4%. volume in its shares on the Spanish continuous In terms of DJ Stoxx-600 sectors, the gainers in On the negative side, Vodafone fell 0.7%, market was 33.7 million shares. Europe were led by travel and leisure (+19.6%), and TeliaSonera was down 16.3%, impacted financial services (+18.7%) and consumer by corporate governance problems in its FURTHER INFORMATION goods (+18.7%), whilst basic materials investments in Eurasia. Refer to the “Shareholders and Investors” (-34.9%), energy (-7.8%) and utilities (-3.7%) section of our corporate website.
17 INTEGRATED REPORT 2015 2 Corporate governance_ INTEGRATED REPORT 2015
Board of Directors_
With the support of its Committees, the Board More detailed information on this matter is of Directors of Telefónica, S.A. carries out contained in the Annual Corporate Governance its activities in accordance with regulations Report and the Annual Report on the covering Corporate Governance, which are Remuneration of Directors. chiefly contained in the Articles of Association, the Regulations for the General Shareholders' Each year at Telefónica we publish a full report Meeting and the Regulations of the Board of on the remuneration of all our Directors, their Directors. structure, the items of remuneration, the fixed and variable short and long-term payments, The Board of Directors is the body which as well as other kinds of allowances. This supervises and controls Company activity, information can be found in the Report on bearing sole responsibility for, among other Corporate Governance and Remunerations of things, the general policies and strategies Directors. of the Company, including those related to Corporate Governance, Corporate Responsibility, remuneration of Directors and Senior Management and shareholder remuneration, as well as strategic investments.
In order to strengthen the Company’s Corporate Governance, the Board of Directors of Telefónica, S.A. has eight Committees, which are responsible for the examination and monitoring of areas of particular relevance.
Furthermore, in accordance with its Regulations, the Board of Directors entrusts the ordinary management of the businesses to the executive bodies and the management team at Telefónica, S.A.
19 INTEGRATED REPORT 2015
COMPOSITION OF THE BOARD OF DIRECTORS
Executive directors Proprietary external directors Independent external directors Other external directors Mr. José María Álvarez-Pallete López (Chairman)
Mr. Isidro Fainé Casas (Vice-Chairman)
Mr. José María Abril Pérez (Vice-Chairman)
Mr. Julio Linares López (Vice-Chairman)
Mr. César Alierta Izuel
Ms. Eva Castillo Sanz
Mr. Juan Ignacio Cirac Sasturain
Mr. José Javier Echenique Landiribar
Mr. Peter Erskine
Ms. Sabina Fluxà Thienemann
Mr. Luiz Fernando Furlán
Mr. Gonzalo Hinojosa Fernández de Angulo
Mr. Pablo Isla Álvarez de Tejera
Mr. Peter Löscher
Mr. Antonio Massanell Lavilla
Mr. Ignacio Moreno Martínez
Mr. Francisco Javier de Paz Mancho
Mr. Wang Xiaochu
Mr. Ramiro Sánchez de Lerín García-Ovies (Non-voting Secretary)
Ms. María Luz Medrano Aranguren (Non-voting Vice-Secretary)
G4-39 20 INTEGRATED REPORT 2015
COMMITTEES OF THE BOARD OF DIRECTORS
Executive Audit and Appointments, Remuneration Institutional Quality of service Committee Control and Corporate Governance Affairs Regulation and Customer Innovation Strategy Mr. José María Álvarez-Pallete López (Chairman)
Mr. Isidro Fainé Casas (Vice-Chairman)
Mr. José María Abril Pérez (Vice-Chairman)
Mr. Julio Linares López (Vice-Chairman)
Mr. César Alierta Izuel
Ms. Eva Castillo Sanz
Mr. Juan Ignacio Cirac Sasturain
Mr. José Javier Echenique Landiribar
Mr. Peter Erskine
Ms. Sabina Fluxà Thienemann
Mr. Luiz Fernando Furlán
Mr. Gonzalo Hinojosa Fernández de Angulo
Mr. Pablo Isla Álvarez de Tejera
Mr. Peter Löscher
Mr. Antonio Massanell Lavilla
Mr. Ignacio Moreno Martínez
Mr. Francisco Javier de Paz Mancho
Mr. Wang Xiaochu
G4-38 21 INTEGRATED REPORT 2015
Committees of the Board of Directors_
EXECUTIVE COMMITTEE statutory or regulatory reasons, to an Executive AUDIT AND CONTROL COMMITTEE Functions. The Board of Directors, always in Committee. This Committee allows the Board of Functions. This Committee, among other tasks, accordance with the current legal provisions, Directors greater operability and effectiveness supports the Board of Directors in its supervisory delegates its powers and attributions, except in the exercise of its functions, inasmuch as it work and assumes the power: to report on those which cannot be delegated for legal, meets more frequently than the latter. issues raised by shareholders on matters which are within the Committee's scope of competence; to propose the appointment and terms of engagement of the accounts auditor; to supervise the internal audit and the process Mr. José María Álvarez-Pallete López Chairman of drawing up and submitting the regulated financial information; to propose the policy for risk control and management; and to establish Mr. Isidro Fainé Casas Vice-Chairman and maintain an appropriate relationship with the accounts auditor. Sustainability risks are also reported to this Committee. Mr. José María Abril Pérez Vice-Chairman
Mr. José Javier Echenique Landiribar Member Composition Position Date of Appointment
Mr. José Javier Echenique Landiribar Chairman 8 April 2016 Mr. Peter Erskine Member
Mr. Gonzalo Hinojosa Fernández de Angulo Member 26 June 2002 Mr. Gonzalo Hinojosa Fernández de Angulo Member
Mr. Antonio Massanell Lavilla Member 30 August 2000 Mr. Francisco Javier de Paz Mancho Member
Mr. Ramiro Sánchez de Lerín García-Ovies Secretary Mr. Ignacio Moreno Martínez Member 31 May 2013
22 INTEGRATED REPORT 2015
Composition Position Date of Appointment APPOINTMENTS, REMUNERATION AND established in the Articles of Association, the Mr. Francisco Javier de Paz Mancho Chairman 8 April 2016 CORPORATE GOVERNANCE COMMITTEE extent and amount of remunerations, rights and Functions. This Committee assumes the tasks economic compensations to be allocated to the Mr. Peter Erskine Member 27 February 2008 of reporting, in accordance with objectivity Chairman and Senior Managers of the Company, Mr. Gonzalo Hinojosa Fernández de Angulo Member 30 November 2005 criteria and the corporate interests, on proposals including the basic terms of their contracts for for the appointment, re-election and dismissal the purposes of contractual implementation. It Mr. Pablo Isla Álvarez de Tejera Member 26 June 2002 of Board Members and Senior Managers of the also oversees compliance with the Telefónica Company and its subsidiaries, evaluating the internal codes of conduct and Corporate skills, knowledge and experience necessary for Governance regulations in force at all times. candidates to fill the vacancies. It also proposes to the Board of Directors, within the framework
Composition Position Date of Appointment QUALITY OF SERVICE AND CUSTOMER Telefónica Group. It also assesses the levels of Mr. Antonio Massanell Lavilla Chairman 26 March 1999 CARE COMMITTEE customer care provided by the Group companies Ms. Eva Castillo Sanz Member 16 December 2009 Functions. Among other tasks, this Committee to their customers. Mr. Gonzalo Hinojosa Fernández de Angulo Member 26 June 2002 performs the examination, analysis and regular monitoring of the quality indices for the Mr. Ignacio Moreno Martínez Member 31 May 2013 main services provided by companies in the Mr. Francisco Javier de Paz Mancho Member 31 May 2013
REGULATION COMMITTEE matters between the Management Team and Composition Position Date of Appointment Functions. Among other powers, this the Board of Directors and, when appropriate, Mr. Gonzalo Hinojosa Fernández de Angulo Chairman 24 April 2013 Committee assumes the role of carrying out it informs the latter on matters it considers permanent monitoring of the main regulatory important or relevant to the Company or any Ms. Eva Castillo Sanz Member 16 December 2009 issues and affairs affecting the Telefónica Group of the Group companies, and for which it is Mr. Ignacio Moreno Martínez Member 31 May 2013 at any one time. It also serves as a channel of necessary or appropriate to make a decision or communication and information on regulatory establish a particular strategy. Mr. Francisco Javier de Paz Mancho Member 23 January 2008
23 INTEGRATED REPORT 2015
Composition Position Date of Appointment Relations, as well as to approve and monitor INSTITUTIONAL AFFAIRS COMMITTEE Mr. Julio Linares López Chairman 31 May 2013 Functions. Without detriment to any other the Corporate Responsible Business Plan of the functions which may be entrusted to it by the Telefónica Group. Mr. Gonzalo Hinojosa Fernández de Angulo Member 31 May 2013 Board of Directors, the Institutional Affairs Mr. Antonio Massanell Lavilla Member 31 May 2013 Committee’s main task is to study and analyse issues and aspects related to Institutional Mr. Francisco Javier de Paz Mancho Member 31 May 2013
Composition Position Date of Appointment and support necessary to ensure the proper Mr. José María Abril Pérez Member 18 May 2011 INNOVATION COMMITTEE Functions. This Committee's main purpose implementation and development of these Mr. Peter Erskine Member 30 July 2008 is to advise and provide support in all matters projects throughout the Telefónica Group. Mr. Julio Linares López Member 18 December 2013 related to innovation, performing the analysis, study and regular monitoring of Company Mr. Antonio Massanell Lavilla Member 30 July 2008 innovation projects, and providing the criteria
Composition Position Date of Appointment STRATEGY COMMITTEE Mr. Peter Erskine Chairman 17 December 2008 Functions. Among other functions, this Committee's main task is to support the Board of Directors in the analysis and monitoring of the strategic policy of the Telefónica Group at a global level. Ms. Eva Castillo Sanz Member 17 December 2008 Mr. Gonzalo Hinojosa Fernández de Angulo Member 17 December 2008 Mr. Julio Linares López Member 31 May 2013
24 INTEGRATED REPORT 2015
Members of the Board_
Mr. José María Mr. Isidro Fainé Casas Mr. José María Abril Pérez Mr. Julio Linares López Álvarez-Pallete López Vice-Chairman Vice-Chairman Vice-Chairman Chairman & CEO Doctor of Economic Sciences. Diploma in Senior Degree in Economic Sciences from the Telecommunications engineer. He joined Degree in Economic Sciences from the Management from IESE. ISMP in Business Commercial University of Deusto and Professor Telefónica in May 1970 at the Research and Complutense University of Madrid. Studies in Administration from Harvard University. at the University for nine years. Development Centre and, since then, has held Economic Sciences at the Université Libre of Member of the Royal Academy of Economics several positions at Telefónica, including that Brussels, in Belgium. International Management and Finance and the Royal Academy of Among other positions, he has been Managing of CEO of Telefónica Multimedia, Executive Program (IMP) at the Pan-American Institute of Doctorate Holders. Director of Wholesale and Investment Banking Chairman of Telefónica España, Chairman Management Development (IPADE). Diploma at Banco Bilbao Vizcaya Argentaria, S.A. and a of the Supervisory Board of Cesky Telecom, in Advanced Studies (DEA) from the Faculty of He is Chairman of CaixaBank, S.A., Chairman of member of its Management Committee. He has Managing Director for Coordination, Business Financial Economics and Accountancy of the the Board of Trustees of the Caixa d’Estalvis i also been Financial Manager of the Sociedad Development and Synergies, and CEO of Complutense University of Madrid. Pensions de Barcelona Banking Foundation (“La Anónima de Alimentación (SAAL) and Sancel- Telefónica, S.A. Caixa”) and of Criteria Caixa, S.A.U., First Vice- Scott Ibérica, Executive Coordinator of Banco He has been Chairman of Telefónica, S.A. since 8 Chairman of Repsol, S.A., and a Board Member Español de Crédito, S.A., Managing Director He is currently a member of the Board April 2016, having previously held various other of Gas Natural SDG, S.A., Banco BPI, S.A., the of the BBV Industrial Group, a member of and Executive Committee of the GSM positions within the Telefónica Group since Bank of East Asia and the Suez Environnement the Boards of Directors of Repsol, Iberia and Association. He is a Trustee of the Mobile World 1999, including COO of Finance at Telefónica Company. Corporación IBV, as well as Vice-Chairman of Capital Barcelona Foundation, the Spanish Internacional, S.A.U., COO of Corporate Finance Spanish Stock Markets ("Bolsas y Mercados Confederation of Directors and Executives at Telefónica, S.A., Executive Chairman of He is Chairman of the Spanish Confederation Españoles" -BME-). Foundation (CEDE), and Fundación Telefónica. Telefónica Internacional, S.A.U., Chairman of Savings Banks (CECA). He is Chairman of He is also a member of the Executive Committee of Telefónica Latin America and Chairman of the European Savings Banks Group (ESBG) and and Management Board of the CEOE, the Telefónica Europe. From September 2012 until Deputy Chairman of the World Savings Banks AMETIC Advisory Council, the Governing Council April 2016 he was Chief Executive Officer of Institute (WSBI). He is also Chairman of the of the Association for Progress in Management Telefónica, S.A. Spanish Confederation of Executives (CEDE), the and the Social Council of the Complutense Spanish Chapter of the Club of Rome and the University of Madrid. He previously worked at Arthur Young Auditors, Círculo Financiero. He is also a member of the Benito & Monjardín/Kidder, Peabody & Co. and Business Council for Competitiveness (CEC). He is also a member of COIT (Official Association Cementos Portland (Cemex). He has been a of Telecommunications Engineers) and the AEIT Board Member of the Cemex Group in Indonesia, (Spanish Association of Telecommunications based in Jakarta, China Netcom Group Engineers). He is a Member of the Advisory Corporation Limited and Portugal Telecom Board of the Higher Technical School of SGPS, S.A, among other companies. Telecommunications Engineers.
25 INTEGRATED REPORT 2015
Mr. César Alierta Izuel Ms. Eva Castillo Sanz Mr. Juan Ignacio Cirac Sasturain (since 2007); and Founding Managing Editor, Member of the Board Member of the Board Member of the Board Computing and Quantum Information (since 2001). Law degree from the University of Zaragoza with Degree in Law and Business Administration from Doctor of Physics from the Complutense a Master’s Degree in Business Administration the Pontifical University of Comillas, ICADE (E-3) University of Madrid and a Degree in Theoretical His national and international awards include: from the University of Columbia, New York. of Madrid. Physics from the same University. Areas of The Hamburg Prize for Theoretical Physics; specialisation: Theoretical Quantum Optics, Medal of Honour, García Cabrerizo Foundation; He is the Executive Chairman of Fundación She is currently Chair of the Supervisory Quantum Information, Atomic Physics and the Wolf Prize in Physics; Medal of Honour Telefónica. He is also a Board Member of China Board of Telefónica Deutschland Holding, AG, Quantum Many-Body Physics. from the Niels Bohr Institute; and the Grand Unicom (Hong Kong) Limited and International and Independent Board Member of Bankia Cross of the Order of Dos de Mayo of the Consolidated Airlines Group (IAG) and a Patron and Visa Europe. She is also a Member of the His professional experience includes Speaker at Community of Madrid. He also has the following of the Caixa d’Estalvis i Pensions de Barcelona Board of Trustees of Fundación Telefónica, the the International Max-Planck Research School distinctions: Member Elect of the Royal Banking Foundation (“La Caixa”). Comillas-ICAI Foundation and the Entreculturas of Quantum Science and Technology (since Academy of Sciences, Spain; Doctor Honoris Foundation. 2016), “Honorarprofessor” at the Technical Causa, Polytechnic University of Valencia, Spain; He is a Member of the Columbia Business University of Munich (Department of Physics) Doctor Honoris Causa, University of Valencia, School Board of Overseers and Chairman of Among other positions, she has been Chair (since 2002), Director of the Theory Division at Spain; Visiting Miller Professorship Award, the Business Council for Competitiveness and and CEO of Telefónica Europe, Chair of the the Max-Planck Institut für Quantenoptik and University of California, Berkeley, California, the Social Council of the National University of Supervisory Board of Telefónica Czech Republic, member of the Max Planck Society (since 2001). USA; Corresponding Member of the Royal Distance Learning ("Universidad Nacional de a.s. and Board Member of Old Mutual Plc. Academy of Sciences and Arts of Barcelona, Educación a Distancia" (UNED)). His other activities include: Member of the Spain; David Ben-Gurión Medal, Ben-Gurión She held various positions at Merrill Lynch until Advisory Board of the Interdisciplinary Institute University of the Negev, Israel; Professor at the Other positions he has held include Founding she was appointed Head of Merrill Lynch Private of Information Sciences, Tsinghua University Centre for Theoretical Science of Princeton, Chairman of Beta Capital Society, President Bank for Europe, the Middle East and Africa (since 2015); Member of the Advisory Board Princeton University, New Jersey, United of the Spanish Institute of Financial Analysts (EMEA), a position she held until December of the Russian Quantum Centre (since 2012); States; Distinguished Lecturer, Technion, Haifa; and Chairman of Tabacalera, S.A. Furthermore, 2009. Member of the Advisory Board of Annalen Tsinghua Songjian Turing Lecturer, Beijing; and in July 2000 he was appointed Executive der Physik (since 2012); Member of the Erwin Schrödinger Distinguished Professor, Chairman of Telefónica, S.A., a post he held until Review Panel, QSIT, Swiss National Science Vienna. April 2016. Foundation (since 2011); Member of the Scientific Committee of the BBVA Foundation He has been a guest speaker at more than (since 2010); Member of the Advisory Board of 200 international conferences and has also the Science Centre of Benasque (since 2008); performed teaching work and held public Member of the Scientific Advisory Board, Centre classes. of Quantum Technology, NUS, Singapore
26 INTEGRATED REPORT 2015
Mr. José Javier He has been Director and Managing Director of Mr. Peter Erskine Ms. Sabina Fluxà Thienemann Echenique Landiribar Allianz-Ercos and Director General of the BBVA Member of the Board Member of the Board Member of the Board Group (Head of Wholesale Banking). He has also been a member of the Board of Directors Degree in Psychology from the University of Degree in Business Management and Degree in Economic and Actuarial Sciences of Telefónica, S.A., Telefónica Móviles, S.A., Liverpool, appointed Doctor Honoris Causa by Administration, with an MBA from ESADE. She from the University of the Basque Country President of Banco Guipuzcoano, Sevillana Reading University. has also completed a Business Management and Professor of Social Security Quantitative de Electricidad, S.A., Acesa, Hidroeléctrica del Program at IESE. Techniques at the Bilbao Faculty of Economic Cantábrico, Corporación IBV, Metrovacesa, He is Chairman of the Henley Business School Sciences of the UPV for several years. the Patricio Echeverria Corporation, the Strategy Board, a Member of the Board of In January 2005 she joined the Iberostar Group, BBVA Seguros Group, the Edhardt Group, Reading University and a Member of the where she currently holds the position of Co- He is currently a member of the Board of Uralita, the Porres Group (Mexico) and Abertis University Strategy and Finance Committees. Vice Executive Chair and CEO. Directors of Banco Sabadell (Vice-Chairman), Infraestructuras, S.A. Board Member of Repsol, S.A., ACS Actividades He began his professional career in the field of In addition, she holds the positions of Board de Construcción y Servicios, S.A., ACS Servicios, marketing at Polycell and Colgate Palmolive, at Member at ACS, Member of the Regional Comunicaciones y Energía, S.L., Telefónica the MARS Group and at UNITEL. He also held Advisory Board of BBVA, Member of the Móviles México and Grupo Empresarial ENCE, S.A. different management positions at BT Mobile Governing Council of APD Illes Baleares and is a until being appointed CEO and Chairman of O2, Patron of the Iberostar Foundation, the Eneavor He is also a Member of the Advisory Board Plc. In December 2015 he resigned as Chairman Foundation and the ACS Foundation. of Telefónica España and a Delegate of the of Ladbrokes, Plc. Telefónica Basque Country Council, a Patron of the Novia Salcedo Foundation, Board Member of the Deusto Business School and Member of the Circle of Basque Entrepreneurs.
27 INTEGRATED REPORT 2015
Mr. Luiz Fernando Furlán Mr. Gonzalo Hinojosa Fernández Mr. Pablo Isla Álvarez de Tejera Mr. Peter Löscher Member of the Board de Angulo Member of the Board Member of the Board Member of the Board Degrees in Chemical Engineering from the FEI Law degree from the Complutense University of He studied Economics at the Vienna University (Industrial Engineering Faculty of São Paulo) and Doctor of Industrial Engineering from the Higher Madrid and State Attorney. of Economics and Business Administration Business Administration from the University of Technical School of Industrial Engineers in at the Chinese University of Hong Kong. He Santana de São Paulo, specialising in Financial Madrid. He has been Chairman and CEO of the INDITEX obtained an MBA from the Vienna University Administration at the Getúlio Vargas Foundation Group since 2011. From 2005 he was Vice- of Economics and completed the Advanced in São Paulo. He is a Board Member of Telefónica del Perú, Chairman and Chief Executive Officer. Management Program at the Harvard Business S.A.A. School. He is currently Chairman of the Board of He was previously Director of Legal Services at Directors of the Amazon Sustainability He was Managing Director, CEO and Chairman Banco Popular (1992-1996), Managing Director He is Chairman of Sulzer AG, non-Executive Vice- Foundation and a Member of the Global Ocean of the Cortefiel Group until 2006. He has also of State Assets at the Ministry of Economy and Chairman of Renova Management AG, Member Commission. been a Board Member of Banco Central Hispano Finance, and Chairman of the Altadis Group of the Supervisory Board of Deutsche Bank and Americano, Portland Valderribas and Altadis S.A. (2000-2005). Member of the Board of TBG AG (Switzerland). He is also a Member of the Board of Directors of Brasil Foods, S.A. (BRF), Telefónica Brazil, S.A. Former Chairman and CEO of Siemens AG. and the AGCO Corporation. He was previously President of Global Human Health and Member of the Executive Board of From 2003 to 2007 he was Minister for Merck & Co., Inc., CEO of GE Healthcare Bio- Industry, Development and Trade in the Sciences and Member of the GE Corporate Brazilian Government. Prior to that he was a Executive Council, Director of Operations and Member of the Board of Directors and Advisor Member of the Board of Amersham Plc. He to numerous companies, including Sadia, S.A., held senior leadership positions at Aventis and Panasonic (Japan), Wal-Mart (USA) and Abertis Hoechst. Infraestructuras, S.A. (Spain). He served as Chairman of the Board of Trustees of the Siemens Foundation and was a Member Emeritus of the Advisory Council of the Economic Development Board of Singapore. He is also a Member of the International Advisory Council of Bocconi University.
28 INTEGRATED REPORT 2015
Mr. Antonio Massanell Lavilla Mr. Ignacio Moreno Martínez Mr. Francisco Javier de Paz Mr. Wang Xiaochu Member of the Board Member of the Board Mancho Member of the Board Member of the Board Degree in Economic Sciences and Business Degree in Economic and Business Sciences from Professor of Higher Engineering; He graduated in Studies from the University of Barcelona. the University of Bilbao, with a Master’s Degree Degree in Information and Marketing. Law Telecommunications Engineering in 1989 from in Marketing and Commercial Management studies. Diploma in Senior Management from the Institute of Posts and Telecommunications He is currently Vice-Chairman of CaixaBank, S.A. from the Business Institute. He also has a IESE (University of Navarre). in Beijing. He completed a doctorate in Business He is also a member of the following Boards of Master’s Degree in Business Administration Administration at Hong Kong Polytechnic Directors: Cecabank (Non-executive Chairman), (MBA) from INSEAD. He is a Board Member of Telefónica de Argentina University in 2005. Mediterranea Beach & Golf Community, S.A., S.A. and Telefónica Brazil, S.A. (Vice-Chairman), Board Member of SAREB He is the current CEO of Metrovacesa, S.A. and He is currently Chairman of China United Network (Company for the Management of Assets the natural person representing the Board Other positions he has held include Chairman Communications Group Company Limited proceeding from Restructuring of the Banking Member Cardomana Servicios y Gestiones, S.L. of Telefónica Gestión de Servicios Compartidos (“Unicom Group”), as well as Chairman and CEO of System) and a member of the Supervisory in Secuoya, Grupo de Comunicación, S.A. España, S.A.U., Chairman of Atento Inversiones China Unicom (Hong Kong) Limited. Board of ERSTE Group Bank. y Teleservicios, S.A.U., of the National MERCASA He has worked at Banco de Vizcaya, Banco Company, Board Member of Tabacalera, S.A., Wang Xiaochu has been Managing Director of In addition, he is Vice-President of the Board of Santander Business, Mercapital, Corporación Assistant to the Chairman and Director of Hangzhou Telecommunications Bureau in Zhejiang Trustees of COTEC (Foundation for Technological Bancaria de España, S.A., Argentaria Bolsa, Corporate Strategy of the Panrico Donuts Group, Province and Managing Director of Tianjin Posts Innovation), Chairman of the Barcelona Centre Sociedad de Valores and Banco Bilbao Vizcaya Managing Director of Internal Trade at the and Telecommunications Administration. He has Financer Europeu Association, a Member of the Argentaria, S.A., where he was Managing Ministry of Trade and Tourism, Board Member of also been Chairman and CEO of China Mobile (Hong Plenary Body of the Chamber of Commerce Director of the Presidency Area. He has also the Panrico Group and Member of the Executive Kong) Limited, Vice-Chairman of China Mobile of Barcelona (since 2010) and a member been CEO of N+1 Private Equity. Committee of the Higher Council of Chambers. Communications Corporation, Chairman and CEO of the ERPB (Euro Retail Payments Board), of China Telecom Corporation Limited, Chairman representing the European Savings and Retail of China Telecommunications Corporation, and Banking Group (since April 2014). Chairman and Non-executive Director of China Communications Services Corporation Limited. During his career he has served on the Boards of Directors of several companies, including Visa España, Inmobiliaria Colonial and Boursorama, S.A., and as Chairman of Port Aventura Entertainment, S.A. and the Barcelona Digital Technology Centre.
29 INTEGRATED REPORT 2015
Mr. Thorsten Dirks Executive Committee_ Telefónica Germany
Mr. Carlos Mr. Eduardo Mr. Guillermo Telefónica's Executive Committee aims to López Blanco Ms. María Navarro Ansaldo Mr. Ángel Vilá Public Affairs & García-Legaz Chief Commercial Chief Global provide more visibility for local operators, CSFO Regulation Chief of Staff Digital Officer Resources Officer bringing them closer to the centre of decisions, Mr. Markus Haas and to strengthen transverse areas in order to Telefónica Germany improve flexibility and agility in the decision- making process. The organisation revolves around a management team which has as its main focuses the definition of strategy and the monitoring of business evolution. Mr. Ronan Dunne Telefónica UK
Mr. Amos Genish Telefónica Brazil
Mr. José María Álvarez-Pallete Mr. Luis Miguel Gilpérez Chairman & CEO Telefónica Spain
Mr. Eduardo Caride Telefónica HispAm
Mr. Ramiro Ms. María Luisa Navas Ms. Laura Abasolo Mr. Ian Small Sánchez de Lerín Corporate Comm. & Planning & Control Chief Data Officer General Counsel Institutional Marketing
30 INTEGRATED REPORT 2015 3 Contribution to progress_ INTEGRATED REPORT 2015
Economic impacts_
We are one of the most important drivers of We therefore provide significant stimulus to IMPACT ON THE TOTAL NUMBER OF COUNTRIES IN WHICH WE HAVE A PRESENCE economic progress in the communities in which the economies of these communities, both Millions of euros Source: PwC analysis we are present, having contributed more than directly and due to the capacity of our activity 53,600 million euros to the combined GDP of to generate a wealth multiplier effect. Thus, 8,804 23,083 the countries in which we operate in 2015. in 2015, for every euro generated, Telefónica Direct impact (Own activity) contributed 3.7 euros to the GDP of the 40.6% of the total impact countries in which we operate. Total Group Indirect impact impact (Ecosystem of suppliers) 43.0% of the total impact For each euro of to the GDP of the 53,624 profit we generated, we countries in which Induced impact contributed we operate (Consumption for salary income) €3.7 16.4% of the total impact 21,737
IMPACT ON GDP % OF GDP
Millions of euros Source: PwC analysis % Source: PwC analysis 1.50
60,000 1.5 1.46 53,624 1.23
50,000 1.16 1.2 0.94 40,000 0.9 1.07
30,000 0.71 0.6 14,615
20,000 14,359 7,790 0.29
5,465 0.3 3,014 2,300 2,334
10,000 2,233 0.16 1,514 0 0 (1) Peru Peru Chile Chile Brazil Brazil Spain Spain Rest Rest Mexico Mexico Germany Colombia Germany Colombia Argentina Argentina Group total Group Group total Group
(1) Includes the approximate impact of Ecuador, Uruguay, Venezuela, El Salvador, Guatemala, Nicaragua, Panama, Costa Rica, USA and Puerto Rico. G4-DMA, G4-EC8 32 INTEGRATED REPORT 2015
IMPACT ON THE TOTAL NUMBER OF COUNTRIES IN WHICH WE HAVE A PRESENCE IMPACTS ON EMPLOYMENT 1.2 million direct, indirect and induced jobs. Telefónica is also a major driver of job creation Thus, for each person recruited for our People Source: PwC analysis in the countries in which we operate. To be workforce, we generated 8.5 additional jobs specific, in 2015 we contributed to employment in the countries in which we operate. 358,967 129,612 in these countries through more than Direct impact (Own activity) 10.6% of the total impact
Total impact: Indirect impact (Ecosystem of suppliers) For each employee additional jobs in the 1,228,096 employees 60.2% of the total impact we recruited we countries in which we Induced impact generated operate 8.5 (Consumption for salary income) 739,516 29.2% of the total impact
IMPACT ON EMPLOYMENT % OF NUMBER OF WORKERS
Employees Source: PwC analysis % Source: PwC analysis 0.96 1,200,000 1.0 0.97
1,000,000 0.8 0.70
800,000 1,228,096
0.6 0.54 0.48 600,000 0.47 0.43 441,710 0.4 400,000 175,575 151,376 0.16 108,865 106,898
200,000 88,079 0.2 70,548 0.08 44,308 40,737
0 0 (1) Peru Chile Peru Brazil Spain Chile Brazil Spain Rest Rest Mexico Mexico Germany Colombia Argentina Germany Colombia Argentina Group total Group Group total Group
(1) Includes the approximate impact of Ecuador, Uruguay, Venezuela, El Salvador, Guatemala, Nicaragua, Panama, Costa Rica, USA and Puerto Rico. G4-DMA, G4-EC8 33 INTEGRATED REPORT 2015
SOCIAL CASH FLOW contributions to tax authorities, payments At Telefónica the income we receive, both to our suppliers (material operations and from our activities with customers and from investments), shareholder returns and the divestments, is contributed to society in net effects of debt servicing and other cash various forms: employee salaries and income, operations with financial institutions.
Euros
Receipts Expenses
57,712,226 6,431,145 11,364,322
Total flow 2015
58,628,580 35,111,441
254,034 208,674 662,320 5,512,998 Customers Employees Divestments Public Adm. Suppliers Others Shareholders (1) Cash and others (2)
(1) Net effect of accounting for dividends and operations with own shares with an increase in capital. (2) Includes the net flows for financing operations and other cash operations.
G4-DMA 34 INTEGRATED REPORT 2015
Contribution to the local tax authorities_
The current economic environment has placed Measures for the Prevention of Fiscal Fraud, in DISTRIBUTION OF THE TAXES PAID BY TELEFÓNICA BY GEOGRAPHIC AREA the tax contributions of large multinational the wording updated by the Final Provision 2 of companies at the centre of the debate. At Law 26/2014 of 27 November. Telefónica we are committed to acting with 2015 fiscal responsibility in the management of The Telefónica Group’s operations in territories 7% our business by complying with all our tax regarded by bodies other than the OECD and 24% obligations in all the territories in which we Spain as having little or no taxation, are, solely Spain operate in a transparent manner. and exclusively, for economic and commercial 26% reasons (Business Purpose) and have the Brazil In order to increase transparency, we material and human resources necessary for Latin America have developed Business Principles for tax conducting the activities, without the purpose compliance, based on which we commit to of these operations being, in any event, to 43% Rest acting with honesty and respect for the law in transfer profits to these jurisdictions to obtain a the management of fiscal matters. reduction of the tax burden.
Furthermore, in 2010 the Board of Directors TAXES IN 2015 (2) (3) approved our adherence to the Code of Good In 2015, our total tax contribution (TTC) TAXES BORNE TAXES COLLECTED Tax Practices developed by the Large Businesses amounted to 11,454 million euros (3,130,299 M€ 2015 2015 Forum, together with the Spanish Tax Authority, in taxes borne and 8,323,802 M€ in taxes in order to avoid the use of opaque structures collected), accounting for 50% of the value 8% (1) 21% for fiscal purposes. distributed by Telefónica . Brazil and Spain, the 45% 80% 12% markets in which the Company generates the Tax on profits Therefore, at Telefónica we do not use corporate most operating profit, are the jurisdictions which structures to conceal or reduce the transparency have most contributed to the payment of taxes. of our activities from tax authorities or any other Taxes associated with employment interested party. Nor do we operate in any of the jurisdictions included in the list of tax havens Taxes on products and legally established by Spain in accordance with 34% services the 1st additional provision of Law 36/2006 on
(1) Value distributed as taxes borne and collected / total distributed value, the latter being the sum of the following items: value for the (2) Taxes borne: taxes paid by Telefónica to administrations of the different states in which it operates and that cause the Company to shareholder (profit after tax), wages and salaries net of taxes collected, net interests and taxes borne and collected. assume an effective cost. (3) Taxes collected: taxes managed by Telefónica that have been entered on behalf of other contributors as a result of the economic activity of the Company; that is, tax revenues obtained due to the economic value generated by this economic activity.
35 INTEGRATED REPORT 2015
BREAKDOWN OF TELEFÓNICA’S GLOBAL TAX CONTRIBUTION IN 2015 The amount in absolute value of Telefónica’s Millions of euros In total, for every 100 euros TTC in 2015 decreased in comparison with Taxes Taxes Total of our turnover, 2014, due to issues arising from the exchange COUNTRY borne (2) collected (3) contribution (4) rates in relevant countries in Latin America (especially Colombia, Peru and Venezuela) and BRAZIL 1,065 3,858 4,922 the United Kingdom’s exit from the scope of SPAIN 561 2,176 2,737 consolidation, among others. ARGENTINA 626 839 1,465 EUROS However, the ratios which make up the 24.2 Telefónica Group’s TTC, compared with the GERMANY 164 551 715 were allocated to tax main business magnitudes (as is the case PERU 208 286 493 payments; of the ratio of the Total Tax Contribution in relation to revenues), were slightly higher than COLOMBIA 146 144 290 those in 2014. CHILE 38 189 227 of which For every 100 euros of the Company’s MEXICO 25 113 138 turnover, 24.2 euros were allocated to tax payments (6.6 to the payment of taxes borne ECUADOR 96 21 117 and 17.6 to the payment of taxes collected(1)). NICARAGUA 23 24 47 6.6 EUROS URUGUAY 21 10 31 were taxes borne and
PANAMA 13 12 25
EL SALVADOR 8 16 24
GUATEMALA 5 12 16
FURTHER INFORMATION OTHERS 131 74 205 Refer to the “Fiscal transparency” section EUROS of our corporate website. TOTAL 3,130 8,324 11,454 17.6 were taxes collected
(1) Calculated as total tax contribution based on revenues. (2) Taxes borne: taxes paid by Telefónica to administrations of the different states in which it operates and that cause the Company to assume an effective cost. (3) Taxes collected: taxes managed by Telefónica that have been entered on behalf of other contributors as a result of the economic activity of the Company; that is, tax revenues obtained due to the economic value generated by this economic activity. (4) Total contribution: the TC measures the total impact of tax payments on the different administrations directly or indirectly as a result of the Company’s economic activity. 36 INTEGRATED REPORT 2015
Environmental impact_
The carbon footprint of our activity accounts for However, sectoral studies indicate that our Our Internet of Things (IoT) lines are already In 2015 our green services brought in revenues
only 0.18% of the total emissions of the 8 main services have the potential to reduce our carbon helping to reduce CO2 emissions in sectors of over 130 million euros. Through our fleet countries in which we operate. footprint a further 9.7 times by 2030. as diverse as energy and utilities, industry, management service alone we managed to avoid transport, agriculture and buildings. more than 20% of the carbon footprint of our activity.
OUR CARBON FOOTPRINT GREEN SERVICES REVENUE
% 8% 2,454,032 1Mt CO2 86,031 33% Emissions avoided during 2015 through Scope 1 our fleet management service 4,344,421 tCO2eq In the 8 main Scope 2 countries in which Energy and Agriculture we operate Scope 3 utilities 2% Transport Buildings 1,804,357 46% Industry 11%
SCOPE 1, 2 AND 3 EMISSIONS % OF THE COUNTRY'S IoT LINES % OF THE COUNTRY'S POPULATION CARBON FOOTPRINT tCO2eq Thousands 4.00 3.82 5 0.60 9 M 8,540 3.50 4,344,421 0.54 4,230 0.50 4.5 M 3.00 4 0.44 1,780 0.40 0.40 1 M 2.50 3 2.09 632 2.00 0.30 600 567 1.78 1.45 2 467 448 1.50 1,498,286 0.18 0.20 0.20 400 0.99 1.06 0.14 310 1.00 818,734 0.11 0.13 0.78
1 594,362
395,191 0.10 200 269,822 361,230 294,368 0.05 0.50 0.46 0.34
112,428 103 0 0.00 0 0.00 Total DE ES MX CO PE CL AR BR Total DE ES MX CO PE CL AR BR Total DE ES MX CO PE CL AR BR Total DE ES MX CO PE CL AR BR countries countries countries countries
37 INTEGRATED REPORT 2015
Impacts of the Network_
There are numerous studies which show that the broadband contributes to increased productivity the creation of new business models. The access to information and culture, and the introduction of broadband has a positive effect and competitiveness of local businesses, due development of broadband also generates a expansion of entertainment options. on the economic growth of the communities in to significant improvements in the speed and number of positive impacts on society which which we operate. In addition to boosting the automation of processes, data processing and go beyond the purely quantitative, including, You can find more information in the section titled telecommunications sector, the development of the dissemination of information, encouraging among others, better and greater customer 'Digital inclusion'.
IMPACT CAUSED BY TELEFÓNICA BROADBAND AS A PERCENTAGE OF GDP Source: PwC analysis FIXED BB IMPACT MOBILE BB IMPACT TOTAL IMPACT (FIXED + MOBILE)
TOTAL TOTAL TOTAL 1.2% 1.0% 2.2%
G4-EC7 38 INTEGRATED REPORT 2015 4 Business Principle model_ INTEGRATED REPORT 2015
Megatrends, opportunities and strategy_
We find ourselves in a world in constant movement and evolution, where borders are becoming more and more blurred. Phenomena 1 such as climate change and immigration, Its together with the economy, education and Digital 1. Digital future: Digitisation 4. Urban world: is changing the economy, expansion necessitates health, are nowadays more global than ever. 6 future 2 providing new challenges and sustainable planning of the What was yesterday’s future is today's reality. opportunities. cities of the future. Transformation Innovation Technological transformation is present in all of the traditional areas of our lives. Connectivity and digitisation Highlights sectors 2. Innovation: 5. Finite resources: have transformed both society and the the need to support open Growing demand is boosting economy, becoming two essential and innovation ecosystems. innovation in this area. differentiating elements in a world which is 5 3 increasingly global, open and digital. New 6. Transformation of the 3. Global market: New Global patterns of trade and traditional sectors: It is precisely in this context that we can identify Finite resources technologies are transforming 4 market investment are being created. six tightly connected megatrends set to change the traditional sectors of the our lives and influence the different industrial economy. sectors over the coming years. Such trends will Urban world be boosted by technology, which will play an essential role. The growing use of mobile More interactive devices, along with the proliferation of data and Less interactive digital transformation, are some of the keys to the change in market behaviour in most industries. New technologies are acting transversely on society, the economy and our daily lives, driving change. of the planet, the shortage of raw materials and technological or social long term emerging risks. The technology sector continues to gain market the transformation of the traditional industries. A good example of this is the 2030 Agenda share in world GDP and as such means The digital future, the rise in innovation and the for sustainable development, which contains technology plays an ever more important role in global nature of the market are having a However, we must bear in mind that nowadays 17 objectives. New technologies will be key in people's lives, allowing them access to products profound impact on economies. Moreover, some we no longer seek to simply make companies reaching these objectives as they provide not and services that promote greater efficiency and of the trends pose a significant challenge to sustainable, but to meet the basic needs of only a vehicle for progress but also the tools boost economic and social development business sustainability, such as the urbanisation society as well and to face the environmental, needed to overcome the challenges. processes. Connectivity thus take on a higher
G4-2 40 INTEGRATED REPORT 2015
relevance and, generally speaking, gives rise to boundaries between products and services are For Telefónica it is an opportunity to facilitate three major trends, based on the three types of disappearing while their life cycles are these connections through connectivity, convergence that our customers demand: shortening, increasing customer expectations. allowing people to take control of their digital lives by making the data available to them. Fixed + Mobile Convergence: Our customers Social development will be exponential as a Excellent Big Data and connectivity innovation seek comprehensive solutions which meet all result of the digital revolution. A new world of BUSINESS STRATEGY their connectivity needs - at home, in the office opportunities is opening up for everyone, Our strategic plan includes six key elements. and when they are on the move. This everywhere. A better world, a world to discover, Three main objectives - excellent connectivity, a translates into increased investment in which we will all benefit from and share. comprehensive offer, and customer values and infrastructures and the proliferation of 4-Play experience; and three enablers - Big Data and packages. Connectivity is essential in this new era. If we innovation, end-to-end digitisation and look around, we can see that the world in which allocation of capital and simplification, are our Convergence between Telecommunications, we live is defined by one concept: connections. tools for transforming the Company. Comprehensive E2E Internet and Media: Content is offered through Supported by technology and open to multiple offer digitisation applications that are supported by our possibilities and applications. In a world in which networks. More specifically, video consumption everyone and everything will be connected, with is already becoming the application with the excellent connectivity; the services of the future greatest traffic demand, making it a key are unlimited. element of the commercial packages we sell.
Cloud Convergence between Networks and IT: Allocation of technology is beginning to allow the Customer values capital and and experience virtualisation of network functions to improve FURTHER INFORMATION simplification efficiency and operational flexibility. This Watch the video “Telefónica is an Onlife Telco: allows us to evolve towards new network Connectivity is in our DNA”. architectures which are more software VALUE ENABLERS intensive. This is a competitive advantage, as it PROPOSITION favours groups with scale, like us, which are capable of extracting synergies from different local operators. We want to create, protect and promote life connections so that people can choose a world Moreover, the barriers preventing entry into the market are being eliminated. As a result, of infinite possibilities
G4-2 41 INTEGRATED REPORT 2015
Excellent connectivity: Comprehensive offer: Customer values and experience: In an era of exponential growth of apps, services and Our aim is to facilitate our customers' digital lives by means Connectivity and supply are not sufficient if they are not terminals, we must make the most of the infrastructures of the best products, services and contents, through a simple accompanied by a distinctive experience which strengthens which differentiate us from our competitors, providing the and comprehensive offer which is attractive and easy to our brand values and defends the interests of our customers, best customer experience and investing to ensure excellent understand. placing them at the centre of our business. We want them to connectivity. This is what our customers expect of us, and be increasingly more satisfied as a result of a unique won't settle for anything less. We are in a privileged position due to our distinctive assets experience at a transactional and emotional level. and our capacity to deliver (knowledge of the customer, value People want to be permanently connected, anywhere they proposition, global scope, network of partners, innovation We are committed to digital trust, giving customers control of are, regardless of the device and with the highest quality. As ecosystem and internal transformation experience). Our their digital lives, an open Internet in which everyone is free a result of the efforts made in recent years to transform our comprehensive offer consists of a wide range of products and to choose their digital experience, and digital accessibility, networks and operational support and business systems, at services which anticipate and adapt to the needs of our ensuring everyone enters digital life with the best Telefónica our focus is on meeting the expectations of our customers, thanks to personalised proposals for both technology, without neglecting anyone. customers. individuals and companies.
Big Data and Innovation: End-to-End Digitisation: Allocation of capital and simplification: After highlighting connectivity, we are taking a further step Our value chain must be fully digital to become a real-time, Optimal allocation of resources allows us to continue moving forward and granting added value to data in order to provide automated and convergent Company. Every aspect of the forward in our transformation, financing growth, eliminating our customers with the services most suited to their needs. business must be digital: the automation of all customer complexities and reaching our goals. Our vision is very Big Data is the key not only to knowing them better, but also processes and experience, data collection and the ability to ambitious and requires continuous capital investment to to optimising our resources and operations. offer a differential value proposition. Digitisation is no longer increase our capabilities. a possibility - it's a reality. We are transforming ourselves into a new Company, Therefore, we have two basic financial goals: providing our customers with control over their own data so The transformation of our processes, policies and systems is Profitable growth optimising the allocation of capital: have that they may decide how to live their digital lives. the cornerstone of digitisation, as well as being a facilitator of the best portfolio of assets, execution of synergies and other priorities. optimisation of investment and simplification. We also promote internal innovation (which is in our DNA), external innovation and entrepreneurship to develop Meeting financial commitments: a solid balance sheet, sustainable services which have a positive impact on our profitability for the shareholders and financial flexibility. society. At Telefónica we are choosing to grow: to grow profitably while maintaining financial flexibility and generating value.
42 INTEGRATED REPORT 2015
Relationships with our stakeholders_
Direct interaction with our stakeholders STAKEHOLDER DIALOGUE STRATEGY is essential for the management of our Company. This relationship allows us to identify which aspects they consider most relevant, as well as new trends in the field Objective: To focus our actions on the real needs and expectations of our stakeholders, allowing of sustainability. Based on this dialogue, sustainability and business to align. we establish our goals, define the strategic plan and also assess our ability to meet society's expectations.
1. Global map. 2. Identification of 1. Selection of our key stakeholders. Map of material aspects. 2. Definition of engagement model: stakeholders 3. Prioritisation of key Specialised dialogue Business stakeholders. Periodical monitoring goals Collaboration for common challenges. 3. Identification of differences in perception and performance. 4. Action assessment. 1. Identification of key material issues for the business. Stakeholder 2. Identification of internal partners and external engagement. management 3. Establishment of objectives and lines of action to achieve these objectives.
G4-25, G4-26 43 INTEGRATED REPORT 2015
DIALOGUE, COMMITMENT AND INTERACTION BETWEEN TELEFÓNICA AND ITS STAKEHOLDERS
Customers Employees Suppliers
Methodology: Through the channels of dialogue set Methodology: We promote the use of the internal Yammer Methodology: The purchasing area up at the moment of sale and as a result of customer Network, which has 89,000 members (14,000 users more than last maintains an ongoing dialogue with our services, satisfaction monitoring services and the year) and an average of 550 active communities per month on the main suppliers, promoting the search for Customer Defence Service (CDS), as well as marketing Company network, as both a communication and an inquiry tool. joint solutions in partnership with each of and market studies, discussion forums and meeting the internal areas which demand the product areas, we can understand the consumer experience, This Network has been a key tool for facilitating dialogue and and/or service. Supplier involvement is needs and expectations for our products and services. debate prior to the launch of the new Company programme. The key, especially in processes where contact event was followed via Yammer by more than 4,000 people. with our customers is performed directly Some examples of commitment and by our suppliers. One example of this is Best practices: During the executives' summit in 2015, Twitter played a interaction with customers: the case of technical and commercial special role among our employees, with about 2,000 people “liking” the support services, about 80% of which is For residential customers we have customer service messages posted; in addition, the #Modoencuentro hashtag became a provided by suppliers in many countries. channels in each of our geographical areas (which trending topic on Twitter in Spain, despite competition from other trends received 377,000 inquiries in 2015) and the “Guru” such as the Spanish electoral debate and football’s Ballon d'Or award. Some examples of commitment services, as well as our profiles on Twitter ( Telefónica and interaction: on Twitter, Movistar on Twitter, among others). The Allies (Aliados) programme, In the field of large corporate and multinational Shareholders implemented in our main clients, in addition to our Business Solutions division, operations in Latin America. particularly worthy of mention are the TBS Quality Week, the Telefónica Leadership Conference, as well as Methodology: We organise and attend regular meetings, both individual Meetings with some of our main other events such as International Telecoms Week. and collective, with institutional investors and sectoral analysts. Moreover, suppliers at a global level to share our thanks to the online channels we can understand which issues are strategies on sustainability issues This year is also particularly relevant due to the active most relevant to the investment community, including SRI (Socially and to exchange best practices. participation of our customers in the definition of our new Responsible Investment) Institutions and/or specific projects for responsible “Choose It All” Company Programme. For nearly two years Workshops on Energy and Climate Change, investment and signatories of the Responsible Investment Principles. we interviewed more than 3,000 consumers in 12 countries organised annually by Telefónica and and performed about 72 focus groups to address those Some examples of commitment and interaction: Telefónica attended by some of our main suppliers. aspects which are most important for our customers. This Shareholders and Investors, Forums and events for Shareholders work has helped us to define the new Company strategy. and Investors, European Sustainable Investment Forum (Eurosif), Societé Generale, RobecoSam, Integrated Reporting.
G4-24, G4-25, G4-27, G4-50 44 INTEGRATED REPORT 2015
TELEFÓNICA'S SOCIAL NETWORK CHANNELS Sectoral organisations
Facebook Twitter Others Germany 3 2 Methodology: We actively participate in forums and associations which discuss the different issues affecting 1 0 our sector, in order to improve measurements, standardise indicators and share best experiences. USA Mexico United Kingdom Some examples of commitment and interaction: GSMA, International Telecommunications 0 1 2 2 1 2 Union (ITU), ASIET, Global e-Sustainability Initiative, European Internet Forum, 0 2 2 0 1 3 Telecommunications Industry Dialogue, ICT Coalition, Internet Governance Forum, Global Guatemala Reporting Initiative, CSR Europe and RSE Action. 2 1 Nicaragua 1 3 1 1 1 1 International organisations Costa Rica El Salvador 1 1 1 1 1 1 Spain Methodology: The dialogue is mainly structured by geographical areas, grouping together the 1 0 5 7 different participants according to their sphere of action (local, regional, national and global). Within Venezuela 5 16 each field of activity we maintain a fluid dialogue with those responsible for telecommunications, 2 2 Panama innovation and consumer, educational, social, regulatory and economic services, etc. 2 3 1 1 Colombia 1 2 Some examples of commitment and interaction: World Economic Forum, International Labour 2 4 Organization, World Health Organization, United Nations Programme for Development, Global Ecuador 3 2 Compact, Carbon Disclosure Project and the Centre for Information Policy Leadership. 1 1 2 2 Brazil 3 4 Peru Uruguay 3 4 4 3 1 1 Non-governmental organisations 3 0 1 2 Global & Chile Argentina Corporate 2 3 4 5 Methodology: We articulate the dialogue principally at a local level in order to respond to the needs 9 12 1 1 3 8 of the communities in which we operate. In the case of Spain, we collaborate with more than 25 8 11 NGOs by means of the Premium messaging service, giving the NGO 100% of the money donated by the customers give through solidarity SMSs. Dialogue with these organisations is ongoing. Keeping our stakeholders informed and concentrate all Company information in a single engaged in dialogue forms one of our goals of portal. In this sense, we have also worked to Some examples of commitment and interaction: NCE - ILUNION Foundation, Red Cross, the 2.0 environment. During 2015 we worked simplify social network and blog channels in UNICEF, Oxfam Intermón, International Plan, ACNUR, Spanish Committee of Representatives on the integration of the new corporate order to respond more effectively to customer of People with Disabilities (CERMI), National Centre of Accessibility Technologies (CENTAC). website – www.telefonica.com, which concerns and the latest technology trends. received 3,215,347 visits last year, in order to
G4-24, G4-25, G4-27, G4-50 45 INTEGRATED REPORT 2015
SOME OF THE ASSOCIATIONS WITH WHICH TELEFÓNICA COLLABORATES
AENOR, a Spanish entity that A significant group of leading The Global e-Sustainability The ITU (International conducts normalisation and Spanish companies, Corporate Initiative (GeSI) is a source of Telecommunications Union) is certification (N+C) activities to Excellence aspires to become a information on resources and best the United Nations' specialised improve quality in companies and technical benchmark. practices to achieve integrated agency for Information and the well-being of society. social and environmental Communication Technology sustainability through Information (ICT). An Association made up of and Communications Technology CSR Europe is an international (ICT) companies. more 50 telecommunications network of companies which heads operators in 20 countries across the promotion of Corporate Social The The United Nations Global The United Nations is an Latin America and Spain. Responsibility in Europe. Compact is an international international organisation initiative which promotes the founded by 51 countries implementation of ten universally committed to maintaining Business Call to Action aims to accepted principles in the areas of international peace and accelerate progress towards the EcoVadis aims to improve Human Rights, Labour Standards, security and promoting social Millennium Development Goals companies' environmental and the Environment and the Fight progress, better living standards (MDGs). social practices. against Corruption. and Human Rights.
The CEOE is the institution that The Global Network Initiative (GNI) The aim of the OECD is to represents Spanish entrepreneurs. ERT is an informal forum which brings is a non-governmental organisation promote policies which improve together up to 50 managing directors for Internet censorship by the economic and social and chairmen of major multinational authoritarian governments and the well-being of people around companies of European parentage. protection of privacy on the Internet the world. The Centre was built with one and the rights of individuals. fundamental objective: to become a technical reference in the analysis An organisation devoted to the of youth phenomena. ETNO is the association which Global Reporting Initiative (GRI) social and labour inclusion of encompasses the major is an organisation whose purpose people with disabilities. European operators. is to promote the development of sustainability reports in all types of The CITEL is the advisory body organisations. of the Organization of American The World Bank is a vital source of financial and technical States in matters relating to ETSI, the European assistance for developing telecommunications/ICT. Telecommunications Standards The GSMA represents the interests countries around the world. Institute. of mobile operators worldwide.
The State Confederation of The World Economic Forum Deaf People is a not-for-profit, 4G Americas is a commercial wireless is an international institution state-level social action NGO. industry association focused on the The IADB supports efforts in Latin dedicated to improving the Americas. America and the Caribbean to situation around the world reduce poverty and inequality. by means of public-private cooperation. The European Commission is the institution which embodies the The Global Apprenticeships Network The International Integrated executive branch of community (GAN) is a business partnership Reporting Council (IIRC) is a joint Telefónica participates in sustainability issues power. driven by the overarching objective of global initiative of regulators, promoting and linking entrepreneurial investors, companies, issuers alongside Local Associations in all the markets initiatives to skills and employment of accounting standards in which it operates, for example: Pantallas CAF is a development bank made opportunities for young people. and professional accouting up of 19 countries and 14 private organisations. Amigas, SPAINSIF... banks in the region.
G4-16 46 INTEGRATED REPORT 2015
Materiality analysis_
Thanks to the relationship with our SPECIALISED DIALOGUE: SUSTAINABILITY ADVISORY PANEL stakeholders we are able to align sustainability and business. That allows us to identify which matters we must address, understand the Independent group of experts who: Dual purpose: perception of the Company and determine to what extent we are meeting expectations. This allows us to guide ourselves towards what is really important to them, thereby facilitating Represent our main stakeholders. Give tangible expression to stakeholder expectations transparency. through a structured dialogue process. Provide an external and independent point of We start with a materiality analysis, which is view in matters of sustainability. Activate key stipulated aspects to be found in our specific to the entire value chain of the new materiality matrix and annual recommendations. technologies hypersector and is designed by the Global e-Sustainability Initiative (GeSI). The analysis preselects 55 potentially material issues which are divided into eight categories: Process 2016 digital inclusion, employees, climate change, supply chain, customers, privacy, governance Results and impact on communities. We call on all Sustainability Materiality analysis stakeholders related to the Company to help Advisory Panel us preselect these material points which have 20 key talking points Identification of Dialogue platform. key impacts on our activity. Identification (Quarterly meetings) relevant aspects of the critical Structured process and contributions The stakeholders which have took part in the opinions of to our materiality analysis. GeSI project are: Alcatel-Lucent, Amdocs, AT&T, stakeholders Links with departments Bell, Bkash, Bolo Phi, Bosch, BSR, BT, Calvert, and activities Quarterly reports. Extended panel Deutsche Telekom, Ericsson, ETNO, Everything Everywhere, Forum for the Future, Green Up to 100 additional critical Biannual global pulse. Electronics Council, Greenpeace, GSMA, HP, talking points Country revision (Biannual consultations) Annual Report: recommendations Huawei, Institute for Public and Environmental and trends. Affairs (IPE), Institute of Contemporary Observation (ICO), ITU, KPN, Nokia, OTE,
47 INTEGRATED REPORT 2015
SACOM, SAM Robeco, SASB, Seagate SOCIAL RESPONSIBILITY ISSUES Technology, Skyworks Solutions Inc., Solving the e-Waste Problem (StEP), Sony Mobile, Supply chain Internal processes Customers Sprint, Swisscom, TDC Group, Telecom Italia, Quality of service Telefónica, Telenor, TeliaSonera, Telstra, Digital trust The Consultative Group to Assist the Poor Economic Ethical business practices X (CGAP), The Energy and Resources Institute issues (TERI), The Sustainability Consortium, United Impact on communities Nations University, Verizon, VimpelCom, Transparency in fiscal contributions X X Vodafone, World Resources Forum and WWF. Energy consumption Carbon emissions The results of analysis, together with our Environmental Circular economy Company strategy, have given way to our issues materiality matrix. Renewable energy X X Electromagnetic fields X Towards the end of 2015, in order to keep the matrix up to date, we assumed the challenge Occupational health and safety X of performing a continuous 360º dialogue Social innovation (digital inclusion) X exercise with our key stakeholders. For this Social issues Talent development and retention X X purpose we have approved the creation of a Diversity and non-discrimination stakeholder panel as a platform for formal and structured dialogue. Thus, we have Human rights created a Sustainability Advisory Panel and a broader advisory group, which will become Very high priority High priority Medium priority X Not applicable operational in 2016. Both of these will be made up of experts in social, innovation and environmental matters and will be consulted on a regular basis. In addition, this will allow These panels will discuss relevant issues at This panel has been made possible thanks to FURTHER INFORMATION our stakeholders to interact with each other a global and local level, paying particular more than 25 interviews with Group senior Refer to the “Stakeholder Engagement” in a structured manner, facilitating the attention to the most significant markets such executives and the realization of more than section of our corporate website. monitoring of common challenges. as Spain, Brazil, Mexico, Germany and Chile. 1,500 online surveys in key markets.
G4-19, G4-20, G4-21 48 INTEGRATED REPORT 2015
Reputation management_ Medir la reputación: Modelo RepTrak™
Reputation has become a strategic asset TO WHAT EXTENT A GOOD REPUTATION INFLUENCES for companies. It attracts and increases the Reputation is an emotionalModelo explica;vo THE SUPPORT y OF STAKEHOLDERS loyalty of the best customers, employees attachment that allows uspredic;vo to Companies with a good or excellent and resources, while also reinforcing the reputation enjoy greater public support character and corporate identity of a company. analyse how inner reality and Thanks to reputation, we can measure external perception are aligned. Scores: Reputation Institute – Global whether a company is capable of aligning its It has a strong relationship with... RepTrak® 100 – 2015. external perception with its internal reality.
A A A A A M DM M DM M DM M DM M DM EE IR EE IR EE IR EE IR EE IR T A T A T A T A T A S T S T S T S T S T E I E I E I E I E I O O O O O
We understand reputation to be the opinion Poor N Weak N Medium N Strong N Excellent N
N N N N
that Stakeholders have of Telefónica, and AD N
O O O O O
I I I I
M I
S S S S
M S 0-39 40-59 60-69 70-79 80+ S S S S
I S
E E E E
E R E T T T T T R R R R R
P P P P
P S S S S S
M M M M A M I I I I that it therefore belongs exclusively to them, E I U U U U U T T TR TR TR TR TR Pulse: S I E O even though it is bound to our activity. N Comparable Behaviours
entre Given sectores, the importance of reputation and its
N
impact on the business, since 2005 we have O
I Would buy the 8% 21% 41% 65% 90%
países y S
S T products
been measuring it by means of the RepTrak E S R
P U
M stakeholders model, developed by the Reputation Institute, I T R which has become a sectoral reference model as a result of the studies conducted by the GSMA. Would recommend 6% 18% 38% 63% 90% El “Pulse” es la variable dependiente que es the Company Who uses the company products? explicadaThis mediante model measures un conjunto the emotional de atributos distribuidosappeal enof our siete Company dimensiones. by means of the Who recommends the company? RepTrak Pulse indicator, which is built on Would say 6% 18% 40% 66% 91% the values of esteem, admiration, trust and Who is willing to invest in it? something positive impression generated. This measurement is complemented by a more rational assessment Who grants the benefit of the doubt? of performance, using the RepTrak Index Would work for 6% 13% 26% 43% 82% indicator. The rational indicator, in the case of Who wants to work for the company? the General Public, is built on seven dimensions: Offer, Work, Government, Leadership, How are the strategy and the results Would invest in 5% 12% 24% 42% 82% Innovation, Citizenship and Finances. aligned?
49 INTEGRATED REPORT 2015
Details of the evaluation of our brand names during Similarly, the role of employees as the definers We are convinced that our reputation influences Pursuing alignment of our internal reality 2015 for each of the dimensions are shown in the of organisational identity and the recipients of the attitudes of our stakeholders towards and our external perception, we analyse the following graph: corporate action is essential to the construction the Group brands. For this reason we work to impact of our actions and communications of the corporate reputation. measure, progressively, the influence of our on the perceptions of our stakeholders and GENERAL PUBLIC REPUTATION reputation among those stakeholders most their associated behaviours. This is essential It is for the above reason that, since 2013, relevant to our activity: for charting a roadmap from management to REPTRAK PULSE 2015 we have measured Telefónica’s reputation communication. among our employees in the 16 countries 60 in which we operate. The aspects which were evaluated include: Ethical behaviour, MEASUREMENT OF REPUTATION WE LINK REPUTATION TO RESULTS Motivation, Professional development and Work 40 AMONG KEY STAKEHOLDERS 56.03
52.99 environment. 51.97
20 GENERAL B2B (2016) PUBLIC DRIVERS RESULTS REPUTATION OF TELEFÓNICA (Annual) A AMONG ITS EMPLOYEES DM EM IR Act and E A T T communicate Perceptions S I Behaviours E O REPTRAK INDEX 2015 80 N
Offer 83.3
60 80.4
65 79.7 N
O
I Act Experience Attitudes
S
60 S T
E S towards the
40 R
Finances Innovation P U M I R service 55 T
50 20 Communicate Reputation 45 EMPLOYEES SUPPLIERS Work (Annual) (Biannual) Leadership 2013 2014 2015 Brand Telefónica’s reputation among our employees These studies are conducted in all the markets Integrity Citizenship is very solid and has improved for a second in which we operate and allow us to interact Sector average consecutive year. with more than 120,000 people, employees and (of the countries in which we operate) general public alike.
Movistar/VIVO/02/Telefónica average
Sector average excluding Telefónica
50 INTEGRATED REPORT 2015
Risk management_
Risks are inherent to all businesses and managers, within their scope of action, can THE TELEFÓNICA RISK Operational: potential losses in value or entrepreneurial activities. Their identification perform the appropriate identification, MANAGEMENT MODEL results arising from events caused by and effective assurance contribute to achieving assessment, response to and monitoring of the We constantly monitor the most significant risks inadequacies or failures in customer service, our business objectives and to strengthening main risks. and long term emerging risks that could affect processes, human resources, hardware and the organisation’s commitment to its the main companies in the Group. For this computer systems, security, contract shareholders, customers and other Through the Integrated Model for risk assurance purpose, the Company has established a fulfilment, laws and standards, or external stakeholders. and management, inspired by best practices, we Corporate Model of Risk Management based on factors. facilitate the prioritisation and development of COSO (Committee of Sponsoring Organisations of At Telefónica we have implemented a coordinated initiatives to combat risks, both the Treadway Commission), which facilitates Financial: potential losses in value or results homogeneous model throughout the Group’s from a global perspective and with a specific assessment of both the impact and the arising from adverse movements of financial main operations, so that the Company’s focus on the Group's main operations. probability of occurrence of the various risks. variables and the Company’s inability to honour its commitments or liquidate its In accordance with this Model and on the basis assets. Risks of a fiscal nature are also included of internationally renowned references and in this category. practices regarding risk management, four risk categories have been defined: Global: potential losses in value or results PRIORITISATION AND ACTION IN RESPONSE TO RISKS arising from events transversely affecting the Business: potential losses in value or results Telefónica Group, its reputation and corporate arising from changes to the business responsibility, corporate communication, the Prioritise Act environment, the competition and market advertising strategy, the brand, sponsorships situation, changes to the regulatory and innovation. framework or strategic uncertainty. Economic Coordinated Impact response
Reputational Mitigate vs. Impact Avoid RISK MANAGEMENT PROCESS
Risk management Response Monitoring Assessment Process Identification to the risk and reporting ASSURANCE MODEL
51 INTEGRATED REPORT 2015
RISK MANAGEMENT GOVERNANCE FLOW OF RISK REPORTING are presented together with the information The Telefónica Group is exposed to risks The Audit and Control Committee, as part of contained in the Management Report of the regarding compliance with legislation Telefónica’s Board of Directors, oversees the risk Financial Statements, the details of which can against corruption and economic sanction management system and proposes to the Corporate level be found in the annex of the Financial Report: programmes. Board of Directors, for its analysis and consideration, the risk control and management The deterioration of the economic or political The customers’ perception regarding the policy, which determines: the risk categories environment may adversely affect Telefónica’s services offered by the Company may be faced by the Company; the definition of an business. disadvantageous in relation to those offered Corporate acceptable risk level; the measures for by competing companies. function of risk mitigating the impact of identified risks; the The Group’s results and financial situation may management control and information systems which will be affected if we do not effectively manage The Company may not adequately anticipate control and manage said risks. our exposure to the exchange rates of foreign and adapt to the technological changes and currencies, interest rates and financial risks trends in the sector. In accordance with the risk management policy, arising from investments. each management area participates in the risk Local function of The Company depends on a network of risk management management process, at both corporate and The current conditions or the deterioration of suppliers. local levels. The entire organisation has the the financial markets may limit the Group’s responsibility to contribute to the identification Local level financing capacity and, consequently, its Any Network failures may lead to a loss of and management of risk, using procedures ability to carry out the business plan. quality or an interruption of the service. which develop the operation and assurance of Risk owners its processes within the Group. The purchase of Telefónica’s operations in the The telecommunications industry may be United Kingdom (O2 UK) by the Hutchison affected by the potential effects that the With regard to the coordination and reporting of Whampoa Group may not materialize. electromagnetic fields emitted by mobile these activities, there exists an internal Risk devices and base stations may have on Management function within the Internal Audit RISKS AND UNCERTAINTIES The Company operates in a heavily regulated people’s health. unit which reports functionally to the Audit and FACED BY THE COMPANY industry which requires certified authorisation Control Committee. The Telefónica Group’s business is conditioned for the provision of many of its services and both by factors exclusive to the Group as well as the use of the spectrum, which is a scarce and by factors which are common to any company expensive resource. in its sector. The most significant risks and uncertainties facing our Company, and which might affect our business, financial situation, reputation, corporate image, brand and results
52 INTEGRATED REPORT 2015
GENERAL OUTLINE OF THE RISK MANAGEMENT MODEL
The Risk Management Model is adapted to the Trend Quantification evolution of the typologies of the main risks metrics Correlation Sensitivity analysis matrix Risk and stress-test assessment Potential changes of a regulatory, business, RISK RESPONSE AND MONITORING economic or political nature may lead to the The Corporate Risk Management Model, which possible reorganisation of accounts for certain takes into account the provisions of the main assets. international references and best practices, Internal and Definition of Monitoring includes both the identification and assessment external Assurance Assurance and reporting The Telefónica Group’s networks transport and of risks, as well as the response to them and reporting Framework store large volumes of confidential, personal subsequent monitoring. and business data and its Internet access Action/ services and hosting services may give rise to In accordance with the diverse risk typologies, Global actions claims for illegal or illicit use of the Internet. the risk response mechanisms include global Prioritisation of initiatives, homogeneously promoted and activities Telefónica and the Group companies are coordinated within the Group’s main operations parties in litigation, claims of a fiscal nature and/or actions specifically aimed at addressing Local actions Activity and other legal proceedings. concrete risks in any one of its companies. planning
In addition, the environmental aspects of Finally, we should point out that the Model telecommunications operations have their is adapted to the evolution of the typologies greatest risk focus on high geographical of the main risks and we have observed an EVOLUTION OF THE MAIN RISKS dispersion and energy consumption, which are increasing relevance of those risks related to controlled through environmental management intangibles and global significance, such as Global based on uniform processes and a global energy sustainability, public image and the social Intangible Financial Strategic efficiency programme. impact of organisations. Operational
53 INTEGRATED REPORT 2015
Sustainability governance and management_
Our sustainability strategy is based on the responsible management of our business, and A BUSINESS not only focuses on managing certain risks, but PRINCIPLE for also on seizing opportunities, efficiency and Sustainable gaining the Customer sustainable growth. This allows us to contribute Talent and management Environmental Sustainable customer's promise and to the social and economic development of diversity of the supply policy innovation digital trust society, making the communities in which we TRUST chain operate more prosperous, and providing better and more inclusive engines of progress. In this way we link our sustainability targets to the development and management of the business, incorporating them into processes and goals ACTION MODEL so that they become part of Telefónica’s DNA and thereby generate a culture of business Responsible Sustainability as a lever principle which embraces all our stakeholders. Risk management productivity for growth Therefore, business principle development requires a culture of integrity, commitment and confidence as basic principles to guarantee the We guarantee compliance with We strive to improve our productivity We highlight the social and trust and security of our customers and their our international, national and by transversally incorporating environmental benefits of the personal data, as well as those of the other local regulatory framework, sustainability criteria into all our products and services that we stakeholders which interact with the Company. coordinating it at a corporate processes. In addition to quality of offer to our customers, be they level in order to anticipate service in our customer offering, companies and individuals. To achieve the above, we rely on a model legislative trends and changes in we seek efficiencies and value by Moreover, we seek to make the of action structured on three levels of an environment where economic, means of a long-term commitment digital environment increasingly commitment, covering our entire value chain. social and environmental matters are to talent management, energy open and secure, so that the increasingly subject to regulation. efficiency, environmental issues, opportunities of technology are the supply chain, taxation and, made available to everyone, generally speaking, a culture advancing geographical, social and FURTHER INFORMATION of ethics and integrity which personal accessibility to technology. Refer to the “Strategy” section of our pervades all our actions. corporate website.
54 INTEGRATED REPORT 2015
The Company strategy points us to our HOW WE GOVERN SUSTAINABILITY An inspection unit specialising in fraud Global Business Principle Plan, which is The highest body responsible for sustainability prevention work and the investigation of being implemented in the different local We have specific at Telefónica is the Board of Directors. On the complaints. markets to achieve specific objectives. one hand, the Institutional Affairs Committee It covers the following priorities: organisational units is responsible for approving and monitoring the A payment intervention unit in the most Business Principle Plan while, on the other, risks important companies. whose goal it is to are reported to the Audit and Control Committee. ensure integrity Both committees meet regularly, on a monthly Global management and local units for Customer promise basis. sustainability. and transparency At an executive level, the General Board of A corporate risk management unit which in Telefónica's Sustainability and Corporate Ethics is responsible centralises and reports the risk information Digital trust for proposing and coordinating the sustainability received from local risk management areas, risk management strategy, reporting directly to the General Board implemented in the main Group operators. processes of Public Affairs and Regulation. Business Principle Office in all countries, In addition, the Business Principle Office is the made up of the managers of the areas of Supply chain transversal body responsible for overseeing Secretary General, Auditing, Human Resources, implementation of the plan in all the Company’s Purchasing, Operations, Marketing and activities. This Office is replicated at a country Sustainability. Telefónica's strategy and enforcement of level, in virtually all of Telefónica’s operations, Diversity and sustainability has received recognition from the and is made up of the areas of Human Resources, On 24 February 2016, the Board of Directors talent management most prestigious global sustainability indexes, Internal Audit, Secretary General, Chief of Telefónica, S.A. approved the creation of such as the Dow Jones Sustainability Index Commercial Development Officer, Purchasing, the position of Chief Compliance Officer at (DJSI), the Carbon Disclosure Project (CDP), Operations, Communication, Marketing and the corporate level, to reinforce and strengthen the Sustainalytics, Ethibel, MSCI and FTSE4Good. General Board of Sustainability and Corporate Telefónica Group’s culture of compliance. Environmental Ethics. management We have also achieved the GOLD level of Furthermore, we have specific organisational recognition in the sustainability rating units whose goal it is to ensure integrity and performed by EcoVadis, a collaborative transparency in our risk management: FURTHER INFORMATION platform which allows companies to Sustainable innovation Refer to the “Governance” section of monitor their own performance in this Internal audit units in all the countries in which our corporate website. area, as well as that of their suppliers. the Group has significant interests.
G4-35, G4-36, G4-37, G4-42, G4-47 55 INTEGRATED REPORT 2015
Ethics and compliance_
OUR CHALLENGE Ethics and responsible business development Since 2006, the year in which it was approved, GLOBAL AREAS are fundamental pillars of our corporate the code has been revised in order to adapt to culture and our commitment to serving the new realities facing the Company. In 2015 A total of customers and society. the principle of Integrity was reinforced, with the 65% inclusion of a specific section in matters of These pillars are embodied by: corruption in order to strengthen our TELEFÓNICA ESPAÑA commitment to ethics and regulatory Our Business Principles. These govern all compliance. In the same regard, a new Anti- 97,550 our actions as employees, as well as our Corruption Policy has been approved, governing EMPLOYEES 84% relationships with shareholders, customers, the acceptance or offering of gifts and suppliers and society. invitations and prohibiting any form of bribery; have passed our “Business TELEFÓNICA BRAZIL as has a corporate standard on conflicts of Principles” course, a figure Our commitment to Human Rights. As interest, which establishes mechanisms which represents part of our due diligence and compliance whereby our employees may report all process, in 2015 we continued to situations entailing a conflict of interest. 90% transversally integrate the results of our LATAM 2012 global impact assessment into all our Telefónica is a registered lobbyist in 86% operational processes. (Refer to the the voluntary register of the European Union, of the total workforce(*) 'Compliance with Human Rights' chapter to reporting expenses related to lobbying see the progress made in each of the activities of 2 million euros and 4,400 million 87% identified lines of action). euros received in grants.
OUR BUSINESS PRINCIPLES The Business Principle Office oversees the major operations, as well as the figure of FURTHER INFORMATION Our Business Principles constitute the disclosure of and compliance with our Business Compliance Officer in Germany. Refer to the “Business Principles” on fundamental standards which apply to Telefónica’s Principles. Over the past year, the Office has our corporate website. commitments in matters of labour, good expanded its team through the addition of During 2015 we launched a second online governance, sustainability, ethics and regulatory Marketing, Purchasing and Operations to the training activity, mandatory for all Group compliance. Within the text we also include Office's existing areas (Human Resources, employees, which had the purpose of Report, a total of 97,550 employees had requirements for our partners and suppliers to act Legal, Internal Audit and Sustainability). We refreshing our professionals’ knowledge of the completed it, a figure which represents 86% in accordance with similar principles. also have local offices set up for the Group's Business Principles. At the time of writing this of the total workforce(*).
(*) The training data does not include the operations of Telefónica United Kingdom or Telefónica Germany.
G4-56, G4-57, G4-58, G4-DMA, G4-SO4 56 INTEGRATED REPORT 2015
BUSINESS PRINCIPLES CHANNEL INTERNAL MONITORING FURTHER INFORMATION All our employees have the option During 2015, we registered a total of: Telefónica on a number of specific committees Go to the section titled “Governance” on of, anonymously or personally, reporting issues and units that help guarantee the appropriate our corporate website. associated with compliance with the Business levels of control and transparency. During Principles and their associated policies. Along 2015, in the execution of its annual work plan, with other media, we operate a Business the Internal Audit area produced a total of Principles channel where all correspondence is 721 reports on Group activity: 822 464 Financial audits or information received and treated in accordance with the CLOSED COMMUNICATIONS systems intended, primarily, for principles of respect, confidentiality and INVESTIGATIONS Fraud prevention, review of internal monitoring of thoroughness. investigation of the financial processes. complaints and the review
of individual actions. 28% When a reported situation contains sufficient INVESTIGATIONS Other works. information to allow its analysis, the FOUND TO BE 8% corresponding investigation is carried out in JUSTIFIED Total or partial 7% accordance with our internal procedures. 206 analysis of the Supervision of the main 7% processes related to 721 technological risks and costs and investment. compliance with legal During 2015, through the Channel of Business Reports provisions affecting the Principles and other media, we registered a total to be justified. The measures taken include 38 Reports aimed at 9% service networks and those of 822 items of correspondence, including disciplinary dismissals. None of those verifying proper 17% affecting the information inquiries and complaints. 464 investigations investigations closed this year were related to compliance systems. with other legal were closed this year, 206 of which were found cases of corruption or discrimination. 24% obligations. Review of income.
Milestones 2015 Compliance Challenges 2016
Completion of the project to review the code of ethics, in accordance with best business practices and in Completed Creation of a stakeholder communications channel. compliance with existing legislation.
Development and adoption of standards that guarantee optimum levels of corruption and fraud control. Completed Internal sensitisation in matters of corruption and bribery. Completed Creation of a compulsory training programme on the new learning Business Principles awareness campaign for employees. Between 70% and 90% of the workforce will tool. be trained in our Business Principles during the 2015/2016 period.
Design and implementation of the complaints mechanism in Definition, in Colombia, of the Mechanism for Human Rights Complaints and Claims, directed at communities. Completed Colombia, and definition of its conceptual and operational framework.
G4-49, G4-56, G4-57, G4-58, G4-HR3, G4-SO3, G4-SO4, G4-SO5, G4-LA16 57 INTEGRATED REPORT 2015
Management of the supply chain_
At Telefónica, all purchases are made in of the local needs of the different countries and We are aware of the impact of our activity us to contribute positively to achieving accordance with a common management business lines, ensuring coordinated and on society and, therefore, with the help of a more sustainable environment. model, which is characterised by the transparent management with our suppliers. new technologies, we seek more efficient globalisation of purchases, without losing sight and innovative processes, which enable
OUR SUPPLY CHAIN IN FIGURES(1)
Impact on Volume of purchases Our principles the community
We are aware of both We seek to ensure that our activity is carried out with 4% the local and global transparency and integrity. 8% 28% impact of our activity Market Advertising and on society. We promote the use of e-commerce tools, which help us to ensure products 10% marketing that our management of the supply chain is carried out with efficiency and transparency, guaranteeing equal opportunities. Information Network 85% of the volume systems of purchases (3) Services was awarded to 29,423 M€ Mobility and works local suppliers negotiated electronically
24% 26% 18,674 M€ in electronic formalisation operations 23,797 M€(2) ... to 12,214 A consolidated global (assignment letters, orders and contracts) purchasing model Awarded...... in 3 main product lines... suppliers through Telefónica We received 873,891 Global Services... electronically issued invoices Our Top 10 suppliers We continue to make progress in the interconnection of the ... which managed systems of Group companies with those of our suppliers, with over 21,334 purchasing 47,062 orders. processes, amounting More than 11,100 suppliers were trained in the management of to 16,487 M€ negotiations, orders and electronic invoices (compared with more than 8,800 suppliers in 2014).
(1) Does not include the figures associated with the purchasing processes performed by Telefónica United Kingdom. (3) Volume traded in 2015, regardless of the budget year of the purchase. G4-12, G4-DMA (2) Volume awarded in the 2015 budget year. 58 INTEGRATED REPORT 2015
OUR PURCHASING PROCESS respond directly to our customers' connectivity Promoting a culture of sustainability within our Our Value Drivers needs. value chain is one of the key objectives of Telefónica’s Business Principle Plan. Therefore, We manage and optimise the entire end-to- ever since we assumed our public commitment Efficient production end process, from the definition of the product in 2010, we have striven to incorporate social and its technical specifications to the final To reduce costs of materials, energy and transport. responsibility as another aspect to be borne in delivery of the equipment, as well as other The development of strategic relationships with suppliers mind in each of the phases of the purchasing critical actions such as the approval of the to optimise the process, products and services. process and in the relationship with our equipment and the centralised management of suppliers. As such all the contracts that the purchases. Telefónica holds with suppliers include specific clauses covering human rights. Culture of sustainability Since the Marco Polo model was introduced in 2013 we have managed to establish a portfolio As a result we are able to identify and manage To train and involve suppliers and employees. of products common to all our operations, potential risks, while fostering a culture which To build strong relationships with stakeholders. allowing us to downsize to 10 teams from promotes social and environmental Positioning in the sustainability indices. 28 in 2015 and achieve efficiencies above commitment throughout the supply chain. 45 million euros.
OUR SUSTAINABLE Risk management Technological partners MANAGEMENT MODEL Within the framework of the Company’s Energy At Telefónica we base our model for the To minimise risks (ethical, social, environmental). Efficiency Project, we work with technological sustainable management of the supply chain on To protect the reputation and value of the brand. partners who provide us with the best the following four Value Drivers. To facilitate access to financing and insurance. technology and help us to identify opportunities to reduce energy consumption and emissions.
Efficient production Strategic alliances Engagement We have launched a strategic collaboration Marco Polo Model programme with China Unicom for the joint We are reinforcing Telefónica’s position as a To promote a close relationship and share good practices. purchase of terminals. The programme's Digital Telco by providing our own brand of To establish communication channels and develop on-site aim is to select smartphones with common home equipment. This allows us to be more forums. specifications, thus allowing both companies to competitive in terms of both added value and provide better data services to a broad base of distinctiveness, thanks to new features which customers in Latin America, China and Europe.
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Culture of sustainability Throughout the different phases of the of sustainability which guarantees service Preparation and organisation of purchasing process we encourage our suppliers excellence for our customers. documentation regarding the Occupational In accordance with our Business Principles, we to fulfil these minimum criteria while promoting Health and Safety Management System, require all our suppliers to carry out their activity similar standards in their own value chains. We want to ensure the formation of these based on the requirements of the International applying similar ethical standards to ensure strategic partnerships in order to guarantee Labour Organization (Chile). compliance with fundamental human and In the event that a supplier does not achieve compliance with organisational objectives, labour rights and respect for the environment. the required level or is not able to provide the technical security and equity, while at the same Implementation of the partner management requested information, we shall implement time developing mechanisms for the early model in the distribution channel (Colombia). The principles we promote among our suppliers the processes necessary for achieving its detection and prevention of risks and sensitizing include those related to labour rights, such commitment with a view to implementing contractors with regard to compliance with Development of the action plan for attending as eliminating child, forced and compulsory improvement plans which ensure compliance Telefónica’s standards. to special audits by the Ministry of Labour labour, promoting the effective recognition of with our standards. (Venezuela). collective bargaining and support for freedom of We employ a management model based on association. In extreme cases, where this is not feasible, upon global tools - such as our policy of minimums Throughout the year we reinforced training the basis of the agreement initially signed by and the third-party committee - which allow initiatives with our internal managers and our To be a Telefónica Group supplier, in addition to both parties, the relationship with the supplier us to develop different lines of action at a suppliers, addressing the specific needs of each technical requirements and quality standards, shall be suspended until it proves that it has local level, taking into account the situation in country. Such training is conducted in person or the company must agree to comply with certain corrected the situation. each of the countries. The different initiatives via the ICampus online platform. minimum business principle criteria, set out in our: undertaken during 2015 include: Strong relationships with our Policy for Responsibility in the Supply Chain. partner companies Implementation of a contractor control system We seek forms of cooperation with our partner (Argentina, Chile, Mexico and Peru). Commitment to Human Rights. companies and contractors which will help us More than to establish sustainable management, with the We began the implementation stage of the General conditions for the supply of goods and aim of turning them into strategic partners and OSHAS 18001, which also involves suppliers in services. increasing customer satisfaction. different countries (Argentina and Colombia). 4,500 In Latin America, our Partner Programme has courses conducted with our become one of the leading initiatives in this field. partners in Latin America Since it was launched in 2008, we have worked closely with our suppliers to promote a culture
G4-12, G4-DMA, G4-HR10 60 INTEGRATED REPORT 2015
Of the critical suppliers, 40 have active We have performed more than 15,550 We evaluated 190 critical suppliers via the EcoVadis corrective action plans, representing a total of administrative audits and more than 1,470 455 corrective actions. on-site audits on risk suppliers, addressing platform and another 20 are currently undergoing the locally critical issues in both cases. Given the Relevant indicators: results obtained, improvement plans for more process, thus achieving the target set for 2015 than 600 suppliers have been proposed. 45% (+4%) have the OHSAS 18001 or equivalent certification, thus demonstrating In addition, we have conducted 100 corporate During 2015, at Telefónica España we promoted In 2015 we focused once again on applying our the organisation’s ability to meet the audits in 8 different countries (42% more than dialogue between the union representatives control and monitoring mechanisms to track the requirements of health and safety legislation. in 2014), using homogeneous sustainability and our partner companies to resolve the labour activity of our risk suppliers, classified as such criteria at a regional level, on the basis of a disputes which led to a strike. Thus, in May, an either due to their activity or to their volume of 73% of suppliers have complaints four pillar model: Business Principles, Human agreement was reached between the two main allocations. procedures. Resources (with particular emphasis on unions - UGT and CCOO - and the ten affected compliance with labour obligations), Health and companies in order to improve the working 360º assessment of risk suppliers 67% (+1%) of the assessed suppliers have Safety and the Environment. conditions of the employees of contracted We analyse and assess the risk level of our the ISO 14001 environmental management companies. suppliers, depending on the product and certification. In general, the results of these audits display service they provide us. To do this, we rely on minor variations on 2014, the suppliers’ level the self-assessment platform of EcoVadis, an 78% (+5%) report use of energy or GHG of compliance remaining within the top area of external independent body. As a result of its emissions. performance. The 82% compliance registered Risk management online tool we obtain a 360º assessment of the in the Human Resources discipline is a clear performance of our leading risk suppliers, based Annual Audit Plan example of the importance of labour obligations on 21 sustainability criteria. Our plan is defined in accordance with the for our partners and the work we perform with Preventing and reducing the potential negative risks of each region or country and the type of them in this regard. impacts of our activity is another of the We have evaluated 190 critical suppliers by supplier, and thus focuses it assessment on the objectives of our Business Principle Plan, as well means of EcoVadis and 20 other suppliers are performance of our suppliers in the most critical The areas for improvement we have detected as those negative impacts which may arise in currently undergoing the process, thereby aspects. include, above all, helping our partners to relation to our suppliers; therefore, this is one of achieving the target set for 2015. The transfer the sustainability issues contained in our main lines of action in the management of percentage of suppliers which have shown Once again, in Latin America we have focused our Policy for Sustainability in the Supply Chain the supply chain. some kind of weakness - medium risk - in their our efforts on managing the risk associated with to their own suppliers. sustainability management has remained labour-intensive partner companies and third at around 30%, with the main risks once parties by means of the Aliados Programme. again being those affecting the sustainable management of the supply chain itself.
G4-12, G4-DMA, G4-LA15, G4-EN32, G4-HR6 61 INTEGRATED REPORT 2015
The distribution of risks has remained stable. They have access to various communication DISTRIBUTION OF AUDITS BY COUNTRY Some of the most common risks have been channels, such as our quarterly partner bulletin detected in: (Colombia, Ecuador and Mexico) the Partner 6% 12% Portal and the Supplier Portal. In the latter they 10% The Induction Process, Training, Climate and can find all our policies as well as a confidential Argentina Ecuador 9% Welfare, as well as Personnel Relationships and channel for questions and complaints relating Management. to the fulfilment of our minimum business Brazil Peru principle criteria. With regard to Health and Safety aspects, 10% Chile Mexico these have focused on the sections of During 2015 we held direct meetings with Industrial Hygiene and Safety (occupational some of our main global suppliers, at which we 33% health, preventive medicine at work, the shared our strategies on sustainability issues 10% Colombia Venezuela Joint Health and Safety Committee and the and exchanged good practices. emergency brigade). 10% We used the online channels to organise And concerning environmental processes, the specific webinars on aspects which we PERCENTAGE OF COMPLIANCE IN THE CORPORATE AUDITS IN structure of the environmental programme, considered of interest to our suppliers. For LATIN AMERICA waste management and the consumption of example, in Ecuador we held the “Movistar
materials and resources. Shield” webinar, at which we conveyed 87 85 our interest in contributing to a secure 82 79 76 80 71 We are working together with the suppliers to environment for the use of ICT for customers, 72 74 2013 69 67 67 carry out improvement plans, defined for each suppliers and distributors. 64 of the suppliers which have displayed some kind 60 2014 of non-compliance. At a local level, we also organise on-site events 2015 with suppliers, including the following: 40
Engagement Meetings of Telefónica’s Partner Companies in Latin America, in which internal managers, 20 We promote constant communication with suppliers, distributors, etc., participate. In 2015 our suppliers in order to maintain a close these were held in Chile, Ecuador and Mexico. relationship with them and to promote a culture 0 of sustainability in our supply chain. Working breakfasts, such as the three PdA Human Health Environment organised in Guatemala last year to Resources and Safety
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convey the importance of Sustainability in As a strategic partner of this Network, at The work performed since its launch has led 1. Traceability of 3TG minerals companies and to pass on to them how our Telefónica Colombia we publicised our to 136 companies being registered and has We encourage our suppliers to carry out Business Principles apply to suppliers. commitment to manage and be held affected more than 226,000 employees. effective due diligence processes to guarantee, accountable for this risk. We also participate whenever necessary and possible, the Thematic workshops, such as the one in the Communications Committee and form Minerals in conflict traceability of 3TG minerals from areas of on Energy and Climate Change, at which part of the Technical Committee together with Within the Telefónica Group, despite not having conflict, as well as the mitigation of the Telefónica and its major suppliers analysed the Ministry of Labour, the Local Network of any direct commercial relationships with smelters associated risks, such as the violation of Human different plans to boost energy efficiency the Global Compact and the Colombian Family or refiners, we actively strive to include Rights.
and reduce CO2 emissions in the world of Welfare Institute, among others. sustainability criteria throughout the value chain. telecommunications. In addition, any supplier which submits an offer Since the launch of the Colombia Network In this regard, we have adopted a company must: RELEVANT ASPECTS FOR OUR Against Child Labour, the “Here I am Taking policy based on the guidelines contained in BUSINESS Action” tool was made available to the the report titled “Due Diligence Guidance Provide the express assurance that, to the best Once again we maintained our commitment to participating companies so that they could for Responsible Supply Chains of Minerals of its knowledge, after performing an appropriate key aspects of the supply chain with high social self-diagnose the risk of child labour in order to from Conflict-Affected and High-Risk Areas” and thorough analysis, the products offered do not impact, such as child labour and minerals in promote respect for the rights of children and published by the OECD. It is a policy which contain any so-called “Minerals in Conflict”. conflict. teenagers in the supply chain and the area of incorporates the Guide's five stages and which influence. In 2015 we conducted five workshops we pass on to our suppliers. Have a clear policy on minerals in conflict Eradication of child labour in three different cities: Neiva, Cali and Bogotá. which promotes the adoption and use of the Preventing and eradicating child labour is an In the latter the exercise was carried out in OECD guidelines for multinational companies international goal which is present on the conjunction with the Colombian Association of and the guiding principles of the United development agendas established by the Flower Exporters of Colombia, coal suppliers of Nations on business and human rights for different countries. Therefore, once again we the Bogotá Energy Group and members of the internal use and for the entire supply chain. continued to collaborate in some of the main Colombia Network Against Child Labour. initiatives launched in this area, such as the Colombia Network Against Child Labour, made up of 35 companies and headed by the Ministry of Labour. Among the 69% 82% 43% suppliers have a policy on implement actions to publish a report assessed: minerals in conflict identify the presence on due diligence of or mitigate risks
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The supplier must have a management system In 2015 we continued with the assessment 4. Complaints FURTHER INFORMATION to comply with this policy. of our suppliers of devices, one of the We continue to work internally to establish a Refer to the “Supply Chain” section of most important lines due to their volume unified complaint mechanism for the whole our corporate website. 2. Assessment of suppliers of allocations and their high risk in view of Group. We analyse and assess the performance of our the significant levels of use of these types suppliers by means of the EcoVadis platform. of minerals in the manufacture of their 5. Information CHALLENGES 2016 Thus, within the module that assesses the components. We report on the due diligence of the supply management of their own supply chains, we chain. analyse the risk suppliers in regard to certain 3. Engagement initiatives A review of the minimum business aspects of this field: We also support and participate in major In addition, at Telefónica, as a company principle criteria we require of our initiatives, both international and sectoral, listed on the New York Stock Exchange, we suppliers, in keeping with the new Whether they have a policy on minerals in aimed at reducing these kinds of risks, such duly comply with Section 1.502 of the Dodd- aspects relevant to the field of conflict. as the Public-Private Alliance for Responsible Frank Wall Street Reform and the Consumer sustainability for the value chain. Minerals Trade (PPA). Protection Act. Whether they publicly support any of the Put special focus on suppliers related to the provision of services, international or sectoral initiatives in this concentrating our attention on the regard. most significant risks. MILESTONES 2015 The different actions implemented to identify Expand the scope of the EcoVadis the presence or to mitigate the risks of the assessment process, including minerals in conflict within their own supply Telefónica’s 250 main risk suppliers. Given the challenges set for 2015 190 critical suppliers assessed by chains (identification mechanisms, inclusion of and the different lines of action on means of EcoVadis with 20 currently Incorporation of Telefónica into the clauses, external certifications, etc.). which we worked throughout the undergoing the process, thus JAC (Joint Audit Cooperation) sectoral year, our milestones include: achieving the target set for 2015. initiative, in order to perform joint Which specific measures they implement to audits on critical suppliers. engage their own supply chain in this respect. A review of the framework contracts of 1,577 on-site audits (both local and some of our major global purchases, such corporate) performed on risk suppliers, Encourage the participation of our as terminals, ensuring the inclusion of whose results have led to the proposal Whether they publish a due diligence report in suppliers in the different dialogue the minimum sustainability criteria to of 608 supplier improvement plans. this regard. initiatives which the Company provides be met by potential suppliers, given the for stakeholders, in order to find new type of product or service we acquire. areas for cooperation.
G4-12 64 INTEGRATED REPORT 2015 5 Focus on the customer_ INTEGRATED REPORT 2015
Customer promise_
Knowing what our customers want is the basis Today digital is normal, and the barriers between CUSTOMER SATISFACTION INDEX of the Company’s business principle proposal. life and digital life are becoming blurred. 2014 2015 We are highly aware that, just like their needs, Technology permanently co-exists with people. their levels of requirements and expectations Digital life is life. And this is precisely our new 7.87 7.79 7.47 7.49 7.56 are evolving. The consumer experience is strategic vision as a Company. 8 7.39 7.24 7.40 a deciding feature within our market and, 7.22 7.06 therefore, our strategy places the customer at CUSTOMER SATISFACTION the centre of the value proposition. At Telefónica we have a specific committee within 6 our Board of Directors which is devoted to Service The digital consumer wants to enjoy the Quality and Customer Attention which meets best connectivity, accompanied by quality, on a quarterly basis to reinforce the focus on 4 transparency, simplicity and integrity. Our customers. customers regard it as essential to be able to 2 access the digital world and communicate at an In 2015, to ensure the above, and with the aim of optimal speed, from anywhere and regardless improving our relationship with our customers, of the device, because nowadays connectivity within our Commercial Digital Area (CCDO) we 0
not only serves for interpersonal interactions, created the area of Customer Engagement, Spain Germany Brazil Latin America Telefónica Total but is also essential for our personal and along with the units responsible for customer working lives. We are therefore taking a step experience in the different countries in which we forward by offering products and services that operate. go beyond connectivity and developing open, This year we established that reliable and challenging relationships with our customers.
We believe that giving customers control of their digital lives is the key to the future. Trust is one of our top priorities. We thus ensure 50% of the variable remuneration of our professionals is the privacy of our customers and promote transparency with regard to their rights. directly linked to the degree of customer satisfaction
G4-PR5 66 INTEGRATED REPORT 2015
Customer satisfaction is the best proof that FURTHER INFORMATION LARGE ACCOUNTS BEST PRACTICES we are moving forward. To measure the above, Watch the “Telefónica Business Solutions” video. Our Telefónica Business Solutions division we use the CSI (Customer Satisfaction Index), is responsible for offering comprehensive an indicator that is regularly reported to the communication solutions to the B2B market INTERNATIONAL TELECOMS WEEK Board of Directors. We are currently number 1 and managing the businesses of Companies At Telefónica Business Solutions we in our sector in the CSI in 11 of our markets and (SMEs, Large Companies and Multinationals), participated in the eighth International we have set ourselves the goal of becoming wholesalers and roaming suppliers across the Telecoms Week (ITW) in Chicago, the number 1 in the CSI in all the countries in which entire Telefónica Group. most important annual event for the we operate by 2020. global wholesale business community. We have an outstanding portfolio of This year the event was attended by Furthermore, we don't just wish to put the telecommunications services: international a record number of 6,300 executives customer at the centre of our Company, Our customer voice services, IP, broadband capacity, from 150 countries, representing 1,900 rather we wish them to be the central work satellite services, mobility and integrated IT companies around the world. Our priority of each one of Telefónica's employees, satisfaction index totals services, fixed and mobile services, as well as delegation of executives attended more whatever the area. For this purpose, this digital cloud and security solutions. than 470 meetings with customers and year we established that 50% of the variable 7.56 points, 0.10 more potential customers in order to expand the remuneration of Telefónica professionals will be than the objective we business and to publicise the Telefónica directly linked to the needs of our customers. Group’s extensive value proposition. set ourselves During the year, the CSI reached a total score of 7.56 points out of 10, representing an increase of 0.16 points over 2014 year-on-year. This score exceeds the objective we set for this year by 0.10 points. We should highlight the change of criterion in CSI scoring in 2015. Replies to the satisfaction survey are given on a scale of 1 to 10. Until 2014 these replies were transformed into results from 0 to 10. Since 2015 replies are no longer transformed, and as a result the results FURTHER INFORMATION are reported directly on a scale from 1 to 10. Refer to the “Customer Satisfaction” section of our corporate website. In this Report the data from 2014 has been configured for comparative purposes.
67 INTEGRATED REPORT 2015
Through Telefónica Business Solutions we wish With the merger of Movistar TV and Canal +, content which fosters social awareness in to become a strategic partner to improve the Telefónica has opted for an innovative platform all fields and promotes the dissemination of efficiency, productivity and competitiveness of which complements content and provides a culture and the values of sport, such as Jon companies in the digital world. We currently have unique user experience. It allows recording in Sistiaga’s social reports in zones of conflict, professionals in more than 40 countries and the cloud, HD channels, VOD and viewing of Icíar Bollaín’s works on emigration, nature provide services to more than 170 countries. content from the last 7 days, across multiple programmes that cover the future of the planet devices. All the above, with the best market and what can be done to protect it, etc. In addition, this year we launched "PCCS", connectivities, in both fixed (300 Mbps) and a consortium-promoted 6,000 kilometre mobile (4G) Networks. All content offered on our platform is duly undersea cable, whose transmission capacity classified according to the appropriate age reaches 80 terabytes per second, allowing us to At Telefónica we also promote social groups. link the communications and services we offer responsibility through Movistar +, providing from the United States to Ecuador.
DIGITAL TELEVISION MILESTONES 2015 BEST PRACTICES The commitment to full connectivity and a broad range of services and content in a single commercial offer for all our customers provides We are expanding our activity in the We reached an agreement with China SPORTING AGREEMENTS proof that Telefónica has been committed European Multinationals market through a Unicom to share international data center In 2015 we reached important deals to digital television services for many years. strategic partnership with Bouygues capacities as a first step towards a cloud for football broadcasting rights, Therefore, in 2015 we acquired Canal +, a Telecom in France. agreement on a larger scale. now making us the Spanish market leading pay TV platform in Spain, which has operator with the most comprehensive helped Movistar + to become market leader, We reached a global collaboration At the business unit ElevenPaths and football offer: the BBVA League, the with 3.7 million subscribers. agreement with Huawei to promote the Security we also signed other strategic Adelante League, international leagues migration of traditional IT services to the partnerships with some of the leading (the Calcio, the Premier League, the Following the above acquisition, the total pay cloud, thereby complementing its potential companies in the security sector, such as Bundesliga, etc.), the King’s Cup, TV customer base grew by 62.6% in 2015, to supply public cloud services in all the Alien Vault, BlueCoat, Intel Security, Palo the 2016 European Championships reaching 8.3 million at 31 December. Telefónica markets in which Telefónica operates. Alto Networks, RSA and Vaultive. qualifiers, the UEFA Champions has pre-paid TV customers in Spain (44%), League and the Europa League. Brazil (22%), Peru (14%), Chile (8%), Colombia (6%), Venezuela and Central America (6%).
68 INTEGRATED REPORT 2015
Digital trust_
In an increasingly digital world it is essential Security for people to be sure that their data is private, We manage and implement all the necessary secure and managed transparently. Trust is technology, applying a logical and physical crucial for enabling citizens to take advantage DIGITAL TRUST security architecture, in order to give our of all the opportunities technology offers them. customers the confidence and certainty that our products and services are secure and Thus, as a gateway to the digital world, have the appropriate defence mechanisms. trust is one of our most material issues and, therefore, one of our top priorities. Our goal Data security is to guarantee the permanent privacy of our customers and to promote transparency Privacy Security Transparency The Corporate Security Committee is with regard to their rights when using our responsible for establishing the policies, products and services. The above will lie standards and procedures for the effective within a framework of security, providing and efficient management of both human customers with control over their digital lives. and material resources, making today’s We address digital trust with a sustainable approach to communications more secure and reliable. PRIVACY AND SECURITY ensure that citizens have control over their digital lives. We live in an increasingly connected world, Service security which in turn gives rise to the emergence of new risks concerning the privacy and security The effort we make to understand the new of personal data. Privacy and security are threats and the latest trends in the digital ever more important values in society. world, as well as anticipating changes with In 2015, under the supervision of the Global The person responsible for the application innovative security solutions, is reflected in a Privacy Privacy Committee, we implemented internal of our Privacy Policy is the Telefónica wide range of security products and services Our commitment is reflected in a Privacy Data Protection regulations in all the countries Chief Privacy Officer. In addition, given the which meet the needs of our customers. Policy in which we describe why, how in which we operate. Within these regulations growing importance of the data economy, and where we handle different kinds of we establish concrete measures with which we have appointed a Chief Data Officer. In this regard ElevenPaths provides us with information. Approved in March 2013, it was Group companies must comply, thereby The purpose of this new figure is to define specific research and development capabilities, updated in the course of 2015 to align it with compelling them to apply the principles the Company’s strategy in matters of the while Telefónica Security Engineering the new challenges faced by our sector. of our Privacy Policy. We seek to ensure management and customisation of digital handles specific developments aimed at that personal data is suitably processed products and services, based on transparency operations, engineering and support. and that the guidelines established in the and the customers’ control of their data. legislation of each country are followed.
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TELEFÓNICA GLOBAL PRIVACY POLICY TRANSPARENCY
WE PROTECT YOUR INFORMATION If we wish to use your data for a purpose other than that initially communicated, we will inform you and obtain, when appropriate, your informed consent in accordance with the legislation.
WHY DO WE USE IT? WHAT KIND OF DATA DO WE PROCESS? RIGHTS To promote and be able to provide the contracted services. The information necessary to We inform you of your rights as a user and how you can provide, improve and adapt our exercise them on our websites. To innovate and improve the products products to your needs. we offer you. There are people in each country responsible for dealing Information on the use of our services, with these kinds of requests. And when it is used for other purposes, browsing and localisation, when the we always inform you and give you applicable legislation permits. We only retain the information for the time required by the chance to object. law or if it is necessary to help us achieve a legitimate business goal.
HOW DO WE COLLECT IT? WHERE DO WE HANDLE IT? SECURITY
We manage and store your customer information When you sign up or use our products, In the countries where we provide responsibly, keeping it secure. access our websites, send inquiries, services. report incidents and participate in market We undertake to act quickly and responsibly if the security studies. It may be transferred internationally of your information and interested parties is endangered. to companies in our Group, or sent to When you browse the Internet, by third companies, always respecting means of cookies, requesting consent, the legal framework, the contractual MINORS if necessary, and always in compliance clauses and Telefónica’s security with the applicable legislation. standards. We strive to provide an environment which encourages responsible use of the Internet and mobile phones among young people.
Click here to access Telefónica’s Global Privacy Policy
G4-DMA 70 INTEGRATED REPORT 2015
Audits These audits are performed every We also work with different organisations At Telefónica we perform the audits required To properly manage the information 18 months on all the public IP addresses and institutions at a local level by means by the government in each of the countries we collect, at Telefónica we rely on four of the Group’s operators, as well as on of training and awareness workshops in in which we operate, which are usually basic pillars of security: products and services to determine, and if matters of data protection and security. performed every two years. However, in appropriate improve, their level of resistance addition, we have implemented an annual to cyberattacks. In 2015 we conducted During 2015 ElevenPaths organised the internal audit system to check not only Confidentiality: 36 cybersecurity audits on all the operators’ third Security Innovation Day in Spain, a compliance with the above but also the We guarantee that the data and systems networks, systems, products and services. benchmark event in the field of security application of best practices in matters are only accessed by duly authorised and ICT in both national and international of data protection. Throughout 2015 persons. Training and awareness terms. During the day synergies with partners we have continued to conduct reviews In 2015, as a result of our Global Training were presented with the aim of promoting of personal data protection, performing Plan in matters of data protection and information security, generating an added a total of 24 audits in this subject. Integrity: security, we conducted courses in these value and combining our technological We guarantee the accuracy of the subjects for a total of 49,352 people. capabilities. As for Telefónica Ecuador, The most important aspects which have information and systems against it held the 3rd Meeting of Authorised been reviewed are: the application of security alteration, loss or destruction, either At a corporate level, we have an internal Suppliers and Distributors at which, measures in the processing of personal data, accidental or fraudulent. Security Portal, where our employees can among the different topics covered, control of access to the data, the quality of access all the current regulations and obtain information security was discussed. the information, consent to the processing updated information, online training and of data and the possibility that the affected Availability: security advice which can be applied in the parties may exercise their rights of access, We guarantee that the information and performance of their professional activity. rectification, cancellation and opposition. systems can be used in the manner and time required. Moreover, Telefónica’s Annual Audit Plan contains a comprehensive cybersecurity audit plan which, among other techniques, Auditability: includes the performing of a penetration test We guarantee that any action or applying ethical hacking techniques based on transaction can be unequivocally related, the OSSTMM, CVSS and OWASP standards. ensuring compliance with the key In 2015 we performed 24 audits in matters of controls established in the corresponding regulations. personal data protection and 36 on cybersecurity
G4-HR2 71 INTEGRATED REPORT 2015
We work to incorporate customer privacy in the development of all of our products and services, from the initial idea to implementation
Penalties mobile data, constantly bearing in mind the In 2015 we registered 78 penalties customers’ privacy, in order to trace actual throughout the Group for issues related to behaviour patterns which enable institutions personal data protection and 154 procedures to make decisions more accurately. were initiated on data protection issues throughout the year. Most of these FREEDOM OF EXPRESSION procedures were initiated in Spain, where During 2015 we worked to support privacy and legislation is stricter than in other markets. freedom of expression, actively participating in the Telecom Industry Dialogue (TID), the PRIVACY BY DESIGN Dialogue Group of the telecommunications We work to incorporate customer privacy in sector. This international organisation is the development of all of our products and made up of a group of global operators services, from the initial idea to implementation. and sellers in the sector which focus on the This is what we call privacy by design, as protection and promotion of the freedom of a result of which we take into account not expression and privacy of individuals within only the guarantees provided by applicable the context of the United Nations Guiding legislation in the matter but also the customers’ Principles on Business and Human Rights. have the status of Observers within the GNI, BEST PRACTICES expectations with regard to their privacy representing a step forward in cooperation on when using our products and services. We work in conjunction with the Telecom behalf of privacy and freedom of expression. Industry Dialogue (TID) and the Global Network DATA PROTECTION Our experts on data protection are involved Initiative (GNI), an organisation made up of The progress we have made in the Telefónica Mexico is the first company from the start in all the digital service projects different agents (companies, investors and civil implementation of the 10 principles of Privacy in the country to receive certification in we undertake. Thus, for example, the Smart and academic society). From 2016 onwards, and Freedom of Expression adopted by the TID matters of Personal Data Protection. Steps product uses anonymous and aggregated the members of the TID who so wish will in 2013 is described in the following table:
G4-PR8 72 INTEGRATED REPORT 2015
GUIDING PRINCIPLES FOR PRIVACY AND FREEDOM OF EXPRESSION AT TELEFÓNICA
Guiding principle Progress of Telefónica
1 To create and/or maintain relevant policies, under the supervision of Our Business Principles, revised in 2010, recognise the right to privacy as the foundation for a trust-based relationship with our stakeholders. the Board of Directors or equivalent, highlighting a commitment to preventing, assessing and mitigating, to the extent possible, the risks to Moreover, the Group has a Privacy Policy, approved by the Board in March 2013, which is binding in all the countries in which we operate. During freedom of expression and privacy associated with the design, sale and 2015 the Policy was updated to align it with the new challenges facing the sector. operation of technology and telecommunications services. We also have a Data Protection Instruction which establishes specific mandatory measures for the companies of the Telefónica Group, developing the principles of the Privacy Policy and thereby guaranteeing proper processing of personal data, without detriment to the provisions of the current legislation of each country. It was implemented during 2015 in all the countries in which we operate, with the Privacy Committee carrying out the monitoring thereof.
The Group has a Chief Privacy Officer, who is responsible for the implementation and monitoring of the Policy. Furthermore, a Chief Data Officer has been introduced to be the person responsible for the Group’s data, protecting it, storing it and designing the database of the future.
With regard to security management, the Group has the Corporate Information Security Policy, which is based on international standards and updated in accordance with growing international demand in matters of security. In addition to receiving policy-specific training, all our employees have access to the Policy via the Group Intranet.
2 To conduct regular impact assessments on human rights and use due Respect and commitment to Human Rights is one of the foundations of our Business Principles. Therefore, in 2012, in accordance with the diligence processes tailored to the Company for identifying, mitigating framework provided by the Guiding Principles on Business and Human Rights, we conducted an assessment, with the support of Business for Social and managing risks to the freedom of expression and privacy (both in Responsibility, of all our operations to assess the global impact of our activity. During 2015 the following due diligence processes were performed: relation to technologies, products and services, as well as to specific countries), in accordance with the Guiding Principles for the application Periodical reviews of the most significant risks in matters of privacy and security which affect our business at a global level. of the UN’s “Protect, respect and remedy” framework. Preparation and presentation by the Privacy Committee of the Guide to procedure in the event of certain requirements by the authorities.
Monitoring of the implementation of the Data Protection Instruction by the local Chief Protection Officers.
3 To create and/or maintain operational processes and procedures for Telefónica has formal processes in place to attend to requirements received from local/governmental authorities. These are the responsibility of the assessing and managing any governmental requests which might have departments of the General Secretary and Security in each of the Group companies. an impact on freedom of expression and privacy. In 2015 the Privacy Committee presented the Guide to procedure in the event of certain governmental requirements, applicable to all companies comprising the Telefónica Group.
4 As far as possible, to adopt strategies to anticipate, respond to and In addition to the formal processes stipulated in the above principle, the Chief Privacy Officer, at a global level, and the Data Protection Officers minimise any potential impact on freedom of expression and privacy in ensure greater uniformity of the procedures and processes which affect the privacy of our customers. the event that an illegal governmental request or demand is received, Furthermore, the Chief Data Officer has been introduced to be the person responsible for the Group’s data, protecting it, storing it and designing the or when governments are deemed to be misusing the products or database of the future. technology for illegitimate purposes.
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Guiding principle Progress of Telefónica
5 To seek to always guarantee the security and freedom of the Health, safety and occupational well-being are the three pillars of Telefónica, not only ensuring the protection of its employees, but also having a Company’s employees who may be exposed to risk situations. direct influence on their satisfaction in their work for the Company. In terms of physical security, the global security directorate establishes a set of guidelines to be followed, appropriate to the risks identified in each country, and which also covers the displacement process. Further information can be found in the “Occupational Health and Safety” section.
6 To sensitise and train the employees affected by the relevant policies The Telefónica Group has designed a specific plan to train and sensitise its employees in the policies and processes which affect them. and processes. This continuous training programme is conducted both in person and online. During 2015 more than 49,300 employees were trained in Data Protection and Information Security.
7 To share knowledge and impressions, whenever relevant and We consider it essential to maintain an ongoing dialogue with our stakeholders in order to identify and mitigate risks and to develop new business appropriate, with all the interested parties involved in order to better opportunities. We believe that both transparency and knowledge sharing with this group is essential to promoting these Guiding Principles. In this understand the legal framework and the effectiveness of these sense we should highlight: principles in practice and to provide support for their application and development. As members of the Telecom Industry Dialogue we participate in the Learning Forum with Stakeholders. Drawing up of a global map of stakeholders on issues of Privacy and Freedom of Expression.
Preparation of a stakeholder panel to serve as a platform for formal and structured dialogue with our main stakeholders. The results of the Stakeholder Engagement will serve to enrich the study of materiality and focus Company planning, both globally and locally, on its social, environmental and ethical initiatives, including Privacy. For further information, refer to the section titled “Relationships with our interest groups”.
8 To annually, and whenever circumstances so require, provide external This Report summarises the progress made by the Telefónica Group in matters of privacy and freedom of expression. information on the progress made in the application of the principles For further information, you can also refer to the Digital Trust chapter of this Report. and, where appropriate, on the main events which occur in this respect.
9 To assist in the development of policies and regulations which promote At Telefónica we are convinced that the best way of achieving global progress with respect to freedom of expression and privacy is through dialogue freedom of expression and privacy, either individually or in collaboration between governments, industry, civil society (including human rights experts), investors, supranational organisations and other affected interested with other entities, seeking to mitigate the potential negative impacts parties. We participate in public consultations relating to privacy and freedom of expression conducted by various different national and international arising from policies and regulations. organisations. We contribute to dialogue on national and international policies in different forums and events relating to Privacy and Freedom of Expression, both at a Company level (2015 Annual Data Summit and 2015 Global Dialogue on Data Protection) and by means of the Telecommunications Industry Dialogue Group, whose initiatives can be found on its website.
10 To examine the options for the implementation of the appropriate During 2015 we worked internally to establish a proper complaints mechanism to cover different aspects of Human Rights, including Privacy and complaint mechanisms, as set out in Principle 31 of the UN’s Guiding Freedom of Expression. Principles on Business and Human Rights.
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Transparency of industry, regulation and economic by the Internet Watch Foundation. At Another fundamental value for obtaining Data Transparency Lab development, researchers and academics. Telefónica we perform this block in nine our customers' trust is transparency. For global call for grants of the countries in which we operate. us, being transparent in the digital world MINORS means explaining to customers, clearly To ensure proper use of the Internet by Products and services and simply, how and why we process their children we have defined a global strategy We develop parental controls for all types of data and involving them in the process. based on partnerships, products, services, devices connected to the Internet, as a tool and education and awareness projects. to help parents to enable their children to Thanks to Telefónica I+D we continue to make responsible use of the technology. be, for another year running, one of the 62 Partnerships main promoters of the Data Transparency proposals Strategic partnerships in civil society like We currently provide this commercial Lab, a community of technologists, INHOPE, Insafe and Pantallas Amigas. offer in three countries: researchers, politicians and industry received representatives who work on promoting Collaboration with the State Law Spain: Movistar Protege and Canguro Net. the transparency of online personal data by Enforcement and Security Forces to fight means of scientific research and design. against illegal content on the Internet. Ecuador: Escudo Movistar.
In 2015 this laboratory launched its first Sectoral alliances: we continue to work Brazil: Filhios online. global call for research grants, with the aim 6 with the Coalition of ICT Companies and of finding innovative projects in matters of projects the Partnership of Mobile Operators to privacy and transparency in the use of data. selected fight against graphic content of sexual A total of 62 proposals were received, from abuse on the Web. We proactively proceed which an independent research Committee to block this content, in accordance selected the six winning projects, which with the guidelines and lists provided received aid totalling 50,000 Euros.
In addition, the second DTL2015 world congress was held last year, with the aim 50 THOUSAND of becoming a benchmark in research into the flow and use of personal data euros of aid for So that children make good use of the Internet we on the Web and the development of each project have defined a global strategy based on partnerships, applications. The event, attended by over 130 people, gathered representatives products, services and education and awareness projects
75 INTEGRATED REPORT 2015
BEST PRACTICES Familia Digital has become a leading PROTECTION OF MINORS Resource Centre for families and educators, During 2015 Telefónica El Salvador signed a letter of commitment with UNICEF and with 196,778 visits in 2015 GSMA, with the aim of working together on protecting children and teenagers on the Internet.
Education and sensitisation In Spain, Familia Digital conducts different Awareness is a key element for us Teaching the future generations to make initiatives, two of which most stand out: and, therefore, we organise different CHALLENGES good use of the Internet is fundamental. the launch of the DigitalKids workshops in initiatives which seek to increase We would therefore like to support families conjunction with the Images, Words and awareness of this issue. The initiatives Familia Digital: The platform will be in the challenge of educating children and Ideas research group at the University of conducted in 2015 include: presented in Argentina and Venezuela in young people in responsible use of the Alcalá, whose aim is to contribute to the the second quarter of 2016. Moreover, we Internet and its connected technologies, as creative and intelligent use of technology by In Ecuador, we held the Escudo are working on the possibility of extending well as providing a secure digital environment children; and the collaboration with Pantallas Movistar Webinar to provide information it to other countries in Latin America. enabling better development of minors. Amigas, to launch the SmartPRIVIAL game. for our customers and stakeholders on the most relevant aspects of The creation of a corporate Privacy Our Familia Digital portal remains one of In November 2015, also in order to promote digital education for minors. Centre on our official website. our main lines of action for achieving these education, we launched the 'Dialogando' objectives. During 2015, we expanded the portal in Brazil, aimed at parents and We presented the first guide on platform to Costa Rica, Ecuador, El Salvador, educators. The platform provides a platform the Digital Identity of teenagers Guatemala, Mexico, Nicaragua and Panama. for dialogue on the responsible use of for Spain and Latin America. the Internet within the family and offers With 196,778 visits last year, this Resource its users a range of interactive content At Movistar Nicaragua we launched a Centre for families and educators has and information from different media new social service whereby, by means FURTHER INFORMATION become a reference point for promoting sources, segmented by age groups. of sending free messages, we distribute Refer to the “Digital Trust” section of digital education and helping to create a information to prevent potential risks and our corporate website. better Internet for children and teenagers. encourage safe use of the Internet.
76 INTEGRATED REPORT 2015 6 Commitment to our team_ INTEGRATED REPORT 2015
Human resources_
TURNOVER RATE ATTRACTION AND RETENTION The key to our transformation and leadership AT TELEFÓNICA OF TALENT is having the best team of professionals. At the One of the most important challenges for end of 2015 the Group had 129,890 employees Total Voluntary a competitive company in the world of with an average age of 41, of which fewer than 129,890 Spain 4.0 3.2 new technologies is to attract and retain 1% held executive positions. In comparison employees the best talent. For this purpose, we offer a with the previous year's figures, the workforce Germany 25.3 9.5 professional career with the aim of, on the increased by 5%. This increase was heavily one hand, attempting to fulfil the concerns influenced by the acquisition of GVT and DTS, Brazil 28.9 6.7 and aspirations of our professionals and, and the deconsolidation of Telefónica United Employees of on the other, answering the mid and long- Kingdom. The organic variation of the workforce, LatAm. 14.0 6.6 term challenges facing our Company. excluding corporate movements, represented Therefore, it is important for us to be a a fall of 4.2% compared with 2014, due to the 98 Telefónica Group 20.0 7.8 good place to work, where our employees simplification startegy that we are implementing nationalities feel appreciated, thus encouraging and in order to achieve greater efficiency within enhancing their training and development. the organisation. Our goal is to maintain our In early 2016 we began a voluntary innovation capacity, despite the increased Redundancy Plan in Spain, in order to achieve We believe that diversity enriches the culture of competition that the sector is experiencing. 19.1% alignment with the objectives of simplification the Company. Therefore, our diversity strategy of women in and the incorporation of young talent. This is defined as the inevitable and natural result During 2015, the country with the most management plan, which will last two years, applies to of adapting our business to the environment employees was Spain, with 38,130; employees who will be 53 years old before in which we operate and, therefore, followed by Brazil, with 35,512, following the end of 2017 and have been working for understanding it as part of our business reality. the purchase of GVT in 2015; Argentina, our Company for fifteen years. Those who with 17,255; and Germany, with 8,738. voluntarily join the plan will receive 68% of We currently have employees of more than 95.8% their salary until they are 65, in addition to 98 nationalities who are based in the 41 countries 95.8% of our staff hold permanent with a permanent work social security and health insurance payments. where we have staff. With regard to gender employment contracts, which demonstrates contract diversity, 37.7% of our workforce in 2015 our commitment to sustainable employment were women, 19.1% of them in management policies. In 2015, 91,451 employees had positions. This diversity strengthens our a negotiated work agreement (70.4% of culture and allows us to position ourselves FURTHER INFORMATION the total), representing an increase over as a global and competitive company, while 19.9% Refer to the “Employees” section of our the previous year (78,166 employees). increasing our ability to reflect the diversity employees under 30 corporate website. This increase is strongly influenced by of our customers and stakeholders. the consolidation of GVT and DTS. years of age
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We are committed to attracting talent Expenditure on training BEST PRACTICES from the new generation of digital natives, Training hours (thousand of euros) who are essential to a sector as dynamic 2014 2015 2014 2015 ‘‘WOMAN IN LEADERSHIP” as ours. In 2015, 19.9% of our employees Telefónica Group 3,712,292 3,986,368 41,559 43,020 To strengthen female leadership were under 30 years of age and we recruited Note: The data is not directly comparable, due to the change of scope caused by the inclusion of O2 United Kingdom in the within our structure, we have a total of 10,912 young people. data for 2014, which is not included in the data for 2015. initiated a global career acceleration programme specifically for women: A large part of our untapped professional 32% “Woman in Leadership”. This is a potential lies among our employees. For this Spain global female leadership initiative reason, in the Talent areas of Telefónica, we which addresses different aspects design and implement programmes which Germany Training 5% involved in managing the barriers that help us to identify and evaluate our talent 35% women can face in their professional internally and develop their skills. In 2015 we hours Brazil careers. It is designed primarily evaluated 93% of Company executives and Latin America for women in executive and pre- managers, enabling us to draw up a talent 22% executive positions, thereby enabling map and a structured succession plan. Corporate centres and others our talent to gain access to positions 6% of greater responsibility, with the aim By means of our evaluation and talent of increasing their presence in senior management processes, we seek to management positions. Two editions contribute to the development of our Programme for the Development of training. We structure the above by means of of the programme were launched professionals and ensure we have the key High-Potential Managers: A personalised classroom training (Universitas and specialised in 2015, which were attended by profiles to guarantee the sustainability of our global development programme aimed courses) and online training (e-learning more than 60 executives. In addition Company. Through a platform designed to at our managers. Over the past year programmes). Thus, during 2015, the to the above, we have conducted align the needs of the business with those 689 managers took part in this programme. Telefónica Group invested a total of 43 million career acceleration programmes of each employee, we manage different euros in different initiatives in this area. for women at a local level. global development programmes: International rotations: Thanks to this global programme our employees can During the year we continued to deliver Young Leaders Programme: Focused on enjoy an international and multi-functional training through individual development plans employees under 30 years of age, its goal is experience at other companies in the group. (IDPs). These have allowed us to put specific to promote their development and growth mechanisms in place to, continuously and within our Company. In 2015, 98 employees Our goal is to offer an attractive professional online, identify training needs and enable us were involved in the programme. career which also promotes talent through to provide a comprehensive and immediate response when these needs arise.
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transformation. In addition, the “On the Road” BEST PRACTICES initiative, which brings the programmes directly to country operators, affected TALENTUM GRANTS 2,041 middle managers at a local level. Last of people under 30 years of age in Since 2011 over a thousand year the university received a rating of 4.7 out 47% our workforce are women professionals have joined Telefónica of 5 from the professionals trained there. España, almost all of them from training grant programmes in We are committed to reconciling the partnership with the SEPI Foundation professional and personal lives of our Indicators 2014 2015 and the Talentum plans. We currently employees. This is reflected in a set of have 112 people undergoing training measures and provisions aimed at work Women in the workforce 38.3% 37.7% with this Company. In order to flexibility, with services and benefits tailored Women in management positions 19.6% 19.1% encourage diversity, we reserve a to their needs. Women on the Executive Committee 1 3 percentage of the Talentum grants for young people with disabilities, thereby On a corporate level, with regard to workdays Number of nationalities in the workforce 90 98 ensuring the incorporation of talent and schedules, a large percentage of the People with disabilities in the workforce (1) 1,072 886 from this segment of professionals. workforce work intensive shorter days annually or in the summer months, Percentage of young people under 30 years of age 21.5% 19.9%
promoting the new forms of flexible work Note: To make 2014 data comparable, the scope of consolidation has been updated to include DTS and GVT, and exclude the that new technologies have made possible. data for Telefónica United Kingdom. (1) The percentage of integration of people with disabilities in Spain (ex-LISMI) stands at 2.07%. At a global level, the Company knowledge transfer is particularly worthy of mention. To enhance family reconciliation, our AGE PYRAMID OF TELEFÓNICA EMPLOYEES This has a base of 16,252 internal teachers employees enjoy flexibility when taking their and is supported by the eKISS platform holidays and also receive childcare bonuses. MEN WOMEN which, as a new feature, has launched a In some cases, such as at Company new, more powerful, social version. The headquarters, we run a daycare service for 13,732 30 years or under 12,059 platform already holds 66,427 documents the employees’ children. 12,137 31-34 years 9,601 and has received 5,965 visits. At Telefónica España we also have an Equal 23,782 35-44 years 16,129 In 2015, Universitas Telefónica, our corporate Opportunities Committee, made up of Company university, trained 2,046 executives on its and workers' representatives, which encourages 25,317 45-54 years 9,770 campus in Barcelona through on-site leadership measures that favour the conciliation of work life and strategy programmes focused on digital with family and personal life. 5,919 > 54 years 1,444
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We strive to create a working environment which encourages the elimination of barriers, an idea which forms part of our corporate strategy and culture. As such we seek to incorporate talent with disabilities, enable access to our facilities to any collective and encourage recruitment at special employment centres.
Our remuneration policy aims to attract, retain and motivate professionals so that, together, we can meet the challenges posed by the transformation of the sector. Telefónica’s Business Principles set out our commitment to our employees, guaranteeing fair pay that is appropriate to the labour market in which we perform our operations.
Employee remunerations come in the form of compensations (basic salary, variable remuneration dependent on objectives, sales incentives, long- term benefits and share programmes) and specific and alignment in remuneration practices Within the concept of total remuneration, benefits (pension plans, holidays, life and health throughout the entire Group. In turn, At Telefónica España the Employee Share Plans play an important insurance, company cars, etc.), as well as other the local remuneration teams ensure role. Receiving shares from our Company ways of compensating employees, such as career alignment with the usual practices in each we reserve 5% of our aligns the interests of the employees with development and opportunities. Our employees area of activity. We have single suppliers those of the shareholders and, at the same also have access to a personalised remuneration for all markets and the launch of retention Talentum grants for young time, generates a sense of belonging and system which enables them to voluntarily programmes has a global application. All more direct involvement in the results of the allocate part of the fixed financial payment to our variable remuneration systems include people with disabilities entity. In 2015, 1 out of every 4 employees the contracting of a series of products and/or at least one Business Principle target for was a shareholder of the Company. services and, therefore, adapt their remuneration the employees: customer satisfaction. to their personal and family needs at all times. Our philosophy of long-term incentives FURTHER INFORMATION At Telefónica we ensure that our remuneration through shares seeks to reach all Group Refer to the “Diversity” section on our Moreover, we have a Global Remuneration policies and practices guarantee equal salaries corporate website. employees around the world, at all Policy which aims to achieve homogeneity and opportunities for men and women. organisational levels. For this purpose we
G4-DMA 81 INTEGRATED REPORT 2015
have designed and implemented different The social benefits for Telefónica employees Pension plan with contributions made by the Teleworking. Our employees have the plans based on Telefónica shares, which are vary from one country to the next and, employee and the Company. opportunity to work from home once a week, available in note 19 of the Financial Report. essentially, consist of the following: subject to prior authorisation. Child and school aid, which varies according to Health, life and accident insurance. The fund is the age of the children. Advances of up to three months. MINIMUM SALARY AT TELEFÓNICA VS paid into to cover the risk of death or total MINIMUM SALARY IN EACH COUNTRY incapacity for all kinds of work. Double the Total incapacity for usual employment. In our Holiday plans and study plans for employees’ amount would be paid out in the event of agreement we include financial compensation children, with the possibility of receiving aid for Country Number of times death or total incapacity for all kinds of work for cases of redundancy in the Company due children who study in a town different to that Germany 1.0 as the result of an accident. to the declaration of permanent total of their family home, in accordance with the incapacity for usual employment. requirements established for this purpose. Argentina 1.9 Brazil 1.5 Maternity supplements during maternity leave: if applicable, the Company supplements Chile 2.1 maternity allowance by up to 100% of the net AVERAGE WAGE GAP BETWEEN MEN AND WOMEN Colombia 1.9 salary of the employee. Percentage of the average salary for women in comparison with the average for men in our Costa Rica 1.0 geographical areas Social welfare. A specialised personal suport Ecuador 1.0 service designed for employees in need of such help, and which may benefit their work, El Salvador 1.3 Basic salaries Spain Germany Brazil LatAm family and social lives. Spain 2.1 Managers 96.3% 90.3% 97.3% 96.3% Intensive shorter days in summer and yearly Guatemala 1.6 Middle management 95.4% 94.4% 99.4% 94.4% for part of the team, voluntary part-time and Mexico 5.3 unpaid leave. Total salaries Spain Germany Brazil LatAm Nicaragua 1.1 Managers 96.5% 86.0% 97.5% 95.7% Flexibility in excercising various authorisations. Panama 1.1 Middle management 96.2% 92.3% 99.5% 94.1% Peru 1.6 Venezuela 1.0 Note 1: LatAm reflects the weighted average of the countries which had reported data at 31 December 2015: Argentina, Colombia, Ecuador and Mexico. Uruguay 1.7 Note 2: The data shown by country corresponds to the whole collective of Managers and Middle Managers, as a result of which they are not homogeneous samples in terms of age, seniority or functional typology of the role performed.
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FREEDOM OF ASSOCIATION modify individual labour conditions must be During 2015, a total of 92,587 of the by country, Chile and Venezuela are those with AND SOCIAL DIALOGUE notified by the Company to the affected worker 120,117 people who received invitations took the highest CI (92%). At Telefónica, by virtue of the agreement and his/her legal representatives at least 15 days part in our environment and commitment reached with Union Network International (UNI), prior to coming into effect. In the case of changes survey, in which we received a score of 79 out of Moreover, during the year, Telefónica we are committed to the basic ILO standards on affecting collectives, the notifications must be 100. By gender, women have a CI (commitment was acknowledged as being the 5th best labour, concerning freedom of association and preceded by a consultation period with workers' index) that is 2 percentage points higher than multinational to work for worldwide, the right to collective bargaining. The agreement legal representatives, lasting no longer than that of men (80% and 78%, respectively) and, according to the 2015 Great Place to Work. was renewed in late 2014 and takes into 15 days. The workers are to be notified of the account developments in matters of corporate decision by the Company's management once responsibility, as set out in the United Nations' the consultation period has ended and if no WORK ENVIRONMENT INDEX BY BUSINESS AREAS AND GENDER
Guiding Principles on Business and Human agreement has been reached, and it will come 100% Rights, which make clear that companies are to into effect in the seven day period following the 85% 85% 82% 81% 83% 84% respect Human Rights in all their operations. date at which it was notified. Furthermore, in the 75% 70% 69% 71% case of Spain, regulation establishes that when 67% 67% 67% During this year, we should highlight the signing restructuring takes place within the organisation, 50% of the First Collective Agreement of Related Management is to inform the relevant Companies between Telefónica España and the Committee 15 days in advance of the 25% largest trade unions, which contemplates restructuring being effected, so that it may issue improvements in employee remuneration, the required report. In case it were necessary to 0% advances in the standardisation of working restructure activities and said process were to Spain Germany Brazil LatAm. conditions, new proposals in matters of the have a direct impact on the volume of IC Total IC men IC women reconciliation of work and personal life, special employment, no workers connected to such references to non-discrimination and a activities will be forcibly reassigned without prior commitment to collaboration between both agreement with workers' representatives, as parties in order to incorporate environmental established in the collective agreements. CHALLENGES 2016 criteria into the management of the Company, with everyone’s involvement. The collective WORK ENVIRONMENT To identify key talent and high potential in To develop the Training Schools into a model bargaining processes in Brazil, Argentina and Our employees play a key role in achieving the different levels and segments. of Communities and Working Groups within Peru, among others, were also significant and our transformation. For us, a high level of Success Factors, distributing them according To define, maintain and develop the global successful. commitment and ongoing improvement to the key skills of our strategy. talent and development framework. in the excellence of our customer service To implement a global training offer In 2015 the Group did not have any significant are competitive advantages which make a To design individual development plans for consisting of language plans, new MOOCs, key collectives within the organisation. collective conflicts. We met all agreements difference. This is why, at Telefónica, we apply the “Being a Trainer at Telefónica” project included in the Workers’ Statute (WS) quantitative, measurable and manageable To encourage measures to incorporate greater and a control kit to promote a culture of concerning substantial changes in labour criteria to identify trends and objectives diversity into our workforce, especially women empowerment. conditions, taking into account the distinctions within the different categories of employee and people with disabilities. determined by law. Decisions that substantially preparation, motivation and resources.
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Occupational health and safety_
Occupational health, safety and well-being To apply management tools in matters Our commitment to the health and safety of In Latin America, during 2015, the have a direct impact on labour costs through of occupational health and safety our workers goes beyond Telefónica's work following significant events stand out: productivity, as well as a considerable influence which are aimed at prevention. environment. We work with our suppliers to on the reputation of our Company and the ensure that that they offer their employees The realisation of more than personal attitude of our employees. Therefore, To comply with the current legislation minimum occupational health and safety 100 evacuation drills in Argentina, with occupational health, safety and well-being is on the matter in all countries. conditions, in accordance with local, national monitoring performed by means of a one of our main priorities. It is implemented via and international standards regarding control plan enabling the corresponding the occupational risk prevention management To carry out training and awareness initiatives the specific hazards of each activity. preventive measures to be taken. system, ensuring the integration of health, safety for employees so that commitment and and prevention criteria into the processes and knowledge of matters of occupational Audit of the Occupational Health and Safety services of all our companies. health and safety is acquired by all. Management System performed by the Occupational health: Colombian Security Council, achieving a score POLICY AND MANAGEMENT BODY Our progress of 97/100 in Colombia. The Joint Service for Occupational Risk During 2015 we renewed the OHSAS 18001 Prevention Management (belonging to Telefónica certification in all our companies in Spain and Automation of Safety Inspection procedures in España's Transformation and Human Resources Colombia; we also plan to obtain it in Argentina the activities of the supply chain in Ecuador. Division) is the unit designated as the Centre in 2016. Obtaining certification such as the of Competence for the Telefónica Group, OHSAS 18001, which goes beyond formal Telefónica also carries out the The implementation of the “Influenza” and coordinates global initiatives in matters compliance with legislation, shows Telefónica’s “Feel Good” programme, which vaccination campaign in Mexico. of prevention and occupational health. commitment to continuous improvement in is built around four fundamental matters of occupational health and safety. pillars: physical activity, nutrition, The Quality of Life programme in Brazil for the Through these bodies, we strive health and person. As such, we promotion of health, which included nutrition, to achieve the following: In addition, this year we received the have launched various initiatives medical monitoring for pregnant women, SGIS Healthy Company certificate for our to promote healthy habits medical centres and outpatient clinics, and To implement and maintain a management commitment to the health, safety and among our employees, such vaccination campaign programmes. system based on continuous improvement, well-being of our workers due to effective as giving up smoking, useful forming a framework to guide the carrying implementation of a comprehensive health tips for a heart-healthy diet, Renewal of the Health and Safety Committee out of occupational health and safety management system which is based on dental health, prevention of in Peru. measures through the definition of elements of continuous improvement. musculoskeletal overexertion and objectives, goals, programmes and indicators, a back school, among others. regularly assessing their evolution.
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JOINT COMMITTEES Incidence rate (1) Gravity ratio (2) Average length (3) The health and safety model established in the During 2015 we renewed Country 2013 2014 2015 2013 2014 2015 2013 2014 2015 different regions in which we operate shows a high worker representation and participation in the OHSAS 18001 Spain 7.0 7.3 6.2 227.0 274.6 238.9 32.6 37.7 38.6 heath and safety aspects via the corresponding Health and Safety Committees in all the certification in all our Germany 2.1 1.2 1.8 27.6 9.1 20.0 12.9 7.8 11.1 regions where Telefónica is present. In 2015, Telefónica had 241 joint committees companies in Spain and Brazil 1.2 0.9 6.4 92.6 12.6 98.3 76.2 14.4 15.5 representing about 93% of the employees Colombia; we also plan in the telecommunications businesses. to obtain it in Argentina LatAm. 19.1 19.0 18.8 489.7 476.8 488.4 25.7 25.2 26.0 The Health and Safety Committees allow (1) Total number of accidents/average number of workers during the period. the implementation and consolidation of during 2016 (2) Total number of days lost due to work-related accidents/average number of workers in the period. objectives established in this area, by means (3) Total number of days lost due to work-related accidents/total number of accidents. of continuous analysis and monitoring of the scheduled preventive activity.
To facilitate transparency and comparison Occupational ACCIDENTS Accident rate Lost days rate Absenteeism rate No special incidence or high risk of certain with other companies in our sector, only the disease rate diseases is perceived among the professional businesses of Telefónica’s main activity have activities performed within our Company. been included in the ratios, that is: fixed and 2013 2014 2015 2013 2014 2015 2013 2014 2015 2013 2014 2015 During 2015, twenty cases of occupational mobile telecommunications in all countries in 0.9 1.0 1.0 0.4 0.2 0.0 26.1 27.6 27.3 5,599.4 5,112.6 6,565.0 diseases were detected among the which we operate, as well as all the activities 129,890 employees of the Group and only carried out in Spain, as this is the corporate two people, both males, were involved centre of our Company. However, ATAM’s social in accidents in itinere, in Argentina and recruitment companies have not been taken EMPLOYEE TRAVEL SAFETY employees an app via our e-learning platform, Brazil. Both accidents resulted in into account because the comparability of Telefónica is committed to going beyond the which provides information on safety and the death of the employee. Telefónica with the other operators would be call of duty to protect employees on their comfort prior to journeys, a classification of distorted, as these are activities whose primary business trips and, therefore, we establish risks by neighbourhoods, recommendations, purpose is the integration of people with indicators for monitoring the quality and assistance centres, local contacts, automatic disabilities. perception of the traveller. Therefore, we offer reception of alerts, geolocation, etc.
G4-LA5, G4-LA6, G4-LA7, G4-LA8 85 INTEGRATED REPORT 2015 7 Commitment to society_ INTEGRATED REPORT 2015
Digital inclusion and innovation_
R&D New digital technologies are the main driving force of social and economic transformation today. This premise is the basis upon which we build our Company vision: we want to guarantee access to digital life, using the best technology Open Sustainable and without leaving anyone behind. innovation innovation
Connectivity is our ally in reducing the digital divide and, due to our fixed and mobile network infrastructure and the services we develop around it, we can aid progress in the communities in which we operate.
To move towards this vision, at Telefónica we work on two basic fronts:
1) Guaranteeing access to technology through digital inclusion, in other words, by means of Network roll-out and an accessible and affordable offer for all sectors of the population.
2) Developing innovative services that add value to our connectivity, and which we develop through innovation: Big Data, the Internet of Things (IoT), eHealth, digital education and eFinances. Emergencies
Accessibility Digital inclusion Affordability
Connectivity
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Digital inclusion_
CONNECTIVITY AND NETWORK ROLL-OUT The total investment LTE access Over the last decade we have contributed amounts to (Mobile Broadband) MILLION substantially to improving access to the tripled in 2015, reaching Internet, as well as its capacity and quality, as a result of our investment in infrastructures to 21accesses ensure that more and more households have via Fixed Broadband and the opportunity to access the benefits of the 20% MILLION digital economy. of the annual income of our 6 million fibre optic accesses Company (30% more than in 2014) customers Thus, in Latin America alone we have invested 29 130,000 million euros over the last 25 years, thanks to which nowadays virtually all households have access to telephony and, MAP OF 3G/4G MOBILE WHERE COVERAGE IS GREATER THAN 80% OF BEST PRACTICES increasingly, access to broadband Internet, both THE POPULATION IN THE COUNTRIES IN WHICH TELEFÓNICA OPERATES
fixed and mobile. December 2015 IMPROVEMENT OF THE 3G During 2015 we invested 9,578 million euros NETWORK IN BRAZIL globally, a figure which represents an increase In the first nine months of of 10% on the previous year and 20% of the 2015, Telefónica Vivo Brazil annual income of our Company. invested approximately Coverage greater than 80% 1,619 million euros in Coverage lower than 80% improving the 3G network in FURTHER INFORMATION the country and in activating Telefónica does not operate Watch the “Telefónica LTE - Football” Freestyle video. the 4G service in 11 cities and in five more states (Ceará, Minas Gerais, Paraíba, Pernambuco and Río de 3G 4G Janeiro). Our Vivo customers Coverage in Coverage in can thus use this technology >90% >60% in 183 municipalities, reaching Germany, Brazil, Chile, Spain, Germany, Argentina, more than 88.7 million people. Guatemala, United Kingdom Chile, Spain and the United Kingdom and Uruguay
Note: The coverage in Ecuador stands at 79%. The coverage in El Salvador stands at 72%. Source: GSMA Intelligence. 88 INTEGRATED REPORT 2015
The investment in high-speed mobile networks is reflected in 8.2 UNIVERSAL SERVICE PROVISIONS the significant increase, during + average percentage points in 3G and 2015, of the percentage of the Millions of euros 2015 population in the countries in Spain (1) 17,535,260 which we operate which were covered by 3G and 4G technology: +17.7 Argentina 141,895,234 average percentage points in 4G Brazil (2) 84,641,020
As a result of our investment in Network Peru (3) 23,024,171 BEST PRACTICES infrastructures, during 2015 we made great progress in terms of the penetration of high- Colombia 50,291,295 speed Internet services, for both fixed and DEPLOYMENT OF THE mobile technologies. Mobile accesses totalled Venezuela 2,352,881 3G NETWORK IN PERU 247 million, of which 113 million corresponded In 2015, at Telefónica in Peru to smartphones, 1.4 times more than in 2014. Ecuador 4,507,146 we deployed a high-speed LTE customers increased threefold in 2015, 3G Network as far as Moyobamba reaching a figure of 30 million. In addition, we (1) The Net Cost of the Universal Service in 2014 was recalculated to take into account the latest CNMC resolutions and Rioja, in the San Martín region. received. registered 21 million Fixed Broadband accesses. (2) Data for 2014. We thereby benefited more 13 million of those were in Latin America, which (3) Includes services of Telefónica Multimedia S.A.C., TIWS and Media Network S.A.C. than 350,000 inhabitants, who counts for almost 50% of our fixed telephony will now have better access to customers in the region. We should also communication and health, more highlight the progressive improvement of the tourism and business opportunities quality of the service. For example, in Chile and through fibre optic. This work is Peru, 77% and 73% of the broadband accesses included in the investment plan have speeds greater than 4 MB. we announced for the 2014-2016 Universal service period for Peru, which assigns We have 6 million fibre optic accesses The universal service is a public investment We currently provide universal service funds about 1,639 million euros to the (30% more than in 2014). The growth in Spain, fund, financed by special taxes on in Argentina, Brazil, Colombia, Ecuador, Spain, development of telecommunications with 2.2 million fibre optic customers, stands telecommunications operators, whose aim is to Peru and Venezuela, where they are under the infrastructure projects. out, as it does in Brazil, where 53% of retail guarantee connectivity to the entire population control and monitoring of the public organisms broadband accesses are fibre optic. at a minimum quality and affordable prices. appointed for such purpose by each country.
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AFFORDABLE SERVICE In the last decade there has been a significant Another important factor which has decisively A unique and personalised offer We are aware that it is important for the fall in prices in the sector, particularly in Latin influenced the affordability of these services is Just as pay-as-you-go products have been services we offer to be affordable for the America. In the mobile market, competition, the advent of smartphones. Such devices are instrumental in universalising access to mobile whole population. Especially in Latin America, technological and commercial innovation and essential for accessing Internet, as their prices services, a unique offer, adapted to the needs for households with few resources, price can private investment have enabled millions of are significantly lower than those of other of each customer, encourages a widespread be an insurmountable barrier to accessing people to access telecommunications services. access terminals, and they are increasingly increase in Internet access. In this regard, telecommunications services. widespread in the region. within the limits of regulation, we strive to Our mobile pay-as-you-go service, unique design an offer tailored to the needs and broadband offer and service packages are key Smartphones are thus a key tool for reducing payment capacity of each of our customers. tools for increasing penetration among sectors the gap in demand in the most economically of the population with lower incomes. vulnerable sectors. Moreover, smartphones We are convinced that it is possible to provide do not require significant skills for use, each of our customers with what they demand, which in turn can bring down certain barriers in a transparent manner. Thus, by activating Digital inclusion indicators Dec. 2014 Dec. 2015 arising from a lack of digital literacy. 48.5% the service package they want, through the of our mobile customers currently have a smart terminal they choose and adapting to Penetration of smartphones 33.6% 48.5% smartphone, 37.5% of whom are on pay-as- the amount they are able to pay, customers Pay-as-you-go 22.4% 37.5% you-go tarifs. can enjoy a distinctive offer which is adapted to their needs. Contract 59.2% 71.0% In countries where large sectors of the LTE smartphones (millions) 9,830.7 29,708.2 population have relatively low incomes, LTE penetration 4.1% 12.5% BEST PRACTICES the existence of differentiated plans allows customers to enjoy Internet access on their pay-as-you-go mobiles at a price within their SOCIAL PAY-AS-YOU-GO RATE purchasing power. At Telefónica in Peru we have over MILLIONS OF 760,000 customers with access In Latin America alone we have more than to the social pay-as-you-go rate, 130 million mobile pay-as-you-go customers. customers which is up to 50% cheaper and 130 37.5% benefits the recipients of State of pay-as-you-go in Latin America of our customers with social programmes and public smartphones are on pay-as-you-go tarifs servants working in rural areas.
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ACCESSIBILITY Design For All DESIGN FOR ALL PROCESS Our strategy as an accessible Company is chiefly With the aim of making all our products and developed along two axes: services accessible to any customer, we work with the “Design for All” attributes in mind, from The first is aimed at our customers and the the initial stages of development, through to the society in which we operate, and is based on design phase. the conviction that access to the digital world 1. MARKET is essential for improving people's lives. This is “Design for All” is a concept integrated into RESEARCH particularly applicable to a large segment of our whole value chain, by means of training, We perform specific market studies the world's population, namely, the collective testing and development activities, which are and use cases and incorporate which represents people with disabilities and carried out by experts on accessibility in order to the experience of users their families. integrate this concept into everything we do. with disabilities into 6. SUPPLY the processes. The second axis, the focus of which lies Collaboration with leading associations helps CHAIN 2. R&D&I within the organisation, is aimed at Company us to understand the needs of the collectives We provide feedback for employees and the facilities where they of people with disabilities and to transmit our suppliers, so that they We encourage the development and our collaborators perform their work. these needs internally so that all areas of the also adopt an approach for of new solutions and accessible Ensuring an accessible work environment and Company incorporate accessibility criteria into the optimal management of services, based on the concept providing equal opportunities for all collectives their daily work, enabling Telefónica to become disability and dependence. of “Design for All”. is an essential goal for the fulfilment of our an accessible Digital Telco. DESIGN FOR strategy. ALL
5. CUSTOMER 3. INDUSTRIALISATION BEST PRACTICES CARE We incorporate a methodology We include the concept of accessibility in our customer called “Design for All” into CARE FOR CUSTOMERS WITH DISABILITIES IN CHILE care channels (call centres, the process and facilitate the During 2015, Telefónica Chile implemented an ambitious plan to improve the care web pages and stores). development of specific experience of our customers with disabilities. The starting point was direct dialogue with products and services. the different collectives affected, which allowed us to define the aspects most appreciated 4. MARKET by these clients when they access a care service. Based on the foregoing, a pilot scheme SEGMENTATION was launched in two stores to expand physical, visual and auditory attention, with excellent We conduct commercial campaigns results. The experience has therefore been extended to 6 branches, initially focusing on in which accessibility is an element. regions where the highest percentage of people with disabilities is concentrated. In addition, our work focus has expanded to the different care fronts: branches and stores, web pages, call centres, training and communication.
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COMMUNICATIONS IN organisation and execution of the timely roll-out BEST PRACTICES EMERGENCY SITUATIONS of telecommunications technology to assist and Information and communication technology support efforts to prepare for and respond to MOVISTAR + ACCESSIBLE has led to substantial improvements in the natural disasters and emergencies. In Spain, our close collaboration with associations such as ONCE, CNSE, FIAPAS, CERMI and management of emergency situations. Having the Royal Board on Disability has allowed us to verify the viability of the pilot scheme we cutting-edge, secure and efficient technology We provide an early warning channel, facilitate launched with Whatscine and Movistar +, whereby people with visual disabilities can access optimises the coordination of both rescue and the coordination of emergency team responses the content of our video platform via the Whatscine app. logistical operations, allows real-time action and and logistical coordination, and we support vital deals more efficiently with the security communications between and to those who are Films can thus be followed by means of subtitles, sign language or audio description using a challenges which occur after a catastrophe. affected. smartphone or tablet, without interfering with the user experiences of others. Beyond connectivity, new digital services based Some of the initiatives we have undertaken are on the analysis of Big Data and the Internet of as follows: Things have great potential for improving the management of different emergency situations, Agreement with the Military MILESTONES 2015 Spain: including adaptation to climate change, Emergency Unit (UME). migratory crises and pandemics. We developed the Multi-channel ATAM: This initiative to support people Brazil: Agreement with the Ministry of Accessibility Project, with the aim of with disabilities is organised by Telefónica in At Telefónica we are fully aware of the Science, Technology and Innovation, and the improving our customers' experience conjunction with 52,000 families belonging importance of our networks and the potential of National Centre for Natural Disaster by incorporating new accessibility to both our active and disassociated workers. the innovative services we offer to address Monitoring and Alerts (Cemaden). criteria in all our channels: shops, Regarded as a Public Utility entity, this private growing social and environmental challenges the online channel and call centres. social protection system reached more more effectively. Moreover, in early 2016, during the Mobile In this sense, our website has the AA than 17,000 users through its programmes World Congress, we signed the Humanitarian certification established by the W3C providing psychosocial support to families, In the event of disasters, the response is Connectivity Charter, promoted by the GSMA. (World Wide Web Consortium). In health, economic aid programmes, primarily the responsibility of governments. We This document seeks to improve coordination addition, since December 2014, our vocational integration and innovation. therefore encourage collaboration with these among mobile network operators before, during Movistar advertising campaigns in Spain and humanitarian organisations in order to and after a disaster. have been accessible to any collective. strengthen response strategies. Our action policy in these cases focuses on the
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Our Action Policy We support access to our mobile services We actively participate in the GSMA The good management of telecommunications during emergency, providing simplified and free Association –an organisation of mobile CHALLENGES 2016 networks and services is the key to a quick and access to vital communications, to the extent operators and related companies, dedicated efficient emergency team response in disaster of reactivating suspended or cancelled services. to supporting the standardisation, situations. In addition to establishing the implementation and promotion of the GSM To reinforce our commitment Continuity Plans, necessary for ensuring the We solve the communication infrastructure mobile telephone system–, through the to digital inclusion, focusing normal provision of services to customers in all deficit by means of our satellite services. We organisation of a specific working group on our investment on improving the countries in which we operate, we include thereby complement the other solutions, “Responses to Disasters and Emergencies”. access to high-speed Internet specific actions for complementing either as the only possibility of communication services and adapting our offer humanitarian aid: or as 100% diversified backup solutions. In to the needs of our customers. addition, we can offer these services globally, We prepare simulations in order to build, regardless of geography and distances to To increase LTE coverage in improve and update the processes, action nodes and centres, and deploy them rapidly. BEST PRACTICES Spain to over 85% (compared plans, capacities and priorities in one response. to 75% in December 2015). THE “EL NIÑO” PHENOMENON We establish a basic code of humanitarian aid To expand LTE coverage in FURTHER INFORMATION IN PERU in coordination with national regulators in In 2015, at Telefónica in Peru we Brazil to 60% (compared Refer to the “Accessible Telco” section order to organise the participation of public of our corporate website. presented a Business Continuity with 46.6% in December and private companies. Plan to the Ministry of Transport and 2015), to reach 352 cities. Communications, which has been allocated 10 million soles, and takes To improve the accessibility into account all the key areas which of our on-site and virtual could suffer an impact from the El Niño customer care channels. phenomenon in the country. The Plan is based on Telefónica’s global Business To expand the scope of Continuity policies and improvement accessible Movistar + services. processes in terms of critical services and processes availability, and To further the implementation incorporates an action plan in the of “Design for All” throughout event of any incident, anticipating all areas of the Company. the communication needs of our customers in such an emergency.
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Innovation_
We are committed to technological innovation, R&D&I Investment/Revenue R&D AT TELEFÓNICA
seeing it as a fundamental tool for becoming % Committing to innovation is the key to one of the main actors in the new digital responsible and sustainable business because universe with the capacity to help create a more 15 it allows us to put ourselves in the place of our 13.84 13.94 sustainable world and, in turn, obtain R&D&I/Revenue customers and respond to their needs. Through competitive advantages and unique products. 12 research and development of solutions and Through the introduction of new technologies R&D/Revenue technologies we seek to give our customers and the development of business solutions and 9 control over their digital lives. processes, we aim to become a more effective, efficient and customer-oriented Group. 6 Our centres of technological excellence represent one of the main tools used to manage To this end, we base our innovation strategy on 3 2.21 2.14 our internal innovation. Five of them are located a balance between: promoting our own internal in Spain: Barcelona, Granada, Huesca, Madrid research and development capacities; fostering 0 and Valladolid. There are also centres in the the creation of open innovation ecosystems; 2014 2015 United States, Israel, Brazil and Chile. and developing sustainable services which generate a positive impact on economic, social Investment in R&D&I and technological progress in the regions in Millions of euros which we operate. 8 Spending on R&D totalled 1,012 million euros. It should be noted that according to the European R&D&I 6 Comission's 2015 EU Industrial R&D Investment R&D The total expenditure Scoreboard, we were fourth in the world ranking 6,974 on R&D was 6,582 of telcos which most invest in R&D and second 4 in Europe.
2 1,111 1,012 MILLIONS 1,012 OF EUROS 0 2014 2015 Note: These figures are not comparable due to the Note: The 2015 data consolidates the results of GVT and DTS from May 1, 2015 and considerer, from the first deconsolidation of O2UK. quarter of 2015, O2 United Kingdom as a discontinued operation. However, the 2014 data is not directly comparable in scope cause by the exclusion of O2 United Kingdom and do not include GVT and DTS.
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We also have a User Experience laboratory, by Evolution of portfolio of patents granted which analyses the driving patterns of users, BEST PRACTICES means of which Telefónica can get to know allowing insurers to establish cost depending on and understand the customer while working the user’s actual driving. As a result the premium on the design of new products and services. paid by the driver can be determined depending MOBILE CONNECT on his or her actual driving and not, as until now, The end of 2015 saw the launch in
During 2015 we continued the 545 on purely statistical factors. The application the first set of countries of Mobile implementation of the internal innovation has a social nature, as it encourages the user Connect, the identification solution methodology called Lean Elephants, which is 454 to improve his driving. In fact, 55% of drivers for Internet services sponsored by the already being recognised as an international improved within three months of use. GSMA. Instead of having to remember reference in this area. So much so that the 346 an infinite number of usernames and University of Berkeley is writing a business In addition, the activities of the Data Transparency passwords, this solution allows the
case based on it. 200 Lab continued during 2015. These can be viewed use of a phone number as an identifier in the Digital Trust section of this Report. and one unique password, which is We also cooperate with other European entered into the phone by the user.
operators and institutions. More than 50 2012 2013 2014 2015 Internet of Things (IoT) We should mention that during the Spanish and foreign universities and research During 2015 we focused on promoting project's initial development Telefónica centres have contributed to helping us development of the Internet of Things as a R&D used Lean Startup methodologies create one of the most important innovation Big Data key tool for improving the connectivity and to standardise activity, making it a networks in the field of new technologies. We seek to study and analyse anonymous development of cities (Smart Cities). In this unique project and a world first. data as a tool to get a better understanding field we designed an advanced technological As a result of this work, in 2015 we submitted of our customers and thereby improve the solution for the integrated management of 23 new patent applications and utility models products and services we offer. As a sign of the cities and municipalities, making them smart FURTHER INFORMATION to the Spanish Patent and Trademark Office importance of responsible management in and connected. Our platform for Smart Cities is Watch the “Telefónica wins a Glomo Award for (SPTO), taking our total to 545 patents this field, in 2015 we created the area of Chief based on FIWARE technology, developed in the the Mobile Connect solution” video. granted. Data Office, which is responsible for Telefónica's European Union promoted project PPP Future overall strategy in matters of Big Data. of Internet, to increase agricultural productivity Regarding the main areas of research and and manage energy consumption more innovation, this year we focused mainly on Examples of applications developed in this area effectively. three pillars: Big Data, Internet of Things, include Smart Tourism, which analyses the Innovation in the Network and transparency. behaviour of tourists, facilitating the design of FURTHER INFORMATION strategies to increase customer acquisition, Refer to the “Big Data” section of our locate businesses and develop a more attractive corporate website. and targeted offer; and Drivies, an application
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FURTHER INFORMATION Watch the “Telefónica is an “On life Telco”. OPEN INNOVATION: OPEN FUTURE_ Choose a city full of possibilities” video. Telefónica Open Future is Telefónica’s global platform which brings together all our activities, initiatives and projects in the field of open innovation.
MARKETS
OPEN FUTURE VALUE CHAIN
We must also mention the official opening this Offer year of the Telefónica R&D centre in Chile. The to the market ACCESS centre focuses on research and development of TO THE Consolidate Internet of Things projects applied to agriculture, MARKET demand mining and urban environments.
Innovation in communications networks Telefónica Presence in Europe & Latam funds As a complement to innovation in services, we Ventures 6 also focus on innovation and the improvement 60 companies invested in 6 sales of our communications networks. Thus, for Global Presence +€260M pledged example, we worked in fields such as the 17 investments virtualisation of network elements (NFV) and 4 sales 11 Academies €55 M invested software-based networks (SND), the latter in 10 countries by Telefónica being an initiative we also promoted within the 532 startups Invest in companies 20 spaces: sales European Union's PPP 5G programme. Chile (1) 10
China (2) +€126M 700 grants financing We also participated in the development and Korea (1) received from Costa Rica (1) standardisation of the future 5G networks. In third parties +12,800 projects Ecuador (1) Accelerate startups doing so, together with IMDEA Networks, we Visit Openfuture.org financed Spain (13) created 5TONIC, the first laboratory for 5G +25,000 users +94,500 participants Finland (1) excellence in Spain, with the aim of fostering +60 challenges launched mentors Startups +3,150 +550 Encourage talent an open innovation and research ecosystem in +7,000 projects created accelerated which industry and academia can work together to promote the development of 5G technologies Public and their entrepreneurial environment. Sources of financing Private
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Through tools such as Think Big, Talentum, TELEFÓNICA OPEN FUTURE_ IS A UNIQUE OPEN INNOVATION NETWORK BEST PRACTICES Crowdworking spaces, Wayra, Telefónica We encourage global talent by transforming innovative ideas into successful companies Ventures and the Amérigo and CIP venture capital funds, we can invest in people, ideas QUANTENNA Programme and viable projects based on technology, This Telefónica Ventures startup was initiatives at any stage of their growth, openly and one of the success stories of 2015. in connection with public and private We currently offer the Quantenna Crowdworking organisations. chipset in next-generation broadband Wayra entertainment services (IPTV) and Telefónica Ventures Our open and transformative nature is wireless domestic network boxes for one of the most defining characteristics of high-definition video transmission Amerigo Telefónica Open Future, whose initiatives in countries like Brazil and Spain. CIP (Open Innovation Factory) enjoy the cooperation and participation of public and private organisations, universities, China Open Future co-investors and other stakeholders in Finland Open Future the telecommunications sector and other industries. We promoted participation in various startups, Korea Open Future allowing us to fuel project turnover. Thus, With a team of 60 employees, a global during 2015, we can highlight launches such very promising expectations, such as Job & At Telefónica Open Future we generate Network of 120 collaborators and more as Marfeel, IAMAT and TRUSTEV by Wayra Talent (23 M€), Carto DB (21 M€), the Peer benefits in all aspects of society. According than 7,000 entrepreneurs, we have helped and BOX by Telefónica Ventures. transfer (18 M€), Packlink (12 M€ return) to the latest European Platform for startups to accelerate more than 850 startups and Inbenta (10 M€ return), Tadó (45 M€ return) report, in Spain we have invested in nearly invested in more than 600. We have a direct Furthermore, some of Amerigo's and Wallapop (38 M€), with valuations close one third of new companies and many others presence in 16 countries in Latin America, new startups are escalating with to 150 M€ in some cases. are in our flow of operations. Europe and Asia.
Telefónica Open Future ended 2015 as one of the main investors in the Spanish area of open innovation and positioned itself as one of the major Venture Capital investment funds in +600 +1,000 +85 16 550 M€ Europe and Latin America. We also helped to Companies invested in startups accelerated public & private countries of total investment committed create more than 10,000 jobs. partners with our partners
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SUSTAINABLE INNOVATION Although sustainable innovation is regarded Health – eHealth: FURTHER INFORMATION During 2015 we not only maintained as a transversal principle within the Company Watch the “Telefónica eHealth” video. our commitment to sustainability but and is integrated into our internal processes, eHealth solutions are a key tool for meeting we continued to promote the values of we defined a series of categories of services major challenges arising from the demographic, sustainable innovation in all areas of the and solutions which stand out for the value social and economic changes faced by society. Company, in such a way that it is a constant they bring to society and the positive impact For this reason, during 2015, we invested in the throughout the life cycle of the solutions they generate, upon which we placed special development of innovative services in the areas we offer. emphasis during the year: of Health and Telecare.
To do this, sustainable innovation is defined as innovation whose main objective is to address a social or environmental challenge, within our Company or outside it, while CATEGORIES OF SUSTAINABLE PRODUCTS AND SERVICES Services like Saluspot have attracted over generating value; in other words, creating 200,000 customers in Latin America, allowing solutions which, as well as generating their users to resolve queries related to economic value, have a positive impact on health and ask a community of thousands of society and the planet. associated health professionals questions over the mobile phone. During 2015 we promoted the development of new initiatives for sustainable innovation ENVIRONMENT Other projects such as Valcronic and ICOR, for HEALTH – EHEALTH FINANCIAL via the Telefónica Open Future platforms, AND SMART chronic patients or patients with heart failure, such as the first call for “Sustainable SERVICES SOCIETIES have demonstrated an improvement in the Innovation”, whose aim was to detect care of these people. More than 80% of the ideas and projects with a strong social patients cared for expressed their preference or environmental impact. Similarly, our for these projects over traditional monitoring, research and development units continued while there was a 30% reduction in hospital to analyse the potential of our technologies emergency admissions for chronic or heart for generating social benefit, such as Big failure symptoms. Data for Social Good and research into agricultural solutions. SOCIOCULTURAL SECURITY DIGITAL FURTHER INFORMATION DIVERSITY EDUCATION Refer to the “Sustainable innovation” section of our corporate website.
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Financial services: Security: Sociocultural diversity:
In developing countries the financial inclusion conservation. This solution is aimed at On the one hand, we offer services and This category encompasses projects indicators display a significant gap with other preserving both historical sites and the products via ElevenPaths, including, during which improve physical accessibility to the countries. According to the World Bank, in assets they house (sculptures, paintings, 2015, Tacyt, a mobile cyberintelligence environment, as well as care for collectives with Latin America 51% of the population have furniture, etc.). ecosystem which monitors, stores, analyses, special needs. bank accounts, set against ratios above 95% correlates and classifies millions of mobile in developed countries. apps. Its advantages include the ability to Through ATAM, the non-profit social entity, detect threats to a company’s brand and and in partnership with other bodies and We undertook to stimulate, in particular, the possibility of preventing fraud against organisations, we have worked on the VIVE the most disadvantaged segments, working customers and employees, in addition to Libre solution, a tool which provides support for closely with governments and financial Education: identifying the modus operandi which lies people with special needs via an application and institutions, and developing ecosystems behind malware. a specialised care centre. which allow the whole population to access During 2015, we gave new impetus to financial services. More specifically, in Brazil Telefónica Educación Digital, through a new In addition, we have launched projects such we have launched the sale of iZettle card strategic orientation which has led to its as FiLIP, the new wearable phone with a CHALLENGES 2016 readers, devices with which payments can expansion in Brazil, Chile, Colombia and Peru. tracker for children. A device designed for be made by credit card or debit card via a It currently has more than 300 customers in children from 4 to 10 years of age to wear, smartphone or tablet. This initiative offers Europe, USA and Latin America and provides with restricted calls, a tracker, a security area To continue leading investment in R&D in our customers the possibility of accessing the training for 4 million students on different warning and emergency calls. Spain, as a driving force for value creation financial ecosystem in order to perform daily platforms; similarly, it has a content factory and progress in the sector and society. banking operations. with an output of more than 40,000 hours of production per year. To be a leading investor and accelerator FURTHER INFORMATION in new technological companies Environment and Smart At Telefónica Educación Digital we promote Watch the “In Spain Movistar markets the FiLIP, in Spain and Latin America. Societies: education via different learning platforms, the first smart watch for children between 4 and 11 including MiriadaX, the first Latin American years of age” video. To further enhance the values of The so-called “Smart Societies” solutions, platform for MOOC courses, with 2,089,986 sustainable innovation, throughout the whose aim is to promote environmental students and a library with 404 courses from life cycle of the processes and solutions sustainability through the management and 77 Latin American universities and institutions. we offer. development of “Green ICT” solutions, include In order to lead the most innovative and projects such as Smart Heritage, which strives disruptive experiences in this area, we are In 2016 we will include metrics for to transform the current management model founding members of the MOOC World Expert measuring our social and environmental focused on the corrective restoration of assets Committee, a public-private partnership based impact in key services. into more efficient and sustainable preventive in Washington.
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Social and cultural action_
At Telefónica we promote social and CONTRIBUTION TO SOCIAL FORM OF cultural action in the countries in which AND CULTURAL ACTIONS(1) CONTRIBUTION(1) we operate, in order to improve society 2015 2015 and the quality of people's lives. 8.6% 3.9% Socio-economic 2.9% development 97.0% During 2015 we allocated 115 million 22.4% euros to social and cultural initiatives, in 6.6% Art and culture Money accordance with the methodology of the Youth and education Employees' time LBG standard. This amount represents a 115 115 percentage of 0.25% of the Group’s revenue MILLIONS Social welfare MILLIONS In kind 0.0% - a figure similar to that of the previous year. Environment 0.1% Management costs 0.1% 97% of the amount allocated was Other made up of monetary contributions. 58.5%
FURTHER INFORMATION CONTRIBUTION CONTRIBUTION Refer to the “Society” section of our BY GEOGRAPHIC AREAS(1) BY ACTIVITY TYPE(1) corporate website.
2015 2015 2.7% 31.2% 55.9% 21.4% For the community Spain For business areas 115 Germany 115 MILLIONS Brazil MILLIONS Charity
12.7% LatAm. 75.9% 0.2%
(1) The data from Fundación Telefónica and ATAM were pending audits at the time of completion of this Report. 100 INTEGRATED REPORT 2015
BENEFICIARIES euros, according to the estimates of the VOLUNTEER WORK refugees arriving in Europe. Thus, a double Beyond the economic contributions we Varkey Foundation and UNESCO. At Telefónica we put the time, talent and solidarity challenge was launched: to get make to social and cultural initiatives, we professionalism of our employees towards 100 volunteers to support this collective and care about the achievements obtained 65% of current primary school students the service of charitable causes. Telefónica 80 partners to collaborate with the Spanish as a result of these contributions. In this will work in professions which do not yet Volunteers is currently one of the largest Commission for Refugee Aid (CEAR). regard, we should highlight that, in 2015, exist today, in which digital knowledge corporate volunteer initiatives in the world. Fundación Telefónica programmes directly will have a great influence. Therefore, at In addition to the International Volunteering reached more than three million people, Fundación Telefónica, we trained 64,832 The Telefónica International Volunteering Day, our employees performed other of whom almost half were children. teachers in 2015, thereby affecting the Day, held on 16 October, is an initiative volunteer activities throughout the year, education of 1,378,403 children. whereby thousands of Company employees such as solidarity meals, the campaign to EDUCATION all over the world devote the day to raise funds for the fight against cancer, the At Telefónica we promote education as a We carried out social action projects which conducting different charitable activities. Fundación Telefónica employment drives, tool for contributing to equal opportunities focused on five problems common to all the In 2015 about 14,000 people were involved etc. All these activities can be viewed on and encouraging the construction of a new, countries in which we operate: the Digital in more than 500 activities organised by its website, which is open to proposals global and inclusive society. We therefore Divide, Functional Illiteracy, Lack of Personal Telefónica in 33 countries in Europe, Asia from the employees themselves. articulate our activity in this area by focusing Values and Skills, Youth Unemployment and Latin America. This year the day was on projects with social impact, through and Obsolete Educational Models. marked by debate and support for the FURTHER INFORMATION Fundación Telefónica, and business solutions, Watch the “Teresa Perales: through Telefónica Educación Digital. objective Rio 2016” video. 2015 Our commitment is reflected in figures; we are the third company in the world in Assisted child labourers 71,555 terms of educational investment, with an Children who receive training 280,659 annual contribution of around 130 million Child beneficiaries of the training initiatives for teachers 1,101,953 Young people who receive training 77,239 Other young people actively participating in Think Big(1) 5,925 FURTHER INFORMATION Teachers who have received training from Fundación Telefónica 67,552 Watch the “What does Fundación Telefónica do?” video. Volunteers who participate in training 9,076 The total number of employees who Adults who receive training (non-teachers) 71,007 participated in Telefónica volunteer programmes in 2015 was Attendees at events (in person only) 132,491 Attendees at exhibitions 1,325,849 TOTAL BENEFICIARIES (2) 3,154,635
(1) Think Big: an innovation and social entrepreneurship programme aimed at young people between 15 and 25 27,110 years of age. PEOPLE (2) This data includes Fundación activities in the United Kingdom.
101 INTEGRATED REPORT 2015 8 Commitment to the environment_ INTEGRATED REPORT 2015
Environment_
SOLUTIONS IN A DIGITAL WORLD We are committed to a green economy, in which the environmental impact of our activities is nergy E
reduced to a minimum. At the same time, we Emis Green ter sio want our services to provide solutions for the a ns innovation W
environmental challenges faced by society.
In order to achieve this, we have an overall Pa pe r environmental strategy in place across all the e st companies that make up the Telefónica Group, a W
which aligns all our efforts to progress in this area. M2M Eco-efficiency Cloud
Circular Big Data IoT Environmental economy requirements
Thanks to our Energy Efficiency Programme, 2015 was an important year for Telefónica which won the Green Mobile Award at GSMA regarding all those products and services in 2016, we are continuing to reduce our the area of environment which contribute emissions. This line of work is complemented by to reducing our customers' environmental a renewable energies plan, the aim of which is to footprints. The Internet of Things (IoT), Environmental Responsible lead us towards a zero emissions future. Big Data and the Cloud are business areas network Management Systems marked for expansion for which environmental Environmental We are integrating the circular economy into indicators are increasingly relevant. permits our activities through practices such as reusing equipment and recycling. In the next few Through our fleet management service alone, in
years, socio-economic and legal changes in the 2015 we avoided emissions of 1 MtCO2eq, which external context will make the results of this is equivalent to 50% of our carbon footprint new focus greater and will lead to a boost in (scopes I and II). opportunities.
+ Efficiency - Risks + Revenues: Lower emissions, better environment 103 INTEGRATED REPORT 2015
GOVERNANCE MATERIALITY We have a multidisciplinary team operating both at a global level and within Based on our materiality analysis, the each of the Group Companies, which is in charge of carrying out our strategy environmental matters that have the greatest at each of the different responsibility levels. The environmental strategy is the repercussion on our activities and on that of our responsibility of the Management Committee within the framework of the stakeholders, and which should therefore be Business Principle Plan. highlighted in this report are:
Office for Global climate Financial ENVIRONMENTAL MATERIALITY change Unit Internal Supply Chain processes Customers
Environment Global Energy consumption managers Operations Unit Green innovation and services
Carbon emissions External Global partners Energy Unit Circular economy
Renewable energy X
Energy We execute our Global managers Purchasing Electromagnetic fields environment Unit strategy with the Responsible network roll-out help of a global, Business Environmental management multidisciplinary Innovations Principle systems Office team units Adaptation to climate change
Chief Country Water Commercial environment Digital Officer committee Very high priority High priority Medium priority X Not applicable
104 INTEGRATED REPORT 2015
OUR IMPACT ENVIRONMENTAL MANAGEMENT SYSTEMS
2015 ISO14001 CERTIFICATES
2015
ENERGY WATER WASTE RENEWABLE RECYCLED ENVIRONMENTAL ENERGY WASTE INVESTMENT 6,439 GWh 3.9 hm3 25,896 t 65% 182 M Var. 2014: Var. 2014: Var. 2014: 16% 97% 16 M€ 60,455 -0.51% / access -7.24% / access +12.5% / access Var. 2014: +1%
EMISSIONS scope 1 EMISSIONS scope 2 EMISSIONS avoided by EMISSIONS saved by energy efficiency energy efficiency 95,677 tCO2eq 1,908,230 tCO2eq Revenue Customers Employees Var. 2014: Var. 2014: 41,114 tCO2eq 162 GWh +2.08% / access -0.42% / access Var. 2014: +37,414 tCO2eq Var. 2014: +150 GWh
REVENUE from EMISSIONS avoided by fleet OBJECTIVE % CERTIFIED REVENUE green services management service 2016 88% 130 M€ 1 MtCO2eq 2017 100%
ENVIRONMENTAL MANAGEMENT this, our Company has different mechanisms to reduce its environmental footprint. Today, We are making a big effort to take our best Annually, based on the precautionary principle, set up such as common environmental 65% of the business has environmental environmental practices over to our operators we analyse the environmental and climate management practices that go beyond management systems in place in accordance in Latin America. Thus, Telefónica Brazil, our change risks across all our operations under regulations and a programme of global energy with international standard ISO 14001, as most important regional operator, will certify its the Company's global risk model, with the aim efficiency. In 2015, in Telefónica we did not endorsed by external certification. Furthermore, environmental management system at the start of reducing such risks and further identifying receive any environmental penalties in this area. in 2015 we adopted a new Environmental of 2016. opportunities for improvement. The possible Policy and are continuing to work on achieving risks are associated with the regulatory aspects The environmental management systems help our objective of having 100% of our operators of environmental legislation, such as waste or us to keep checks on environmental risks, at certified by an external body in 2017. noise, vulnerability of our Network to climatic the same time as bringing opportunities linked disasters and energy costs. To keep checks on to eco-efficiency and allowing our Company
G4-14, G4-EN1, G4-EN2 105 INTEGRATED REPORT 2015
A RESPONSIBLE NETWORK MORE INFORMATION It is in our Network that we see the greatest For example, we share, where possible, the Refer to the 'Environmental management' section of our corporate website. environmental impact due to energy location of our facilities with other operators or consumption, but also as a result of physical communication tower management companies. elements, such as visual impact or waste. To This leads to a lesser visual and energy impact, roll out and maintain the Network responsibly, as well as a reduction in waste creation. This we apply the best available practices and we practice is increasingly widespread in Telefónica. manage all the environmental aspects of these As a result, during 2015, 33,878 of our base from design to decommissioning. stations were shared.
RESPONSIBLE NETWORK ROLL-OUT
PLANNING AND CONSTRUCTION OPERATION DECOMMISSIONING
1,470 K€ 34,162UD M€ 1,892 t 37 M€ Environmental 600 4.6 Environmental Electromagnetic Environmental WEEE Recycled Sale of waste licences and field measurements adpatation operations operations permits impact studies
412 5,259 33,878 118 Reuse of internal Visual impact Remote base Shared base Energy efficiency equipment reduction measures stations using stations projects renewable energy
2.8 M€ 812,257 € Visual impact Acoustic impact reduction actions
G4-14, G4-EN1, G4-EN2 106 INTEGRATED REPORT 2015
Electronic equipment
Energy efficiency Return of equipme nt / m ain Water consumption ten Circular economy_ an ce Paper usage / re u s Refrigeration gases e Reuse a OUR n Batteries d
r The circular economy emulates the behaviour e CIRCULAR f u
r of ecosystems, in which there is no waste and Efficiency b
ECONOMY i s
h the balance and sustainability of the system is m aintenan
M ce e
based on the relationships with different actors. n This presents many business opportunities; Reuse t thus, Telefónica has already integrated in large Customer part this philosophy into our activities through Eco-rating reusing and recycling, but also in our value chain through practices such as low carbon Terminal rental purchasing, renting terminals or eco-rating Telefónica M2M/IoT/Big Data services among others. Scope 3 CO2 emissions R e c y Cloud Computing c l in g g Smart Waste in g We are implementing various strategies to s n a li h c c y optimise the consumption of our resources r c u e along the whole value chain and to promote the P R return of used goods to the production cycle. These initiatives are based mainly on Network and customer processes, as these represent the greatest consumers of materials and resources. Furthermore, we are focusing on the development of digital services which provide possibilities for the circular economy, such as Suppliers aterials Smart Waste. Raw m
PRINCIPLES OF THE TELEFÓNICA CIRCULAR ECONOMY Eco-design Eco-rating TCO, low carbon purchasing Scope 3 CO emissions 2 Renewable and eco- Sharing and Eco-efficiency and Closing the Virtualisation, Innovation efficient resources and reusing eco-design, less circle, recycling dematerialisation materials waste
G4-DMA 107 INTEGRATED REPORT 2015
RESPONSIBLE PROCUREMENT Given its relevance, a separate chapter is TELEFÓNICA'S WATER CONSUMPTION VS. WATER STRESS Little by little, we are incorporating practices to dedicated to energy consumption: 'Energy and reduce the consumption of resources, besides climate change'. trying to acquire cleaner materials. Thus, for example, we have incorporated the TCO (Total As for our water consumption, this principally WATER CONSUMPTION Cost Ownership) for low carbon purchasing, we corresponds to sanitation use and, to a lesser PE set minimum criteria common to all substances extent, air-conditioning. Each of our operations VE BR(1) and materials in electronic devices, and we takes specific measures to reduce consumption, DE purchase recycled and sustainable goods. especially in those places where water stress PA GT is greater, for example in Mexico City D.F. and CR Furthermore, we are committed to responsible São Paulo, or in countries like Spain. In these ES NI EC AR CH paper consumption, promoting the use of cases, our Company carries out specific plans CO UY recycled paper and virgin fibre paper from for sustainable water management. Thanks SV sustainable origins, through using paper that to these, in 2015 we reduced our overall water MX carries a seal, such as from the FSC (in Spain, consumption by 5%. WATER STRESS Argentina, Brazil, Germany, Colombia, Ecuador(*) and Uruguay). Our paper consumption increased Another example of eco-efficiency is the 0 1 2 3 4 5 in 2015 to 1,163 t, around 230 t of which were introduction of digital billing for our customers 0-1 Low 1-2 Low-medium 2-3 Medium-high 3-4 High 4-5 Very high <10% 10-20% 20-40% 40-80% >80% recycled paper which avoided 129 t of CO2. thanks to new technology. In 2015, 45 million customers chose this way of receiving their bills. Source: World Resources Institute. (1) Brazilian Cities More information can be found in 'Supply chain management'. WASTE AND UNUSED EQUIPMENT Across all our activities (Network, offices and INTERNAL ECO-EFFICIENCY customers) we generate waste and unused to ensure that it is managed with maximum reutilisation of equipment, where possible , both Eco-efficient practices allow us to provide more equipment. These represent a very relevant guarantees and with an emphasis on improving internally and among our customers. services to a greater number of customers, aspect of environmental management and are traceability. and reducing our environmental footprint key to the circular economy. Some can have When reutilisation is not an option, recycling at the same time. Resource consumption is dangerous components, such as batteries, Our main aim is to reduce waste generation is the best alternative for dealing with waste. reduced thanks to practices such as adequate while others have other associated risks, such and to promote a circular economy, advocating Thus, in 2015, we generated 25,896 t of waste, maintenance or by reusing equipment as electronic waste or e-waste. Thus, for several reuse and recycling. To achieve this, we are of which 97.2% was recycled. internally. years we have been carrying out audits on encouraging practices that promote the waste internally and among suppliers, in order
(*) Only 50%.
G4-DMA, G4-EN22, G4-EN33 108 INTEGRATED REPORT 2015
TELEFÓNICA WASTE ELECTRONIC WASTE AND USED Electronic EQUIPMENT waste and used Other customer equipment Tonnes Tonnes equipment Operations 4,798 WEEE* WEEE* Batteries Paper cardboard Cables, piping internal external and others 2,694 and metals 1,901 BR BR ES ES BR ES Customer mobile DE Offices DE DE telephones 132 71 BR HispAm ES HispAm ES DE 237 HispAm 1 HispAm BR 8 2,456 HispAm 129 1 2 28 43 DE 1,892
938 17,779 2,021 2,484 2,673 Recycling Reuse Landfill and incineration Donation
Total recycled waste 97.2% Total landfill waste2.8% 0.03% 0.03% 6.05% 93.89% *WEEE: Waste Electrical and Electronic Equipment.
About 70% of our waste corresponds to cables Carry out reutilisation and recycling pratices. CUSTOMERS still in working order. This programme will be that come from our Network transformation We want to help our customers to join in extended to 9 more countries in 2016 and it is process. Their reuse is not possible but we can Encourage the development of a regulatory with the circular economy and reduce their hoped that it the number of returned terminals recycle them, and therefore 97% get recycled framework for reutilization and recycling. environmental impact. Thus, we facilitate the will increase 4-fold in three years. Thanks to by specialist companies. The increase in the reutilisation of terminals, through leasing or this project we are also promoting advances in generation of this type of waste in Brazil, caused Guarantee adequate treatment with refurbishment initiatives, and promote the service supply, with the move from 2G to 4G by the incorporation of GVT into our Telefónica monitoring in our supply chain. recycling of their telephones and supply them equipment in Latin America. Brazil operator, was the reason for the rise in with environmental information on terminals waste in 2015. Provide our customers with environmental through eco-rating, which allows them to Through our services we are also encouraging information during purchase (Eco-rating) and choose the most eco-efficient terminal. the circular economy. Virtualisation reduces the ELECTRONIC WASTE alternatives for their used telephones. consumption of raw materials and resources, According to the United Nations, of the We promote the reuse of terminals through while existing M2M services, like Smart Waste, 42 million tonnes of electronic waste or e-waste Promote the best eco-design in line with programmes in which our customers can return help to improve the management of municipal that is generated each year, only 12% is international standards. their mobile, still working but that they wish waste (85% recycled, 60% incidences, 18% recycled, despite being the fastest growing to change, in return for a financial incentive. In maintenance costs). source of waste. Thus, in Telefónica we consider Thanks to this, nearly 94% of devices used in this way we are able to prolong the useful life that the solution to this problem has to come our operations and by our customers have been of the mobile in collaboration with specialist This circular economy brings with it many from shared responsibility from all those actors recycled, and more than 6% reused. The boost partners. In the past year, we received possibilities, and we are in a position to make involved. Our contribution to change is based on from the circular economy will bring with it an 52,000 terminals in Spain and 100,000 in the most of them and contribute solutions the following principles: increase in reutilization over the coming years. 7 countries in Latin America, 94% of them through sustainable innovation.
G4-EN23, G4-EN25 109 INTEGRATED REPORT 2015
Energy and Climate Change_ We want a more efficient and cleaner Network in terms of energy and carbon.
Climate change is one of the most pressing intensity has been reduced by 25%. challenges for society today, affecting quality of Even though the initial goal of a reduction MEASUREMENT CALCULATION life and the planet as a whole. Thus, it is urgent to of 30% has not been achieved, the result is boost economic growth which is less dependant nonetheless very positive. We measure our energy consumption and We calculate our total energy consumption, as on carbon. We are aware of the role we can play we monitor the Network by installing smart well as green house gas emissions for each of as a digital company in the search for solutions All of this spurs us on to continue down this line meters in our facilities. Thanks to these, we can the scopes one, two and three, in line with through our services, but we are also aware of the and we are now setting a new framework of goals determine our consumption more precisely, a global model based on the GHG Protocol, responsibility we have to reduce our own carbon for 2020. These will set the road map for energy identify faults in the Network and optimise the ISO 14064 and the ITU-T L. 1420 footprint. efficiency and also for renewable energies. operational energy costs. recommendation.
With this aim, in 2008, we set up a Global Office Renewable energies are necessary to achieving for Climate Change and set some ambitious the decarbonisation of our activities and to Monitoring of stations in Leadership in the Carbon goals for energy and emissions. This has led reducing our carbon footprint in absolute Telefónica España Disclosure Project to there being 100 people working today to terms. Today this transition has already begun, achieve these goals. and more than 16% of energy now comes from renewable sources, mainly in Brazil and In 2015, we carried out the monitoring For 5 consecutive years, Telefónica In 2015, some of these goals were finalised, Germany. We are defining a Renewable Energies of the National Centre for Supervision has remained among the leading and it is therefore time for analysis. The Energy Plan which, through the purchasing of electricity and Operations (CNSO) in Madrid. The 5 telecommunications companies Efficiency Plan has resulted in a saving of from renewable energies, micro-generation and building was monitored to measure in the Carbon Disclosure Project 64 million euros since 2010, and our energy Energy Procurement Agreements, will lead the energy consumption, hourly (CDP) with a rating of 99A, Company to a zero emissions future. consumption patterns (daily and the second best rating in our seasonal), as well as the environmental sector. Furthermore, we were Calculation Analysis variables and thermal characteristics of recognised by the 'CDP Supply Measurement Reduction the building. In parallel to this we Chain' programme as one of the carried out load studies of the building companies that best manages to measure the degree of correlation energy and climate change risks between consumption and occupation. and opportunities globally, and The information obtained from the informs its customers about meters was subsequently presented to the impact of the services Checks a Big Data technology company with provided on emissions. the aim of analysing, calculating and We measure our energy consumption and we calculate our carbon footprint. We analyse and identify new homogenising the behaviour and opportunities for energy and green house gas emissions (GHG) reduction, and we implement energy efficiency and response of the building to its usage renewable energy projects in each of our operations. As a result of this, we are reducing the operational energy needs. consumption and the environmental impact of our activities.
G4-DMA 110 INTEGRATED REPORT 2015
MORE INFORMATION ENERGY INVENTORY AND GHG EMISSIONS ANALYSIS Watch the video 'Telefónica Global Energy Efficiency Programme' Energy (GWh) GHG emissions (tCO2eq) We carry out an analysis of operational energy Base stations 2,609 882,695 consumption and of our carbon emissions. Based on this, we assess how we meet our DE ES ES BR MX global goals for the reduction of energy and MX BR VE DE GHG emissions, and work with different groups CO CL and associations in the sector to identify risks and opportunities regarding energy and climate Technical buildings 2,936 864,785 change. DE AR PE AR BR ES BR ES CL CL DE PE GLOBAL ENERGY AND EMISSIONS GOALS Base Offices 635 206,656 Base Goal year Value Reduction PE BR KPI Unit year year value 2015 goal Current DE AR CO AR DE ES ES CL Energy BR consumption kWh/ea(*) 2007 2015 32.7 24.7 30% -25% in networks per Vehicles 259 49,771 customer BR ES DE BR AR ES DE AR Energy consumption MWh/ 2007 2015 6.3 5.5 10% -13% in offices per emp(**) tCO 6,439 GWh 7% 93% 2,003,907 2eq 5% 95% employee Fuel Electricity Scope 1 Scope 2 Carbon emission Note: 16% energy from renewable sources. tCO /ea 2010 2020 10.2 9.3 30% -9% per customer 2eq OTHER INDIRECT SCOPE 3 EMISSIONS Energy OPEX M€ 2013 2017 - 27.7 50 M€ - tCO 2eq (*) ea = equivalent access (**) emp = employee 2 1,610,822 1.5 6th Global Energy and Climate Change Workshop
1 In 2015, we hosted the 6th Global Energy and Climate Change Workshop at Telefónica in Quito, 423,423 where 200 participants came together, including energy and environmental managers, 0.5 329,186 technological partners and other special guests. During the event, Telefónica Brazil was recognised 209,836 688 34,075 72,016 0 for its energy management in 2015. Telefónica Ecuador and Telefónica España received the prize Purchasing of Capital Activities related Operational Work travel Use of sold Investments for best energy efficiency project and best Green project respectively.Telefónica Colombia received goods and services goods to energy and fuel waste products consumption (not the prize for best efficiency plan, while Evolution Networks was recognised as best Green partner included in scopes I and II) at this event.
G4-EN3, G4-EN4, G4-EN5, G4-EN6, G4-EN7, G4-EN17, G4-EN18, G4-EN19 111 INTEGRATED REPORT 2015
REDUCTION CHECKS Winner of the Green Mobile Award In 2015, we carried out more than 100 energy Additionally, in Telefónica we carry out efficiency and GHG emissions reduction Telefónica was awarded the GSMA Glomo in 2016 at the MWC for our global energy an independent energy and emissions initiatives in our networks and offices. As a efficiency programme. The jury agreed that it was a noteworthy example of what data checking process on an annual basis, result of these, we reduced our energy all operators should be aiming to achieve: improvements in energy efficiency, which allows us to better identify areas for consumption by 162 GWh and avoided more reduction of their carbon footprint and preservation of the environment. improvement in our processes and manage
than 41,000 tonnes of CO2eq emissions. energy and carbon in a transparent manner.
(1) ENERGY EFFICIENCY PROJECTS ENERGY INVENTORY AND C02 POWER COOLING Energy 2014 2015 % Var 2015 2015 25 Total energy consumption MWh 6,352,388 6,438,573 1.4% 25 21.8 35 32 30 20 23.6 Electricity MWh 5,951,515 5,997,388 0.8% 25 15 20 15 10 Fuel MWh 400,870 441,185 10.1% 5.6 10 6.8 5 2.2 2.7 5 Energy from renewable sources % 15 16 6.7% 0 0
No. of M€ GWh ktCO2eq No. of M€ GWh ktCO2eq projects saved saved avoided projects saved saved avoided GHG emissions Improvement in the efficiency of electronic Improvement in the efficiency of (2) equipment (rectifiers, UPS and inverters). refrigeration and air conditioning equipment Direct emissions (Scope 1) tCO2eq 92,004 95,677 4.0% (modernisation of equipment, free cooling). Indirect emissions (Scope 2) (method based on tCO eq 1,880,938 1,908,230 1.5% PSF OTHER localisation) 2 2015 2015 Indirect emissions (Scope 2) (market-based tCO eq - 1,609,677 - 79.7 method) 2 40 37.6 80
60 Avoided emissions (3) tCO eq 1,324 6,547 394.5% 30 48 2 40 (1) Inventory based on ISO 14.064, GHG Protocol & ITU-T L.1420 (02/2012). 20 13 22.0 (2) CO2eq = CO2, CH4 & N2O. 20 10 6.8 (3) Emissions avoided as a result of renewable energy generation for self-consumption. 4.1 14.8 0 0 No. of M€ GWh ktCO2eq No. of M€ GWh ktCO2eq MORE INFORMATION projects saved saved avoided projects saved saved avoided Refer to the 'Energy and Climate Change' Reduction in energy consumption at radio Lighting, selective shut-off, hybrid and section of our corporate Website. bases during periods of low load. renewable generation. G4-EN3, G4-EN5, G4-EN15, G4-EN16, G4-EN17 112 INTEGRATED REPORT 2015
Electromagnetic fields_
The roll-out of mobile telephone networks University of Ilmenau in the study on radio COLLABORATING WITH INSTITUTIONS has been frenetic over the last few years. frequency exposure in every day life, We cooperate with different institutions with Scientific research in this field, supported the results of which confirmed that good All measurements that the aim of creating synergies to respond to all by technological progress, has investigated coverage is an important contributor to concerns, not only those of our customers, but the possible effects of emissions on health reducing total exposure to a minimum. we have taken at our base those of the population in general. for more than 40 years. Telefónica actively works with such institutions, with citizens, WE COOPERATE IN RESEARCH: WE stations have always been In 2015, our work in Peru on the 'Antenas Buena businesses, public authorities and with INCREASE OUR KNOWLEDGE Onda' campaign stands out, which was carried society in general to boost the maximum For the World Health Organisation, below internationally out in conjunction with the Ministry of Transport guarantees for safety and the most scientific research in this field is a priority recognised levels and Communications in order to establish base scientific and objective perception possible in their research schedule. At Telefónica stations in the country. on awareness of electromagnetic fields. we follow these projects closely and we even work directly with some of them: In Colombia, we have adhered to the Colombian WE COMPLY WITH INTERNATIONALLY Mobile Industry Association (Asomovil) and RECOGNISED RESTRICTIONS GSMA initiative called 'Nos Importa Colombia' All terminals and equipment that (We Care about Colombia) to tackle the we provide meet the international subject of responsible roll-out of Network standards established by the SAR Mobikids infrastructures. (Specific Absorption Rate) parameter. WE TALK TO COMMUNITIES Furthermore, in 2015, all the measurements In Ecuador we implemented a pioneering taken at our base stations were below Gerónimo: social information process with a view to the internationally recognised levels, in strengthening citizen participation processes, some countries comfortably fulfilling this being the first step in the roll-out of our these requirements by some way. These 'Best Practice Manual'. This methodology allows measurements are available to the public in COSMOS: us to manage the social component of the the majority of countries in which we operate. Network roll-out and improve our relationships with communities. We have noted that MORE INFORMATION Furthermore, at Telefónica Deutschland achieving a successful Network roll-out results Refer to the 'Electromagnetic fields' section of we have worked with IZMF (Mobilfunk SCAMP study: our corporate website. in a decrease of community health-related Information Centre) and the Technical conflicts.
G4-DMA, G4-PR1, G4-PR2 113 INTEGRATED REPORT 2015
Also in Ecuador, and in association with the telecommunications infrastructure, generating Furthermore, in Venezuela we gave training Fundación Telefónica, we launched the 'Digital confidence and promoting a favourable to Huawei Technologies, the company Literacy' project. This has allowed us to reduce environment for the roll-out, quality and whose job it is to assess our performance in the digital divide in rural and marginal areas, stability of the Network. electromagnetic fields in the country, with the and to bring communities the benefits of aim of improving and making its measuring technology for their daily activities. This has BUILDING AWARENESS AMONG OUR tasks more efficient. In Ecuador we have also been a determining factor for Network roll-out EMPLOYEES provided continuous training to our employees in these areas, where before there was absolute Our employees are our best ambassadors. For so that they can explain how mobile rejection of the construction of base stations this reason, in 2015, in Colombia we launched telecommunications work and the benefits due to the lack of knowledge of their operation the campaign 'On the waves with aerials' with that they bring. and importance to local development. the aim of creating a forum for sharing solid arguments that will help us to break the myths COMMITMENTS WITH OTHER In Colombia, in collaboration with local surrounding the infrastructure in our sector. ORGANISATIONS institutions, we have launched an initiative In 2015, we participated in various different called 'Aerials for Progress', with the forums. In Colombia we collaborated on aim of improving public perception of the training event 'ICT, health and the application of the precautionary principle', % EFFECTIVENESS IN THE SOLUTION OF COMMUNITY CONFLICTS directed at judges and magistrates with the aim of clarifying doubts and myths about Network roll-out: Ecuador electromagnetic fields and their effects on We believe that health. 32% 58% 68% 95% 96% information is fundamental WE COMMUNICATE We believe that information is fundamental for society to overcome for society to overcome myths related to the myths related to electromagnetic fields and understand the operation of telecommunications. Thus, we electromagnetic fields provide links of interest, expert information on the subject and frequently asked
2011 2012 2013 2014 2015 questions, which we update periodically.
G4-14 114 INTEGRATED REPORT 2015
Green services_
In the current context, where environmental We align our business and environmental Mt CO2 Smart Metering 1 challenges affect the whole of society, strategies, looking to secure opportunities linked Emissions avoided in 2015 by our Telefónica is developing services based on the to the search for solutions to environmental fleet management service 'Internet of Things' (IoT), Cloud Computing questions. We want to position ourselves as a and Big Data to reduce the consumption of key actor in the green economy and, therefore, Fleet resources and the environmental impact of sustainable innovation is essential. Management our customers. These will be key in the area of Smart Buildings reduction of and adaptation to climate change.
Fire Protection Smart Transport and Environmental Protection
2020 Big Data IoT Smart Water Cycle Management Fauna Tracking / Smart FIEB 2015: +9 M IoT Smart Urban connections Lighting 2015 +130 M€ Added value services Smart Agri Smart Waste Connected Smart Parking Management electric vehicles Smart Water
Hydro Smart 2010 Connectivity
Note: IoT connections also support services other than Green services. Energy CO2 emissions Water Waste recycling Atmospheric emissions Time Biodiversity
G4-DMA 115 INTEGRATED REPORT 2015
INTERNET OF THINGS the subject, the IoT could reduce 200 million REVENUE FROM GREEN SERVICES BIG DATA IoT will be the next industrial revolution in a tonnes of CO2 emissions, approximately 23% % It is already clear how the data analysis of hyperconnected world. It is expected, according of the 2030 goal for the European Union in the 8% social behaviour models and movement to Gartner, that more than 6 billion 'things' will be areas of transportation and buildings. Therefore, flows can have important uses in terms of connected in 2016, 30% more than the previous the potential for these services to mitigate climate 33% the environment, such as in climate change year. It is estimated that this figure could rise to change is enormous and we want to be part of it. adaptation. Our Company vision is to become a 50 billion in 2020. benchmark, in the medium-term, for the data 46% economy, whereby the Internet of Things will For us, the Internet of Things has become one IOT services also be a key element, as without it we would of the main areas for investment, where the 2% not have Big Data. main points of interest are better connectivity 11% and value added services. Today, more than We currently have some services in place, 1,000 customers around the world use our Smart 15% Energy and utilities Industry Buildings such as Smart Steps, which utilise anonymous M2M. Although we are still at the early stages reduction of fuel consumption with data to help take decisions, for example on Transport Agriculture of this process, we are laying the bases and the our fleet management services transportation in cities. Furthermore, we next few years will be critical. Thus, there are recently acquired Synergic Partners, an expert elements that will speed up the growth of the IoT: consultancy in science and data engineering. BEST PRACTICES new technologies that are more accessible and open; favourable regulations with medium-term HOSTING AND CLOUD public investment strategies; and an increase in 15% SMART CITIES As a result of our hosting services at Data customer needs as well as the development of irrigation water reduction with In the urban environment, where the great Center, we have managed to dematerialise new business models. Smart Water majority of the population is concentrated, contents and services, thereby reducing energy sustainability challenges are multiplied and consumption and greatly optimising space Therefore Telefónica is committed to total efforts to create 'Smart Cities' are already a usage. This all contributes to reducing our connectivity and open platforms. We cooperate priority for local authorities. customers' carbon footprint significantly. At with technology partners to find solutions for our Telefónica we see virtualisation as a first step customers' needs. According to recent studies on 10% In this regard, the Internet of Things towards Cloud Computing. fuel savings and 85% improvement currently allows us to provide cities with MORE INFORMATION of black points where there is bad effective digital solutions that converge in We currently operate four Data Centers Watch the video 'What is the Internet of Things?' waste separation, thanks to Smart one integrated and open platform, thanks to globally, located in Alcalá de Henares (Spain), Waste which costs can be reduced, revenues Brazil, Miami and Mexico. They all comply increased, urban resource administration with international Green IT principles for eco- A reduction of can be improved, as can the lives of efficiency and sustainability, and have electric inhabitants. infrastructure and air-conditioning, which allows us to reduce energy consumed by the Our platform 'Thinking Cities' has already infrastructure itself by about 75%. The average 30% been implemented in cities like Valencia PUE of our strategic Data Centers is 1.8. in the consumption of public and Santander (Spain). street lighting with Smart Lighting
G4-DMA, G4-EN27, G4-EN28 116 INTEGRATED REPORT 2015 9 Annexes_ INTEGRATED REPORT 2015
Principles for the preparation of the Report_
The 2015 Telefónica Annual Integrated Report The Sarbarnes-Oxley Act (USA). Collaboration with ETNO (European sets out the progress achieved during the Telecommunications Network Operators year by the Company and its value chain in ISO Standards. Association), ITU (International economic, social and environmental matters, Telecommunication Union) and GSMA (World as well as its strategic and market positioning, International guidelines (ICNIRP). Association of Mobile Telephone Operators). thus enabling the reader to better understand the Company’s business model and its ability Information is also presented regarding Carbon Disclosure Project. to generate value through its capital and its the different voluntary standards to which stakeholders. Telefónica subscribes: GHG Protocol.
In this document Telefónica reports on its The United Nations Global Compact. Code of Good Advertising Practices, Self- commitment to the following International Monitoring. Standards: GRI G4. This Report has been prepared in line with the The United Nations Universal Declaration of OECD Guidelines for Multinational Enterprises. general G4 'In Accordance' criteria issued by Human Rights. the Global Reporting Initiative (GRI). Telefónica Spanish Good Governance Code of Listed has chosen to use the “Comprehensive option” The International Covenant on Civil and Companies. of the GRI G4 guidelines. This option has been of Telefónica, as well as the usefulness for its Political Rights. subsequently subjected to external verification stakeholders. Moreover, the review carried out UN Principles for Responsible Investment by EY. by EY has been conducted in accordance with The International Covenant on Economic, (UNPRI). the principles defined by the AA1000AS (2008) Social and Cultural Rights. The inventory of GHG emissions has been Standard, the purpose of which is to “ensure Due Diligence Guidance for Responsible Supply prepared on the basis of the Greenhouse Gas the quality of the organisation’s Sustainability Convention on the Rights of the Child. Chains of Minerals from Conflict-Affected and Protocol, and subsequently verified by AENOR in Report and that of the processes, systems High Risk Areas. accordance with the ISO 14064 standard. and competences that serve as a basis for its Convention on the Rights of Persons with implementation by the entire organisation.” Disabilities. Global e-Sustainability Initiative (GeSI). Below appears an explanation of how these standards have been applied, along with details Both the principles issued by the Global International Labour Organization Conventions. London Benchmarking Group (LBG). of those which determine content and quality, Reporting Initiative (GRI) and those defined and which ensure a balanced and reasonable by AA1000AS (2008) are the standards which The Basel Convention (on hazardous waste). The United Nations Sustainable Development presentation of the organisation's performance. are most commonly referenced and used in Goals (SDG). This whole process has been carried out taking the preparation of sustainability and corporate into account both the experience and purpose social responsibility reports.
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PRINCIPLES FOR DETERMINING PRINCIPLES FOR DETERMINING THE QUALITY OF THE INFORMATION IN THIS REPORT THE CONTENTS OF THIS REPORT
In accordance with GRI (Global Reporting Initiative) Clarity Stakeholder participation reporting standards: The information is set out in a manner which is The “Relationships with our stakeholders” chapter identifies understandable to stakeholders who have a reasonable our stakeholders and explains how Telefónica has responded to Balance knowledge of the Company and its activities. In addition, their reasonable expectations and interests. This testimony reflects both the positive and negative the information regarding indicators is presented in aspects of the Company’s performance in order to three-year periods. Context of sustainability propitiate a well-founded assessment. Telefónica contributes to the progress of the communities Reliability in which it operates and to their social and environmental Comparability This Report is externally reviewed by EY, as reflected in the sustainability throughout its value chain: from working with The information contained herein is presented in a attached independent assessment report. our suppliers, marketing sustainable products and services, to systematic manner in order to enable stakeholders to showing respect for consumer rights. analyse the evolution of the Company’s performance, so In accordance with the AA1000 sustainability assurance that it can be compared with that of other organisations. standards: Materiality We address those aspects which reflect the significant economic, Accuracy Inclusiveness environmental and social impacts of the Company and which This Report is accurate in qualitative and quantitative This refers to stakeholder participation in the development substantially influence the assessments and decisions of our terms, enabling the stakeholders to assess the and achievement of a responsible and strategic response to stakeholders. For this purpose we have conducted a materiality organisation's performance. sustainability. analysis at coporate, local and regional level. Punctuality Relevance Comprehensiveness This Report is presented on the occasion of the convening Telefónica has determined the importance of each issue to We indicate material aspects and their coverage, scope and of Telefónica’s Ordinary Shareholders's Meeting in order to stakeholders based on this criteria. time in a manner that reflects their significant economic, maintain a regular schedule so that stakeholders have the environmental and social effects. As such, stakeholders can information necessary at the time of the meeting to be able Responsiveness analyse Telefónica’s performance for the corresponding period. to make informed decisions. This is Telefónica’s reaction to the demands of its stakeholders, demonstrated by the Company’s sustainability milestones and challenges.
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Structure and scope of consolidation of the Report_
During 2015 the following variations took place In June 2015 the company Telco TE, Following the signing of the definitive it from the scope of consolidation of the non- in the scope of consolidation: S.p.A. was established, owned entirely by agreement, and as of 31 December 2015, financial indicators so that it receives the same Telefónica. Following the split of Telco, S.p.A., O2 UK remains part of the scope of treatment as the financial indicators, in order to On 28 May the acquisition of Vivendi, S.A. from Telefónica received, through this company, consolidation of the Telefónica Group, but is make all ratios and comparisons homogeneous. GVT was approved, for the amount of 4,663 the proportional part of shares in Telecom now reported as a discontinuing operation and Information corresponding to previous years has million euros, together with delivery of 12% Italia, S.p.A. (14.72% of its ordinary capital) its assets and liabilities as “held for sale”, in not been redefined. of the corporate capital of the new Telefónica corresponding to it upon the basis of its accordance with IFRS standards. Brazil which resulted from the integration. participation in Telco, S.p.A. The complete list of all the companies that In June, Vivendi, S.A. exchanged 4.5% of the The completion of the process is subject, comprise the Telefónica Group is published in above percentage with Telefónica, S.A. for The total divestment of Telecom Italia, S.p.A. among other conditions customary in these Annex VI: “Main companies of the Telefónica 8.3% of the ordinary shares of Telecom Italia. occurred prior to 30 June, in accordance with transactions, to the relevant regulatory Group” of the Consolidated Financial the regulation and competition commitments approvals and the obtaining of waivers on the Statements, which accompany this Report and GVT and its subsidiary companies were it had assumed. change of control clauses. can be found on the corporate website. incorporated into the scope of consolidation of the Telefónica Group by means of the global On 30 April, once the necessary regulatory On 2 January 2015 the sale of integration method. approval had been obtained, Telefónica de Yourfone GmbH was finalised. The Contenidos, S.A.U. acquired 56% of DTS company, which was consolidated by On 29 July 2015 it was agreed with Distribuidora de Televisión por Satélite, S.A.(DTS). means of the global integration method, Vivendi, S.A. to deliver treasury shares of DTS and its subsidiary companies were has left the scope of consolidation. Telefónica, S.A. representing 0.95% of its incorporated into the scope of consolidation of corporate capital, in exchange for preferred the Telefónica Group by means of the global In short, some important variations occurred shares belonging to Telefónica Brazil, S.A., integration method. Prior participation was in Telefónica’s scope of consolidation during representing approximately 3.5% of its recorded by means of the equity method. 2015, which are basically reflected in this Report corporate capital. through the incorporations of GVT in Brazil and On 24 March 2015 Telefónica reached a DTS in Spain, and the classification of O2 UK definitive agreement to sell its operations in as “held for sale”, given that, as it is regarded a the United Kingdom (O2 UK) to the Hutchison discontinuing asset, we have decided to remove Whampoa Group.
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SOURCE OF INFORMATION Innovation IN THIS REPORT Consolidated through the corporate area of the CCDO, both for R&D and open innovation. 2015 saw the incorporation of GVT and DTS, and Corporate governance and shareholders The data in these sections is sourced from Drawn from the same sources used to prepare the purchasing systems and are consolidated the exit of O2 United Kingdom, regarded as a the information contained in the 2015 Annual without applying any proportionality criteria. Corporate Governance Report, included in full in discontinuing asset following the sale agreement the annexes. Customers Sourced from Telefónica S.A. management Economic and financial information control systems of and country operations. Drawn from the same sources used to prepare The Company’s total number of accesses does the information contained in the 2015 Financial not have to equal the partial sum of accesses Employees Environment and climate change Report, audited by EY and included in full in the from country to country since, for the sake of Figures come from the Corporate Human Information is drawn from the Environment and annexes. homogenisation, the Corporate Management Resources management systems. This Operations areas of each country by means of Control area standardises some access Report uses the concept of people instead of online questionnaires and other information accounting criteria. The standardisation criteria employees, as this term is more commonly media. The data is consolidated by simple are explained in the relevant chapter. used in financial reports. In cases in which addition and, in the case of climate change, the information is presented in consolidated emission factors of the GHG Protocol are taken form, the number of employees is used as a into account. For the “Circular Economy” and proportionality factor. The section devoted to “Green Services” chapters, quantitative and them includes the entire economic scope of qualitative information is compiled from the the Telefónica Group, except in the Employee global business area (Chief Commercial Officer). Health and Safety chapter, in which the rates reported correspond only to the Group’s telecommunications businesses. This is to facilitate comparison with other companies in the sector, as rates are produced taking into Telecommunications businesses Other companies account the sector specific circumstances and Revenue 96.9% 3.1% legislation (e.g. listing of occupational diseases) and account for a proportion greater than 86% People 86.6% 13.4% of the total number of employees.
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Suppliers Social action Scope of treatment of each section of this Report Sourced from the contract allocation system The data comes from the management control through the purchasing areas. The consolidation systems and sponsorship committees of Other Corporate Outside the of information is performed without applying Fundación Telefónica, ATAM and the Telefónica “Core” subsidiaries centres organisation any criteria as a proportionality factor and Group, and is integrated under LBG criteria. Market indicators is presented broken down by countries and Financial indicators business lines. The chapter devoted to them Exchange rates includes the entire economic scope of the All the information in this Report is presented in Non-financial indicators Telefónica Group. It is important to underline current euros, unless otherwise indicated. The the difference between the supply data in exchange rates applied correspond to those Corporate governance the consolidated accounts of the financial used in all financial statements published by Impacts on the community statements (on an accrual basis and in the Company (balance sheet, consolidated and accordance with the accounting scope of individual accounts) in order to facilitate the Social and cultural action consolidation of the Telefónica Group) and integral relationship between financial variables Business model the criterion for allocated purchases used in and non-financial variables. different sections of this Report, which refers Relationships with our stakeholders to the purchases which were approved in this Throughout this Report we include links to Reputation management period, regardless of their accounting criterion or further information, which provide greater detail accruals and defferals as an expense. on certain subjects covered herein. However, the Sustainability governance and management information available via these links does not Ethics and compliance Digital inclusion from an integral part of this Report. The information reaches the systems of the Supply chain management local operators in each country and from Customer promise Fundación Telefónica. Digital trust
Human resources
Digital inclusion and innovation
Environment
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EXTERNAL EVALUATIONS Awards and acknowledgements_
MEXICO COLOMBIA BRAZIL GERMANY Member of the World Member 99A Top 5 6th of 127 and Europe Indices Our Ixtlahuaca Data We are the telco with the best Our Tamboré Data Center in Brazil Germany occupies second Center (Mexico) talent in Colombia. received the Tier III Gold certificate. position for global Network and obtained TIER III the first for value. The government of Colombia Vivo received the “Most Innovative” Award certification endorsing its Member of the Prime Rating Leader Award highlighted our “Fishing with at the TMForum, for development of the RobecoSam Sustainability sustainability. Global 800 Mobile Networks” project as first smart city in Brazil. Yearbook an example of social inclusion We obtained the highest GHG Protocol through technology. recognition in Brazil. Telefónica received the “Silver Euronext 120 Excellence Rating A (upgrade) 2016 GSMA Seal” from the Government of Register Glomo Award Colombia for its gender equality policy. We are the telco with the best reputation in Colombia. GLOBAL Valencia chosen as a model Smart City at a global summit in Washington. We are the third company in the world in terms of investment in education, according to UNESCO and Telefónica Vivo named company of the year in the the Varkey Foundation. 2015 Telecom Yearbook. Telefónica is one of the most sustainable suppliers in Telefónica is one of the nine leading telcos in the the world, according to the CDP index. world in terms of sustainability. Telefónica was among the winners of the 2015 Telefónica ranked world leader for the second EuroCloud Awards. consecutive year at the M2M Magic Quadrant. PERU We are the Telco with the most 5G projects endorsed We are the fifth best company and the best telco to Cine Papaya, Wayra Peru’s SPAIN by the European Union to define future networks. work for in the world, according to GPTW. startup, was selected as an César Alierta received the CODESPA award “Endeavor” entrepreneur. from the King of Spain for our social The UN acknowledges Telefónica’s contribution to the We are the second best telco in the world in the global development of telecommunications. transparent management of climate change, Our “Insurance on the Internet” action programme “Fundación Telefónica according to CDP. complaints portal won the “2015 Classrooms”. LATCH, our cybersecurity solution, won best multi- National Digital Democracy The TELEMAC management project for device mobile app at the 2015 Internet Awards. Telefónica is the telco with the best reputation in Award” in Peru. Spain and Latin America. chronic patients obtained a new award for “Senior OS”, the accessible mobile for the elderly, won innovation in Catalonia. “gold” at the 2015 HackforGood Awards. Brazil, Spain, Ecuador and Colombia won Telefónica’s Energy Efficiency Awards. CHILE The “WhatsCine” Platform received the Our Movistar TV customers once again placed us at 2015 Queen Letizia Award for Accessibility Young people rated Telefónica the top of the ISSCE satisfaction ranking in 2015. Telefónica won the 2016 GSMA Glomo Award at Technologies. the Mobile World Congress for our global “Energy Chile as one of the best Telefónica climbs to second place in the ranking of Efficiency” programme. companies for their first job. Movistar rated market leader for value best multinationals to work for in Latin America. according to the XIII Observatory of the Spanish Consumers Union (UCE-UCA). Telefónica I+D won a GlobbTV award for the “best Internet of Things solution”.
123 INTEGRATED REPORT 2015
GRI compliance tables_
GRI G4 Content Index For “in accordance” - Comprehensive
GENERAL STANDARD DISCLOSURES
General standard External disclosures Page Omissions Assurance
Strategy and Analysis G4-1 3 Statement from the most senior decisionmaker of the organisation.
G4-2 40, 41 and 52 Description of key impacts, risks, and opportunities.
Organisational Profile
G4-3 7 Name of the organisation.
G4-4 7 Primary brands, products, and services.
G4-5 7 Location of the organisation’s headquarters.
G4-6 9 Countries where the organisation operates.
G4-7 7 Nature of ownership and legal form.
G4-8 9 Markets served.
G4-9 7 Scale of the organisation.
G4-10 80 Total number of employees by employment contract, region and gender.
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GENERAL STANDARD DISCLOSURES
General standard External disclosures Page Omissions Assurance
G4-11 78 Percentage of total employees covered by collective bargaining agreements. 58, 59, 60, 61, G4-12 Organisation’s supply chain. 62, 63 and 64 G4-13 120 Significant changes during the reporting period.
Commitments to External Initiatives
G4-14 105 and 114 Precautionary approach or principle addressed by the organisation. Externally developed economic, environmental and social charters, principles, or other initiatives to which the G4-15 118 organisation subscribes or which it endorses. G4-16 46 Memberships of associations.
Identified Material Aspects and Boundaries ICA: 274, 275, G4-17 Entities included in the organisation’s consolidated financial statements or equivalent documents. 276, 277 and 278 G4-18 119, 121 and 122 Process for defining the report content and the Aspect Boundaries.
G4-19 48 Material Aspects identified in the process for defining report content.
G4-20 48 and 122 Report the Aspect Boundary within the organisation.
G4-21 48 and 122 Report the Aspect Boundary outside the organisation.
G4-22 120 Restatements of information provided in previous reports.
G4-23 120 Report significant changes from previous reporting periods in the Scope and Aspect Boundaries.
Stakeholder Engagement
G4-24 44 and 45 List of stakeholder groups engaged by the organisation.
G4-25 43, 44 and 45 Basis for identification and selection of stakeholders with whom to engage.
G4-26 43 Organisation’s approach to stakeholder engagement, including frequency of engagement by type and by stakeholder group.
G4-27 44 and 45 Key topics and concerns that have been raised through stakeholder engagement, and how the organisation has responded.
Report Profile
G4-28 7 Reporting period.
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GENERAL STANDARD DISCLOSURES
General standard External disclosures Page Omissions Assurance
G4-29 7 Date of most recent previous report.
G4-30 7 Reporting cycle.
G4-31 145 Contact point for questions regarding the report or its contents.
G4-32 118 ‘In accordance’ option, GRI Content Index, reference to the External Assurance Report.
G4-33 118 and 119 Organisation’s policy and current practice with regard to seeking external assurance for the report.
Governance IAGC: 12, 13, 30, G4-34 31, 32, 33, 34 Governance structure of the organisation. and 35 Process for delegating authority for economic, environmental and social topics from the highest governance body to G4-35 55 senior executives and other employees. Report whether the organisation has appointed an executive-level position or positions with responsibility for G4-36 55 economic, environmental and social topics, and whether post holders report directly to the highest governance body. Processes for consultation between stakeholders and the highest governance body on economic, environmental G4-37 55 and social topics. G4-38 21 Composition of the highest governance body and its committees.
G4-39 20 Report whether the Chair of the highest governance body is also an executive officer.
G4-40 IAGC: 16 Report the nomination and selection processes for the highest governance body and its committees.
G4-41 IAGC: 38 Report processes for the highest governance body to ensure conflicts of interest are avoided and managed. Report the highest governance body’s and senior executives’ roles in the development, approval, and updating G4-42 55 of the organisation’s purpose, value or mission statements, strategies, policies, and goals related to economic, environmental and social impacts. Measures taken to develop and enhance the highest governance body’s collective knowledge of economic, G4-43 IAGC: 27 environmental and social topics. Processes for evaluation of the highest governance body’s performance with respect to governance of economic, G4-44 IAGC: 22 and 23 environmental and social topics. Highest governance body’s role in the identification and management of economic, environmental and social G4-45 IAGC: 32 and 33 impacts, risks, and opportunities.
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GENERAL STANDARD DISCLOSURES
General standard External disclosures Page Omissions Assurance Highest governance body’s role in reviewing the effectiveness of the organisation’s risk management processes for G4-46 IAGC: 40 economic, environmental and social topics. Frequency of the highest governance body’s review of economic, environmental and social impacts, risks and G4-47 55 opportunities. G4-48 3 Highest committee or position that formally reviews and approves the organisation’s sustainability report.
G4-49 57 Process for communicating critical concerns to the highest governance body. Nature and total number of critical concerns that were communicated to the highest governance body and the G4-50 44-45 mechanism(s) used to address and resolve them. IAGC: 90, 91, 92, G4-51 Remuneration policies for the highest governance body and senior executives. 93, 94, 95 and 96 IAGC: 86, 87 and G4-52 Report the process for determining remuneration. 88 G4-53 IAGC: 86 and 87 How stakeholders’ views are sought and taken into account regarding remuneration.
On the referenced pages you can find IAGC: 114 Ratio of the annual total compensation for the organisation’s highest-paid individual in each country of significant G4-54 the information which allows calculation of this ICA: 151 operations to the median annual total compensation for all employees. ratio.
On the referenced pages you can find the IAGC: 114 Ratio of percentage increase in annual total compensation for the organisation’s highest-paid individual in each G4-55 information which allows calculation of this ICA: 151 country of significant operations to the median percentage increase in annual total compensation for all employees. ratio.
Ethics and Integrity
G4-56 56 and 57 Organisation’s values, principles, standards and norms of behaviour such as codes of conduct and codes of ethics. Internal and external mechanisms for seeking advice on ethical and lawful behaviour, and matters related to G4-57 56 and 57 organisational integrity. Internal and external mechanisms for reporting concerns about unethical or unlawful behaviour, and matters related G4-58 56 and 57 to organisational integrity.
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SPECIFIC STANDARD DISCLOSURES
Management focus and External indicator Page Omissions Assurance CATEGORY: ECONOMIC Indirect Economic Impacts G4-DMA 32, 33 and 34 Disclosures on management approach.
G4-EC7 38 Development and impact of infrastructure investments and services supported.
G4-EC8 32 and 33 Significant indirect economic impacts, including the extent of impacts.
Procurement Practices G4-DMA 58 and 59 Disclosures on management approach.
G4-EC9 9 Proportion of spending on local suppliers at significant locations of operation.
CATEGORY: ENVIRONMENTAL Energy G4-DMA 110 Disclosures on management approach.
G4-EN3 111 and 112 Energy consumption within the organisation.
G4-EN4 111 Energy consumption outside of the organisation.
G4-EN5 111 and 112 Energy intensity.
G4-EN6 111 Reduction of energy consumption.
G4-EN7 111 Reductions in energy requirements of products and services.
Emissions
G4-DMA 110 Disclosures on management approach.
G4-EN15 112 Direct greenhouse gas (GHG) emissions (Scope 1).
G4-EN16 112 Energy indirect greenhouse gas (GHG) emissions (Scope 2).
G4-EN17 111 and 112 Other indirect greenhouse gas (GHG) emissions (Scope 3).
G4-EN18 111 Greenhouse gas (GHG) emissions intensity.
G4-EN19 111 Reduction of greenhouse gas (GHG) emissions.
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SPECIFIC STANDARD DISCLOSURES
Management focus and External indicator Page Omissions Assurance Not relevant. Emissions of these pollutants are G4-EN20 Emissions of ozone-depleting substances (ODS). not significant to our business. Not relevant. Emissions of these pollutants are G4-EN21 NOX, SOX, and other significant air emissions. not significant to our business. Effluents and Waste
G4-DMA 107 and 108 Disclosures on management approach.
G4-EN22 108 Total water discharge by quality and destination.
G4-EN23 109 Total weight of waste by type and disposal method.
G4-EN24 There have been no significant spills. Total number and volume of significant spills. Weight of transported, imported, exported, or treated waste deemed hazardous under the terms of the Basel G4-EN25 109 Convention2 Annex I, II, III, and VIII, and percentage of transported waste shipped internationally. Pouring water in Telefónica is just a sanitary Identity, size, protected status, and biodiversity value of water bodies and related habitats significantly affected by G4-EN26 issue and is poured into municipal sanitation the organisation’s discharges of water and runoff. systems. Products and Services
G4-DMA 115 and 116 Disclosures on management approach.
G4-EN27 116 Extent of impact mitigation of environmental impacts of products and services.
G4-EN28 116 Percentage of products sold and their packaging materials that are reclaimed by category.
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SPECIFIC STANDARD DISCLOSURES
Management focus and External indicator Page Omissions Assurance
CATEGORY: SOCIAL SUBCATEGORY: LABOUR PRACTICES AND DECENT WORK Occupational Health and Safety
G4-DMA 84 Disclosures on management approach. Percentage of total workforce represented in formal joint management–worker health and safety committees that G4-LA5 85 help monitor and advise on occupational health and safety programmes. Breakdown by gender is only available for Type of injury and rates of injury, occupational diseases, lost days, and absenteeism, and total number of work- G4-LA6 85 mortal victims. related fatalities, by region and by gender. G4-LA7 85 Workers with high incidence or high risk of diseases related to their occupation.
G4-LA8 85 Health and safety topics covered in formal agreements with trade unions.
Training and Education
G4-DMA 79 Disclosures on management approach. Breakdown by gender is not available. We are G4-LA9 79 adapting our information systems to be able Average hours of training per year per employee by gender, and by employee category. provide these figures shortly. Programmes for skills management and lifelong learning that support the continued employability of employees and G4-LA10 79 and 80 assist them in managing career endings. Percentage of employees receiving regular performance and career development reviews, by gender and by G4-LA11 79 employee category. Diversity and Equal Opportunity
G4-DMA 78 Disclosures on management approach. Composition of governance bodies and breakdown of employees per employee category according to gender, age G4-LA12 80 group, minority group membership, and other indicators of diversity. Equal Remuneration for Women and Men G4-DMA 81 Disclosures on management approach. G4-LA13 82 Ratio of basic salary and remuneration of women to men by employee category, by significant locations of operation.
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SPECIFIC STANDARD DISCLOSURES
Management focus and External indicator Page Omissions Assurance Supplier Assessment for Labour Practices
G4-DMA 61 Disclosures on management approach.
G4-LA14 62 Percentage of new suppliers that were screened using labour practices criteria.
G4-LA15 61 and 62 Significant actual and potential negative impacts for labour practices in the supply chain and actions taken.
SUBCATEGORY: HUMAN RIGHTS Investment G4-DMA 138 and 139 Disclosures on management approach. Total number and percentage of significant investment agreements and contracts that include human rights clauses G4-HR1 59 or that underwent human rights screening. Total hours of employee training on human rights policies or procedures concerning aspects of human rights that are G4-HR2 71 relevant to operations, including the percentage of employees trained. Non-discrimination G4-DMA 138 Disclosures on management approach. G4-HR3 57 Total number of incidents of discrimination and corrective actions taken.
Freedom of Association and Collective Bargaining
G4-DMA 83 Disclosures on management approach. Operations and suppliers identified in which the right to exercise freedom of association and collective bargaining G4-HR4 62 may be violated or at significant risk, and measures taken to support these rights. Forced or Compulsory Labour
G4-DMA 60 Disclosures on management approach. Operations and suppliers identified as having significant risk for incidents of forced or compulsory labour, and G4-HR6 61 measures to contribute to the elimination of all forms of forced or compulsory labour. Supplier Human Rights Assessment
G4-DMA 59 Disclosures on management approach.
G4-HR10 60 Percentage of new suppliers that were screened using human rights criteria.
G4-HR11 138 Significant actual and potential negative human rights impacts in the supply chain and actions taken.
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SPECIFIC STANDARD DISCLOSURES
Management focus and External indicator Page Omissions Assurance SUBCATEGORY: SOCIETY Anti-corruption G4-DMA 56 Disclosures on management approach.
G4-SO3 57 Total number and percentage of operations assessed for risks related to corruption and the significant risks identified.
G4-SO4 56 and 57 Communication and training on anti-corruption policies and procedures.
G4-SO5 57 Confirmed incidents of corruption and actions taken. Anti-competitive Behaviour
G4-DMA PNR: 8 Disclosures on management approach.
ICA: 86, 87 and G4-SO7 Total number of legal actions for anti-competitive behaviour, anti-trust, and monopoly practices and their outcomes. 88 SUBCATEGORY: PRODUCT RESPONSIBILITY Customer Health and Safety G4-DMA 113 Disclosures on management approach.
G4-PR1 113 Percentage of significant product and service categories for which health and safety impacts are assessed for improvement. Total number of incidents of non-compliance with regulations and voluntary codes concerning the health and safety G4-PR2 113 impacts of products and services during their life cycle, by type of outcomes. Customer Privacy
G4-DMA 69 and 70 Disclosures on management approach.
G4-PR8 72 Total number of substantiated complaints regarding breaches of customer privacy and losses of customer data.
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OTHER NON MATERIAL SPECIFIC STANDARD DISCLOSURES REPORTED
Management focus and External indicator Page Omissions Assurance CATEGORY: ECONOMIC Market presence G4-EC5 82 Ratios of standard entry level wage by gender compared to local minimum wage at significant locations of operation.
CATEGORY: ENVIRONMENTAL
Materials
G4-EN1 105 and 106 Materials used by weight or volume.
G4-EN2 105 and 106 Percentage of materials used that are recycled input materials.
Water G4-EN8 16 Total water withdrawal by source.
Supplier Environmental Assessment
G4-EN32 61 Percentage of new suppliers that were screened using environmental criteria.
G4-EN33 62 and 108 Significant actual and potential negative environmental impacts in the supply chain and actions taken.
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OTHER NON MATERIAL SPECIFIC STANDARD DISCLOSURES REPORTED
Management focus and External indicator Page Omissions Assurance CATEGORY: SOCIAL SUBCATEGORY: LABOUR PRACTICES AND DECENT WORK Labour/Management Relations
G4-LA4 83 Minimum notice periods regarding operational changes, including whether these are specified in collective agreements.
Labour Practices Grievance Mechanisms
G4-LA16 57 Number of grievances about labour practices filed, addressed, and resolved through formal grievance mechanisms.
Child Labour Operations and suppliers identified as having significant risk for incidents of child labour, and measures taken G4-HR5 63 to contribute to the effective abolition of child labour.
Product Responsibility
G4-PR5 66 Results of surveys measuring customer satisfaction.
ICA Financial Report.
IAGC Annual Report on Corporate Governance.
20F Form 20-F of SEC.
IAR Annual Compensation Report.
PNR Business Principles.
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Compliance with the Global Compact_
Chapters Chapters
Businesses should support and Businesses should support a respect the protection of the Compliance with Principle 7 precautionary approach to Environment Principle 1 internationally proclaimed Human Human Rights environmental challenges. Rights within their sphere of influence. Human Businesses should undertake Rights Management of Principle 8 initiatives to promote greater Environment Businesses should ensure that they the supply chain Environment environmental responsibility. Principle 2 are not complicit in Human Rights abuses. Human resources Businesses should encourage the Energy and development and diffusion of Climate Change Principle 9 Businesses should uphold the environmentally friendly freedom of association and the technologies. Green services Principle 3 Human resources effective recognition of the right to collective bargaining. Businesses should work against Ethics and Anti-corruption Principle 10 corruption in all its forms, Businesses should uphold the compliance Management of including extortion and bribery. Principle 4 elimination of all forms of forced and the supply chain compulsory labour. Labour standards Companies should uphold the Management of Principle 5 effective abolition of child labour. the supply chain
FURTHER INFORMATION Businesses should uphold the Refer to the United Nations Sustainable elimination of discrimination in Development Goals website. Principle 6 Human resources respect of employment and occupation.
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Compliance with Sustainable Development Goals_
Digital inclusion and innovation:
Energy and Climate Change:
Environment:
Commitment to our team:
Circular economy:
Relationships with our stakeholders:
Economic impacts:
Management of the supply chain:
FURTHER INFORMATION Refer to the United Nations Sustainable Sustainability governance: Development Goals website.
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Compliance with Human Rights_
Matter assessed Description Due Diligence Matter assessed Description Due Diligence We promote equal opportunities and treat all people fairly and impartially, without discriminating on the basis of race, skin We respect the rights and freedoms of individuals, which includes colour, nationality, ethnic origin, religion, gender, sexual the fundamental right to the protection of personal data. We are orientation, marital status, age, disability or family aware that our commitment to privacy is key to ensuring that all 1. Non- responsibilities. During 2015, in order to alleviate inequality Diversity 5. Privacy our relationships are built on trust. This commitment is Privacy discrimination between men and women in the technology sector, we worked management expressed in our Privacy Policy, approved in March 2013 and on different initiatives intended to promote women’s access to updated in 2015 to align it with the new challenges faced by our careers in technology. 38% of the Company’s workforce was sector. made up of professional women in 2015, with 19% holding managerial positions.
Safety, Health and Well-being at Telefónica are among the main We are convinced that the best way of achieving global progress priorities for the Company. They are safeguarded through the in terms of respect for freedom of expression is through dialogue 6. Freedom of occupational risk prevention management system, which between governments, industry, civil society (including human 2. Health and ensures safety and health via the integration of prevention expression Freedom of Health and safety rights experts), investors, supranational organisations and other safety criteria in our processes and services. During 2015, OHSAS 18001 affected interested parties. Telefónica continues to form part of expression certification was renewed for all the firms owned by the the Telecom Industry Dialogue and to implement its Guiding Company in Spain and Colombia, and we plan to obtain it in Principles, signed in 2013. Argentina in the course of 2016.
We guarantee the right of our employees to belong to the union For more than a decade, we have been active in promoting and 3. Collective of their choice and will not tolerate any retaliation or hostile respecting children's rights as part of our business strategy and action towards employees who take part in union activities. In from various lines of action. During 2015 the Company continued Good use of bargaining and Collective 7. Children's 2015 we maintained the agreement with Union Network to focus its efforts on self-regulation as a way of promoting the the Internet freedom of International (UNI), continuing our commitment to the bargaining rights association development of products and services which help children and by children fundamental ILO labour standards which relate to freedom of teenagers to take full advantage of the new technologies. Proof association and the right to collective bargaining. of the above is the expansion of “Digital Family” to Latin America.
Our responsibility with regard to respect for Human Rights Telefónica is reinforcing its commitment to ethics and regulatory extends to our business relationships. We require certain levels of compliance. In 2015 the principle of Integrity was reinforced in performance in relation to the ethical, social and environmental 4. Working the Business Principles for those aspects related to corruption. conditions to be met by our suppliers. In this sense, we analyse Supply chain conditions in the A new Anti-Corruption Policy governing the acceptance and and assess our risk suppliers’ level of compliance through the management 8. Corruption and Ethics and supply chain offering of gifts and invitations, prohibiting any form of bribery, EcoVadis platform, check compliance levels using on-site audits bribery was also approved, together with a corporate standard on compliance and we agree improvement plans with those suppliers that do conflicts of interest, which provides all our employees with a not meet the minimum performance levels required. mechanism for reporting any situations which involve conflicts of interest.
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Matter assessed Description Due Diligence Matter assessed Description Due Diligence We are convinced that digital technology enables new models of We support the Right of minorities to enjoy their own cultures, to access to health. Telefónica has spent years investing heavily in profess and practice their own religions and to use their own 9. Healthcare Diversity the development of innovative services in the areas of Health eHealth 12. Language languages. We have developed initiatives which promote this access and Telecare. Several projects were launched in 2015, such as respect at a local level. Saluspot, Connected Wellness and Te acompaña. Fundación Telefónica’s priority is to explore, together with At Telefónica, aware of the potential that the digital technologies experts, specialists and research centres, solutions in the world have to offer, we work along three lines of activity: of educational innovation, publicising them, testing them and encouraging reflection and knowledge of their results in order to Enabling access to communications and the Internet in all contribute to accelerating the changes which are leading society places, including remote and difficult-to-access areas. For towards a digital world. Education is the most important tool for example, the Intégrame project in Peru managed to provide reducing inequality and laying the foundations for sustained 10. Inclusion and mobile communications in more than 800 rural areas in 2015. 13. Access to Digital inclusion growth, especially in vulnerable environments. And the Digital education access to ICT education digitisation of education facilitates new learning opportunities Development of products and services under the “design for all” and further democratises access to quality knowledge. criteria, with the aim of allowing all environments, products, Fundación Telefónica structures its activity for the education of services and systems to be used with people with special children, educators and young people with this premise in mind needs, such as the Whatscine project, which provides - so that they can develop, learn, communicate and work in the audiovisual services for people with visual and hearing online society, and because we firmly believe in a more solidary problems. digital world. We define sustainable innovation as innovation whose main objective is to address a social and/or environmental challenge, Telefónica's practices for conducting responsible roll-out of its both within the Company and outside it, in turn generating value mobile and fixed networks are uniform across the whole Group, for the Company. Telefónica remains committed to technological and seek to achieve the greatest possible coverage, even in innovation as a tool fundamental to our goal of being one of the 14. Deployment remote areas, with the least possible impact. The Company leading actors in the new digital universe, with a capacity to help and management thereby goes beyond legal compliance in each country and Electromagnetic to create a more sustainable world while producing competitive of network establishes guidelines to minimise its impact on the environment fields 11. Social advantages and distinctive products. New solutions such as Social innovation infrastructures by sharing infrastructures, and thus reducing the visual impact. innovation Smart Heritage, which ensures the control of monuments of In addition, Telefónica maintains dialogue and communication social interest, projects for the protection of wildlife like with the communities in which it rolls out its network, on topics Smartfieb and health solutions such as Saluspot which which may be of interest to them, such as electromagnetic fields. guarantee information and access to health care by telephone in several countries in Latin America, are just some examples of innovative projects on which Telefónica has worked throughout the past year.
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External validation_
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Telefónica, S.A. Integrated Report 2015
This report is available on the Telefónica website at: http://www.telefonica.com
Likewise, the mandatory information that must be provided under prevailing legislation is also available to shareholders and the general public.
Edition: Global Head of Public and Regulatory Affairs Telefónica, S.A.
Design and Artwork by: MRM Worldwide Spain, S.A.
Date of publication: May 2016
Legal Deposit: M-12348-2016
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