Sabesp Companhia De Saneamento Básico Do Estado De São Paulo

Guarapiranga Reservoir (Guarapiranga System), in São Paulo

2016

Pedro Breicht Reservoir (Alto Cotia System), in Cotia

Jaguari Reservoir (Cantareira System), in Bragança Paulista SABESP COMPANHIA DE SANEAMENTO BÁSICO DO ESTADO DE SÃO PAULO

OWNERSHIP STRUCTURE IN 31/12/2016 50.3% SÃO PAULO STATE GOVERNMENT, 19.4% NYSE, 30,3% BOVESPA

EMPLOYEES 14,137

RANKING LARGEST SANITATION COMPANY IN THE AMERICAS AND FOURTH IN THE WORLD IN SERVED POPULATION

CUSTOMERS 27.7 MILLION

OPERATION 367 MUNICIPALITIES

COVERAGE INDEXES WATER: 100%, SEWAGE COLLECTION: 82%, COLLECTED SEWAGE TREATMENT: 74%

MARKET VALUE R$ 19.7 BILLION

ADJUSTED EBITDA R$ 4.5 BILLION

ADJUSTED EBITDA MARGIN 32.4%

INVESTMENT IN THE YEAR R$ 3.8 BILLION

PROFIT FOR THE YEAR R$ 2.9 BILLION

DIVIDEND PER SHARE R$ 0.2193

SHARES CODE BM&FBOVESPA – SBSP3; NYSE – (LEVEL III ADR) SBS 256 219 136 187 189 294 119 283 296 224 356 179 230 87 72 131 281 27 360 255 366 233 215 188 53 353 304 77 234 305 98 103 288 160 207 315 186 130 164 85 317 362 221 254 276 18 185 208 9 110 335 116 180 213 124 29 329 158 273 107204 198 155 115 252 348 195 210 359 205 355 173 249 128 74 367 220 51 302 2 139 102 197 297 73 61 209 39 287 79 67 330 117 122 211 299 113 192 108 1 238 303 291 10 174 311 176 171 106 218 253 86 137 23 361 156 95 184 267 278 310 258 126 243 289 225 32 262 8 57 38 354 3 263 316 307 264 13 24 269 261 43 88 182 12 266 214 30 48 308 47 96 247 271 217 114 231 191 17 104 347 343 178 177 89 222 14 248 351 293 99 338 90 175 285 100 358 229 6 301 76 268 28 5 170 202 183 250 331 334 97 25 321 82 344 277 313 64 56 16 228 232 22 235 298 4 127 260 242 66 333 33 109 49 309 212 125 201 363 241 172 78 194 199 50 165 200 352 40 169 153 286 44 244 31 226 92 349 245 154 157 163 318 55 346 168 21 257 365 132 328 350 75 63 203 265 45 54 161 270 320 101 121 345 223 15 Regional Systems Office 339 69 20 295 341 141 357 RA – Alto Paranapanema Business Unit 7 11 324 RB – Baixo Paranapanema Business Unit 34 80 62 145 327 292 149 70 RG – Pardo e Grande Business Unit 52 239 129 RJ – Capivari/Jundiaí Business Unit 284 41 140 240 325 322 83 312 RM – Médio Tietê Business Unit 146 342 135 68 340 326 123 RN – Litoral Norte Business Unit 151 259 196 RR – Vale do Ribeira Business Unit 236 142 206 118 279 RS – Baixada Santista Business Unit 275 166 190 237 RT – Baixo Tietê e Grande Business Unit 46 332 152 São Paulo Metropolitan Region 111 300 181 RV – Vale do Paraíba Business Unit 35 19 59 112 246 58 91 272 133 26 148 274 138 306 120 Metropolitan Office 143 150 37 216 MC – Centro Business Unit 227 162 251 147 71 ML – Leste Business Unit 60 159 323 105 193 290 364 337 MN – Norte Business Unit 36 93 336 42 134 81 84 280 MO – Oeste Business Unit 144 282 MS – Sul Business Unit 65 319 94 314

167 SABESP SERVED MUNICIPALITIES (MAP ON THE SIDE FLAP)

1 RB Adamantina 92 RJ Elias Fausto 184 RB Mariápolis 276 RG Ribeirão Corrente 2 RT Adolfo 93 MS Embu das Artes 185 RT Marinópolis 277 RA Ribeirão do Sul 3 RG Águas da Prata 94 MS Embu-Guaçu 186 RT Meridiano 278 RB Ribeirão dos Índios 4 RA Águas de Santa Bárbara 95 RB Emilianópolis 187 RT Mesópolis 279 RA Ribeirão Grande 5 RM Águas de São Pedro 96 RG Espírito Santo do Pinhal 188 RG Miguelópolis 280 MS Ribeirão Pires 6 RM Agudos 97 RA Espírito Santo do Turvo 189 RT Mira Estrela 281 RG Rifaina 7 RA Alambari 98 RT Estrela d’Oeste 190 RR Miracatu 282 MS Rio Grande da Serra 8 RB Alfredo Marcondes 99 RB Estrela do Norte 191 RB Mirante do Paranapanema 283 RT Riolândia 9 RG Altair 100 RB Euclides da Cunha Paulista 192 RG Mococa 284 RA Riversul 10 RT Alto Alegre 101 RA Fartura 193 ML Mogi das Cruzes* 285 RB Rosana 11 RM Alumínio 102 RT Fernando Prestes 194 RJ Mombuca 286 RV Roseira 12 RB Álvares Machado 103 RT Fernandópolis 195 RT Monções 287 RT Rubiácea 13 RB Álvaro de Carvalho 104 RA Fernão 196 RS Mongaguá 288 RT Rubinéia 14 RA Alvinlândia 105 ML Ferraz de Vasconcelos 197 RT Monte Alto 289 RB Sagres 15 RA Angatuba 106 RB Flora Rica 198 RT Monte Aprazível 290 ML Salesópolis 16 RM Anhembi 107 RT Floreal 199 RJ Monte Mor 291 RB Salmourão 17 RB Anhumas 108 RB Flórida Paulista 200 RV Monteiro Lobato 292 RM Salto de Pirapora 18 RT Aparecida d’Oeste 109 RB Florínea 201 RJ Morungaba 293 RB Sandovalina 19 RR Apiaí 110 RG Franca 202 RB Narandiba 294 RT Santa Albertina 20 RM Araçariguama 111 MN Francisco Morato 203 MN Nazaré Paulista 295 RV Santa Branca 21 RA Arandu 112 MN Franco da Rocha 204 RT Nhandeara 296 RT Santa Clara d’Oeste 22 RV Arapeí 113 RB Gabriel Monteiro 205 RT Nipoã 297 RG Santa Cruz da Esperança 23 RB Arco-Íris 114 RA Gália 206 RA Nova Campina 298 RA Santa Cruz do Rio Pardo 24 RM Arealva 115 RT Gastão Vidigal 207 RT Nova Canaã Paulista 299 RT Santa Ernestina 25 RM Areiópolis 116 RT General Salgado 208 RT Nova Granada 300 RV Santa Isabel 26 ML Arujá 117 RT Glicério 209 RB Nova Guataporanga 301 RM Santa Maria da Serra 27 RT Aspásia 118 RA Guapiara 210 RT Nova Luzitânia 302 RB Santa Mercedes 28 RB Assis 119 RT Guarani d’Oeste 211 RT Novo Horizonte 303 RG Santa Rosa de Viterbo 29 RT Auriflama 120 RV Guararema 212 RA Óleo 304 RT Santa Salete 30 RT Avaí 121 RA Guareí 213 RT Onda Verde 305 RT Santana da Ponte Pensa 31 RA Avaré 122 RG Guariba 214 RB Oriente 306 MO Santana de Parnaíba 32 RT Balbinos 123 RS Guarujá 215 RT Orindiúva 307 RB Santo Anastácio 33 RV Bananal 124 RT Guzolândia 216 MO Osasco 308 RG Santo Antônio do Jardim 34 RA Barão de Antonina 125 RJ Hortolândia 217 RB Oscar Bressane 309 RV Santo Antônio do Pinhal 35 RR Barra do Chapéu 126 RB Iacri 218 RB Osvaldo Cruz 310 RB Santo Expedito 36 RR Barra do Turvo 127 RA Iaras 219 RT Ouroeste 311 RB Santópolis do Aguapeí 37 MO Barueri 128 RT Ibirá 220 RT Palmares Paulista 312 RS Santos 38 RB Bastos 129 RM Ibiúna 221 RT Palmeira d’Oeste 313 RV São Bento do Sapucaí 39 RT Bento de Abreu 130 RG Icém 222 RB Paraguaçu Paulista 314 MS São Bernardo do Campo 40 RA Bernardino de Campos 131 RG Igarapava 223 RA Paranapanema 315 RT São Francisco 41 RS Bertioga 132 RV Igaratá 224 RT Paranapuã 316 RG São João da Boa Vista 42 ML Biritiba-Mirim 133 RR Iguape 225 RB Parapuã 317 RT São João das Duas Pontes 43 RM Bocaina 134 RR Ilha Comprida 226 RM Pardinho 318 RV São José dos Campos 44 RM Bofete 135 RN Ilhabela 227 RR Pariquera-Açu 319 RR São Lourenço da Serra 45 RM Boituva 136 RT Indiaporã 228 RJ Paulínia 320 RV São Luiz do Paraitinga 46 RA Bom Sucesso de Itararé 137 RB Inúbia Paulista 229 RA Paulistânia 321 RM São Manuel 47 RB Borá 138 RR Iporanga 230 RT Paulo de Faria 322 RA São Miguel Arcanjo 48 RM Boracéia 139 RT Irapuã 231 RM Pederneiras 323 MC São Paulo 49 RM Botucatu 140 RA Itaberá 232 MN Pedra Bela 324 RM São Roque 50 MN Bragança Paulista 141 RA Itaí 233 RT Pedranópolis 325 RN São Sebastião 51 RT Brejo Alegre 142 RS Itanhaém 234 RG Pedregulho 326 RS São Vicente 52 RA Buri 143 RR Itaóca 235 RB Pedrinhas Paulista 327 RA Sarapuí 53 RG Buritizal 144 MS Itapecerica da Serra 236 RR Pedro de Toledo 328 RA Sarutaiá 54 RJ Cabreúva 145 RA Itapetininga 237 RS Peruíbe 329 RT Sebastianópolis do Sul 55 RV Cachoeira Paulista 146 RA Itapeva 238 RB Piacatu 330 RG Serra Azul 56 RV Caçapava 147 MO Itapevi 239 RM Piedade 331 RG Serra Negra 57 RB Caiabu 148 RR Itapirapuã Paulista 240 RA Pilar do Sul 332 RR Sete Barras 58 MN Caieiras 149 RA Itaporanga 241 RV Pindamonhangaba 333 RV Silveiras 59 MN Cajamar 150 ML Itaquaquecetuba 242 MN Pinhalzinho 334 MN Socorro 60 RR Cajati 151 RA Itararé 243 RB Piquerobi 335 RT Sud Mennucci 61 RG Cajuru 152 RR Itariri 244 MN Piracaia 336 ML Suzano 62 RA Campina do Monte Alegre 153 RJ Itatiba 245 RA Piraju 337 MO Taboão da Serra 63 RJ Campo Limpo Paulista 154 RM Itatinga 246 MO Pirapora do Bom Jesus 338 RB Taciba 64 RV Campos do Jordão 155 RG Itirapuã 247 RB Pirapozinho 339 RA Taguaí 65 RR Cananéia 156 RG Itobi 248 RT Piratininga 340 RR Tapiraí 66 RV Canas 157 RJ Itupeva 249 RT Planalto 341 RA Taquarituba 67 RT Cândido Rodrigues 158 RG Jaborandi 250 RB Platina 342 RA Taquarivaí 68 RA Capão Bonito 159 RR Jacupiranga 251 ML Poá 343 RB Tarabaí 69 RM Capela do Alto 160 RT Jales 252 RT Poloni 344 RB Tarumã 70 RN Caraguatatuba 161 RV Jambeiro 253 RT Pongaí 345 RM Tatuí 71 MO Carapicuíba 162 MO Jandira 254 RT Pontalinda 346 RV Taubaté 72 RT Cardoso 163 RJ Jarinu 255 RT Pontes Gestal 347 RB Teodoro Sampaio 73 RG Cássia dos Coqueiros 164 RG Jeriquara 256 RT Populina 348 RG Terra Roxa 74 RT Catiguá 165 MN Joanópolis 257 RM Porangaba 349 RA Timburi 75 RM Cesário Lange 166 RR Juquiá 258 RB Pracinha 350 RM Torre de Pedra 76 RM Charqueada 167 RR Juquitiba 259 RS Praia Grande 351 RM Torrinha 77 RG Colômbia 168 RV Lagoinha 260 RM Pratânia 352 RV Tremembé 78 RM Conchas 169 RM Laranjal Paulista 261 RT Presidente Alves 353 RT Três Fronteiras 79 RT Coroados 170 RV Lavrinhas 262 RB Presidente Bernardes 354 RB Tupã 80 RA Coronel Macedo 171 RT Lins 263 RB Presidente Epitácio 355 RT Turiúba 81 MO Cotia 172 RV Lorena 264 RB Presidente Prudente 356 RT Turmalina 82 RB Cruzália 173 RT Lourdes 265 RM Quadra 357 RN Ubatuba 83 RS Cubatão 174 RB Lucélia 266 RB Quatá 358 RA Ubirajara 84 MS Diadema 175 RA Lucianópolis 267 RB Queiróz 359 RT União Paulista 85 RT Dirce Reis 176 RB Luiziânia 268 RV Queluz 360 RT Urânia 86 RG Divinolândia 177 RA Lupércio 269 RB Quintana 361 RT Uru 87 RT Dolcinópolis 178 RB Lutécia 270 RV Redenção da Serra 362 RT Valentim Gentil 88 RM Dourado 179 RT Macedônia 271 RB Regente Feijó 363 MN Vargem 89 RA Duartina 180 RT Magda 272 RR Registro 364 MO Vargem Grande Paulista 90 RB Echaporã 181 MN Mairiporã 273 RG Restinga 365 RJ Várzea Paulista 91 RR Eldorado 182 RB Marabá Paulista 274 RR Ribeira 366 RT Vitória Brasil * Partial and wholesale water supply 183 RB Maracaí 275 RA Ribeirão Branco 367 RT Zacarias COMPANHIA DE SANEAMENTO BÁSICO 2016 DO ESTADO DE SÃO PAULO SABESP SUSTAINABILITY REPORT 2016

BOARD OF DIRECTORS

Benedito Pinto Ferreira Braga Junior – Chairman Francisco Vidal Luna Jerônimo Antunes Jerson Kelman 2016 Luis Eduardo Assis Reinaldo Guerreiro WATER SECURITY AND COMMITMENT TO PROGRESS IN SANITATION Message from the Chairman of the Board of Directors 6

OVERCOMING THE WATER CRISIS, LEGACIES AND MANAGEMENT IMPROVEMENT Message from the CEO 7 EXECUTIVE BOARD THE WORLD’S FOURTH LARGEST COMPANY REGARDING POPULATION SERVED Jerson Kelman Profile 10 Chief Executive Officer

Edison Airoldi PANEL OF INDICATORS Technology, Projects and the Environment Officer 12 Luiz Paulo de Almeida Neto Regional Systems Officer MODERN MANAGEMENT, ETHICS AND INTEGRITY Corporate governance 16 Manuelito Pereira Magalhães Junior Corporate Management Officer STRATEGY AND VISION OF FUTURE Paulo Massato Yoshimoto Planning 22 Metropolitan Officer Rui de Britto Álvares Affonso INFRASTRUCTURE AND PLANNING FOR THE FUTURE OF THE SUPPLY 28 Chief Financial Officer and Investor Relations Officer Water

INFRASTRUCTURE EXPANSION AND THE RECOVERY OF WATER RESOURCES Sewage 42

RESULTS TRANSLATED INTO ADVANCES IN SERVING THE POPULATION 52 SUNSTAINABILITY REPORT 2016 Economic and Financial Management Coordination Aloisio Hildebrand, João Paulo Nocetti Tonello and Priscila Costa da Silva A RELATIONSHIP ORIENTED BY SUSTAINABILITY 62 Writing / Editing Aloisio Hildebrand and Priscila Costa da Silva Sanitation and the Environment Writers Alessandra Mortada Castro, Ana Lúcia Fonseca Rodrigues Szabjubok, Francisca Adalgisa Silva, João Paulo Nocetti Tonello, Paula Márcia Sapia Furukawa, Priscila Costa da Silva, Regina Cavalcanti de RESPECT FOR CUSTOMERS AND FUTURE GENERATIONS 74 Albuquerque, Roseli Chistoni, Silvia Anette Kneip, Valéria D´Amico and Wady Roberto Bon. Social Responsibility Working group Adriano Stringhini, Alessandra Mortada Castro, Aloisio Hildebrand, Ana Lúcia Fonseca Rodrigues Szabjubok, Ângela Beatriz Airoldi, Carlos Eduardo Rodrigues, Awards received in 2016 Carlos Eduardo Hashish, Cristina Gonçalves Tabosa Alves, Elísio Jacques Castro, Francisca Adalgisa Silva, 95 Guaraci Loureiro Sarzedas, Hélio Rubens G. Figueiredo, Irineu S. Yamashiro, João Paulo Nocetti Tonello, Juliana Gualda Scomparim Fartes, Kelly Marques Pinto, Marcelo Miyagui, Márcio de Freitas Junior, Maria da Conceição Gouveia, Marcello X. Veiga, Maria Regina F. Campos, Maycon Rogerio Abreu, Murilo Cesar Simão, Nilton João dos Santos, Paula Márcia Sapia Furukawa, Priscila Costa da Silva, Regina Cavalcanti de Albuquerque, Rodolfo Lopes Protti, Roseli Chistoni, Silvia Anette Kneip, Silvania de Oliveira Chagas, Valéria D´Amico, Valéria Monte Alegre Angeli, Wanderley da Silva Paganini, Social Balance Sheet – 2016 96 Wady Roberto Bon and William Ferraz Ramalho Sousa. Financial Statements audited by KPMG Auditores Independentes Photos / Infographics Equipe Sabesp About the report / Materiality matrix 98 Graphic Project and Art Direction Marcus Romanelli (coordination), Henrique de Brito and Marcello Mussa Location of GRI Indicators 100 Issues 350 exemplares

Location of Global Compact principles 103

The publication of this Sustainability Report complies with article 8 Customer Service Channels 104 of the Government-Owned Companies Act (Brazilian Federal Law Nr. 13,303) 4 5 SABESP SUSTAINABILITY REPORT 2016 INFRAESTRUTURA E PLANEJAMENTO PARA O FUTURO DO ABASTECIMENTO

MESSAGE FROM THE CHAIRMAN OF THE BOARD OF DIRECTORS WATER SECURITY AND COMMITMENT TO “THE ENHANCED OPERATIONAL EFFICIENCY PROGRESS IN SANITATION AND QUALITY OF THE SERVICES PROVIDED IMPLIES AN EFFECTIVE G4-1 The taking up of the challenge and the rap- supply network contingent on the connecting with POLICY OF VALUING id recovery from the most serious water crisis in the sewage network. In addition to countering pol- the São Paulo Metropolitan Region (MRSP), experi- lution, the measure also targets the collective well- AND TRAINING OUR enced over the two-year period from 2014 to 2015, being, offering a level playing field to a large part of EMPLOYEES, LEADERSHIP was proof of Sabesp’s high level of resilience. In society which, with the availability of the collection DEVELOPMENT AND 2016, with water supply fully reestablished, we network, can connect in the proper manner and were able to resume the path of investments in correctly dispose of sewage. TECHNOLOGICAL sanitation works to which we had previously com- The normalization of the water supply scenario MODERNIZATION OF THE mitted, but which had been put on hold temporarily during 2016, in the SPMR did not, however, lead to due to the contingent situation. a slackening off in the efforts to carry out interven- PROCEDURES.” Out of a total of R$3,9 billion invested in 2016, tion work that will ensure water security for the R$1,2 billion was channeled to expanding the infra- decades to come. BENEDITO BRAGA structure for collecting and treating sewage within We stayed on track with the work on the São the covered area. We installed 236,600 new sewage Lourenço Production System, which has been on- Chairman of the connections throughout the State of São Paulo. In going since April 2014 – and which will add up to 6 Board of Directors the interior, seven sewage treatment plants (STP) m³/s within SPMR; and the interconnection of the were put into operation and a further 17 are under Cantareira System with the Paraíba do Sul River, construction. In the SPMR, within the Tietê Proj- work which began in February of 2016 and which ect, we moved forward in expanding the treatment will enable the exchange of up to 8,5 m³/s between capacity of the Barueri STP and, on the coast, we the two catchment areas, thus increasing the stor- remained on track with the “Onda Limpa” (Clean age capacity of both of them. We also moved for- Wave) Program, the largest sanitation intervention ward with the process reversing the waters from on the Brazilian coastline, which is expected to ac- the Itapanhaú basin to the Alto Tietê System. celerate from 2017 onwards. In 2016, we stepped up measures against physi- This high level of investment should be main- cal and commercial losses of water by changing tained in coming years,placing Sabesp as the com- networks, branches and hydrometers (investments pany that most invests in Brazil among the state of R$505 million), while cooperating with the Police sanitation concessionaires. In 2016, a survey pub- in the drive against frauds. lished by the Ministry for Cities points to Sabesp as The enhanced operational efficiency and quality being responsible for 38% of the resources chan- of the services provided implies an effective policy neled to basic sanitation among Brazilian state en- of valuing and training our employees, leadership terprises between 2011 and 20152. development and technological modernization of Expanding the sanitation infrastructure means the procedures. Thus, the year 2016 was also one reducing infant mortality, hospitalization because of major inhouse advances in processes and cor- of water-borne diseases, depollution of rivers, pro- porate management, as well as in risk manage- viding more jobs and enhancing the tourism and ment and compliance at the Company. real estate sectors. In other words, sanitation is Having overcome this tough crossing, the experi- synonymous with prosperity and development. ence from the crisis teaches us that we are able to Nevertheless, we cannot fail to point out that face up to a critical situation with the existence of the the complete depollution of the environment awareness of society, planning, transparency, heavy also depends on the effective participation of investments, technological innovation and the tech- local government and society, by properly dis- nical capability to achieve. The fact that the moment posing of urban garbage, promoting cleaner of adversity was quickly overcome demonstrates that cities and the proper channeling of sewage to Sabesp knew how to turn the crisis to its advantage the collection network. as an opportunity to innovate and implement long- Barueri Sewage To that end, we took a major step forward in term sustainable solutions. We are on the right path. Treatment Plant 2016 when, with the force of the law behind it, BENEDITO BRAGA aerators, in São Paulo Sabesp decided to make connection to the water Chairman of the Board of Directors Metropolitan Region 1 – Consolidated data based on studies by the Brazil National Sanitation Information System – SNIS, 2011, 2012, 2013, 2014 and 2015 editions. 6 7 SABESP SUSTAINABILITY REPORT 2016

MESSAGE FROM THE CEO willingness to pay. Since Sabesp does not receive subsidies, the investments required for universalization OVERCOMING THE come exclusively from earnings retained or loans, which, obviously, have to be repaid. To make it simple, WATER CRISIS, LEGACIES AND the earnings received in a given year will make up the “THREE MAJOR PROJECTS WILL GIVE SABESP funds to be invested in subsequent years. THE CAPACITY TO FACE WEATHER DROUGHTS AS MANAGEMENT IMPROVEMENT For this reason, the policy of distribution of dividends to Sabesp’s shareholders is very important: SEVERE AS THE ONE EXPERIENCED IN 2014-2015: in recent years, earnings have been allocated to investments in accordance with the legal limits. This • SÃO LOURENÇO PRODUCTION SYSTEM, G4-1 The highlight of 2016 was the end of the The crisis has also spurred an extensive social benefits the population in the form of better servic- most serious water crisis ever recorded in the São debate about the need to review concepts of con- es, and the shareholders, in the form of increased • INTERCONNECTION BETWEEN THE PARAÍBA DO Paulo metropolitan region (SPMR).Today we are sumption and appreciation the value of water and equity. In other words, contrary to the erroneous SUL WATER BASIN AND THE CANTAREIRA SYSTEM back to normality, with a strong recovery of the res- sanitation, which in 2017 is now leading us toward assumption that stateowned companies should not ervoirs that supply the metropolis. The total volume a more qualified interaction with the regulatory record profit, the excellent results achieved in 2016 • REVERSAL OF THE ITAPANHAÚ WATER BASIN TO of water reserves in early 2017 already surpasses agency (Sanitation and Energy Regulatory Agency of R$2.9 billion mean good news for all and not only THE ALTO TIETÊ SYSTEM.” that of 2013, before the severe drought took hold. of the State of São Paulo – Arsesp) regarding the for the company’s shareholders. The return to normal conditions was possible process of review on the tariff structure. The second challenge is to align the actions of thanks to a positive combination of three factors: The regulatory body and the regulated party the Company to the municipal governments and the emergency construction and structural works are required to explain the calculation of tariffs to Public Prosecutor’s Office in order to reach solu- Another highlight was the evolution of risk man- implemented right at the outset of the first signs society. Many opinion makers and individuals still tions that may be compatible with the difficult task agement and compliance practices. of the crisis, which avoided a collapse in the wa- mistakenly assume that they pay for the provision to provide sanitation services to irregular, yet con- We have addressed the adjustments required in ter supply; resumption of normal rainfall levels, of a universalized service where all sewage is prop- solidated, settlements. order to comply with the requirements of the State- and the change in habits of the population, which erly collected and treated. But actually the services Also, we should not limit the pace of invest- owned Companies Law of June 2016, and we have understood the critical nature of the moment and delivered are not yet universalized, particularly in ments to the payment capacity of the less well- made progress in building technical parameters for began saving water. Notwithstanding the increase areas of chaotic urbanization, due to serivice con- off. If, on the one hand, we have to provide eco- establishing an investment hierarchy in which ‘e in water availability during 2016, the average con- cessionaire deficiencies. nomic protection for this section of the population match our limited resources with the urgencies of sumption in the SPMR was 15% lower than that However, the reality is different: tariffs are cal- using social tariffs, on the other hand, we have sanitation. The priorities obey the following order:1) registered in 2013, before the crisis. culated taking into account the investments and to make all efforts to increase the willingness to water quality, 2) water security, including counter- The severe crisis we faced has left us two impor- operational costs effectively incurred, rather than pay of social levels that afford to do so. We must ing losses and 3) sewage collection and treatment. tant legacies. Today we have a more robust and re- those that should have been made to provide ser- convince the middle and high social classes that Countering water losses while providing health to silient supply system, with capacity to face weather vices with, for example, European standards. Sa- society can do more and better. And the best way those living in irregular areas, where Sabesp is le- droughts as severe as the one we have experienced besp has full technical capacity to advance towards to reach this objective is to continuously increase gally prevented from operating, are other tasks we in 2014-2015 when three major projects come on universalization in the areas covered by its services. the Company’s productivity in order to improve have managed to address thanks to partnerships stream: The São Lourenço Production System, the A proof of that is that the company is already pro- the quality of services in a manner that can be with the courts. Planning is on-going with partial Interconnection between the Paraíba do Sul Water viding full services in all cities of the interior of the noticed by consumers. execution to eliminate a total of 160,000 illegal con- Basin and the Cantareira System and the reversal of State of São Paulo, which have lower urban com- With the situation normalized and having nections. Being precarious and insalubrious, this the Itapanhaú Water Basin to the Alto Tietê System. plexity. This means that all urban properties are strengthened the structures and operations, in “spaghetti junction” of pipes littering the side streets An example of operational legacy is the successful connected to the water and sewage network and 2016 we were able to channel our efforts to improv- result in huge losses of water due to leakage and un- experience involving the intake of technical reserves the waste collected is correctly treated prior to dis- ing the efficiency of our internal management. Once limited consumption, in addition to directly affecting of the Cantareira System through floating pumps, charge in some water body. again we began addressing the phases for setting the public health of the community. currently on loan to the National Integration Ministry Year after year, the municipality of Franca, for up the Sabesp Integrated Information System– SiiS, Seeing the crisis in the rearview mirror, as we to accelerate the arrival of waters from São Francisco example, has ranked first in the classification of the in view of the SAP platform having come on stream do now, does not mean removing the risk of water river to the states of Paraíba and Pernambuco, which “Trata Brasil” Institute regarding the quality of ser- in April 2017. Regarding the strategic planning, we shortages from the list of priorities. Summariz- were on the verge of a collapse in water supply. vices. Many cities have shown clear improvements completed the review of the Company’s targets for ing, we are now in the phase of enhancing what we The all-out deployment of our professionals has in the quality of river waters as a result of sewage the next five years (2017-2021). have learned from the experience, but with our eyes added a significant technological and qualitative treatment. This is the case, for example, of the Jun- We gave the first steps towards expanding the always pointing on the future of the water supply enhancement to our operations. From the institu- diaí river and of São Paulo’s stretch of the Paraíba Management Excellence Model (MEG) across all ar- without losing sight of the expansion in sanitation tional point of view, we are experiencing a move- do Sul river. In other words, there are no technical eas of the Company in order to promote best prac- and the efficient and sustainable management of ment towards closer relations between industry limits to advance towards more elevated and civi- tices through exchange of experiences and part- our water resources. players (operators, regulators, specialists and wa- lized sanitation standards. nerships, including internationally, for example, ter resource managers) with a view to improving We face two key challenges. First, we must com- establishing technical cooperation arrangements JERSON KELMAN the institutional framework. bine the pace of investments to society’s capacity and and the Waste to Energy project of the Barueri STP. Chief Executive Officer 8 9 SABESP SUSTAINABILITY REPORT 2016 THE WORLD’S FOURTH LARGEST COMPANY REGARDING POPULATION SERVED

OWNERSHIP According to the Arup in Depth Water Yearbook STRUCTURE 2014-2015, Sabesp is the largest sanitation company in the Americas and the world’s fourth largest in population served. In 2016, the Company maintained the trend to- G4-3/4/5/6/7/8/9/12/13 wards the universalization of water supply already IN 2016, Basic Sanitation Company noticeable in previous years, reaching the mark of 50.3% THE WORLD’S 8.7 million water connections. With regard to sew- of the State of São Paulo – Sabesp age services, the 7.1 million connections represent a sewage coverage ratio of 87%, and a collected sewage FOURTH LARGEST completed 43 years of providing water treatment ratio of 79% of the sewage collected. and sewage services in the State of São Net revenues in 2016 were R$14.1 billion, while in- COMPANY come of R$2.9 billion exceeded the figure for the year Paulo, Brazil, always seeking to adapt to preceding the water crisis, in current values. Assets 19.4% REGARDING amounted to R$36.7 billion, while market value stood the needs of the different regions in which at R$19.7 billion on December 31, 2016. Still with regard to its area of operations and mar- it operates, while preserving the collective ket, the Company remains a shareholder in the com- 30.3% POPULATION panies, Águas de Castilho S.A., Águas de Andradina interest that justified its creation. S.A. and Saneaqua Mairinque S.A., companies that provide water and sewage services, while in SESAMM – Serviços de Saneamento de Mogi Mirim S.A., it is SERVED With its main offices in the capital of the State in charge of the modernization, implementation and of São Paulo, it is a publicly-held and government- management of the sewage treatment system. In the controlled company. The Government of the State of non-domestic sewage segment, the Company is a São Paulo holds 50.3% of the capital stock, with the shareholder in the company Attend Ambiental. remainder traded on stock exchanges in Brazil and In synergy with the importance of planning for de- 43 overseas. On December 31, 2016, 30.3% of the shares veloping water resources, Sabesp continues to pro- R$36.7 BI were traded on the BM&FBovespa, in São Paulo, mote the use of reused water for non-prime purposes ANOS with the ticker SBSP3, while the remaining 19.4% based on the production, supply and commercializa- ASSETS were traded in the United States, on the New York tion of reused water obtained from some of its sew- Stock Exchange (NYSE) with the ticker SBS. On the age treatment plants, and it is also a shareholder in 367 BM&FBovespa, the Company’s shares continue to be Aquapolo Ambiental. part of the main indexes. In the electricity segment, Sabesp is a shareholder R$19.7 BI SERVED Responsibility for controlling, inspecting and regu- in the company Paulista Geradora de Energia S.A, MUNICIPALITIES lating Sabesp’s operations, including tariffs, rests for whose operations have been rescheduled to begin MARKET VALUE the most part with the Sanitation and Energy Regula- in the second half of 2018. In 2016, Sabesp injected tory Agency of the State of São Paulo – Arsesp. R$818.0 thousand in its investees, an amount corre- Since 2017, with the commencement of operations sponding to its percentage equity stake in the com- in the municipality of Santa Branca, Sabesp is serving panies: Saneaqua Mairinque S/A (R$150.0 thousand), R$2.9 BI 27.7 367 municipalities of the State of São Paulo, provid- Águas de Andradina S/A (R$607.0 thousand), and MILLION ing water supply and sewage collection and treatment Águas de Castilho S/A (R$61.0 thousand). INCOME CUSTOMERS services to residential, commercial, government and In its mission to “provide sanitation services, industrial customers. Furthermore, it provides water thereby contributing to improving the quality of life on a wholesale basis to five municipalities in the São and of the environment”, Sabesp’s operations are Paulo Metropolitan Region (SPMR), four of whom also aligned with the Ten Principles of the United Nations R$3.9 BI LARGEST benefit from sewage treatment services. Global Compact and with the environmental and so- SANITATION In 2016, the Company provided water to around cioeconomic policies of the government of the São INVESTIMENT 27.7 million people (24.7 million directly and 3.0 mil- Paulo State. COMPANY lion residents in the five municipalities served on the This is how the Company adopts an approach to IN THE wholesale market), representing about 66% of the providing services and establishing relations with urban population in the State. The sewage collection society and its suppliers, through planning and eco- AMERICAS service serves 21.2 million people. nomic, social and environmental responsibility. 10 11 SABESP SUSTAINABILITY REPORT 2016 PANEL OF INDICATORS OPERATIONAL Water connections Water connections/economies Water loss per connection(8) 8,654 8,420 8,210 7,888 7,679 thousands 308 258 319 372 392 perdas por ligaçãoof connections liters/ thousands conneciton/ PANEL OF 12,000 11,686 11,375 10,910 10,613 of economies 2016 2015 2014 2013 2012 day Sewage2016 2015 connections2014 2013 2012 Sewage connections/economies Water Meter ratio(9) INDICATORS 7,091 6,861 6,660 6,340 6,128 thousands 2016 99.97 of connections hidrometração 2015 99.97 thousands 2014 99.97 2012 TO 2016 10,123 9,797 9,496 9,024 8,723 of economies 2013 99.97 2016 2015 2014 2013 2012 2012 99.97 % Water network extension(5) Volume of water produced 73,015 71,705 70,800 69,619 67,647 vol, prod, água 2,696 2,466 2,840 3,053 3,059 2016extensão2015 2014 esgoto2013 2012 km million 2016 2015 2014 2013 2012 m³ Sewageextensão network extension esgoto(5) 50,097 48,774 47,992 47,103 45,778 Volume of water – metered on retail market etas2016micromedido2015 2014 2013 água2012 varejokm 1,465 1,399 1,573 1,629 1,601 SERVICE WTP – Water Treatment Plants million 2016 2015 2014 2013 2012 m³ 237 235 235 232 214 Water coverage ratio(1) Volume of water billed on the wholesale market 2016 2015vol,2014 fat,2013 agua2012 atacadounits 227 216 247 299 298 Sewage collection coverage ratio poços (2) million Collected sewage treatment ratio Wells 2016 2015 2014 2013 2012 m³ 1,093 1,085 1,055 1,083 1,079 Resident Resident Volume of water billed on the retail market TENDS TOWARDS UNIVERSALIZATION ~100% population population 1,763 1,698 1,812 1,835 1,796 2016 87% provided with provided with 2016 2015 vol,2014 fat,2013 agua2012 varejounits 79% water supply(3) sewage collection(3) million WTP – Sewage Treatment Plants 2016 2015 2014 2013 2012 m³ 548 539 524 509 502 TENDS TOWARDS UNIVERSALIZATION ~100% 24.7 2016 21.2 Volume of sewage billed 86% 2015 vol fat esgoto 1,552 1,481 1,562 1,579 1,535 78% 24.4 2015 21.0 2016 2015 2014 2013 2012 units million 2016 2015 2014 2013 2012 m³ TENDS TOWARDS UNIVERSALIZATION ~100% 24.2 2014 20.6 Waterperdas Billed Loss - faturamento Index(6)

85% 2016 20.8 (10) 2014 Milion inhabitants empregadosHeadcount 77% 2015 16.4 14,137 14,223 14,753 15,015 15,019 Positive perception of 2014 21.3 TENDS TOWARDS UNIVERSALIZATION ~100% customer satisfaction(4) 2013 24.4 2013 84% 2012 25.7 % 2016 82% 2016 2015 2014 2013 2012 units 78% (7) 2015 75% Water Metered Loss Index Operatingprodutividade productivity operacional 2014 80% 2016 31.8 TENDS TOWARDS UNIVERSALIZATION ~100% 1,114 1,074 1,008 948 919 2013 perdas89% - micromedição 2015 28.5 2012 83% 2012 89% 2014 29.8 77% 2013 31.2 connections/ 2012 32.1 % 2016 2015 2014 2013 2012 employee 12 9 SABESP SUSTAINABILITY REPORT 2016 PANEL OF INDICATORS FINANCIAL SOCIAL Unit 2016 2015 2014 2013 2012 Gross revenues R$ million 14,855.1 12,283.5 11,823.4 11,984.8 11,391.2 Amount invested in in-company Positive public perception social programs Net revenues R$ million 14,098.2 11,711.6 11,213.2 11,315.6 10,737.6 valor - internos ofpercepcao Sabesp’s social responsibility positiva Adjusted EBITDA(11) R$ million 4,571.5 3,974.3 2,918.7 4,006.6 3,605.0 411 664 617 594 522 2016 63 Adjusted EBITDA Margin % of net income 32.4 33.9 26.0 35.4 33.6 2015 64 Adjusted EBITDA Margin before construction revenues and costs % of net income 43.3 46.6 34.4 44.6 43.0 2014 66 (12) 2013 70 Operating result R$ million 3,429.6 3,044.0 1,910.7 3,138.8 2,843.3 R$ Operating Margin(12) % of net income 24.3 26.0 17.0 27.7 26.5 2016 2015 2014 2013 2012 milhões 2012 64 % Result (net income/loss) R$ million 2,947.1 536.3 903.0 1,923.6 1,911.9 Net Margin % da receita líquida 20.9 4.6 8.1 17.0 17.8 Amount invested in external social Complaints ranked at the Net Debt by Adjusted EBITDA(13) Multiple 2.2 2.9 3.1 1.9 1.9 andvalor environmental - externos programs Consumerreclamações Protection Agency ranqueadas – Procon Net debt to equity(13) % 65.4 83.7 68.1 59.3 61.8 39 16 47 63 58 93 86 78 Investiment(14) R$ million 3,877.7 3,481.8 3,210.6 2,716.0 2,535.6 41 61

2016 2015 2014 2013 2012 unidade % da receira 2016 2015 2014 2013 2012 bruta ENVIRONMENTAL Position in the ranking of the Consumer Unit 2016 2015 2014 2013 2012 Frequency rate of accidents Protectionposição Agency ranking – Procon(22) procon involving medical leave G4-EN1 Chemical products used in treating water and sewage Tons 261,326.3 279,199.7 273,417.9 268,959.8 232,386.1 acidentes º G4-EN2 Percentage of recycled chemical products used 6,7 5,7 6,5 6,7 5,5 - 43 - - - in treating water and sewage(15) % 3.45 3.06 3.56 3.97 4.54 (16) G4-EN3 Total electricity consumption Terajoules(TJ) 7,895 7,726 8,613 8,309 8,552 acidentes por G4-EN5 Electricity consumption/m³ of produced water kWh/m³ 0.67 0.72 0.71 0.63 0.65 milhão de horas 2016 2015 2014 2013 2012 trabalhadas 2016 2015 2014 2013 2012 posição G4-EN5 Electricity consumption/m³ of treated sewage kWh/m³ 0.43 0.47 0.43 0.42 0.42 percepcao positiva G4-EN6 Reduction in energy consumption for water produced – J % -2.0 12.4 -3.2% - - (1) 99% or more. (2) For methodological reasons, it includes a variation margin of plus or minus 2 percentage points. (3) From 2016 on, the demographic data G4-EN6 Energy consumption reduction for sewage – J % -3.0 -0.7 -2.4% - - shown herein started to take into account “The Projected Population and Domiciles or the Municipalities of the State of São Paulo: 2010-2050”, prepared by the Reduction in energy requirements/m³ G4-EN7 % 6.7 -1.4 -12.4 - - State Data Analysis System Foundation, as well as the new methodology used for determining the service and coverage indicators discussed in the chapter of water – kWh/m³ “Strategy and Vision of the Future.” Data were not recalculated for the years 2012 and 2013. (4) Survey carried out in 2016 by Praxian Consultoria Ltda. (5,928 interviewees across the entire operating base with a margin of error of 1.3% and a reliability interval of 95%). (5) Includes water mains, branch collectors, G4-EN7 Reduction in energy requirements/m³ % 7.7 -9.3 -4.2 - - of sewage – kWh/m³ interceptors and outfalls. Register base updated in December 2016. (6) Includes real (or physical) and apparent (or non-physical) losses .The percentage of G4-EN8 Total water withdrawn – Surface Million m³ 2,539 2,397 2,674 - - water loss represents the resulting ratio between the (i) Lost Volume Billed and (ii) Volume of Water Produced. The Lost Volume Billed corresponds to: The Volume of Water Produced MINUS the Volume Billed MINUS the Volume of Uses. The Volume of Uses corresponds to: water used for regular maintenance G4-EN8 Total water withdrawn – Underground Million m³ 168 168 166 - - of pipelines and water reservoirs; water provided for use by municipalities, such as firefighting, for example; and water provided to irregular settlements. (17) G4-EN10 Percentage of water consumed in treatment at WTP % 3 1.73 0.8 0.5 2.3 (7) Includes real (or physical) and apparent (or non-physical) losses. The water loss percentage represents the ratio between the (i) Lost Volume Micro Measured and (ii) Volume of Water Produced. The Lost Volume Micro Measured corresponds to: the Volume of Water Produced MINUS the Volume of Uses. The Volume Recovery percentage of washing water from % 84.3% 76.59 87.4 95.5 96.8 G4-EN10 filters and clarifiers at WTP(17) of Uses corresponds to: water used for periodic maintenance of pipelines and water reservoirs; water provided for use by municipalities, such as firefighting, Direct and indirect emissions of greenhouse gas(18) t CO e 2,204,464 2,359,114 2,154,407 2,141,111 for example; and water provided to areas of irregular settlements. (8) Calculated by dividing the Measured Volume lost a year, by the annual average number 2 of active water connections, divided by the number of days in the year. (9) Connections with Water Meters / Total Connections. (10) Internal headcount. Does G4-EN15 Direct emissions of greenhouse gases (GHG) (Scope 1) t CO e 1,909,847 2,018,912 1,912,750 - 2 not include those assigned to other entities. Employees with permanent disability are no longer considered as from 2016. (11) Adjusted EBITDA corresponds Indirect emissions of greenhouse gases (GHG) G4-EN16 t CO e 267,117 322,006 221,212 - to net income before: (i) expenses with depreciation and amortization; (ii) income and social contribution taxes (federal revenue taxes); (iii) financial income deriving from energy aquisition (Scope 2) 2 and (iv) other operating expenses, net. (12) Does not include financial revenues and expenses. (13) Net debt encompasses the debt, less cash and cash Other indirect emissions of t CO e 27,500 18,197 20,445 - equivalents. (14) Does not include financial commitments assumed in program agreements (R$155 million, R$65 million, R$116 million, R$177 million and G4-EN17 greenhouse gases (GHG) (Scope 3) 2 R$6 million, in 2012, 2013, 2014, 2015 and 2016, respectively). (15) Refers to the quantity of “fluorosilicate acid” in relation to the total chemical products used G4-EN22 Reuse water volume provided(19) thousand m³ 1,683.64 1,851.8 1,214.9 1,679.70 1,645.79 in treating water and sewage. (16) Of the total electricity consumed, 81.5% was used in the water process (catchment, production, transportation via pipelines Percentage of reuse water sold over and treatment), 17.3% in the sewage process (collection, removal and treatment) and 1.2% in the administrative process. (17) Refers to water treatment plants G4-EN22 sewage treated at STP with reuse(19) % 0.4 0.52 0.27 0.35 0.35 within the Metropolitan Office. (18) The 2015 inventory indicates that sewage collection and treatment activities are the greatest sources of GHG emissions, accounting for approximately 87% of the total. Electricity contributes 12%, while the other activities account for approximately 1%. The annual GHG inventory Reuse water percentage provided G4-EN22 (19) % 32.19 35.67 28.50 35.42 34.74 for 2016 is under preparation during 2017. (19) Refers to the sewage treatment plants (STPs)at Barueri, Jesus Netto, Parque Novo Mundo and São Miguel, over installed capacity which have facilities for producing water for reuse. Water supplied corresponds to what is sold. The capacity of the facilities is nominal. The amounts for 2016 Total investments and expenses related take into account the volume of effluent treated and supplied to the Aquapolo Ambiental water reuse project, which was 13.1 million cubic meters. (20) This G4-EN31 (20) R$ million 21.2 18.4 29.8 32.5 27.7 to environmental protection takes into account the investments in and expenditures on environmental protection directly associated with the development and implementation of the key corporate environmental management programs, as well as the Program for the Rational Use of Water – Pura, among other environmental initiatives Number of STP and WTP with Units 129 95 95 95 65 Environmental Management Systems (EMS)(21) at local level in which the company’s business units engage. Other investments and expenditures associated with environmental protection are included Number of STP and WTP certified to ISO 14001(21) Units 35 35 51 50 50 in the total amount of operating expenses and investments shown in this report, given the direct relationship of these environmental activities with the company’s core business. (21) Since 2015, Sabesp has been working with a mixed model for setting up the Environmental Management System (SGA) at the Number of people on monitored environmental and sanitary People 71,122 77,580 58,018 64,000 56,456 STPs and water treatment plants (WTPs), with ISO 14001 applied to the certified scope while, in the case of the other plants, it uses its own environmental education visits to the operating units management (known as SGA-Sabesp). In the light of this strategic realignment, there was a reduction in 2015 in the 14001 certified scope. (22) When not Tree Seedlings planted voluntarily Units 9,500 12,214 20,702 19,081 30,034 informed this means that Sabesp was not among the 50 companies with the most complaints in the ranking of the Consumer Protection Agency – Procon. Amount of recyclable materials collected at Sabesp 3Rs Tons 177 268 310 381 372 Average consumption of ethanol fuel L/vehicle 3,143 2,827 2,861 2,747 2,532 Ethanol consumption/total fuel % 62 57 53 54 50

Positive public perception of Sabesp’s environmental responsibility(4) % 57 60 63 69 65 14 15 CORPORATE GOVERNANCE MODERN MANAGEMENT, ETHICS AND INTEGRITY

Decantors at Guaraú, Sabesp’s largest Water Treatment Plant, part of the Cantareira System SABESP SUSTAINABILITY REPORT 2016

Sabesp G4-34/56 Operated Area FOR STATE-OWNED companies, Among the innovations introduced by the State-Owned Companies Law and its provisions, 2016 particularlly stands out because of the impact some relate to the Code of Ethics and Conduct. Sabesp’s Code of Ethics and Conduct, launched of the opening discussions for adapting to Law in 2003 and updated in 2014, represents its key benchmark on principles and values, and ap- No. 13303/16 (The State-Owned Companies Law) plies to the organization as a whole, including the Served and State Decree No. 62349/16. Board of Directors, in accordance with the new legal system. It sets out the bases for the Com- Municipalities pany’s relationship with its various stakeholders, Created to provide greater legal security while being available at www.sabesp.com.br. enhancing the role of the control bodies, the The Ethics and Conduct Committee is respon- INTERNAL Law provides for changes in the current manage- sible for the appropriateness, timeliness, promo- CONTROLS HAVE ment rules, including regulations on tenders and tion and application of the Code. An important against the government, in compliance with Law Brazilian Bar association (OAB) and integrates BEEN EVALUATED contracts, in addition to mandatory adoption of mechanism for its actions is the Internal Whistle- 12846/2013 (the Anti-Corruption Law) and the US the UN Global Compact’s Anti-corruption Work- IN A STRUCTURED corporate governance practices. blower Channel, which centralizes all complaints Foreign Corrupt Practices Act (FCPA). ing Group and the Instituto Ethos Integrity Com- AND SYSTEMATIC As a joint-stock corporation listed on the Novo received by the Ombudsman, the Customer Ser- In 2016, the Integrity Program was reshuffled to mittee, having staged in 2016 a gathering of spe- Mercado segment of the BM&FBovespa and vice Unit, e-mail, phone, post office box, mail, or ensure compliance with Law 13303/2016, and cur- cialists in anti-corruption specialists to debate MANNER shares traded on the New York Stock Exchange personally delivered to the Audit Superintendence, rently consists of a set of internal integrity mecha- control measures and ways of working together. SINCE 2005. since 2002, Sabesp benefits from the fact of al- which is the unit that controls the Channel. nisms and procedures involving monitoring and Within the scope of the state government, ready having a consolidated corporate gover- In 2016, 154 incidents were recorded, of which encouraging complaints about irregularities, in Sabesp is directly involved in the actions of the nance structure which facilitates its adaptation 65% were verified, while 35% are still under in- addition to the effective application of the codes of government’s internal affairs department and co- to the new rules and regulations. vestigation. Of the total, 17% involved inappropri- ethics and conduct, policies and guidelines for the ordinates a working group consisting of govern- Throughout 2016, the Company sponsored events ate behavior, harassment, discrimination, per- purpose of detecting and putting right deviations, ment-controlled (private) from the State Depart- to study and debate the adaptation measures re- secution and unfair treatment. In the case of all frauds, irregularities and illegal acts. ments of Sanitation and Water Resources and quired in order to be legally compliant. The primary complaints considered pertinent, penalties were The Program is currently structured on sev- Energy and Mining, and whose purpose is to set measures involve changes to the bylaws, adjustment imposed on 64 own and outsourced employees: en pillars: Senior Management’s Commitment; up mutual cooperation for planning, developing to the governance structure, such as setting up a 6 warnings, 7 suspensions and 51 redundancies. Functional Structuring; Values and Conduct and and implementing compliance programs within Statutory Appointment Committee, management The outcomes of the investigations into the com- the Whistleblower Channel; Relation with Third the State of São Paulo. assessment and the creation of policy for operations plaints are forwarded to the Audit Committee and Parties; Governance and Internal Controls; Risk G4-SO3 During the year, the Program mapped with related parties, in addition to drawing up Inter- the Ethics and Conduct Committee. Management; Training and Communication. 112 actions as compliance practices which were nal Regulations on Bidding Procedures. The State-owned Companies Law also makes Also in 2016, the institutional policies on In- allocated priority following the analysis of corpo- it mandatory to set up a Statutory Audit Commit- ternal Audits and Compliance were reformulated, rate corruption and fraud and new legal require- tee consisting of an independent majority. The based on the “Three Lines of Defense in Effective ments. The evaluation of these actions showed Audit Committee at Sabesp has existed for 10 Risk Management and Control” model recom- that, in relation to the 2015 evaluation, there was THE COMPANY’S years, consisting of 3 independent directors who mended by The Institute of Internal Auditors – IIA. growth of 20% in compliance. meet every fifteen days. To find out more about The purpose of the Institutional Policy on Com- CODE OF ETHICS AND CONDUCT, the corporate governance structure of Sabesp go pliance, in addition to setting out the guidelines, to www.sabesp.com.br/investidores, “Governan- principles and competences and disseminating the Internal controls LAUNCHED IN 2003 AND UPDATED ça Corporativa” section. Program at all levels within the company, is to consolidate the three lines of defense model within the Internal controls have been evaluated in a Anti-corruption internal control structure and to ensure that the structured and systematic manner since 2005, IN 2014, REPRESENTS functional compliance area created in 2016 operates benchmarking with the parameters of the Com- Sabesp launched its Integrity Program in 2015, independently in carrying out its responsibilities. mittee of Sponsoring Organizations of the Tread- ITS KEY BENCHMARK initially with aim of implementing the set of an- In addition to the internal practices, Sabesp way Commission (COSO) of 2013 and the Control ticorruption measures, especially those aimed sits on the Committee on Anti-corruption and Objectives for Information and Related Technol- ON PRINCIPLES AND VALUES. at preventing, detecting and remediating crimes Compliance of the Pinheiros/SP Chapter of the ogy (COBIT). 18 19 SABESP SUSTAINABILITY REPORT 2016 MODERN MANAGEMENT, ETHICS AND INTEGRITY

The internal controls evaluation process takes regard to not auditing their own work, not holding place once a year, taking into account both the managerial functions and not acting on behalf of occasional existence of risks associated with the their client. Deloitte Touche Tohmatsu Auditores preparation and disclosure of financial state- Independentes served as Sabesp’s auditors from ments, and possible significant changes to infor- the review of the quarterly information – ITR – of mation technology processes and systems. The September 30, 2012, until the review of the quar- controls are tested by the Audit Superintendence, terly information – ITR – of March 31, 2016. Dur- an independent unit of the Company, and include ing this period, they audited the financial state- the procedures for adapting the accounting led- ments and reviewed the quarterly information Sabesp is gers; the preparation of the financial statements and finance projects. responsible for in accordance with the official rules; and proper KPMG Auditores Independentes has served as Sa- 25% authorization of transactions involving the acqui- besp’s auditors since the review of the quarterly in- of all investment sition, use and disposal of the Company’s assets. formation – ITR – of June 30, 2016. During this period, made Management’s assessment of the effective- they have audited financial statements and reviewed on sanitation ness of internal controls did not identify any the quarterly information. In 2016, the Company paid in Brazil. shortcomings considered material in 2016, as R$2.0 million for these services, of which 93.0% refers has been the case in previous years. to auditing of financial statements. Among Sabesp’s af- filiates, KPMG Auditores Independentes audits Águas de Castilho S.A. and Águas de Andradina S.A. During External Audit its period of service to the Company, Deloitte Touche Tohmatsu Auditores Independentes audited the com- Sabesp respects the principles that protect pany SESAMM – Serviços de Saneamento de Mogi the independence of the external auditors with Mirim S.A. During the period of their service to the Company, the auditors did not provide any services not involving external auditing. AS A JOINT-STOCK Management Compensation CORPORATION LISTED ON THE G4-51In 2016, the compensation of the directors, NOVO MERCADO SEGMENT members of the fiscal council and officers, in gross values, including benefits and legal charges, was approximately R$4.4 million. This amount includes OF THE BM&FBOVESPA AND around R$494.2 thousand referring to officers’ variable compensation, and it should be remembered SHARES TRADED ON THE NEW that variable compensation is closed to directors and members of the fiscal council, pursuant to YORK STOCK EXCHANGE SINCE State Decree 58265/12 ratified by the shareholders’ meeting of April 2013. 2002, SABESP BENEFITS FROM Under the Brazilian corporate law, the compensation of the directors, members of the fiscal council and officers is fixed, in an aggregate amount, by THE FACT OF ALREADY HAVING the shareholders’ meeting. At Sabesp, the compensation policy for board members and officers is A CONSOLIDATED CORPORATE fixed in accordance with the guidelines of the government of São Paulo, always subject to approval by GOVERNANCE STRUCTURE. the shareholders’ meeting.

Details of the Cachoeira do França Reservoir pumping station, in the municipality of Ibiúna, São Lourenço Production System catchment point 20 21 Filters of the Taiaçupeba WTP, in Suzano, which treats water from the Alto Tietê System, PLANNING already connected to the Rio Grande System and, soon, to the Itapanhaú river basin

STRATEGY AND VISION OF THE FUTURE SABESP SUSTAINABILITY REPORT 2016 STRATEGY AND VISION OF THE FUTURE

Legend Water Supply Coverage Water Service FEASIBLE Sewage Collection Coverage CONNECTION Sewage Service Example G4-2 Without Coverage Household without Service, Without Service sewage connection SABESP DOES not view sustainability – ERM – The Committee of Sponsoring Organiza- coverage (Without Service) even with tions of the Treadway Commission “Enterprise Risk and feasable sewage collection as mere rhetoric. Instead, it understands Management – Integrated Framework” and ABNT connections system installed (With Coverage) standard NBR ISO 31.000 – Risk Management – it is a prerequisite for a business to exist. Principles and Guidelines, the risk management process is divided into four categories: strategic, financial, operational and compliance. The key risks It reflects results in the social, environmental and to which the Company is exposed are described in economic areas in the Company, through the universal section 4.1 of the Reference Form. Water network Water distribution of quality water and the expansion of sewage To achieve our vision of being a global benchmark connections collection and treatment, improving the life quality and in the provision of sustainable, competitive and in- Sewage network Sewage connection the health of the population, in addition to contributing to novative sanitation services, focused on our custom- a healthier environment. ers, we reformulated our strategic guidelines. They At the economic level, a sound business in a reg- are: water security, service excellence, sustainability, Coverage Water Feasible Connection without Feasible ulated environment results in profitability which, stakeholders engagement, innovation and technology, = connection Service Sewage Feasible Connection in turn, leads to greater investments in sanitation appreciation of people and expansion of the sewage and the subsequent economic development of the treatment network. Our future objectives, according regions served. to these guidelines, will be to: The Company’s main market is the São Paulo Metro- politan Region (SPMR), which has more than 21 million Ensure the availability of water in our area of op- and social justice; and to apply the principles of fi- Balance of Targets inhabitants, accounting for nearly half the population of erations and to continue expanding sewage col- nancial growth and sustainability to the business, the State of São Paulo and one the world’s largest ag- lection and treatment using good, cost-effective defining goals and responsibilities. One goal to be The year 2016 also reflected the realignment of glomerations. Located at the furthest edge of the Alto technology, so as to contribute to the goal of univer- pursued is to give water its economic value by re- the investments needed to tackle the water crisis, Tietê basin, the SPMR’s supply per capita is similar to sal availability and to provide quality services and structuring the tariff calculation model. prioritizing actions that minimize its effects. The semi-arid regions. products. Our aim is to maintain universal coverage collected sewage treatment index reached 79%, Sabesp’s strategies and guidelines consider in water supply, with high levels of quality and avail- Encourage the creation, adoption and dissemi- compared to the target of 86%. Although lower than BY USING TOTAL inputs to be the study of scenarios, risks and op- ability, with some 815,000 new water connections nation of solutions focusing on value creation, the established target, the index achieved is higher URBAN AREA OF portunities. Based on international standards and by 2021. The Company also intends to raise sew- seeking to enhance the management of assets and than the index registered in 2015 (78%), tending to- MUNICIPALITIES, Brazilian technical standards, specifically COSO age collection and coverage, with approximately 1.2 to continue to reduce water losses and operating wards the expansion of service provision. The sew- SABESP CHANGED million new connections by the year 2021. costs. We can achieve this by investing in techno- age collection index reached 87%, slightly below ITS WAY OF logical research and development and automation, the target of 88% for the period, maintaining the Improve the Company’s management through the integrated planning and improved processes. In progress in sewage collection service in relation to CALCULATING WATER SECURITY, SERVICE introduction of an ERP system expected to go live 2016, Sabesp invested approximately R$11.9 mil- the previous year (86%). INDEXES. this year and a CRM system to replace the current lion in research, development and innovation, both The pace of implementation of new sewage con- EXCELLENCE, STAKEHOLDERS commercial and management information systems. with its own funds or funds raised through fund- nections was maintained, with 236.6 thousand new In addition, the project to improve the Company’s raising entities or from third parties. To learn more, connections, a level very close to the proposed tar- management model based on the Management see the chapter “Expansion of Infrastructure and get (242 thousand connections), and which points ENGAGEMENT, INNOVATION, Excellence Model (MEG) of Fundação Nacional da Recovery of Water Resources.” to the resumption of the planned course, since it Qualidade (National Quality Foundation) was initi- exceeds by ten thousand units the connections TECHNOLOGY, APPRECIATION OF ated at the end of 2016. The benefits expected from Stimulate the growth of our professionals through implemented in 2015. The target of 177 thousand these projects include strengthening management, opportunities and recognition, increasing their job new water connections for 2016 was exceeded, with PEOPLE AND EXPANSION OF THE greater support in decision making, increased ef- satisfaction and wellbeing, so as to maintain their 200.2 thousand new connections in the period. ficiency of internal processes and operations, and commitment and productivity. To motivate, retain With regard to the loss ratio, the end of the wa- increased productivity. and attract people by providing opportunities for ter crisis, which until the end of 2015 imposed the SEWAGE TREATMENT NETWORK ARE professional and personal development, continu- management of pressures in water distribution Promote Sabesp’s growth with economic and fi- ous access to operational, technological and mana- networks, led to an increase in indicators in 2016. SABESP’S STRATEGIC GUIDELINES. nancial balance, in an environmentally adequate gerial knowledge applicable to the business. This increase is expected to continue in the coming 24 25 SABESP SUSTAINABILITY REPORT 2016 STRATEGY AND VISION OF THE FUTURE

With the interconnection, months, since the indicators are calculated using not yet connected, known as “feasible,” to the it will be possible the annual volume moving average. total homes existing in the area of provision of to pump water In 2016, the Company made progress in its stra- services contracted with the municipal govern- from Jaguari reservoir, in the tegic planning, completing the revision of its targets ments (servable areas). Within this universe, the HAVING OVERCOME Paraíba for the next five years. In this process, the collected service index is calculated as the ratio of homes THE CRISIS, SABESP do Sul basin, to the Cantareira sewage treatment indicator applied until Decem- connected to the networks to the total homes of MADE PROGRESS System ber 2016, which considered the treated volume in serviceable areas. IN ITS STRATEGIC relation to the volume of sewage collected, was The principal changes regarding the indicators PLANNING FOR THE replaced by the “Index of Economies Connected to reported by Sabesp until 2016 include the defini- NEXT FIVE YEARS. Sewage Treatment”, which represents the connection of the area that is considered the denomina- tion of consumer units to sewage treatment. tor of the calculation formula, whose classification Additionally, as of this year, Sabesp will begin to was changed from “urban area,” as defined by the disclose coverage and service indicators, consider- municipalities, to “serviceable area,” and the in- ing the concession areas of the services or service- troduction of the coverage index. Additionally, the able areas. A serviceable area is the urbanized area Company now uses the most recent demographic defined by mutual consent with the Municipal Gov- and home estimates released by the State Data ernments for the provision of services. The cover- Analysis System Foundation – Seade, for the period age index represents the availability of the service from 2010 to 2050. with public water or sewage networks, and the ser- The following table shows the Company’s vice index represents the connection of the property achievements in 2016, based on the new set of in- to the public network. dicators, and the targets for the period 2017-2021, The coverage index is calculated as the ra- to be supported by investments of R$13.9 billion. tio of homes connected to the public supply or Further details on the planned investments can be sewage collection networks, plus the homes for seen in the Financial and Economic Management which these networks are already available but chapter, page 50.

Achievements in 2016 and Targets for 2017-2021 Achieved Targets 2016 2016 2017 2018 2019 2020 2021

1 Tends toward universal Water supply service (%) service - Tends toward universal coverage Sewage collection service (%)2 82 - 83 84 85 86 87

3 Tends toward universal Water supply coverage (%) coverage - Tends toward universal coverage Sewage collection coverage (%) 89 - 90 91 91 92 93 Index of economies connected to sewage treatment (%) 74 - 75 76 77 80 83 New water connections (thousands) 200.2 172 185 168 164 155 143 New sewage connections (thousands) 236.6 242 200 226 235 240 234 Micro-measured water losses index (%) 31.8 28.4 31.7 31.3 30.6 29.9 29.3 (1) 95% or more (2) The value realized in 2016 presented herein was calculated in accordance with the new methodology, and it differs from the value presented in the Panel of Indicators. (3) 98% or more

In addition, the Company defined some indicators that are in line with its organizational strategy, reflecting economic, social and environmental performance, and which are included in the Company’s Profit Sharing Program.

26 27 One of Sabesp’s main initiatives to ensure water security in the São Paulo Metropolitan Area WATER SECURITY is the São Lourenço Production System, which has more than half of the work carried out already INFRASTRUCTURE AND PLANNING FOR THE FUTURE OF SUPPLY SABESP SUSTAINABILITY REPORT 2016 INFRASTRUCTURE AND PLANNING FOR THE FUTURE OF SUPPLY

Inflow to the main supply systems of the SPMR Inflow Jan-Dec in m³/s Metropolitan Office Cantareira Guarapiranga Alto Tietê Alto Cotia Rio Grande Rio Claro Historical average 83.4 43.5 12.1 19.9 1.1 5.8 1.0 Year 2016 73.5 36.9 15.0 14.5 1.2 5.2 0.7 SABESP IS THE UTILITY company This takes place by structuring of programs di- Variation (%) 88.2% 84.8% 124.4% 73.0% 108.3% 90.4% 68.1% rected to the three regions served: the São Paulo responsible for providing water to 367 Metropolitan Region (SPMR), the Coastal region and the Interior of the State of São Paulo. Thus, municipalities in the State of São Paulo, during the last decade, global water production ca- a universe of 27.7 million customers, pacity structure grew by 14%, to 118 m³/s at the end the Sanitation and Energy Regulatory Agency of the to be granted by the National Waters Agency (local of 2016. State of São Paulo (Arsesp) to cancel the Program acronym, ANA) and the Department of Waters and around 64% of the total population of the At the same time, in regions such as the SPMR for Encouraging Reduction in Water Consumption Energy of the State of São Paulo (local acronym, and the Coastal region, where the occurrence of ir- and Contingency Tariff. Arsesp granted the Com- DAEE), based on the behavior of the rainfall, water State (with 24.7 million served directly and regular areas is high, and where the Company is pany’s request on March 31, 2016, and the Bonus inflows, the level of the water sources and the re- legally prevented from acting, agreements with the Program and the Contingency Tariff terminated on quests from the Company. three million residents in the municipalities judiciary and the municipal government have al- May 1, 2016. Even with the end of the economic in- With the improvement in the trends of the wa- lowed for greater supply availability and guarantee centives, the population continued to save water. ter inventories since the end of 2015, in February receiving water on the wholesale market). of the rights of hundreds of families. With the water sources recovering, on December 2016, the Company received official authorization to 31, 2016, the global storage index of the production extract 23 m³/s from the Cantareira System, a sig- São Paulo Metropolitan Region systems stood at 1,238.6 trillion liters taking into nificant increase when compared to 13.5 m³/s au- DURING THE The water is distributed by means of 73,015 kilome- account the volume of the technical reserves. This thorized during the majority of the months of 2015. LAST DECADE, ters of networks and pipelines, besides 8,654 mil- After two years of the most serious water cri- represents 62.2%, or 77.6% of the system’s total ca- From September to November, 2016, the Compa- GLOBAL WATER lion connections. sis ever recorded in the SPMR, the year 2016 was pacity when the technical reserves are added. ny’s authorization was expanded for the catchment The expansion of the service, though available marked by a period of recovery of the main systems In January 2017, with increased rainfall, the set of 25 m³/s and, in December 2016, a new approval PRODUCTION to everyone, demands constant monitoring of de- that supply the 39 municipalities in the metropoli- of supply sources reached 1,451 trillion liters, when authorized the catchment of up to 31 m³/s, still less CAPACITY mographic and geographic growth of the cities, tan area, of which 34 are served directly and anoth- technical reserves are factored in. Thus, the grand than what was permitted before February 2014, STRUCTURE which required 200 thousand new connections in er 5 supplied indirectly by selling of treated water total of all reservoirs – net of the technical reserves when the catchment limit was 33 m³/s. GREW BY 14%. 2016. This service aims at the constant expansion on a wholesale basis. The SPMR concentrates 67% – exceeded the total volume for 2013, the period im- of the supply infrastructure by investing in catch- of the total population served by the Company. mediately preceding the water crisis (chart). Granting of the Cantareira System ment, transportation (adduction), treatment, Although the natural contribution (inflow) to the The outcome of these better conditions of the storage and replacement or revitalization of the sources was 88% of the historical average through- water sources is also reflected in the expanded Water intake from the Cantareira System is grant- distribution networks. out 2016, the adoption of rational consumption authorization to draw water from the Cantareira ed to Sabesp by the ANA and the DAEE. The grant in habits acquired by the population during the water System which, from the onset of the crisis, began force, renewed in 2004 for ten years, would expire in crisis contributed significantly to lower water withdrawal from the supply sources, consequently in- 170 Per capita creasing inventories. Per capita consumption in 2016 was 129 liters Average production of treated water in 2016 160 conumption was 15% lower in relation to 2013, prior to the crisis a day, 24% lower than the average of 169 liters 169 169 in the SPMR per inhabitant/day registered in 2013, before the THE INCORPORATION In liters/inhabitant/day onset of the water crisis. Another factor likely to 68 SPMR Monthly Production OF RATIONAL 140 influence the decrease in consumption may be re- 69.1 CONSUMPTION HABITS SPMR Average annual prod. lated to the Brazilian economic downturn for the (in m³/s) BY THE POPULATION 62.2 second consecutive year, impacting the industrial 63 CONTRIBUTED 120 and commercial sectors. As a result, the aver- 129 SIGNIFICANTLY TO 129 age monthly production in 2016 for the SPMR was 58.5 126 THE SMALLER WATER 126 120 120 58.5 m³/s. That is: 15% lower compared to the average 58 WITHDRAWAL FROM 69.1 m³/s produced in 2013. In the years of crisis, THE SOURCES 100 the averages produced were 52.0 m³/s in 2015 and 53 62.2 m³/s in 2014. 52.0 In the first months of 2016, as a result of improve- 80 2013 2014 2015 2016 ments of the reservoirs, the Company requested 2013 2014 2015 2016 30 31 SABESP SUSTAINABILITY REPORT 2016 INFRASTRUCTURE AND PLANNING FOR THE FUTURE OF SUPPLY

1567.6 Total volume of water sources supplying the SPMR Within the SPMR, in addition to the Cantareira Rio Grande to the Alto Tietê System, which has been 1350.6 in hm³, at the end of 2016 System Sabesp owns seven other water production in operations since mid-2015. 1,238.6 systems – Alto Cotia, Baixo Cotia, Guarapiranga, Rio This work also strengthened security in the ABC 1141.0 including the technical reserves Grande, Rio Claro, Alto Tietê and Ribeirão da Estiva. region, since it permits the transfer of part of the un- Together, under normal climatic conditions, their treated water to the Rio Grande WTP, responsible for without the technical reserves 918.9 951.1 nominal water production capacity is 75,8 m³/s, and supplying part of the ABC and certified in 2016 to ISO they comprise the Metropolitan Integrated Water 14001 by the Bureau Veritas Certification, an interna- 749.6 703.5 Supply System (local acronym, SIM). tionally recognized certification entity. These production systems are connected by This combination of civil works and strategic mea- large-scale pipelines that comprise the Metropolitan sures have significantly expanded the supply infra- BALANCE 416.0 Pipeline System (local acronym, SAM), responsible structure so as to respond to possible climatic adver- BETWEEN 261.9 for carrying treated water to the sectorial reservoirs, sities. With the conclusion of three other major works, AVAILABILITY and from there, for distribution to around 21 million the São Lourenço Production System, the connection AND DEMAND people in Greater São Paulo. between the Atibainha – Jaguari reservoirs and the IS ENSURED BY 2009 2010 2011 2012 2013 2014 2015 2016 G4-EC2 The critical nature of the 2014 scenario reversal of the Itapanhaú, the SPMR will have the abil- THE INTEGRATION called for an intensification of water integration and ity to safely weather similar scenarios to those experi- OF WATER 1,869.4 hm³ IS transfer between the production systems via the SAM, enced in 2014-2015. THE INTEGRATED triggering a joint effort by the operations teams to car- The new risk scenario imposed by the severe re- PRODUCTION SYSTEM’S TOTAL August 2014. However, due to the extreme climatic The SPMR and the supply challenges ry out on-the-fly work to enable the reversal of flows cent drought crisis has demanded strategic repo- SYSTEMS. RESERVATION events prevailing in the area covered by the Cantareira to save the Cantareira System. As a result, the robust sitioning from the Company in order to strengthen CAPACITY System, it was extended to the end of October 2015 The 2014/2015 water crisis served to aggravate infrastructure already installed, a result of structur- water security in the metropolis. Thus, the long- and, later on, until May 2017, with special and specific the already challenging task of supplying a region ing investments made in the 1995-2014 period by term planning conducted by Sabesp started to take rules for withdrawing water appropriate for dealing with very low water availability which, even in times means of the Metropolitan Water Program – (local into account the effects of climate change, striving with the water shortage recorded during this period. of climatic normality, offers less water per capita acronym, PMA) and the set of works and emergency to increase the guarantee of water security. On February 20, 2017, the ANA and the DAEE dis- than the levels registered in semi-arid regions like actions taken during 2014 – 2015 crises allowed the During 2016, the Company focused on preparing closed the base document to negotiate the granting the Brazilian Northeast. This arises from a combina- conveyance of flows between the production systems the Review and Update of the SPMR Master Plan for that will be effective for the next ten years. This pro- tion of factors. of more than 10 m³/s. Water Supply for a horizon of up to 2045. These re- posal will be the subject of public inquiries and hear- In addition to being located in the spring region In October 2016, resuming the work sequence views and updates occur, on average, every five years, ings during March, based on the definition of the wa- of the Alto Tietê basin, the SPMR records one of the brought forward on account of the crisis, the 1,2 ki- seeking adjustments as a result of population inter volumes that can be drawn off to supply the SPMR. highest population densities in the planet – more lometer-long structure was inaugurated to transfer crease, rearrangement of the population distribution The extreme climatic event that occurred be- than 21 million people (69% of Sabesp’s total cus- water at up to 4 m³/s from the Rio Pequeno river to the across the territory and consumption behavior. tween 2014 and 2015 brought home the need for tomers). Also, the region has been suffering with Rio Grande river (both part of the Billings reservoir). For this new planning, which is still being pre- mechanisms to control water withdrawal, accord- intense and disorganized occupancy of soil for de- The intervention costs around R$20 million, boost- pared, studies and projections of water availability ing to the volume accumulated. This proposal es- cades, including environmental protection areas, ing the integration and security of the metropolitan from the production systems are based on monthly tablishes that water withdrawn to supply the SPMR where the main water supply sources are located, a system and providing a structural backstop for the historical series of natural flows of the period from must abide by five ranges: situation that further compromises the quantity and transfer of the same 4 m³/s from the affluent of the January 1930 to December 2015 (including, therefore, (i) if the accumulated volume of water exceeds 60%, quality of the already low volume of water supply. up to 33 m³/s can be drawn; Given this complex scenario for urban supply, Sa- (ii) if the volume is less than 60% and equal to or besp started “importing” water outside the Alto Tietê greater than 40%, up to 31 m³/s can be withdrawn; basin by means of the construction of the Cantareira São Lourenço Vargem Grande Itapevi Jandira Barueri (iii) if the volume is less than 40% and equal to or System, located to the north of the SPMR, more than Production System Paulista Ibiúna greater than 30%, up to 27 m³/s can be withdrawn; four decades ago. Carapicuíba (iv) if the accumulated volume is less than 30% and Of the six reservoirs of the Cantareira System, the TRANSPORTATION Osasco OR RAW WATER Cotia METROPOLIAN equal to or greater than 20%, the limit is 23 m³/s; primary source of supply for the SPMR, four are in- CACHOEIRA INTEGRATED DO FRANÇA SYSTEM (v) if the accumulated volume is less than 20%, the cluded in the Piracicaba (local acronym, PCJ) basin. RESERVOIR VARGEM limit on withdrawing water is 15.5 m³/s. The other two (Paiva Castro and Águas Claras) are GRANDE WTP São Embu das Artes The recovery of water supply sources with the located in the Alto Tietê basin. These reservoirs are Paulo return of rain is no guarantee of a totally foresee- connected by a complex system of tunnels and ca- GRANJA CAROLINA able future, given the possibility of new extreme cli- nals located along the municipalities of São Paulo, SURGE RESERVOIR km mate events in a complex supply region. That is why Mairiporã, Nazaré Paulista, Piracaia, Vargem and TANK 83 Juquitiba Itapecerica da Serra from catchment Sabesp continues with its planning, while carrying Joanópolis, the latter two on the border with the CATCHMENT AND to the served out work and enhancing its programs, with a view to state of Minas Gerais, approximately 100 kilometers municipalities PUMPING STATION São Lourenço da Serra expanding water security in the SPMR. from the capital city, São Paulo. 32 33 RELATÓRIO DE SUSTENTABILIDADE SABESP 2016 INFRASTRUCTURE AND PLANNING FOR THE FUTURE OF SUPPLY

METROPOLITAN SUPPLY SYSTEM Interconnection between the Cantareira System and the Paraiba do Sul Water Basin THE INTERCONNECTION Areas served WILL DIRECTLY BENEFIT by each system 20 millon 20 km Cantareira people directly and indirectly of untreated R$ 555 million AROUND NINE MILLION Guarapiranga benefited in the SPMR water transportation investment PEOPLE IN THE SPMR (approximately) Alto Tietê SUPPLIED BY THE Rio Grande CANTAREIRA SYSTEM. Rio Claro Average flow: São Lourenço Guarapiranga Cantareira Alto Alto Cotia 5.13 m³/s Underground Nazaré INDIRECTLY, IT WILL (under work) Tietê Capivari Paulista Water São Lourenço PROVIDE WATER (projection) Main Baixo Cotia / Atibainha Tunnel 13.2 km lenght SECURITY TO 20 MILLION (intersec. Cantareira) Reservoir 6.2 km in lenght PEOPLE THROUGH THE Ribeirão da Estiva INTEGRATED SYSTEM. / (intersec. Rio Claro) height difference between reservoirs: 164 m Igaratá Santa Isolated systems Isabel Areas of systems Jaguari-Atibainha intersections Interconneciton Jaguari Cantareira/ (under work) Guarapiranga Reservoir Cantareira / Baixo Alto Tietê Cantareira System Paraíba do Sul Basin Cotia Alto Cotia / Guarapiranga R. Claro/ A. Tietê / Cantareira Rio Grande / Rio Claro Rio Grande / Guarapiranga the two-year crisis period: 2014-2015), enable deter- production system coming on stream and how this im- Guarapiranga / R. Claro / Alto mining the joint behavior of the production systems in pacts the integration with the other systems. Tietê / Cantareira different risk scenarios. This planning process of the SPMR Integrated Supply System is based on advanced water hydrau- More water on the way lic monitoring software technology associated with the forecasts for demand, water source availabilities, As in the Cantareira System, the search for treatment and treated water transportation capaci- water at increasingly longer distances at basins ties, as well as the experiences and knowledge ac- neighboring the Alto Tietê basin is a reality to Itapanhaú River Interconnection quired in operating the supply systems. This makes it be tackled in the SPMR. The same applies to the (under approval) easy to analyze the integration of the production sys- implementation of three major structural works: tems using the SAM, which is made possible by trans- The São Lourenço Production System, the con- ferring treated water between the areas of influence nection between the Atibainha – Jaguari reser- of the systems in order to strike a balance between voirs and the reversal of the Itapanhaú. The ex- the availability of untreated and treated water at each pansion arising from current and future work will production system. enable up to an additional 13 m³/s of water to the Rio Claro Thus, scenarios are projected, enabling an as- SPMR, 7 m³/s of untreated water and 6 m³/s of sessment of the integration capability and opera- treated water. FUTURE WORKS tional flexibility within the SIM, as well as the ex- Initiated in April 2014, the São Lourenço Pro- WILL ENABLE pansion requirements of the units involved for the duction System ended 2016 with more than half ADDITIONAL purpose of increasing the transfer capabilities of the of the works already executed and a total of 3,700 13 m³/s OF WATER SAM in order to improve the system in the event of a employees, both direct and indirect. It is expected TO THE SPMR. repetition of the previous water crisis. to start operating in the first half of 2018. When Also with regard to the SAM, one can identify, for the pumps are installed at the Cachoeira do Alto Capivari Rio Ribeirão Cotia Grande da Estiva example, for how long a regional pipeline or reservoir França reservoir on the Juquiá river in Itabuna, in will be able to serve an expanding region. One can also the Vale do Ribeira region, the water will travel 83 evaluate the best position for installing a pumping sta- kilometers to reach the capital São Paulo. tion and verify whether a new interconnection of sys- After treatment at the Vargem Grande Paulista tems is more efficient and sustainable that spending WTP and storage in reservoirs with a capacity for 125 money on pumps and the electricity to operate them. million liters of water, the new production system will One can further estimate the effect on the SIM of a new have capacity to provide up to 6 m³/s of drinking water 34 35 SABESP SUSTAINABILITY REPORT 2016 INFRASTRUCTURE AND PLANNING FOR THE FUTURE OF SUPPLY

increase in Metropolitan Water Program The actions are funded by the Federal Govern- Laura, Las Palmas, Pinheirinho, Los Angeles, production capacity 32.5% ment, the Government of the State of São Paulo, Represa and Imigrantes, in São Bernardo. Work is 75.8 The three major works reported above aim at the Municipal Government and the World Bank. expected to be concluded in four years. m³/s 29% complementing the interventions undertaken dur- Thus, it has been possible to expand the sewage A third initiative within the scope of the actions tak- increase in SPMR 57.2.2 ing the 2014-2015 crisis and give sequence to the collection infrastructure and improve precarious en to recover the metropolitan water supply sources population m³/s Population work of strengthening the metropolitan water in- allotments and housing complexes installed in arose with the implementation of the Nossa Guara- * * 15.7 20.3 frastructure initiated in mid-90’s. At that time, the sub-basin areas of the two water supply sources. piranga (Our Guarapiranga) Program at the end of mi mi shortcomings in supply affected many areas of the In 2016, the amount invested was R$39 million, 2011. The Program is intended to improve the quality SPMR, where approximately five million people when, among other actions, there was a resump- of the water in the dam by removing waste and mac- were subjected to rolling rationing on account of tion in the implementation of the sewage system rophytes – water plants that block water catchment. * - Served directly structural bottlenecks. in Itapecerica da Serra, in addition to services for Since it was set up, around 15,100 m³ of rubbish and indirectly (wholesale water) The situation was relieved with the works involv- recovering the stretch of permanent preservation have been removed from the water course, of which 1995 ing the Metropolitan Water Program (local acronym, area; fauna stewardship and the clean-up of the 221 m³ in 2016. In the case of macrophytes, between PMA) carried out by the Company, which led to an in- area flooded by the Taiaçupeba reservoir. 2012 and 2016 around 109,000 m³ were removed, of Source: Sabesp, Seade, IBGE 2016 crease in water reserves, new adductors and pump- Pró-Billings is another program that has been which 28,000 m³ in 2016, favoring depollution of the ing stations. These major advances could already expanding the sanitary sewage system with the water and multiple uses of the dam, which, in ad- 32,5% INCREASE IN be felt since 1998, when rolling rationing was aban- installation of trunk collectors, pumping stations, dition to being a source for public supply, is used PRODUTCION CAPACITY doned. Today, all regulated areas of the Great São networks and residential connections that will for leisure, fishing and water sports practice pur- AGAINST POPULATION for up to two million people in districts on the west Paulo region are regularly supplied. One of the PMA carry sewer from part of the inhabitants of the Bill- poses. Two boats were specially built for this task GROWTH OF 29%. side of the capital, as well as the towns of Barueri, highlights was the Alto Tietê public-private partner- ings basin for treatment in the ABC WTP. The in- and eco-barriers are being deployed at the mouth THE CAPACITY ADDED Carapicuíba, Itapevi, Jandira and Vargem Grande. ship (PPP) which in 2011 increased the production of terventions of this Program total US$123 million, of of the main tributaries of the reservoir. TO WATER TREATMENT However, as Sabesp’s water supply system water of this system by 5 m³/s. Additionally, it also Sabesp’s funds and financing from the JICA (Japan OVER THESE 20 YEARS IS across the SPMR is integrated, the increased sup- enabled increased treatment capacity for the Guara- International Cooperation Agency) and the BNDES. SUFFICIENT TO SUPPLY ply will indirectly benefit the entire population piranga, Rio Grande, Alto and Baixo Cotia systems. Since 2011, when the project began, secondary Coastline water ALMOST 6 MILLION served in the metropolis. Thanks to re-planning and the bringing forward connections have been laid down, as well as part PEOPLE, SIMILAR The interconnection of the Jaguari – Atibainha of work projects for dealing with the water crisis, of the Couros Trunk Collector, the main stretch of After the SPMR, the Baixada Santista Metropoli- TO THE POPULATION dams will connect the Paraíba do Sul water basin to the investments in the PMA have increased even piping that will take sewage to the ABC STP lo- tan Region (BSMR) is considered the most complex OF THE CITY OF the Cantareira system, permitting the transfer of an further. The program required investment of R$410 cated where São Paulo meets São Caetano do Sul. area for water supply within Sabesp´s operated RIO DE JANEIRO. average flow rate of 5.13 m³/s of untreated water. This million in 2016, in addition to the amounts invest- Due to the water crisis, the program did not area. In addition to temperature peaks, during the is another strategic undertaking for increasing water ed by the São Lourenço PPP. This program is fi- advance sufficiently in 2016, but it is expected to summer the region is also visited by a large num- security in the SPMR. Initiated in February 2016, the nanced with own funds as well as funds from Caixa gain momentum in 2017 as the works resume. The ber of tourists, overloading the supply system. construction site has created over 5,300 direct and in- Econômica Federal savings bank and the National package to be put out to tender in the first half The increase in supply security in periods of direct jobs. The assisted operation should commence Bank for Economic and Social Development. of 2017 includes the construction of 34 sewage high demand is based on the integrated supply in the second half of 2017. Total investment is R$555 Over the last decades the water treatment ca- pumping stations (SPSs), 60 kilometers of piping system, which allows better supply in some re- million, 33% less than initially expected as a reference pacity has outpaced the demand in the SPMR. Be- to collect and remove detritus and 7.5 kilometers gions by transferring water from one city to an- for the bidding process (R$830 million). tween 1995 and 2016, while the set of urban popu- of domestic connections in districts like Jardim other. Thus, the structure enables balancing the At the estimated cost of R$170 million, the lation increased by nearly 29% (from 15.7 million transposal of the excellent quality water of the Ita- in 1995 to 20.3 million in 2016), water production panhaú river basin, in the Serra do Mar mountains, capacity increased by 32.5% (from 57.2 m³/s to the IN 2016, WATER will allow the reversion of 2 m³/s on average from current 75.8 m³/s). Reserves in RESERVES ON THE Ribeirão Sertãozinho (which forms the Itapanhaú COAST WERE EXPANDED River) to the Biritiba reservoir, which is part of the coastal areas BY 31.5 MILLION LITERS, Alto Tietê Production System (SPAT). Recovery of urban water supply sources +31.5 8.5 AN INCREASE OF In 2016 Sabesp continued to make progress in million liters growth in 2016 in relation to 2015 8.5% IN CAPACITY OVER approving environmental permits and, at the end of In order to assure the availability of drinking wa- 2015. THIS VOLUME the year, the company was waiting for the project to ter to the population the structural actions to in- IS SUFFICIENT TO SERVE be ruled eligible for inclusion in the PAC (the Growth crease water supply are complemented by initiatives MORE THAN Acceleration Program) by the Ministry of Planning focused on preserving water resources. Since 2009, equivalent to 150,000 PEOPLE the population of of the Brazilian Government. Once included, the Sabesp,in partnership with the Municipal Govern- to IN AN ENTIRE DAY bidding process will take place to hire the company ment of the Capital City, has been developing the is suf cient AT AN AVERAGE OF to provide 200 that will execute the work. Work is expected to get Water Supply Sources Program which is focused on 150,000 200 LITERS under way at the end of the first half of 2017, and is recovering two of the major dams of the Great São L/day people São Sebastião PER PERSON PER DAY. expected to be concluded by September, 2018. Paulo: Billings and Guarapiranga. and Peruíbe 36 37 SABESP SUSTAINABILITY REPORT 2016 INFRASTRUCTURE AND PLANNING FOR THE FUTURE OF SUPPLY

Loss indicators – Metropolitan Office supply in accordance with the consumption needs ized supply in the majority of the areas served, the Track record 666 of fixed and floating populations of approximately aim of the actions taken was to tackle non-recur- 626 614 three million people. ring situations. 552 600 Ratio of losses 507 per connection 40.5 474 486 470 476 In 2016, the Company invested R$25 million in In all, the Company invested in 2016 R$53 mil- 40 38.1 37.4 446 500 (liters per 34.6 365 connection the region. Among other actions, the integrated lion in water supply works in the interior. In the 32.7 359 400 per day) 31.4 31.9 31.3 31.8 30.8 277 system was reinforced by the beginning of opera- PCJ region, work was completed on expanding the 30 300 32.0 tions of the Melvi Treated Water Reservation Cen- Paulínia WTP, setting up a compact unit with a ca- 29.1 200 26.3 Micro ter, located in Praia Grande, which increased from pacity of 400 L/s. In neighboring Hortolândia, two 24.8 27.1 100 measurement 20 24.3 22.5 20 million reserved liters to 45 million reserved reservoirs came on stream with a storage capacity 21.3 20.4 20.7 20.3 20.7 21.3 loss ratio 20.0 17.9 (%) liters. The structure is part of the Mambu-Branco of 5 million liters of water each. 17.8 production system (opened in 2013, in Itanhaém) In the mid-western area of the State, the mu- 10 and benefits residents and tourists in Praia Grande nicipality of Torrinha benefited from the handover 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Actual loss ratio and São Vicente. As it is part of the integrated sys- of the Guarani Well, 420 meters deep and with an (%) tem, the structure increases water security in the estimated flow rate of 150,000 liters per hour, in Also known as Loss indicators – Sabesp physical loss nine municipalities of the BSMR. addition to the chemicals store, an untreated water 547 Track record SINCE 2009, During 2016, in the nine cities, 75 kilometers of adductor, reservoir and revitalization of the exist- 522 509 R$3.3 BILLION HAVE water distribution networks were laid (greater than ing distribution network. In Cananéia, in the Vale do 467 500 41.0 430 BEEN INVESTED the distance between Santos and São Paulo) and Ribeira region, a new untreated water catchment 39.0 400 40 38.1 403 395 392 400 more than 15 thousand preventive building inspec- system and reservoir was built. 35.8 372 IN REPLACING 34.1 319 EQUIPMENT, PIPING, tions were made. The Company also carried out 35 32.4 32.3 308 32.0 32.1 31.2 258 300 2,200 inspections to detect fraud against the sup- THE INSTALLATION OF 30 29.8 31.8 PRESSURE REDUCTION ply system, resulting in the elimination of 1,100 ir- Fighting water loss 28.5 200 26.7 25.4 regularities. 200 million de liters of water that never 24.8 23.3 VALVES, REPAIRS 25 22.8 reached consumers’ taps were recovered. G4-EN27 The major investments and actions to in- 21.1 TO LEAKS AND 21.0 20.8 20.9 20.3 21.0 In 2016, work also began to expand the two WTPs crease water security, including the search for water 20 18.8 18.7 THE SEARCH FOR in Peruíbe. The Guaraú WTP has a nominal capacity of at increasingly longer distances, would have been in NON-VISIBLE LEAKS 25 L/s. It is expected to come on stream in June 2018. vain if the Company had not made efforts to reduce 15 The other is the Peruíbe WTP, with a nominal capacity the water loss in its distribution network. 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 of 270 L/s, an expected investment of R$13.5 million In Brazil, only 63.3 out of 100 liters produced reach and due to enter operation in January 2019. the end consumer, according to data from the 2015 On the northern coastline, 2016 saw expansion SNIS. In São Paulo, this index of total losses has been work on reservoirs (an increase of 6,5 million li- gradually reduced over the last years in the cities ters stocked), redistribution of almost 12 kilome- served by Sabesp – from 41% in 2004 to 31.8% in 2016, ters of water networks, de-silting of catchment ar- on average (graph). Total losses are the sum of the so-called physi- Measures to prevent the theft of water eas and the interconnection of systems, benefiting As a priority pursued for over two decades, this cal losses (leakages) and apparent losses (billings), SABESP INVESTED the municipalities of Ilhabela, Caraguatatuba, São work gained momentum in 2009 with the implemen- which account for the difference of 10% and are the In 2016, Sabesp uncovered 26 thousand cases R$53 MILLION Sebastião and Ubatuba. In the fight against waste tation of the Corporate Waste Reduction Program result of the use of illegal connections (“gatos”), of theft of water in the SPMR and the Bragantina IN WATER SUPPLY and irregularities in the region, the Company sub- executed with the technological partnership of the fraud and inaccurate measurement by water me- region, representing the loss of approximately 3.8 WORKS stituted 3,434 hydrometers and inspected another JICA. In force for eight years, R$3.3 billion (current ters, for which the Company receives no payment. billion liters, which would be enough to supply IN THE INTERIOR 4,023 buildings, both residential and commercial. amounts) have been invested in the program, of In the those cities mentioned above, apparent about 380 thousand people for a month. In rela- which R$505 million only in 2016. losses are practically non-existent. It is also impor- tion to 2013, the year preceding the water crisis, OF THE STATE Although the 31.8% losses for 2016 are at a level tant to note that since this loss ratio is a percentage the number of police reports for stealing water in IN 2016. Water supply in the interior of the State similar to those seen in 20122, progress on this front of production, it is affected by consumption and can 2016 rose by 477%. is evident when we consider that Sabesp’s physical be inaccurate. Since the start of the Program, the The increase in mainly due to the launch of joint Sabesp is in charge of serving 329 municipalities loss ratio (leakages) of 20.8% in 2016 is similar to the ratio was reduced from 34.1%, in 2008, to 31.8% in operations between the company and the Depart- in the interior of the State, and in all of them supply figure for Barcelona (19%) and lower than in Chicago 2016, which means that total losses have been cut ment of Public Security since 2014, as well as the has been universalized. In 2016, with the regular- (24%) or London (28%). by 3.6 m³/s. constant contribution by the population, which re- With part of the financing already contracted with ported an annual average of 59,000 reports of fraud the BNDES and the JICA itself, our target is to invest during the period. 2 – It should be noted that the reduction of water pressure in the networks was an essential measure to deal R$6.3 billion between 2009 and 2020, by which time Greater emphasis was placed on inspections of with the water crisis, and was responsible for a large part of the reduction in losses in the two-year period we hope to reduce the ratio of real (physical) losses properties where irregular water connections are 2014-2015. In 2016, with the recovery of the water sources, the pressure was returned to normal so as to ensure supplies for the population. This adjustment resulted in the ratios returning to levels similar to those seen in our area to 19.4% (target under review), a level suspected. In 2016, our 70 anti-fraud teams carried before the crisis broke. similar to that of the United Kingdom. out 239 thousand inspections, around 660 per day. 38 39 SABESP SUSTAINABILITY REPORT 2016 INFRASTRUCTURE AND PLANNING FOR THE FUTURE OF SUPPLY

The amount recovered from the frauds identified new piping and reservoirs for catchment and reuse of THE STATE-WIDE CAMPAIGN ABOUT There are also interactive games that simulate exceeded R$35 million. rain water. At the same time, education campaigns the hunt for frauds, challenging visitors to correctly Of the total frauds detected, 22,000 cases were are carried out, with practical guidance for employees THE CONSCIENTIOUS USE OF WATER install underground water, rainwater and sewage recorded in homes, 2,600 in commercial establish- and pupils in the case of state schools. Sabesp oper- connections. A pair of virtual reality glasses also ments and another thousand or so of mixed or in- ates through partnerships with government entities STRESSED THE VALUE OF WATER enables a visit to the Sabesp water sources, as well dustrial use. Tampering with water meters (54%) and state and municipal level. At state level, it engag- as the cleaning of a water storage tank, among and clandestine connections (41%) were the main es in the State Government Program for Better Public other simulations. In all, the truck visited 29 cities, types of irregularity. We should emphasize, how- Expenditure, under the coordination of the Govern- AS A KEY ISSUE, EXPLAINING THE receiving 580,000 visitors, including pupils, parents ever, that fraud on commercial premises causes ment Secretariat, identifying properties with high wa- and teachers from 186 public and private schools. a much greater loss of water, because of the type ter consumption and supply structure problems. LONG WAY IT TAKES TO REACH of consumption. The inspections are undertaken The program was initiated in 1996. In 2016 it had been Water quality jointly with the State Public Security Department. implemented in 6,399 buildings throughout the state, CUSTOMERS’ HOMES. SABESP’S NEW In 2016, Sabesp and the Civil Police carried out including state schools, prisons and hospitals. In 2016, The guarantee that the water supplied to the pop- TXRF TECHNOLOGY 35 joint operations, in cases where the culprits im- 1,912 government buildings were so benefited. Between ulation meets strict safety and potability standards IS MORE VERSATILE pede our inspectors, or when they sell the water 2010 and 2016, 627 state schools were served by the is provided by 16 quality control laboratories, 14 of AND SENSITIVE obtained illegally to homes, traders and industries. PURA Program, which guaranteed savings of more than STP. Approximately one million cubic meters per which have been certified for ISO 17.025 by the Na- IN THE QUALITY 552 police reports were filed. 110,000 cubic meters of water a month, affecting over month are supplied to companies in the Capuava tional Institute of Metrology, Quality and Technology 700,000 pupils. In 2017, the goal of the program is to ex- Petrochemical Hub, in São Paulo’s ABC region, for (local acronym, Inmetro). Located in various parts of ANALYSIS OF THE tend the benefit to another 380 schools. use in cooling towers, steam generators and boil- the state, they carry out an average of 64 thousand WATER DELIVERED SABESP IS Rational use, education and reuse G4-EN27 Technology for the reuse of waste treated ers and for other industrial purposes. In 2016, three analyses taken from water at every stage from the TO THE CUSTOMERS. TAKING STEPS in STPs has been adopted by the most advanced sys- new industrial consumers (Bridgestone, Paranapa- source to the point of consumption. Basic control TO TO PROVIDE Initiatives aimed at sustainability included mea- tems worldwide. It is one of the most efficient ways of nema and Arconic-Alcoa) were connected to the parameters include turbidity, color, chlorine content, GOOD QUALITY sures for the efficient and responsible use of water consuming water sustainably, and leads to major sav- adductor that supplies the Petrochemical Complex. coliforms and thermotolerant bacteria. WATER TO SOME by spreading the message that water resources are ings in the amount of raw water needed to be drawn We expect Aquapolo to reach peak production of The results are sent to the sanitary surveillance definite. The water crisis of 2014-2015 underlined the from natural sources, and to a greater amount of 1 m³/s in the next few years. At the same time, Sa- partments of the municipalities served and are printed 400 THOUSAND importance of these initiatives. Among these actions, treated water being available to supply the population. besp produces water for reuse at the Barueri, Je- on customers’ water bills, in accordance with Federal PEOPLE IN SPMR we highlight the Rational Water Use Program – (lo- Aquapolo Ambiental, a project introduced at the sus Neto, Parque Novo Mundo and São Miguel STPs Decree No. 5440/05. Customers receive an annual con- INFORMAL AREAS. cal acronym – PURA) which promotes structural ad- end of 2012 under a partnership between Sabesp to supply urban requirements, such as washing solidated analysis report which is also emailed to the justments in public buildings in order to reduce losses and Odebrecht Ambiental, is the largest undertak- streets, yards and monuments, unblocking sewage Ministry of Health each month. Customers are sent an and reinforce responsible consumption. ing for the production of water for reuse by industry pipes, and so on. In 2016, these four STPs supplied annual summary of the analyses. The source, quantity The buildings receive reduction valves, water out- in South America, and the fifth largest in the world. approximately 1.7 million m³. and results of the samples are also available in sum- let aerators, new floaters and water volume sensors, The plant treats the waste generated in the ABC In regard to the permanent awareness campaigns mary form on the Sabesp website. about the conscientious use of water, in 2016 Sabesp There was technological progress in the qual- advertised on TV, radio and the internet, including the ity analysis procedure in 2016, with X-rays being Company’s social networks. The state-wide campaign used for the first time to detect metals such as stressed the value of water as a key issue, explaining arsenic, cadmium, chromium, lead, silver, mer- Expansion of access in informal areas the long way it takes to reach customers’ homes. cury and selenium in coagulants, and other prod- Furthermore, during the second half of 2016, ucts used to treat water, thus eliminating the risk G4-EC8 Sabesp has been taking steps to increase supplies to the itinerant project “Somos Água” (We are Water), of contamination. The test for identifying these informal areas. Agreements made with the municipality and mercial credit in general. A further direct impact of this action the courts has enabled us to provide access to water mains to lies in the reduction in losses from leakage because clandes- aboard a truck, traveled around the SPMR and vari- metals is covered in Ministry of Health Ordinance more regions of Greater São Paulo. These are areas where the tine connections, using precariously installed hosepipes, are ous cities in the interior. A huge panel displays the No. 2.914 and Sabesp already has this test in population supplies itself with water using what are popularly replaced by the Sabesp network. entire path taken by water, showing the details of place using a different method. known in Brazil as “gatos”, precarious and unhealthy installa- The new customers are included within the social tar- the process for treating water and sewage. After The new technology, however, represents a major tions which, in addition to causing high levels of losses through iff for consumption of up to 10 m³ per month. Having com- this, visitors move to a small laboratory where they advance. Called Total X-Ray Reflection Fluorescence leaks and unlimited consumption, directly affect the public menced at the end of 2015, it has already benefited 110,000 are introduced to the cycle of water and its evapora- (TXRF), it is more versatile, making the preparation of health of the community involved. The aim is to provide good people in the Billings, Guarapiranga, Interlagos, Itaquera, quality water to some 400 thousand people in approximately São Miguel Paulista, Pirituba, Santana and Santo Amaro tion, the formation of clouds, rainfall and the run- the samples easier and using equipment that is more 160 thousand properties. regions, with approximately 32,000 new connections during off to rivers, lakes and reservoirs. sensitive to the presence of these elements. As well as improving health conditions for low-income 2016. The initiative is based on an innovative bidding model, families, this work has a positive impact on the population’s the performance contract, in which the company winning social conditions, since the families that benefit now receive the bid installs the networks, connections, meter boxes and proof of address, a document usually requested when enroll- hydrometers, but is only remunerated for the volume of wa- ing children in school and for granting bank loans and com- ter that is no longer lost.

40 41 Tietê Project actions include incluem enlargement of Barueri STP, SEWERAGE which began to serve 1.5 million more people EXPANSION OF INFRASTRUCTURE AND RECOVERY OF WATER RESOURCES SABESP SUSTAINABILITY REPORT 2016 EXPANSION OF INFRASTRUCTURE AND RECOVERY OF WATER RESOURCES

In addition to expanding the sewage collection 2016, the Tietê project covered actions of the third and transport infrastructure, treatment capacity stage, and priority actions of the fourth stage have has been more than doubled. As a result, through- been advanced,resulting in investments of approxi- out these 25 years the volume of sewage treated in mately R$342 million. the SPMR has jumped from 4 m³/s to 16 m³/s (an Although the results of the actions of the Tietê increase of over 300%) This difference is equivalent Project are not yet noticeable along the stretch that SÃO PAULO IS THE STATE Of the R$3.9 billion invested by the Company during to the sewage generated by 8.5 million people. crosses the metropolitan area, progress can be the year, R$1.2 billion was allocated to expanding the For this third stage, the total investment is forecast measured by the significant reduction in the pollut- with the lowest percentage of people without collection and sewage treatment infrastructure. to be US$2 billion, with own funds and financing from ant stain from the interior onward. The longest river In 2016, the average indices for all registered the Inter-American Development Bank (BID), the Na- in the state by extension, the Tietê runs for 1,100 adequate water supplies or sewage facilities3. municipalities served were 89% for sewage collec- tional Bank for Economic and Social Development (lo- kilometers and crosses 62 municipalities, from tion coverage, 82% for sewage collection service cal acronym, BNDES) and Caixa Econômica Federal. Salesópolis to the border with Mato Grosso do Sul, and 74% for economies connected to sewage treat- In 2016, among the initiatives taken during the where it flows into the Paraná river. This is primarily due to Sabesp’s presence in 367 ment. Although these ratios are not ideal, and there year, worthy of note are the capacity expansion works In accordance with the most recent water municipalities in the state of São Paulo (57% of the is much still to be done, they are significantly better at the Barueri STP. The project is financed by the Inte- monitoring data released by the SOS Mata Atlân- total of 645 municipalities), where the average to- than in most of the rest of the country, where only ramerican Development Bank – BID with the support tica Foundation, collected from August 2015 to July tal of infrastructure investment in recent years has 58% of urban sewage is collected, and of this 74% of the National Economic and Social Development 20167, the condition of Tietê ranges from good to remained at approximately one-third of all invest- is properly treated. In round numbers, according Bank (local acronym, BNDES) and is considered one regular along a 439-kilometer extension, which is ment in sanitation nationwide. to the Ministry of Cities, approximately 100 million of the key elements of this phase of the Tietê Project. the sum of the first stretch, running from the source Balance sheet data, published in February of Brazilians are without sewage collection. Current nominal treatment capacity of the Barueri in Salesópolis to Itaquaquecetuba, and the second 2016 by the Ministry of Cities, show that Sabesp ac- STP is 9.5 m³/s. Capacity will jump to 11 m³/s in the stretch, which runs from Salto to Barra Bonita on counts for 38% of the funds channeled to sanita- first quarter of 2017, reaching 16 m³/s by the end of the Middle Tietê region. Between these stretches, tion among Brazilian state enterprises in the period São Paulo Metropolitan Region (SPMR) the same year. Another highlight of the 2016 program there are 137 kilometers where the conditions from 2011 to 2015. was the completion of the IPi.8 interceptor, complet- of the river range from bad to deplorable exactly Of total investment in sanitation in Brazil during In view of its large size and the complex chal- ing the interception system on the Pinheiros river, one where one of the world’s largest urban concentra- the same period, Sabesp was responsible for 28%4. lenges facing sanitation operations, as shown of the main tributaries of the Tietê river. tions, the SPMR, is located. After the two-year period 2014-2015, when our ef- on page 24, the SPMR requires concentrated ef- Currently, the fourth stage of the Tietê Project is The lowest pollution level was recorded in 2014, forts and investments were concentrated on handling forts to revitalize the Tietê river over time, and being planned. Its goal is to provide sanitation for with 71 kilometers of extension. Due to the wa- the water crisis, in 2016 progress on works for ex- to improve the quality of life of the people who the entire SPMR and includes works of great com- ter crisis, river water intake recorded a deep fall, panding collection, removal and treatment in our area live in the metropolis. This is the challenge facing plexity in the central region of São Paulo city. Also which increased pollution concentration. Accord- of operations resumed its normal rate. At the end of the Tietê Project, Brazil’s largest environmental the expansion of networks and trunk collectors into ingly, 2015 measurements indicated that pollution 2016, the Company’s collection and treatment struc- sanitation program, involving 34 municipalities in regularized areas on the periphery of the metro- increased from an extension of 71 to 154.7 kilome- ture amounted to 50,097 kilometers of networks and Greater São Paulo in the expansion and improve- politan region, where low-income families live. In ters. The last monitoring results, disclosed in 2016, 548 STPs installed throughout the state of São Paulo. ment of the system for collecting, transporting and treating sewage. Starting in 1992, when 70% of sewage was collect- BEGINNING NOWADAYS GOAL ed and only 24% of that was treated, the Tietê Project Tietê IN 2016, SABESP is now in its third stage, having reached the goal of Project 1992 Construction of 2016 UNIVERSALIZATION REGISTERED INDEXES OF: collecting 87% of sewage. Simultaneously, the proj- 70% 24% 4,000 km 87% 68% ects seek to increase the percentage of treatment of collection treatment collection treatment Pollution of buried piping % FOR SEWAGE sewage collected from 68% to 84% in SPMR. stretch has 89 Increase of the treatment capacity R$342 million COLLECTION COVERAGE Since its beginning until today important progress shrunk 4 m³/s increase of over 300% 16 m³/s Investment has been achieved in expanding the sanitation infra- only in 2016 393km (3rd and 4th stages) 82% FOR SEWAGE structure of Greater São Paulo. Approximately 910 from kilometers of trunk collectors and sewage intercep- 1993 and COLLECTION SERVICE AND 2016 equivalent to tors have been laid, in addition to 3,140 kilometers of the sewage 8.5 million generated by people collector networks, making a total of 4,000 kilometers Tietê Project most noteworthy venture in 2016 74% FOR ECONOMIES CONNECTED of buried piping whose function is to collect the sew- TO SEWAGE TREATMENT. age produced and transport it to the treatment plants. BARUERI US$2 billion 9.5 16 the total invesment STP for the 3rd stage m³/s EXPANSION m³/s BID 3 – Atlas of Social Vulnerability in Brazilian Municipalities (2015). Institute of Applied Economic Research (Ipea). By the end BNES (Br. Development Bank) 4 – “Diagnosis of Water and Sewage Services”, based on data from the National Information System on Sanitation of 2017 CEF (Federal Savings Bank) (SNIS) for 2015. 44 45 SABESP SUSTAINABILITY REPORT 2016 EXPANSION OF INFRASTRUCTURE AND RECOVERY OF WATER RESOURCES

Partnership of Sabesp with sible for cleaning water streams and checking the Treatment of effluents and to resolve the outstanding issue with Sabesp. São Paulo’s municipality conditions of the micro-drainage system (storm As a joint venture between Sabesp and They were chosen because they produce a lot of 1,500L/s of sewage Clean drains and rainwater gullies). Estre Ambiental, Attend Ambiental treats sewage – more than 50,000 liters a month. 2007 removed from Stream Executive municipal authorities are also respon- non-domestic sewage. Operating since the Sabesp and the Appellate Court notified 318 water bodies sible for removing irregular settlements from valleys end of 2014, Attend is located next to Barueri properties that are not connected and which have 149 and margins of water streams, and resettling families STP and receives industrial effluents from the produced a high volume of sewage in the SPMR. water streams cleaned R$240 in more adequate places. Municipal authorities also SPMR region. According to the environmental They produce 72.8 million liters of sewage a month. MILLION inspect illegal sewage connections, issuing assess- legislation, companies must treat their As only 78 of them reach an agreement to cease sewage collection investment networks and (amount restated) ments and fines for the owners of properties not cor- effluents before discharging them for polluting, 240 major customers continue to dump connections 2.2 MILLION people rectly connected to the collection system. conventional treatment by the STPs. Attend is 43.6 million liters of sewage in the Tietê. water benefited streams Operating since 2007, the program cleaned 149 a supplier of such services, being a profitable The company has sent the Prosecutors’ office the rivers interceptors water streams and benefited over 2.2 million per- option in outsourcing this process. In 2016, the list of these customers in order for them to be sued. If sons. Some 1,500 L/s of sewage were removed company processed 1.87 million m³ of non- all customers are taken into account, including those from the water bodies served by the program. With domestic sewage, which were subsequently that produce the lowest monthly volumes of sewage, a total investment of R$240 million (amount restat- sent for treatment by the Barueri STP. With the SPMR has around 160,000 properties that dispose show the return of the downward trend, with a re- ed using the IPCA-E), the program was suspended the arrival of new customers, the volume has of their rubbish in the rivers, when they could send duction of 17.7 km (11.5%) compared to 2015 (from by the previous city administration. Despite that, in risen by 75% in relation to the 1,066 million their detritus to be treated by just connecting to the 154.7 to 137 kilometers). 2016 Sabesp invested R$4.8 million in the steward- m³ treated in 2015. The architectural design collector network in the street. Of these 160,000 cus- With the expansion of the sanitation infrastruc- ship and monitoring of the water streams benefited of the plant, characterized by sustainable tomers, 65,000 are in the capital of São Paulo. ture deployed since the Tietê Project began in 1993, by the action. functionality, was granted the International Also, since February 2016, based on the Sanitation the stain has shrunk by 393 kilometers, from the In 2016, within the process of review of the agree- Property Awards in the category Public Law (11445/07), Sabesp only provides new water con- initial 530 kilometers of the dead stretch of the riv- ment entered into with the Municipality of São Pau- Service Architecture. nections for customers who also connect their proper, from Mogi das Cruzes, to the Barra Bonita res- lo, a clause was included on the obligation of the erties to the sewage pipes. This condition is valid for ervoir, to the current 137 kilometers concentrated Municipality to adhere to the program. As a result, all types of customers – residential, commercial and PARTNERSHIP in the SPMR. early in 2017, Sabesp met with 100 representatives industrial, – being applicable to those who: 1) request WITH THE It must be remembered that the process for de- of several municipal executive bodies, including brap (the Brazilian Center for Analysis and Plan- new water connections, 2) request reconnections JUDICIAL POWER polluting the Tietê River does not only depend on some regional mayors, to resume the program’s ning). During 2016, 24 meetings were held with (empty properties, demolition, unification) and 3) in- STRENGHTEN the actions of Sabesp, but also on the administra- planning for the coming years. The amounts to be regional communities and social enterprises bor- tend to change the position of existing connections – SURVEILLANCE tions of the municipalities in the Alto Tietê water invested and the water streams to be treated will be dering the streams, in which local representa- as in the case of refurbishing the garage. basin, by expanding sanitation, cracking down on defined in the 1st half of 2017. tives, objectives and priorities were established, Thus, the participation of society is essential for OVER IRREGULAR illegal dumping, including industrial effluents, and The positive experience in São Paulo enabled the in addition to being a space for debating socio- raising awareness about the proper disposal of gar- SEWAGE DISPOSAL. settling land ownership issues in occupied areas, expansion of the program to neighboring munici- environmental issues of common interest. It is bage and the connection of homes to the sewage so that the sanitation companies can get on with palities. The Ressaca and Guaçu streams in Embu estimated that the population affected is approxi- network, as well as for the action of local authorities expanding sewage collection. das Artes, the João Gerbelli stream in São Ber- mately 600,000 inhabitants living in the catch- to keep the cities clean and inspect irregularities. Furthermore, the data from the latest research nardo do Campo and the Anita Garibaldi stream in ment areas of the 29 streams where the Company began in mid-2015, when the Company was facing Ribeirão Pires have been revitalized. is engaged in this work. the effects of the water crisis, having been forced to Expansion to the interior rack up investment in water production infrastructure while reducing the pace of sewerage work. Community involvement United for the collective well-being For the fourth consecutive year, the municipality of Franca, served by Sabesp, led the ranking of Bra- Joint operations with government bodies is essen- In 2016, a partnership between Sabesp and the zil’s 100 largest cities with the best basic sanitation Revitalization of urban rivers tial for the program to move forward. But that alone is São Paulo Appellate Court resulted in the interruption services in the country. The survey conducted by the not enough. The population, especially the communi- to the more than 29 million liters of sewage dumped Trata Brasil Institute is based on data obtained from The improvement of the Tietê river also ben- ties living close to the streams, need to be aware of every month into the Tietê river. This was the volume the National Sanitation Information System (SNIS), efits from actions for depollution of tributary water the important role they play in not disposing of rub- of effluent that 78 properties illegally dumped be- and it has also included the cities of São José dos bodies taken under the Clean Stream (“Córrego bish either in the streams or on the streets, in having cause they were not connected to collector network, Campos and Santos among the 5 cities with the Limpo”) Program, conducted since 2007 in part- the proper connections to the sewage network and in although the structure was available. best services. These positions reflect Sabesp’s en- nership with São Paulo’s city council. According to how to use water and sewage devices properly, in ad- The list of properties in the capital and Greater deavor and investments to provide the best quality this program, Sabesp is responsible for sweeping dition to reporting the irregular disposal of rubbish in São Paulo that committed to connecting includes of services and expand the access to treated water illegal sewage discharge; expanding sewage col- their neighborhoods churches, bakeries, condos and residences, among and sewage collection and treatment also in the in- lection networks and connections; and monitoring This process of working together takes place others. They represent 25% of the customers noti- land and coastal regions of the State. In the interior, and providing maintenance services to existing net- through “Collaborative Governance”, a social ap- fied by the Appellate Court to participate in the Na- the Company is working to achieve universalization works. The city Administration, in turn, is respon- proach methodology jointly developed with Ce- tional Reconciliation Week held in November 2016, of sewage collection and treatment services. 46 47 SABESP SUSTAINABILITY REPORT 2016 EXPANSION OF INFRASTRUCTURE AND RECOVERY OF WATER RESOURCES

São José dos Campos, rated the 3rd best-served São José dos Campos’s new sewage system, for SABESP STARTED WORKING TOWARDS For the effective result of the expansion of the city in Brazil, is an example that highlights the ex- example, contributes directly to the conservation of sanitation infrastructure, however, it is necessary that cellence of the Company’s work. In 2016, the mu- important water streams, including Alambari, Par- THE GENERATION OF ELECTRICAL POWER the population become aware of and connect the resi- nicipality achieved universalization of the service, arangaba and Botujuru, which is also reflected in dences to the collection networks made available by following the inauguration of the Pararangaba sys- the quality of the water of the Paraíba do Sul river, FROM THE USE OF SLUDGE AND BIOGAS Sabesp. It is also a role of the municipality to monitor FRANCA AND tem which has the capacity to treat 404 L/s, at a a major water spring in the country that supplies the irregularities. Because it is a region with many va- SÃO JOSÉ total cost of R$107,8 million. The STP had already 15 million people in the states of São Paulo, Rio de GENERATED IN THE BARUERI STP. cation residences, many owners do not make the nec- DOS CAMPOS ARE been completed in 2015, but began to work at full Janeiro and Minas Gerais. essary sanitary adaptations and continue to discharge AMONG BRAZILIAN capacity following the conclusion of the entire sys- A similar situation can be found in the Jundiaí the sewage inadequately, which results in permanent MUNICIPALITIES tem – 37 kilometers of trunk collectors, 26 kilome- river, in the region of Itupeva, a municipality served cluding projects, management and expansion works. pollution of the urban environment. WITH BEST ters of sewerage, 1,726 domestic connections and by Sabesp. Due to the sanitation investments made, In 2016, investments amounted to R$102 million. SANITATION eight pumping stations. As a result, the city, along the river, which belongs to the Piracicaba, Capivari Since the outset, the nine municipalities of the with Curitiba and Uberlândia, is now among Brazil’s and Jundiaí Water Basin (PCJ), saw the quality of its Santos lowland area (Baixada) have benefited from Discharge of residues STRUCTURE. three best cities, in terms of sanitation, with more waters reclassified from 4 to 3. 1,203 kilometers of networks (collector network, than 600,000 inhabitants. São José dos Campos has The reclassification of this important affluent of discharge line, interceptor and land-based emis- The final destination of the solid residues deriv- 690,000 inhabitants. the Tietê River was approved by the São Paulo State sary), 50 kilometers of trunk collectors, 110 pumping from the water and sewage treatment systems In all, in 2016, Sabesp invested R$120 million Council for Water Resources, where the stretch un- ing stations, seven STPs, two sewage precondi- has been one of the areas with most concentration in work in the interior of the state, including the der analysis includes the perimeter between the tioning stations and 4,5 kilometers of underwater of studies and research, aiming at the search for coastal area, in addition to the Onda Limpa (Clean mouth of the São José brook, in Itupeva, and the emissaries. Over a nine-year period, 102,000 con- economically viable and environmentally sustain- Waves) Program. This amount includes the conclu- Barnabé stream in Indaiatuba. The result is partly nections were made to the collector network, out of able solutions. In 2016, Sabesp issued a public call sion of ten STPs in nine municipalities: Miracatu due to the implementation of two STPs: Itupeva and an expected total of 123,000 for the entire program. notice to attract partners with proposals for gen- (two units), Santópolis do Aguapeí (asset renewal), Campo Limpo Paulista/Várzea Paulista, an invest- In 2016, 8,272 economies, including residential, eration of electric power from the use of sludge and Presidente Prudente, Águas de São Pedro, São ment of more than R$200 million. commercial, government and industrial properties biogas generated in the Barueri STP. Roque, Barra do Chapéu, Eldorado, Ribeira and São In relation to the works completed in 2016, these were connected to the network. As the largest sewage treatment plant in Latin João das Duas Pontes. Four of these STPs are in STPs directly reflect in the improved quality of the wa- In addition to improving health conditions, the America, the STP accounts for more than half of downtown areas, while the other six are in distant ter from different water courses across the entire state, works made by Sabesp provide benefits regarding the entire volume of sewage treated by the Com- districts. Additionally, a further 17 STPs are under such as the Aguapeí, Catas Altas, São Lourenço, Ribei- the use of over 80 beaches in the region, boosting its pany in the SPMR (São Paulo, Jandira, Itapevi, DUE TO THE construction, bearing in mind that two of these are ra do Iguape, Ribeira rivers and Araquá brook, as well economy, tourism, generation of jobs, and income. Barueri, Carapicuíba, Osasco, Taboão da Serra SANITATION classified as asset renewals. as the Duas Pontes, Da Onça and Do Carmo streams. Also, in the wake of the priority allocated to invest- and some places in Cotia and Embu). INVESTMENTS, ments in water security to deal with the water crisis With the title of Waste to Energy Barueri, the JUNDIAÍ RIVER of 2014-2015, in 2016 we invested R$86.9 million in project is undergoing public consultation, and is WATER CAN AGAIN Recovery of rivers and water streams Onda Limpa (Clean Wave) the BSMR, and investment is expected to resume at expected to be tendered in the first half of 2017. BE USED TO in the State of São Paulo a similar pace to the pre-crisis period, in 2017. The The contract will have a term of thirty years. By HUMAN SUPPLY. The largest environmental sanitation program on provision of new resources depends, however, on the means of drying, 500 tons of sludge are reduced The actions taken in the interior, and the advanc- the Brazilian coastline, Onda Limpa, began in 2007, renewal of contracts with municipalities. In addition to to 140 tons which give rise to pellets (cylindrical es made in the metropolitan and coastal regions of having increased the average sewage coverage index its own funds, the program has financing by the JICA blocks) and are used as a source of fuel for gen- the State of São Paulo, directly supported the im- in the Baixada Santista Metropolitan Region (BSMR) (Japanese development agency) and Government eration of thermal energy (biogas). provement in the quality of major São Paulo’s rivers from 53% to 76%. By the close of 2016, these works Severance Fund for Employees (FGTS). The generated energy returns to the cycle and and many streams used by the communities. had already required investments of R$1.84 billion, in- The second stage of the Onda Limpa Program is used to dry the sludge, as well as to operate the has been planned for the period between 2022 and STP itself. In addition to becoming partially sus- 2030. The Company estimates investments amount- tainable in electric power, another advantage is ing to nearly R$1.8 billion to expand and implement the reduction of expenditures with transportation Onda Limpa sewage collection and treatment systems and build and with the landfills in which the sludge from 57 thousand new connections. The purpose of the the STPs is discharged. The pioneering spirit of Sewage collection km second stage is to provide total sewage service cov- the idea has already earned recognition with the 2007 (the average sewage 2016 1,203 coverage index ) networks 2 Sewage 53% erage in the Baixada Santista Metropolitan Region. 100 Most Influent in 2016 Energy award, in the Preconditioning Stations Northern In 2016, on the northern coastline, worthy of note Sustainability category, awarded by the Grupo Mí- 53% 76% 7 STPs coastline SEWAGE is the conclusion of the work to install sewage col- dia, by means of the Full Energy magazine. 50 km COLLECTOR 110 trunk collectors NETWORKS lector networks in Ubatuba and São Sebastião, in For the interior and coast regions there are pumping addition to handing over the Paúba STP in the same initiatives for the implementation of thermosolar stations 102 thousand R$1.84 billion sewage 100% municipality. Since its outset, the program has al- sludge drying systems, associated in some cases Investiments connections TREATMENT 4.5 km of collected 69% ready raised the coverage ratio from 53% to 69%. with the implementation of composting systems, underwater (of 123 thousand sewage In 2016: R$102 million emissaries expected) Everything collected is treated. using, for example tree pruning remains and euca- Baixada Santista Region Santista Baixada 48 49 SABESP SUSTAINABILITY REPORT 2016

TEN NEW STPS IN 2016, 10 NEW SEWAGE TREATMENT PLANTS these it is expected that there will be investments of ARE IN: MIRACATU (2 UNITS), WERE CONCLUED IN THE INTERIOR R$7 million and a term of execution of 42 months. SANTÓPOLIS DO OF THE STATE, FOUR OF THEM IN Among the projects under study a highlight is the Water treatment Sewage treatment AGUAPEÍ, viability of using the WTP sludge as sanitary land- PRESIDENTE DOWNTOWN AREAS. ADDITIONALLY, fill cover material and its direct application in com- PRUDENTE, Sludge pacted soil landfills. This will enable the disposal of The sludge (solids) is pumped from the primary and ÁGUAS DE SÃO FURTHER 17 ARE UNDER CONSTRUCTION. sludge into Nature, thereby preserving the soil by secondary clarifiers into biodigesters and centrifuges, PEDRO, SÃO ROQUE, where it loses water producing so-called "cakes", BARRA DO CHAPÉU, partial substitution with WTP-treated sludge. which will be forwarded to landfills. ELDORADO, RIBEIRA By means of the Financing Agreement execut- AND SÃO JOÃO DAS lyptus bark to generate a compound to be applied ed in 2015 with the Brazilian Innovation Agency Intake Index of Secondary clarifiers DUAS PONTES. in agriculture. This process reduces the emission (FINEP), Sabesp is enabling the implementation of Large pipes and equipment pump water from rivers, lakes economies In the secondary clarifirs, the of greenhouse gases and reduces dependence on its “Technological Innovations Plan for Sanitation”. or reseroirs, sending it to connected to remaining solids (sludge) thetreatment plants. settle on the bottom and the sanitary landfills and, consequently, decreases With a plan of implementation in 30 months at a sewage treatment liquid portion is rid of nearly waste disposal expenses, in addition to being an cost of R$60 million, the Plan consists of four proj- 90% of impurities already. This water can not be drunk. environmentally sustainable alternative. ects: System for production of reuse water for ur- 237 Coagulation 74% It is laid into rivers or reused ban and industrial use, implemented in the SPMR; Iron (or Aluminum) chemicals to clean streets, squares Biofiltration units for control of the odors of sew- are added; with the aid and watering gardens, WTPs of quicklime, forming after further treatment Research and technological innovation age collection plants, to be also implemented in flakes with impurities. (Reclaimed water). Reclaimed water in water and sewage the SPMR, STP Sludge Drier by means of Solar Ir- Sabesp produces radiation, in implementation in the city of Franca, Reclaimed water Floculation from Sewage G4-EC7 The initiatives taken for the proper dis- and the plasma gasification system for solid waste 2,564 The water with the flakes is treatment plants’ posal of waste have led Sabesp to strategically en- from sewage treatment plants. gently shaken so that the flakes efluents, increase in size and weight. Aeration tanks gage with academia, research promotion entities There was also progress in the project executed billion subjecting it to m³ per year additional Sewage is and leading-edge companies. The objective is to with the Fraunhofer Institute of Germany, for the use cleaning. composed 548 of organic seek for innovative solutions that add technology of bio-methane generated in the Franca STP with Reclaimed water can be used by matter and Decanting Filtration STPs and efficiency to water and sewage services and, clean fuel to supply the fleet of vehicles. The equip- industry, for microorganisms. In these tanks, the flakes To complete the street cleaning In aeration tanks, consequently, bring socioeconomic and environment arrived from Germany and the STP is being descend to the bottom treatment, the water and other supplied air by gravity . From 80 a passes through mental sustainability to the Company and the re- adapted for its installation (see more in the chapter: non-potable causes these 90% of the impurities are filters consisting of 82% gions served. A Relationship Oriented by Sustainability). applications, microorganisms Sewage removed in this step. a gravel base, sand to multiply and coal, which retain enabling the collection With a department exclusively dedicated to The technical cooperation agreements are an- targeting of and eat service the dirt not removed the organic technological development, in the last three years other way to foster development of technologies in decantation. drinking water for human use. matter. Sabesp invested approximately R$37.3 million in in themes that are priorities for Sabesp, such as 73,015 km Water network research, innovation and development, of which reduction of losses, energy efficiency and alterna- 89% R$11.9 million in 2016. tives for the treatment and disposal of sludge. Sewage Final Adjustments collection The funds allocated to the projects are its own, In this sense, in 2016 an agreement was ex- More chlorine is added in order to ensure that the water will coverage collected from development entities or even partially ecuted with a representative of Danish company be disinfected (free from viruses and bacteria) to get our Primary clarifiers Sand boxes or totally funded by partners. An example is the co- named Liqtech for evaluation of the technology of houses. Also more quicklime is added to protect the In the primary clarifiers, distribution piping. Finally, water is fluoridated, which helps heavier particles are After passing operation agreement between Sabesp and FAPESP ceramic membranes for ultrafiltration of silicon protection of the teeth and prevention of dental caries). left to settle. through the grids, the sewage is with the intention of financing projects in institutions carbide for recovery of residual waters in water conveyed to tanks of higher education and research in São Paulo. treatment plants. The technical and economic vi- Sewage network where sand will This Agreement provides for non-refundable fi- ability of the material is expected to be tested in Reservation and Distribution be removed, to prevent clogging. nancing of R$50 million, divided equally between Sa- 2017 in a number of WTPs. If water is houshold stored in a dirty of open water tank, 50,097 km besp and FAPESP. Initiated in 2009, the partnership Likewise in 2016 Sabesp executed a protocol of there may be contamination. has already given rise to 17 projects, nine of which Intentions with the Government of Denmark with It is important to keep the water tank always closed and Grids Before being treated, the sewage already completed, with an investment of R$5.2 the purpose of developing joint projects of energy to clean it every six months. goes through dirt removing grids million, and another eight projects were approved efficiency in sewage treatment plants and to com- (paper, plastic, bottle caps etc.). and had their Agreements executed in 2015. For bat water losses in the distribution network. Water connections City 7,091 After distribution in households, water used 8,654 for personal hygiene, cooking and cleaning million million turns into sewage. When it leaves homes, it Sewage connections goes to the sewage collection networks, branch collectors and interceptors so it may reach the Sewage Treatment Plants. 50 ECONOMIC AND FINANCIAL MANAGEMENT RESULTS TRANSLATED INTO ADVANCES IN SERVING THE POPULATION Tremembé Stream, in north of the city of São Paulo, one of the streams decontaminated through Clean Stream Project SABESP SUSTAINABILITY REPORT 2016 RESULTS TRANSLATED INTO ADVANCES IN SERVING THE POPULATION Histórico de receita operacional líquida emHistory bilhões of operationalcorrentes revenue 14 R$ billion (current) 14.1

12 11.7 11.2 11.3 10 10.7 AFTER OVERCOMING the Net operational revenue totaled R$14.1 billion, an increase of 20.4% in relation to the previous year. 8 worst drought in more than 80 years, Gross operating revenue related to the performance of water and sewage services showed an in- particularly in the SPMR where its 6 crease of R$2.2 billion or 24.3% when compared to 2015, which is mainly explained by: (i) the tariff adjust- largest production system is located, the 4 ment of 15.2% (7.8% of the ordinary tariff readjust- Cantareira System, Sabesp discontinued ment and 6.9% of extraordinary tariff revision) since June 2015; (ii) the tariff readjustment of 8.4% since 2 the measures taken to mitigate the May 2016; (iii) the 4.4% increase in the total volume billed; and (iv) the lower granting of bonuses in 2016, impacts of the water crisis, among which the total of which was of R$187.4 million (R$926.1 2016 2015 2014 2013 2012 million in 2015), within the context of the Water Re- the Incentive Program for Reduction of duction Incentive Program, ended in April 2016. The increase caused by the factors described Water Consumption and the Contingency above was mitigated by the end of the applica- Release, available on the Company’s website at million in 2016, and the adjusted EBITDA margin tion of the Contingency Tariff in April 2016, the www.sabesp.com.br/investors, item Financial and reached 32.4%, while in the previous year it was Tariff, which enabled recovery of revenues amount of which was of R$224.7 million in 2016 Operational Information in the top menu. 33.9%. Excluding the effects of revenue and of and improved financial results. (R$499.7 million in 2015). Adjusted EBITDA showed an increase of 15.0%, construction costs the adjusted EBITDA margin In 2016 the costs of products sold and services going from R$3,974.3 million in 2015 to R$4,571.5 in 2016 is 43.3% (46.6% in 2015). rendered, administrative, commercial and construction expenses increased by 21.1% (R$1.9 billion). Disregarding the effects of the costs of History of gross operational revenue Economic-Financial Performance construction, the increase was 26.6%. The share 14.8 R$ billion (current) of costs and expenses in net revenue rose to 75.7% In 2016 the Company recorded net income of in 2016, compared to the 75.3% shown in 2015. For 14 R$2.9 billion, against income of R$536.3 million further information on the breakdown and the FOR THE PERIOD 12.3 shown in 2015. changes in costs and expenses, see the Earnings 11.8 12.0 FROM 2017 TO 12 11.4 2021 THE COMPANY EXPECTS TO INVEST 10 3,000 2,947 History of income APPROXIMATELY R$ million (current) 8 R$13.9 BILLION. Construction 2,500

6 2,000 1,924 1,912 Sewage 4 1,500 Water 2

1,000 903

536 2016 2015 2014 2013 2012 500 Total 14.8 12.3 11.8 12.0 11.4 Construction 3.7 3.4 2.9 2.4 2.5 Sewage 5.0 3.9 4.0 4.3 4.0 2016 2015 2014 2013 2012 Water 6.1 5.0 4.9 5.3 4.9 54 55 SABESP SUSTAINABILITY REPORT 2016 RESULTS TRANSLATED INTO ADVANCES IN SERVING THE POPULATION

HISTÓRICO DO EBITDA AJUSTADO Total water and sewage billed(1) by category of use – Millions of m³ 4.6 History of Adjusted EBITDA and Ajusted EBITDA Margin Water Sewage Water + Sewage 2016 2015 % 2016 2015 % 2016 2015 % 4.0 4.0 Residential 1,527.6 1,465.0 4.3 1,294.0 1,232.1 5.0 2,821.6 2,697.1 4.6 Comercial 162.9 160.0 1.8 155.0 151.9 2.0 317.9 311.9 1.9 3.6 Adjusted EBITDA Industrial 31.6 32.6 (3.1) 38.3 38.9 (1.5) 69.9 71.5 (2.2) (R$ current billion) Public 40.8 40.6 0.5 35.9 33.4 7.5 76.7 74.0 3.6 2.9 Total reatil 1,762.9 1,698.2 3.8 1,523.2 1,456.3 4.6 3,286.1 3,154.5 4.2 (2) Wholesale 227.4 215.5 5.5 29.0 24.4 18.9 256.4 239.9 6.9 46.6% Total 1,990.3 1,913.7 4.0 1,552.2 1,480.7 4.8 3,542.5 3,394.4 4.4 43.3% 44.6% 43.0% Adjusted EBITDA (1) Not audited. (2) Wholesale includes the volumes of reuse water and non-domestic sewges. Margin before 34.4% construction Volume of water and sewage billed(1) by region – Milions of m³ revenues and costs Water Sewage Water + Sewage 2016 2015 % 2016 2015 % 2016 2015 % 32.4% 33.9% 35.4% 33.6% Metropolitan 1,136.7 1,084.3 4.8 987.8 939.1 5.2 2,124.5 2,023.4 5.0 26.0% Adjusted Regional Systems(2) 626.2 613.9 2.0 535.4 517.2 3.5 1,161.6 1,131.1 2.7 EBITDA Margin Total retail 1,765.9 1,698.2 3.8 1,523.2 1,456.3 4.6 3,286.1 3,154.5 4.2 Wholesale(3) 227.4 215.5 5.5 29.0 24.4 18.9 256.4 239.9 6.9 Total 1,990.3 1,913.7 4.0 1,552.2 1,480.7 4.8 3,542.5 3,394.4 4.4 2016 2015 2014 2013 2012 (1) Not audited. (2) Consisting of the coast and interior regions. (3) Wholesale includes the volumes of reuse water and non-domestic sewages.

Reconciliation of Adjusted EBITDA(1) (Non-accounting measure) Investments R$ million R$ million (current) Water Sewage Total

2016 2015 2014 2013 2012 In 2016, an investment was made in the amount Net income 2,947.1 536.3 903.0 1,923.6 1,911.9 of R$3.9 billion, including R$1.3 billion relative to São Paulo Metropolitan Region 2,373.5 819.4 3,192.9 Financial results (699.4) 2,456.5 635.9 483.2 295.7 the São Lourenço PPP, still reflecting the prioritiza- Depreciation and amortization 1,146.6 1,074.1 1,004.5 871.1 738.5 tion of the water supply infrastructure. For the period from 2017 to 2021 the Company Regional Systems Income and social contribution taxes 1,181.9 51.2 371.8 732.0 635.7 (interior and coast) 270.1 414.7 684.8 expects to directly invest approximately R$13.9 bil- Other operating net revenues/ expenses(2) (4.7) (143.8) 3.5 (3.3) 23.2 lion, of which R$7.1 billion in water and R$6.8 bil- Adjusted EBITDA 4,571.5 3,974.3 2,918.7 4,006.6 3,605.0 lion in collection and treatment of sewage5. Total 2,643.6 1,234.1 3,877.7 Adjusted EBITDA 32.4 33.9 26.0 35.4 33.6 The following table details the investment made, Note: Does not include the commitments assumed Revenue from construction (3,732.9) (3,336.7) (2,918.0) (2,444.8) (2,464.5) segregated by water, sewage and region. under the program agreement (R$6 million). Cost of construction 3,651.4 3,263.8 2,885.5 2,394.5 2,414.4 Adjusted EBITDA excluding revenue and cost of construction 4,490.0 3,901.4 2,856.2 3,956.3 3,554.9 Adjusted EBITDA Margin excluding revenue and cost of construction 43.3 46.6 34.4 44.6 43.0 2017-2021 Investment plan 3,500 R$ million (1) Adjusted EBITDA (“Adjusted EBITDA”) corresponds to net income before: (i) depreciation and amortization expenses; (ii) income and social contribution taxes (federal taxes on income); (iii) the financial results; and (iv) other net operating expenses. Adjusted 2,949 3,000 2,854 2,936 EBITDA is not a measure of financial performance according to accounting practices adopted in Brazil, IFRS – International Financial 2,809 362 282 Reporting Standard or USGAAP (generally accepted accounting principles in the United States), nor should it be considered in 248 330 isolation or as an alternative to net income, as a measure of operational performance, or as an alternative to operating cash flows 2,500 989 1,395 1,245 2,331 1,152 Sewage as a measure of liquidity. Adjusted EBITDA has no standardized meaning, and the Company’s definition of Adjusted EBITDA is not 136 comparable with those used by other companies. The Company’s management believes that the Adjusted EBITDA provides a useful Treatment measure of its performance, which is widely used by investors and analysts to evaluate performance and compare companies. 2,000 642 Other companies may calculate Adjusted EBITDA in a form that is different from that of the Company. Adjusted EBITDA is not a part of the financial statements. Adjusted EBITDA has the purpose of showing an operational economic performance indicator. 1,500 1,617 Sabesp’s Adjusted EBITDA is equivalent to net income before net financial expenses, Income and Social Contribution Taxes (federal 1,553 Sewage 1,409 taxes on income), depreciation and amortization, and other net operating expenses. Adjusted EBITDA is not an indicator of financial 1,327 Collection performance recognized under the Corporate Law Method and must not be considered severally or as an alternative to net income 1,192 as an indicator of operating performance, as an alternative to the operational cash flows or as an indicator of liquidity. Sabesp’s 1,000 Adjusted EBITDA serves as a general indicator of its economic performance and is not affected by the restructuring of debts, oscillation of the interest rates, alterations of tax burden or levels of depreciation and amortization. As a result, Adjusted EBITDA 500 serves as an adequate instrument for regular comparison of the operational performance. In addition, there is another formula for Water calculation of Adjusted EBITDA that is adopted in clauses of some of the financial commitments. Adjusted EBITDA enables a better understanding not only of the operational performance but also of the ability of fulfilling the Company’s obligations and raising funds for capital investments and working capital. Adjusted EBITDA, however, has limitations that hinder it from being used as an 2017 2018 2019 2020 2021 indicator of profitability, inasmuch as it does not take into account other costs resulting from Sabesp’s activities or certain other costs that may affect its profits significantly, such as financial expenses, taxes, depreciation, capital expenditures and other related charges. (2) “Other net operating revenues/expenses” mainly related to write-offs of fixed assets, provisions for losses with intangible 5 – For further information on our investment and emergency works to cope with the water crisis, see the chapters assets, loss from economically unviable projects, after deducting revenues from sale of fixed assets, sales of invitations to bid, indemnities Infrastructure and Planning for the Future of Supply and Expansion of Infrastructure and Recovery of Water and reimbursement of expenses, penalty fines and bonds, rental of real estate, reuse of water, projects and Pura and Aqualog services. Resources. 56 57 SABESP SUSTAINABILITY REPORT 2016 RESULTS TRANSLATED INTO ADVANCES IN SERVING THE POPULATION

Indebtedness decrease of the amount in Reais of the debt in for- statements, the Company does not use hedging Fundraising eign currency. instruments, since a major part of the foreign cur- In the course of 2016, as the Company was recov- In relation to total debt, inasmuch as there was rency debt is contracted with official agencies of In October 2016 the Company contracted a ering from the effects of the hydric crisis, this was re- no substantial increase in the Company’s indebted- foreign and national governments, in addition to foreign loan in the amount of US$150 million, flected in its indebtedness metrics. Also contributing ness, since new funding was basically allocated to multilateral organizations, with very low costs, long corresponding to R$469 million, for a term of to this improvement was the evolution of the country’s the refinancing of overdue transactions in the pe- maturity terms and diluted repayments. 3 years, with an interest rate corresponding to macroeconomic scenario, particularly the lower vola- riod, there was an improvement in the debt metrics, The management that Sabesp has been adopting the Libor for 3 months plus 4.50% per annum. tility of the foreign exchange rate and the appreciation particularly in the “Total Adjusted Debt/Adjusted allowed the Company to show a robust economic- The interest relative to this loan will be paid on a of the Brazilian Real in relation to foreign currencies. EBITDA” financial indicator (covenant), which ended financial performance in the years prior to the hy- quarterly basis and the repayment will occur in The Company’s active management of the debt the year 2015 by 3.26 times, but which, as a result dric crisis, and was fundamental in the absorption six-monthly installments as from the 18th month. maintained its conservative, prudent and respon- both of the nominal reduction of the debt and by its effects in the years 2014 and 2015. Throughout The funds raised by this loan were used for sible guidance of not increasing its relative level the gradual recovery of the EBITDA, ended the year 2016, as explained above, it gradually recovered its settle of the 2016 Eurobond, in the amount of of indebtedness, as well as maintaining its level of 2016 by 2.58 times, very close to the Company’s his- credit metrics, showing a solid economic-financial US$140 million, and other debts falling due debt in foreign currency (% of the total debt) within torical levels, around 2.5 times. structure, which enabled it to maintain high invest- in 2016. the average of the previous years, which was es- In 2016, the Company repaid R$1,535.3 million ments, even in times of crisis. In 2016, no new debts were contracted for in- sential to preserve the low cost of third-party capi- of debt and closed the year with total indebted- Despite this improvement in the Company’s vestment financing. More information on loans tal and administrate the effects of the foreign ex- ness of approximately R$12.0 billion, compared to economic indicators, its credit risk rating has not and financing is available in Note 16 to the Fi- change rate variance on the debt. R$13.1 billion at the end of 2015, which represents yet captured this evolution, due to three factors: nancial Statements. The Real/dollar exchange rate, which ended the a nominal reduction of 8.07%. The foreign currency (i) the Brazilian credit risk rating downgrade in year 2015 quoted at R$3.9048 per dollar, ended the debt, which totaled 50.4% of total debt in 2015, rep- early 2016, which generated immediate down- year 2016 at R$3.2591. As the nominal foreign cur- resented 47.3% at the end of 2016. grade of the credit rating of Brazilian compa- Agreement with the Municipality rency indebtedness remained in line with previous Although Sabesp must cope with the effects nies, among them Sabesp; (ii) the fact that the of São Paulo years, this appreciation of the Real translated into a of the exchange rate fluctuations on its financial improvement in the Company’s credit indicators has been occurring at a gradual pace since the In December the first Quadrennial Review of first half of 2016; and (iii) the non-occurrence of the Agreement with São Paulo was completed, annual credit reviews in the course of the sec- which altered the Service Targets and Service Total Ajusted Debt / Adjusted EBITDA ond half of 2016. The Company’s credit scores are Quality Plan, the Investment Plan and the Invest- EBITDA Ajustado Dív. Total Ajust. / EBITDA (R$ milhões) (R$ milhões) Dólar shown below, including the downgrade that oc- ment Compatibility Plan. However, the recovery, IN 2016 SABESP 5.000 6,00 curred in February 2016 in the Standard & Poor’s by means of a tariff, of the transfer to the Mu- CONTINUED TO BE credit rating due to the downgrade of the rating nicipal Fund for Environmental Sanitation and MONITORED BY of the country. Infrastructure, authorized by Arsesp Resolution 407/2013, was not addressed, and the suspen- THE MARKET’S 4.000 5,00 sion approved by Arsesp Resolution 413/13 and MAJOR FINANCIAL Rating agencies upheld by Resolution 488/14 was maintained. INSTITUTIONS. National Scale Global Scale To learn more about the transfer, see Note 14 (d) 3.000 4,00 (v) to the Financial Statements.

3,65 Standard & Poor’s

Relationship with the Municipalities 2.000 3,00 Served by Wholesale brA+ BB

Sabesp provides water by wholesale to five 1.000 2,00 FitchRatings municipalities of the SPMR: São Caetano, Mogi das Cruzes, Guarulhos, Mauá and Santo An- dré. The municipalities of Guarulhos, Mauá and Santo André show a relevant history of default. 0 1,00 AA- (bra) BB 1T13 2T13 3T13 4T13 1T14 2T14 3T14 4T14 1T15 2T15 3T15 4T15 1T16 2T16 3T16 4T16 In 2017, except for Guarulhos, which made the full payment of the consumption bill for January EBITDA 3.638 3.751 3.891 4.007 4.101 3.851 3.552 2.919 3.260 3.355 3.516 3.974 3.525 3.885 4.320 4.571,5 Moody’s 2017, the other municipalities maintained the default behavior. Dív. Total Ajusta. / EBITDA 2,40 2,38 2,30 2,32 2,26 2,52 2,85 3,64 3,59 3,27 3,54 3,26 3,42 3,00 2,73 2,58 From mid-2015 to early 2016 Sabesp exe- Aa2.br Ba2 cuted Protocols of Intention with the three mu- Dólar 2,0138 2,2156 2,23 2,3426 2,263 2,2025 2,451 2,6562 3,208 3,1026 3,9729 3,9048 3,5589 3,2098 3,2462 3,2591 nicipalities to develop studies and assessments 58 59 SABESP SUSTAINABILITY REPORT 2016 RESULTS TRANSLATED INTO ADVANCES IN SERVING THE POPULATION

aimed at resolving the existing commercial re- Metropolitan Region and of the end of the Wa- ANEFAC TRANSPARENCY TROPHY 2016, RECEIVED BY SABESP, lations and debts, but all of the Protocols were ter Consumption Reduction Incentive Program. ON DISPLAY IN THE BOARDROOM. AWARD GIVEN BY ANEFAC IN PARTNERSHIP ended with no success in the negotiations in These events had a positive impact on the Com- WITH FIPECAFI AND SERASA EXPERIAN RECOGNIZES COMPANIES THAT SHOW mid-2016. pany’s shares, which at the end of 2016 reached MORE CLARITY IN THE DISSEMINATION OF THEIR BALANCE SHEETS. In 2016, Sabesp included the autonomous R$28.79, a 53.5% appreciation compared to municipal agencies in default in the Single Reg- 2015, surpassing Ibovespa, which recorded a rise ister of Debtors of São Paulo (State CADIN) by of 38.9%. which all unpaid amounts are collected judicial- The ADRs closed the year with appreciation of ly. The Company has been successful in the judi- 90.7%, quoted at US$8.68. In the same period, cial proceedings, whereby some of courtordered the Dow Jones index recorded a rise of 13.4%, public debt payments are in pay-out phase. For and the S&P 500 of 9.5%. With this performance, more information on the accounts receivable the Company’s market value showed significant from the municipalities served by wholesale, recovery, going from R$12.9 billion in 2015 to see Note 9 to the Financial Statements. R$19.7 billion in 2016. On December 31, 2016 In addition, at the request of the Municipal the Company’s equity value was of approximate- Environmental Sanitation Service of Santo An- ly R$22.56 per share. dré (SEMASA), the Economic Defense Coun- Sabesp’s shares participated in 100% of cil (CADE) filed an administrative investigation BM&FBovespa’s trading sessions, and the an- against Sabesp for alleged violation of the eco- nual financial volume traded more than doubled nomic order in wholesale water supply. Subse- in comparison with 2015, reaching a figure of quently the municipality of Guarulhos adopted a R$13.0 billion. In the US market, the Company similar measure, and its request was attached closed the year with 132.4 million of outstanding to the same proceeding. As of this date, no ad- ADRs, and an annual financial volume of US$4.5 IN 2016, ministrative proceeding has been filed. billion, 50% more than in the previous year. THE COMPANY’S In 2016 Sabesp continued to be monitored by MARKET VALUE the market’s major financial institutions. Transactions with Related Parties SHOWED

SIGNIFICANT The year was also marked by the execution Dividends RECOVERY. of an agreement with the Metropolitan Water and Energy Company (EMAE), aiming at the G4-EC1 According to the Company’s Bylaws, definite dismissal of litigation involving the use the common shares are entitled to a minimum of the Guarapiranga and Billings reservoirs. mandatory dividend, corresponding to 25% of The efficacy of the transaction is still subject net income for the year, arrived at after certain to the condition precedent of approval by the deductions that determined or admitted by law pertinent corporate bodies of the EMAE, inas- and that can be paid in the form of interest on much as it has already been approved by the Na- own capital. In 2016 Sabesp credited dividends tional Electric Power Agency – ANEEL. For more in the form of interest on own capital amounting information on the transaction, see Explanatory to R$149.9 million relative to 2015, correspond- Note 10 (c). ing to approximately R$0.2193 per common share and a dividend yield of 1.2%. As regards the year 2016, the Board of Direc- Stock Market tors approved the proposal of payment of interest on own capital amounting to R$823.5 million, The behavior of the stock market in 2016 re- corresponding to R$1.2048 per common share flected the investors’ expectations mainly due to and a dividend yield of 4.2%, to be paid on June the recovery of the reservoirs of the São Paulo 27, 2017.

60 61 Atibainha Reservoir, part of the Cantareira System: SANITATION AND ENVIRONMENT water sources returned to the levels they had befor the crisis

A RELATIONSHIP ORIENTED BY SUSTAINABILITY SABESP SUSTAINABILITY REPORT 2016 A RELATIONSHIP ORIENTED BY SUSTAINABILITY

Evolution of Greenhouse Gas Emissions at Sabesp, from 2007 to 2015

From 2007 to 2015 – CO2e million tons) 2.5

2.0

SABESP’S ENVIRONMENTAL Other investments and expenses associated with 1.5 environmental protection are contemplated in the management, based on the guidelines proposed total amount of operational expenses and invest- 1.0 ments informed in this report, given the direct re- in its Environmental Policy, is inherent lationship of the environmental activities with the end-activity of the Company. As an example, the 0.5 on the provision of the sanitation services investments in sewage, effluents monitoring, pay- and the essence of the business. ment for the use of water from federal and state watercourses, maintenance of reserves in pro- 2007 2008 2009 2010 2011 2012 2013 2014 2015 tected areas, maintenance of forest nurseries, ef- Aiming at reaching a new level of operational fluents reuse initiatives, environmental education excellence, the Sabesp corporate environmental actions, environmental skills development, among management planning has as one of its prem- other initiatives. ronmental aspects that are more relevant for the Electricity contributed with 12%, while the ises to implement a culture of prevention and operation of the Sewage Treatment Plants and Wa- other activities accounted for approximately 1%. of best environmental practices, aiming at the ter Treatment Plants. Drawn up since 2007, the document follows the continual improvement of the Company’s envi- Environmental Management System principles and requirements of the standard NBR ronmental performance. and ISO 14001 Certification Climate change and management ISO 14064:2007 Part 1 and the Brazilian GHG Pro- In order to consolidate the environmental cul- of greenhouse gas emissions tocol Program. ture, the Company prioritizes the internal and ex- Sabesp has been prioritizing as part of its Envi- In line with the opportunities to reduce green- ternal dissemination of knowledge and experiences ronmental Policy implementation strategy, the con- G4-EN15, EN16, EN17 Climate conditions and house gas emissions resulting from the Company’s related to good environmental practices. These tinuity of the Corporate Program for progressive extreme events interfere directly on sanitation ac- energy consumption, to identify opportunities to are actions that are present in the corporate pro- implementation of an Environmental Management tivities. Thus, technical capability, the quantification increase the efficiency of energy consumption and grams for environmental management that involve System (EMS) at the Sewage Treatment Plants of greenhouse gas emissions and the implementa- to enhance operations, several of the Company’s the collaborators, the community and partnerships (STP) and Water Treatment Plants (WTP), which tion of actions to mitigate them, as well as adapta- operating units are developing studies on energy with nongovernmental organizations. was structured in 2009. tion to current climatic conditions are now on the consumption efficiency, one of which is at the São G4-EN31 In 2016 there was allocation of approxi- The EMS is currently present in 129 plants, of Company’s agenda, constituting a set of initiatives João da Boa Vista STP, where efficiency studies mately R$21 million to investments and expen- which 35 are certified in ISO 14001. There are per- intended to enhance their environmental and oper- were carried out involving mechanical aerators for ditures with the environment, directly associated spectives of implementing the EMSin all plants by ating performance. sewage treatment lagoons with depth of more than with the development of and implementation of the 2024, whereby the scope of 14001 certification may The preparation of annual inventories to mea- 4 meters. As a result, alternatives capable of gen- THE CORPORATE principal corporate environmental management be expanded according to the strategy of the Busi- sure greenhouse gas emissions – GHG, the pro- erating demand reductions and energy savings es- PROGRAM FOR programs, as well as with the Program for Rational ness Units, which scope is evaluated annually by motion of awareness programs regarding climate timated in the order of 40% were identified. MANAGEMENT OF Use of Pure Water, among other environmental ini- means of outside audits. issues and the fostering of adoption of environ- Another initiative was carried out in the Parque GHG REFLECTS THE tiatives of a local scope implemented by the Com- This program has fostered and strengthened mentally more efficient measures and practices so Novo Mundo STP during 2016, to find new tech- RESPONSIBILITIES pany’s Business Units. the Company’s culture change process, which as to manage greenhouse gas emissions are some nologies in replacement of the existing air blowers. SET OUT IN THE inserts environmental management in the busi- of the actions on-going in the company within the During that study, it was noted that the current air ness guidelines. It also has the purpose of im- scope of the Corporate Program for Management production system can be exchanged for machines GUIDELINES proving the operational management, aiming at of Greenhouse Gas Emissions – GHG. The initiative offering high energy efficiency and at the same time AND THE Environmental Management System minimizing risks, accidents and generation of en- reflects the responsibilities set out in the guide- an increased air production, in order to meet the REQUIREMENTS OF vironmental liabilities, in addition to stimulating lines and the requirements of the State Policy on expected increases in treatment demand. THE STATE POLICY 2009–2016 the development of preventive and sustainable Climate Change (SPCC). The new equipment proposed – state-of-the-art ON CLIMATE 129 Treatment Plants actions, with consequent improvement of the en- In 2016, Sabesp concluded its 2015 corporate blowers – will offer higher control over the treat- CHANGE. vironmental performance. GHG inventory, totaling 2,204,464 tCO2e. This is the ment process in aeration tanks, thus contributing Since 2015 Sabesp has been working on the EMS 9th edition of the inventory, and it shows the trend to the continuing improvement of effluent as well Of those, with a mixed model, where the ISO 14001 standard observed in previous inventories, in which the col- as an estimated reduction of 23% in energy con- 35 plants is applied to the certified scope, and for the other lection and treatment of sewage are the largest sumption. Photovoltaic energy generation is also have 14001 certification plants, it uses its own environmental management sources of GHG emissions, accounting for approxi- being studied as an alternative for the Company. model (named EMS-Sabesp), with focus on envi- mately 87% of the total. The year 2016 saw new legislation for the electric- 64 65 SABESP SUSTAINABILITY REPORT 2016 A RELATIONSHIP ORIENTED BY SUSTAINABILITY

Fleet Renewal Program ity sector, permitting the application of photovoltaic biomass-fed thermoelectric and solar-powered of greenhouse gas emissions. Together with this energy to distributed generation in some places. In plants, in addition to small hydroelectric power program, Sabesp follows government guidelines SABESP FOLLOWS this sense, an early-stage study, is under develop- plants (HPP) and hydroelectric developments with on the use of ethanol, a renewable fuel, for flex ve- Since GOVERNMENT ment for the implementation of photovoltaic energy a capacity equal to or less than 1MW (CGH). hicles and Diesel S10 for heavy vehicles. 2011 GUIDELINES in some sewage treatment lagoons which permits The use of biogas as a source of energy has also Added to the environmental importance are the 1,446 461 ON THE USE OF estimated economies ranging from 10% to 20% in been explored by the Company as an alternative to economic benefits and the modernization of man- light heavy RENEWABLE FUEL. electrical energy consumption. optimize processes, together with the principles of agement afforded by the Fleet Renewal Program, vehicles vehicles A study to generate hydro energy in water pipe- sustainability, with positive effects on the reduc- such as the reduction in fossil fuel consumption, lines, taking advantage of water’s kinetic energy, is tion of greenhouse gas emissions. This is a tech- savings with maintenance and documentation and also under development. The project is underway in nical cooperation agreement in an amount of ap- the revenue raised for auctioning the vehicles re- two water-pumping stations with an estimated 25% proximately R$7.3 million between Sabesp and the placed. By sticking with the program, we have as to the rational use of water by its inherent eco- IN 2016, reduction in the energy consuption. German Fraunhofer Institute, with the purpose of reached a 99.5% daily fleet availability level, thus nomic value and the provision of part of the funds 4.33% OF ALL At the Vila Romana water-pumping station, a obtaining biomethane (vehicle fuel) for the Compa- increasing the productivity of our operations. required for the actions planned by the Water Basin ELECTRICITY USED project to replace the booster pumps electrical ny’s fleet, from the biogas generated at the Franca Committees aimed at recuperating and preserving BY SABESP CAME engines with natural gas engines is foreseen. The sewage treatment unit. water resources. FROM SOURCES project is included in COMGÁS’s R&D program. The return is estimated at about R$235 thousand Water resource management and protection In 2016, the company disbursed approximately SUCH AS WIND, This change may allow energy savings of more a year, from the reduced consumption in traditional R$43 million as payment for the use of water un- BIOMASS-FED than 50% during peak hours and 10% during the fuels. Equipment imported was received by the end Sabesp actively participates at different levels of der federal and state dominion in the water basins THERMOELECTRIC rest of the day. In addition, it is a simpler and more of 2016. Completion of construction works, equip- the National Water Resource System, represented of the Paraíba do Sul river, the Piracicaba, Capi- AND SOLAR reliable pumping system, because it eliminates a ment installation and the beginning of technologi- by 158 of its employees from different company vari and Jundiaí rivers, the Sorocaba and Médio POWERED PLANTS. series of components, such as primary cabin and cal tests are expected to take place in 2017. units who follow a corporate course of action. Tietê rivers, the rivers in Baixada Santista region transformer, as well as safety and control panels. At present, this is the unique initiative in Brazil Within the scope of the System, Sabesp holds and those of the Alto Tietê river, Baixo Tietê river, Also in the search for continuing improvement in to transform gas generated in sewage treatment in a position in the Plenary Sessions of the National Tietê Batalha river, Tietê Jacaré river and Ribeira energy consumption, in 2016, we signed a protocol vehicle fuel with this technology. In recognition of Council for Water Resources and in three of the lat- de Iguape river and Litoral Sul. Charges for the re- of intentions with the Danish Water Forum (DWF) its commitment to the environment meant by this ter’s technical chambers. It is also represented at maining river basins in the State of São Paulo are whose objectives include international technologi- agreement, in 2016 Sabesp was awarded the Ethic the plenary session and in the technical chambers expected to begin in 2017. cal cooperation in energy efficiency projects for in Business prize in the sustainability category. of the four federal committees encompassing the Another debating point in which the company is sewage treatment plants. Also at the Franca STP, the project of drying sludge State of São Paulo. At state level, Sabesp partici- involved focuses on the classification of water bod- It is also worth pointing out that, in 2016, 4.33% through solar irradiation deserves special mention. pates in the seven technical chambers of the State ies in which the water basin sets up a pact around of all electricity consumed by Sabesp, measured in The reduction in the volume of sludge generated by Council for Water Resources and has a seat at the targets for the quality of the water associated with GWh, corresponds do energy produced under ener- the project reduces the number of trips necessary to plenary sessions of the 21 state water basin com- its predominant uses. These two management and gy incentive programs. The programs are an initia- carry sludge to the landfill, thus reducing vehicle fuel mittees and in technical chambers. planning instruments are directly related to the tive of the Brazilian government to foster produc- consumption and greenhouse gases emissions. To date, Sabesp’s priorities include, besides business. Among the other activities within the tion of energy from renewable sources, so that the We also contributed to the reduction in green- participation in the plenary sessions, work in the scope of the Water Resources Management System acquisition of this type of energy contributes to the house gas (GHG) emissions with the Sabesp Fleet chambers dealing with Planning, Sanitation and in which Sabesp representatives participate, the enlargement of the clean source electricity matrix Renewal Program, an action that has been in place Charging for the Use of Water, being represented preparation of draft bills on the protection of water on a nationwide scale and to the reduction of green- since 2011, focusing on the replacement of light in al of them. In continuity, and considering the im- sources deserves special mention. house gas emissions. vehicles with more than 7 years’ use and heavy ve- portance of Environmental Education in the man- In appreciation of the need to preserve the water Under prevailing regulations, incentivized hicles with an age of more than 20 years. After the agement of water resources, Sabesp will include resources, the company owns and maintains areas sources include renewable energy generation proj- replacement of 1,446 light and 461 heavy vehicles, its participation in the Environmental Education within conservation units which are inspected and ects with an installed capacity not exceeding 30 representing 74% and 72% of the total fleet, respec- Chamber among its priorities. The Company is al- monitored. The areas are also open to universities MW, such as wind power generating complexes, tively, the program has contributed to the reduction ready active in several of those chambers and in- and NGOs for social and environmental studies. tends to expand its representation to participate in Besides the reserves, since 1990 Sabesp main- all of the environmental education chambers now tains two forest nurseries intended for producing in existence or that may be implemented by the ba- seedlings of native species. The objective is to con- BIOGAS VEHICULAR sin committees in the future, since not all commit- tribute to the projects for restoring and rehabilitating BEGINNING Equipment OF TESTS tees have this chamber implemented. of riparian vegetation surrounding the water sources EXPECTED TO installed at GAS Also with a view to further enhancing water re- that supply the São Paulo Metropolitan Region. One Franca STP will generated at 2017 transform BIO source management, Sabesp has been accompany- of them is installed at the Jaguari dam of the Canta- SEWAGE into FUEL TREATMENT ing the gradual implementation of charges for the reira System within the municipality of Vargem, and use of water This is an important instrument whose another one at Alto Cotia WTP, in the municipality of Reduced Unique R$ R$235 thousand/year 7.3 million consumption of initiative estimated objectives provided for in the National Policy on Wa- Cotia. It also runs a nursery in the Jales STP, which investiment Traditional fuels in Brazil return ter Resources include, among others, awareness supplies seedlings of tabebuia, cecropia, mahogany, 66 67 SABESP SUSTAINABILITY REPORT 2016 A RELATIONSHIP ORIENTED BY SUSTAINABILITY

G4-EN11 Reserves within protected areas creased awareness of the importance of house con- thousand monitored visits to Sabesp facilities, receiv- Morro Grande Rio Claro Capivari São Francisco nections to the sewage system and the adequate ing 71 thousand visitors, mostly from schools. Reserve Reserve Farm Reserve use of the sanitation equipment available, of ratio- In the same vein, worth of mention is the “Apre- nal use of water, of the 3Rs concept in solid waste ndendo a Aprender” (Learning to Learn) a project Salesópolis Municipality Cotia São Paulo São Sebastião and orientation to avoid the misguided connections developed in partnership with the Jales University and Bertioga of rain water to the sewage system and vice-versa. – Unijales, state and local teaching institutions and Besides the advances and technological solu- organizations from the town of Jales. The project is Area 10,700 ha 16,200 ha 2,900 ha 258 ha tions for responding to the environmental demands located at the STP in Jales, on an area of 100 hect- that arise, the involvement of the entire popula- ares, where 140,000 fruit and native tree seedlings Perimeter 70 km – 12 km 7,1 km tion is vital to sanitation, in other words, carrying have already been planted, affording huge envi- Production out works and command of the technology are ronmental benefits. The space also houses an en- Alto Cotia Rio Claro Guarapiranga São Francisco System not enough. The enjoyment of the advantages of a vironmental education room, an ecological house, SABESP healthy and balanced environment requires main- a theme garden, an aroma garden, a fishing lake, ENVIRONMENTAL Reservoirs: Water basin: taining an investment in education, the basis that an organic vegetable garden, ecology trails and a Water Source/ Graça and Pedro Beicht Ribeirão do Campo – Stream: São Francisco EDUCATION Water Basin Water basin: Reservoir, Guaratuba can sustain the transformations and advances re- seedling nursery that produces around 8,000 seed- Pedro Beicht Reservoir and Poço Preto quired to the evolution of the community. lings a year. In 2016, the project received 1,623 stu- PROGRAM AIMS The goal of the PEA Sabesp educational program dents. TO CREATE Law 1949/79 – M. Grande is environmental awareness and social mobiliza- In the municipality of Lins, Sabesp has a part- ENVIRONMENTAL forest reserve; protected Located within Serra Located within the Serra tion, with the insertion of a new vision of the im- nership with the local administration through the AWARENESS by the Condephaat since do Mar State Park Located in the do Mar State Park Further 1981. (Decree 10251/77) Capivari-Monos (Decree n.º 10251/77) portance of sanitation equipment and services for a local Forest Garden, where environmental educa- AND SOCIAL information Declared the Biosphere Declared Biosphere Area of Evironmental Declared Biosphere healthy environment and society. tion activities take place involving students from Reserve of the São Paulo Protection (APA) MOBILIZATION, Reserve of the Atlantic Reserve of the Atlantic private and public schools, such as the “Bosques Green Belt by UNESCO Forest by UNESCO (1994) Forest by UNESCO (1994) BY INSERTINT A (1994) Urbanos” (Urban Woods) reforestation project and the puppet theater, “Sabesp salvando o rio da Ci- NEW VISION OF Such actions promote: dade” (Sabesp saving the town’s river), which are THE IMPORTANCE • Increased perception of the value of held on the premises of the Environmental Educa- OF SANITATION sanitation services provided in relation to tion Center and in the Theme Garden. In 2016, the EQUIPMENT cedar, queen palm, palm, guava tree, bilimbi and It is also planned to hire the planting and main- the water treatment and distribution and of Environmental Education Center was visited by AND SERVICES moringa, used for reforestation purposes. tenance of 300 thousand more tree seedlings in the around 2,100 pupils. sewage collection and treatment. FOR HEALTHY In regard to environmental grants and permits, short and medium terms, integrated to the “Pro- Sabesp is also moving ahead with the “Horta nas • Development of actions related to ENVIRONMENT AND the existing operating complex is the subject mat- grama Nacentes”. The total expenditure for this Escolas” (Kitchen Garden in the Schools) project, in- hygienic and preventive health habits. ter of the Corporate Programs for Obtaining and program is R$40 million. volving students from state and municipal schools. SOCIETY. • Training of local environmental agents Maintaining Grants of Right of Use of Water Re- As a result, it is expected not only the improve- The purpose of these activities is to encourage the and educators committed to environmental sources and Environmental Permits for STP, WTP ment in the management and fulfillment of the children to adopt healthier eating habits, while at the preservation. and Sewage Pumping Stations (SPS). commitments, but also a greater environmental same time promoting contact with nature, empha- Sabesp in the development of its activities related benefit arising from the coordinated efforts be- sizing the importance of water for growing food. Pro- to the execution of works and interventions, goes tween Sabesp and the Government of the State of duction takes place at the school itself, which plays through a process of obtaining permits and environ- São Paulo through the “Programa Nascentes”. an important role in motivating students and teach- mental licenses, according to the current legislation. At Sabesp, the Sanitary and Environmental ers, both with regard to how to cultivate the garden, As a result of these processes ,, Sabesp undertakes Education activities have been under the care of and the adoption of eating habits that are safe and environmental compensation commitments. Sabesp Environmental Education employees of different organizational levels, dif- sustainable. The parents of the pupils have become To meet the current and future obligations, Sa- Program – PEA ferent backgrounds and different functional and enthusiastic with the outcome of the initiative, since besp developed and is implementing a program operational areas of the Company, for more than besides accompanying the development of the veg- that includes the planting and the maintenance of To the extent that water and sewage services 40 years. For that purpose, PEA Sabesp relies on etables after they are planted, the students harvest 1 million tree seedlings in the period of ten years. expand, and also considering the increased global corporate guidance including company procedures, them, sterilize the food and taste the meal prepared The work has already started and is included awareness of environmental questions, the need methodology and mechanisms for the planning and by them. The cities of Lins, Monte Alto, Cândido within the context of the “Programa Nascentes” to interact with the population also increases, management of the hundreds of environmental Rodrigues and Santa Ernestina have planted over of the Government of the State of São Paulo, being considering that social participation plays an in- projects and actions developed by the company. twenty vegetable gardens in local schools. currently in course the plantation and maintenance creasing role in the daily life of sanitation compa- During 2016, a total of 2,268 talks were given Another project worth drawing attention to is of 213 thousand tree seedlings in the São Paulo nies’ activities. in schools communities and companies within the the Jardim Sensorial (Sensorial Garden), whose Metropolitan Region, with the prospect to hire im- Within this context, environmental education is scope of PEA Sabesp. The talks were attended by ap- purpose is to get closer to, and to appreciate na- mediately 110 thousand more tree seedlings in the a necessary instrument to ensure the effectiveness proximately 382 thousand persons, mostly youngsters ture using a circuit that aims to stimulate the hu- interior of São Paulo. of sanitation actions. Such education enables in- between 15 and 29 years of age. Also, there were 1.6 man senses. The municipality of Monte Alto was 68 69 SABESP SUSTAINABILITY REPORT 2016 A RELATIONSHIP ORIENTED BY SUSTAINABILITY

one of the early movers in this action. In Lins, this school children can foster a critical understanding Day, Tree Day and Rivers and Beaches Clean-up SABESP ENVIRONMENTAL EDUCATION PROGRAM IN 2016: project consists of nine initiatives involving several of the role each one plays in managing the environ- Day are also reasons for the Company’s large-scale entities and partnerships with the city administra- ment and in the conservation and proper use of engagements. We enter into partnerships with city 2,268 TALKS WERE GIVEN IN SCHOOLS, COMMUNITIES tions. The municipality is also the headquarters of natural resources, especially water. administrations, schools and entities involved with AND COMPANIES, the Pequenos Cientistas (Young Scientists) project Also noteworthy is a project designed to change the environment, among others, to arrange talks whose purpose is to encourage pre-school age and behavior regarding the practice of discarding and and visits, distribution and planting of tree seed- 382,000 PEOPLE ATTENDED, MOSTLY YOUNGSTERS elementary education level students to discuss nat- disposing of waste. The purpose of this initiative is lings as well as theater productions and competi- BETWEEN 15 AND 29 YEARS OF AGE ural phenomena by means of simple experiments to promote awareness and introduce good practices tions and task forces to clean up rivers and beaches in physics, chemistry and biology laboratories. for reducing, reusing and recycling waste produced among other activities. These arrangements aim to ALSO, THERE WERE 1,600 MONITORED VISITS In Nazaré Paulista, through a partnership with in the offices, creating an interface between the bring home to, and raise the awareness of partici- TO SABESP FACILITES, the Department of Education, the Fire Brigade and PEA Sabesp and Sabesp 3Rs corporate programs. pants as to the importance of environmental pres- local entities, the Educator Training Program has This activity is taking place in the region that in- ervation for maintaining life on the planet. RECEIVING 71,000 VISITORS been developed with the intention of training di- cludes districts in the northern part of the SPMR In the city of Franca, for example, in 2016 there MOSTLY FROM SCHOOLS. rectors, teaching coordinators and teachers of the and 13 surrounding municipalities, including Bra- was yet another edition of “Cavalgada Ecológica” state and municipal schools within the municipal- gança Paulista, Franco da Rocha, Mairiporã and So- (Ecology on Horseback), as part of the activities in ity. To encourage conservation and appreciation of corro. In this case, exclusive teaching material was the “Verde Vida” (Life is Green) Program. Along the the water sources, as well as keeping to a minimum produced to serve the objectives of local tactical and Canoas river, the main water source that supplies The event emphasized several aspects related the risks to life around the reservoirs, this program operational planning, such as videos and illustrated Franca, this action sees large-scale engagement by to water resources, calling on everyone to assume also involves talks, technical visits and educational leaflets that were prepared with the participation of local inhabitants on World Water Day. With the sup- the responsibility for habits of environmental pres- actions intended to bring together leisure, environ- our employees for use in meetings between em- port of Sabesp and partnerships with local entities ervation and rational consumption of water which mental education and citizenship. ployees and management, and which were made and associations, the purpose of the initiative is to ensure the sustainability of water supplies, not only By training multipliers capable of producing a available on the unit’s general electronic portal, so raise awareness about the importance of preserv- for this generation, but also for future generations. SABESP set of integrated projects and actions by operating that all teams can access and consult them. Since ing natural resources and it is part of the Verde Vida The waste produced by the race participants was MAINTAINS through a network provided by the local education it began in 2016, the project has made possible to Program which has already planted over 100,000 forwarded to locations that recycle this material. FOREST infrastructure, the initiative aims to set an operat- dispose more than 4 tons of recyclable waste in an seedlings of native trees in the riparian forest. In Participants had the opportunity to get to know and NURSERIES ing standard capable of contributing to environ- environmentally appropriate manner. 2016, 1,500 seedlings were planted in and around think about the two largest reservoirs of one of the INTENDED FOR mental education processes and the participation In the municipalities of Juquitiba, São Lourenço Franca, as well as an additional 500 in the munici- world’s largest water production systems. PRODUCING of society in the shared management of the areas da Serra and the southern sector of Ibiúna, 2016 pality of Mococa. Also in Franca, Sabesp runs the In Tremembé and Alvinlândia, and in the Barra SEEDLINGS OF surrounding the reservoirs of the Cantareira Sys- saw the development of a special environmental “Minha Cidade Tem Sabesp” (Sabesp is in my Town) do Ribeira community in Iguape, where sanitation tem, from which both the population and Sabesp education project whose main objectives are to Program through which, in 2016 , more than 15,980 work has also begun to improve the sewage treat- NATIVE SPECIES. stand to gain. It also aims to provide subsidies so raise the population’s awareness to the benefits people were attended to. ment system and to expand treatment and collector that those professionals directly engaged with from protecting the environmental heritage by ex- Another example took place at Registro, where networks, the environmental education was pres- panding knowledge about how to manage the re- a partnership between Sabesp, the city administra- ent through actions aligned with the local needs, gion’s natural resources while employing participation and local entities supported the organization aiming at promoting the correct use and apprecia- tive methodologies to encourage the engagement of the “ 2º Ecociclismo”, the second ecological bike tion of the assets and the installed infrastructure. BESIDES THE ADVANCES of multipliers on environmental themes. This joint ride. This initiative, over a distance of 22 km, was The activities carried out included talks and edu- initiative with local entities included activities such organized with aim of highlighting the importance cational workshops that sought to communicate as monitored technical visits to the Jurupará State of environmental preservation, in commemoration concepts about the importance of environmental AND TECHNOLOGICAL Park, the Cachoeira do França hydroelectric plant of Environment Week. The event attracted 152 par- conservation for the health of society, in addition and the Sabesp water treatment plants at Ibiúna ticipants who enrolled by donating 1 kg of food, sub- to practical concepts about how people can col- SOLUTIONS FOR RESPONDING and Juquitiba. sequently donated to local institutions that support laborate in this sense through actions that pro- Training activities were also carried out involv- young people and the elderly. mote rational use of water and proper disposal of TO THE ENVIRONMENTAL ing teachers and students of 32 schools of the mu- The dam on Jaguari-Jacarei rivers, in the Canta- waste, connecting sewers to the collector network nicipalities involved, through the course “Training reira System, staged in 2016 the third edition of the already installed and the segregation of rain water in Environmental Education of the Social Groups in “Corrida Ecomananciais”, an ecological race orga- from sewage networks, among others. In addition DEMANDS THAT ARISE, the Area of the Water Source of the São Lourenço nized by Sabesp around the water sources, with 722 to meetings and talks, specific activities took place Production System Development”, aligned with the participants, including Sabesp employees, top-flight such as tree planting and storytelling workshops THE INVOLVEMENT OF THE guidelines on environmental education proposed by athletes and the general public. This initiative is part involving the public schools, local inhabitants and the São Paulo State Department of Education, as of the project from conserving and valuing the water community health workers. well as with prevailing legislation and the socioen- sources, and its purpose is to raise the awareness of Sabesp also engages in awareness actions and ENTIRE POPULATION vironmental peculiarities of the region. participants about preserving this important source actions for collecting cooking oil, in partnership Commemorative dates involving environmental of water supply by encouraging sports and, conse- with city administrations, environmental municipal IS VITAL TO SANITATION. themes, such as World Water Day, Environment quently, promoting well-being and health. departments, local entities and schools. This is the 70 71 SABESP SUSTAINABILITY REPORT 2016 A RELATIONSHIP ORIENTED BY SUSTAINABILITY

“Cooking Oil Recycling Program” (local acronym In the case of the partnership with the local reaction and effectiveness in training sessions, PROL), a sustainable program whose purpose is authorities in Osasco, an Ecological District was seminars and other employee training and de- 400 thousand to keep to a minimum the environmental impacts created to improve the efficiency of the sewerage velopment events. Initially adopted within the sheets of of improper disposal of cooking oil into the ground system by optimizing the infrastructure already in Sabesp’s Metropolitan Region of São Paulo, the paper spared and water courses, by raising awareness about place and taking the necessary steps to univer- main purpose of the initiative is to save paper by through the implementation of electronic forms. the importance of properly disposing of cooking oil salize the sanitation services. Another project is a eliminating the circulation of physical documents used in domestic and commercial activities, thus partnership with the City Administration of Itapevi, and implementing electronic approvals. SABESP avoiding improper dumping that can adversely af- which enacted Municipal Law 2210/2013, regulat- Another example is the development of an ac- Gradual replacement IMPLEMENTED fect sanitation facilities and the environment, so as ing the disposal of used cooking oil and its waste in tion plan, initially implemented at our head office, by LED Light Bulbs: THE 3RS more efficient lighting to avoid contaminating water sources. the environment and forcing restaurants and snack to acquire LED light bulbs for gradual replacement with lower comsumption The program, which in 2016 has promoted the bars to properly dispose the used oil. In this part- according to maintenance requirements. Thus, PROGRAM At the Company’s head office AIMING THE collection of 300,000 liters of cooking oil, involves nership, Sabesp provided the collection recipients each burnt-out lamp is replaced by an LED lamp, each burnt-out lamp is replaced by an LED lamp. ADEQUATE the participation of company technicians and, espe- and jointly manages the collection with the Environ- which provides more efficient lighting with lower DESTINATION OF cially, in the metropolitan region, the Socioenviron- mental Municipal Department. consumption of electricity. mental Responsibility and Community Participation In Santos, for example, within the scope of the Sabesp, in its training processes concerning ma- Sustainability with SOLID WASTE teams. The specific objectives of this activity are to PROL, awareness talks are also given and terials considered of strategic value, and in agree- the Fluorine supply GENERATED BY reduce blockages in the sewage collector network; are included in the syllabuses of courses on food ment with the needs and quality standards required Resources preservation by reuse and purification ADMINISTRATIVE contribute to the sustainable creation of jobs and hygiene and handling given to local food service by the Company, looks for suppliers who can offer of processed materials. AREAS. income and to improve society’s quality of life. industry. Also worthy of mention are the initiatives social responsibility and commitment with the en- The practice was initially implemented in 2008 undertaken in the Vale do Paraíba region, in which vironment and its surroundings. It assesses com- in the downtown region of the SPMR. On the East between the municipalities of Taubaté, Lagoinha, pliance with environmental legislation through side, the program has adopted the strategy of set- São Luiz do Paraitinga and Pindamonhangaba, Sa- implementation and operating permits issued by ting in agencies of attendance to the public. In the besp collected over 180,000 liters of used cooking the environmental authorities. In addition, we also south region, collection points exist in the munici- oil, thereby preventing it from being improperly dis- assess the toxicological risks posed by the product, which contributes to the preservation of natural palities of Rio Grande da Serra, São Bernardo do posed of in the environment. pursuant to regulations in force, in such a way as resources at the same time while at the same Campo and Embu das Artes, among others. On to guarantee safe use both in the water treatment time protects the oral health of the population by the West side, the program is up and running at plant and for the final consumer. strengthening teeth enamel. every Sabesp address in the region, in addition Good environmental practices This process also consists of the following anal- All bid notices contemplate the environmental to partnerships with major businesses, shopping in administrative areas yses: a technological development indicator; pro- legislations and standards. Sabesp’s contractual SABESP LOOKS malls and in over 20 restaurants within the Bu- duction process assessment, from the raw mate- instruments, in turn, have clauses that require tantã Campus of the Cidade Universitária region, Sabesp implemented the “3Rs Program” aiming rial to the finished product; verification of aspects compliance with the positions of the Municipal- FOR SUPPLIERS to reuse the used cooking oil, which is converted the adequate destination of solid waste generated involving the environment and social responsibility; ity and State and Federal legal provisions that WHO CAN OFFER to cleaner fuel (biodiesel). by administrative areas. The program was conceived promoting fair trade, selecting suppliers with the may interfere with the execution of works and COMMITMENT with the purpose of structuring management of same level of quality and, within those circum- services, especially, regarding environmental WITH THE those residues and organizing and standardizing a stances, seeking out the lowest price. legislation, CONAMA Resolutions and State Law ENVIRONMENT. series of selective collection initiatives which were Within this context, worthy of note is the qualifi- 12684/07. Sabesp also uses the Outsourced Ser- already carried out in different units of the Company. cation work of the suppliers of fluorosilicate acid, vices Studies of the Government of the State of COOKING OIL RECYCLING PROGRAM Using the 3Rs concept of residue management known as Fluor, which is added to the final stage São Paulo – Social and Environmental Specific (PROL) (Reduce, Reuse, Recycle) actions and practices to of the water treatment process in accordance Instructions for defining its technical specifica- In 2016, through the Cooking Oil Recycling Program, were collected and properly disposed:: minimize residue generation were defined. These with Law 6050/1974 and its regulatory decree tions. This study establishes environmental ac- prioritize reduction of consumption, reuse of mate- 76872/1975. This material is subjected to rigor- tions, such as: the rational use of water and elec- 300,000 LITERS rials and recycling and also determine an environ- ous quality control and is evaluated according to tric power, reduction in the production of solid mentally responsible destination of solid residues procedures set forth under ABNT/NBR Standard residues, etc., whether through providing training OF COOKING OIL generated in administrative activities. The program 15784/2014, and must meet the parameters set for the contractor’s employees, the awareness of includes training employees and providers of out- out in Ministry of Health Ordinance 2914/2011, re- all those involved or by means of concrete actions keep to a minimum the environmental • sourced cleaning services to act as multipliers in sulting from the reuse and purification of materi- specially indicated in Sabesp’s and the contrac- impacts of improper disposal of their work areas and external activities. als arising from the processing of phosphate rock, tor’s technical specifications and obligations. cooking oil into the ground and water courses, Application of the 3Rs concept – Reduce, Re- use, Recycle – stimulated the development of • avoid contaminating water sources, • creation of sustainable jobs and several projects within the Company. An example income and to improve society’s is the reduction of over 400 thousand sheets of quality of life. paper and other printing resources , through the implementation of electronic forms to evaluate 72 73 SOCIAL RESPONSIBILITY RESPECT FOR CLIENTS AND THE FUTURE GENERATIONS

Pink October (photo), Blood Donation and Blue November are among Sabesp’s awareness capaigns SABESP SUSTAINABILITY REPORT 2016 RESPECT FOR CLIENTS AND THE FUTURE GENERATIONS

Community Participation Program Summary table

Low Income Centers Total Community relations Total Number of technical visits 19,015 Visits to leaders 1,219 Registrations and surveys conducted 14,195 Calls made/services carried out 7,529 UMA Boxes material provided 5,016 Number of meetings with the community 418 Number of water connections regularized 7,038 Persons present at the meetings 11,273 SABESP BELIEVES that Voluntary adhesions and Number of sewage connections 1,930 Community Satisfaction Rate 88 Number of people benefited 64,551 institutional programs socioenvironmental responsibility Socioenvironmental Responsibility Total Institutional Actions – TA Number of talks 446 G4-15 In the social area, worthy of note is our con- cannot be merely a concept. It must Number of persons benefited 37,608 tinued voluntary involvement with movements and Quantity 227 Number of events – Leak Detection Course/ Visits to WTPs, STPs, Laboratories Environmental Awareness/PURA/Trilha da água 246 global compacts on citizenship. be an attitude assumed every day, inside and other Sabesp facilities (Water trail)/Visits to the source of the Tietê River Sabesp is a signatory to the UN Global Compact, Attendances 15,859 3Rs – Kg of recyclables properly disposed of 46,944 and outside the Company, so that the which brings together businesses, workers and civil PROL – total liters of cooking oil collected 76,188 society to promote sustainable growth and citizen- Clean Stream Program – Talks/visits/events/ 24 Talks, courses, presentations, Quantity 228 surveys company can advance in a sustainable ship. Sabesp aligns its activities with the principles social mobilization Number of streams with collaborative governance 34 of human rights, labor, environmental protection, (World Water Day, Environment Day) Attendances 225,877 In-school guidance 117 manner, reducing its environmental and anti-corruption. Water for reuse Produced (liters/sec) 180 The Company supports and encourages the footprint and fostering social equality. 17 Sustainable Development Goals (SDGs), another initiative by the United Nations, which aims to stimu- Since 2012, Sabesp has been part of São Paulo’s satisfaction for all those involved and is increasing late actions for the next 15 years in areas of crucial Program in Search of Missing Children and Adoles- year after year, with better results. Under the theme G4-EC8 Given that water, raw material for life, is its importance to humanity, the planet, countries and cents, launched by the government of São Paulo. The “Good clothes are for donation”, everyone makes an core business, Sabesp is inextricably committed to the companies. The SDGs are part of our Corporate program is advertised on water bills, customer ser- effort to collect quality items which, in 2016, totaled sustainability. The Company’s actions go far beyond Volunteer Program whose purpose is to engage in vice agencies and on employee pay slips. The Com- 1.360,000 items collected, benefitting 257 entities. water treatment, water supply, sewage collection actions and encourage changes of behavior that con- pany is also a partner in the business ethics entity, and treatment services. It also seeks environmen- tribute, to the greatest extent possible, to the social Instituto Ethos and maintains an agreement with tal preservation and the development of the com- development of the population under its influence. Associação Amigos Metroviários dos Excepcionais Institutional Programs focused munities where it operates. Sabesp renewed, for the 13th consecutive year, (AME), through which several people with disabilities on the Social Area The path the Company is following to sustainable the certificate awarded by Abrinq Foundation – Save work in our public service units. development involves programs on environmental the Children. The renewal is of special significance, Aware of the importance of voluntary work, and Clubinho Sabesp: With games and characters, education and preservation and social development because being recognized as a Child-Friendly Com- of its benefits for society, Sabesp, through its Corpo- the website www.clubinhosabesp.com.br encour- and responsibility. The commitment to sustainability pany means being part of a network of companies rate Volunteer Program, inspires good practices and ages a closer relationship with children and young is part of a range of activities that are assimilated into committed to the situation of infancy in Brazil, which brings more dignity to those involved, carrying out people, from six to thirteen years of age. This vir- SABESP IS JOINT the corporate processes and projects, beginning with ratifies our mission and values, so as to further campaigns that result annually in the collection of tual space is directed primarily to environmental SPONSOR OF the dissemination of information about the conscien- strengthen our position and a socially responsible food, clothing, hygiene products, books and maga- education, focusing on “Learn how to take care of THE CITIZEN tious consumption of water business. Embracing this cause, and sharing with zines, among others. our water with the saving tips from the Team of CHILD INSTITUTE everyone the importance of children and adoles- In addition to the campaigns, it engages in sev- Clubinho Sabesp”. DEDICATED TO cents for the future, makes Sabesp very proud. eral actions of social inclusion, learning and care for BRINGING UP Sabesp is joint sponsor of the Citizen Child Insti- children, the elderly and people with special needs. The Apprentice Program: In tune with its objec- YOUNG PEOPLE tute (local acronym, ICC), dedicated to bringing up Also in 2016 we maintained partnerships with the tive of evolving as a business, which by vocation young people from families in situations of economic surrounding communities, NGOs, the state govern- is socially responsible, and to comply with Law FROM FAMILIES and social difficulty by providing education, culture ment, city administrations, schools, orphanages and 10097/2000, since 2006 Sabesp has been devel- IN SITUATIONS OF Campanha do agasalho 2016 and assistance to around 7,500 people, including daycare centers, among other segments. oping an Apprentice Program that contributes to ECONOMIC AND children, young people and adults in the São Paulo Voluntary actions are coordinated by a group of creating citizenship and vocational training for SOCIAL DIFFICULTY. Metropolitan Region employees representing all departments, and who young people between the ages of 14 and 22. With Sabesp maintains the granting of the Sao Paulo network with volunteers. an 18-month contract covering theory and on- Seal of Diversity, instituted by the State Govern- In 2016, worthy of note is the Winter Clothing Cam- the-job training, this program, which was devel- ment, which aims to encourage public, private and paign by the Solidarity and Social and Cultural Devel- oped in partnership with the National Service of 1.3 million 257 civil society organizations to include this issue in opment Fund of the State of Sao Paulo – FUSSESP, Industrial Learning – Senai/Sao Paulo prepares clothing pieces institutions their human resource management, and highlights an action that is already part of Sabesp’s calendar young people for the job market, providing learn- collected benefited good business practices as a strategic action for as one of the most integrated and best-performing ing that allows them to plan a professional ca- equal rights. corporate actions. Participation is always a source of reer, and expect a better future. 76 77 SABESP SUSTAINABILITY REPORT 2016 RESPECT FOR CLIENTS AND THE FUTURE GENERATIONS

Financial incentives Among the indirect positive impacts of this (Abdib) and on the Superior Council for Infrastruc- R$ thousand program, one can highlight a consistent techni- ture of the Industries Federation of the State of São Incentives 2012 2013 2014 2015 2016 cal and vocational development in the adminis- Paulo (Fiesp). Additionally, in the field of scientific tration, finance and human resources segments. and technological disclosure, Sabesp has repre- Cultural incentives – Rouanet Law: 9,280 7,341 4,304 396 7,210 In addition, the young people contribute to the sentatives on the collegiate bodies of the following Audiovisual incentive 4,672 6,908 5,572 1,188 7,252 family income, since they receive compensation entities: the Brazilian Association of Scientific Edi- Sports incentives 2,872 3,379 2,130 396 3,615 and benefits. On the other hand, this program is tors (ABEC), the Brazilian Technical Standards As- Cancer awareness incentive 0 0 0 396 3,600 also an opportunity to encourage our employees sociation (ABNT), the National Association for Re- Condeca (State Council on the Rights of Children and Adolescents) 3,000 3,300 2,100 0 3,600 to play the role of tutors, a function that contrib- search and Development of Innovative Companies Total 19,831 20,928 14,106 2,376 25,277 utes to the exercise of citizenship. This initiative (ANPEI) and on the Metrology Network of the State has already opened opportunities for 3,307 young of São Paulo (REMESP). people, of whom 429 were part of the Company’s staff in 2016. All these initiatives comply with the Code of Local communities Support and sponsorship mitment to, and involvement with, the organiza- Ethics and Conduct whose values are respect tion’s objectives and strategy. Reviews are con- for society and customers, the environment and G4-SO1 The Community Participation Program Cultural incentives under the Rouanet Law: Sa- tinually carried out in the search for excellence people, in addition to integrity, competence and was created to serve primarily low-income groups besp sponsors several projects in the areas of and to generate results. citizenship. To ensure that these principles are or clients through social responsibility practices, literature, plastic arts, music, dance, theater, cir- In this field, we place particular emphasis on respected, we have an Ethics Committee, an including fight against losses, community articula- cus, cinema, and preservation of cultural heritage. integrated processes incorporating continuing internal channel for whistleblowers and a cor- tion, and raising awareness about environmental Since 2004, when the Company joined the program education, career management, quality of life, porate procedure for investigating responsibili- issues, efforts to clean up rivers and streams, plan- Fomento ao Cinema Paulista [a program to foster climate management, and HR services. ties. We also maintain an external whistleblower tation of trees, and others. filmmaking in the State of Sao Paulo], more than The ever-present assumption in the actions is channel through the Ombudsman and the Cus- The meetings with Communities periodically 150 films have received sponsorship. Sabesp is the to incorporate into our corporate culture advanced tomer Service Unit. bring together community leaders for the presen- company that most invests in cinema in the State of approaches to people management that are coher- THE CURRENT tation of Sabesp’s actions and investments, survey São Paulo, and is one of the three biggest promot- ent with the nature of our organizational model. It is MODEL FOR of the population’s expectations, and alignment of ers of the sector in the whole country. our belief that close integration between the vision Participation in associations the Company’s actions with local needs. The initia- of Sabesp’s future and the human and leadership PEOPLE tive, which is has been held for 18 years, allows for Incentive for sport: Sports sponsorship through competencies and arising from this are an essen- MANAGEMENT G4-16 Sabesp’s engagement in sectorial entities a strong work of awareness and behavior change tax incentives began in 2008, one year following tial condition for its success. HAS BEEN serves the purpose of expanding the relationship related to the rational use of water, and also im- implementation of the law regulating this practice. IMPROVED IN with sanitation agents and strengthening the dialog provement of services provided in the São Paulo Since then, Sabesp has been supporting several THE SEARCH about issues that encourage the creation of public Metropolitan Region. projects, both aimed at high performance and sport Labor Relations FOR EXCELLENCE policies intended for expanding the availability of as an instrument of education. Last year, with sup- AND TO GENERATE basic sanitation, as well as the efficient and sus- port to the project to initiate childhood basketball, Sabesp seeks to meet the main demands of tainable management of water resources at re- with an educational and social inclusion approach, employees, always respecting the limits of its RESULTS. gional and national level. At the same time, Sabesp IN PERIODICAL MEETINGS around 4,800 students of approximately 80 public financial capacity and legal and governmental avails itself of these openings to spread and acquire schools benefited from basketball initiation classes guidelines. To that end, the collective bargain- knowledge, bearing in mind the incorporation or during their second shift at school. ing for the 2016/2017 period with the main union sharing of technological advances applied to basic WITH COMMUNITIES, SABESP entities representing the employees were held in sanitation operations. People management May 2006 and resulted in a Collective Bargaining Within the same entity, the Company has officers Agreement providing for a salary adjustment of on the board of executive officers of its section in São PRESENTS ITS ACTIONS AND To ensure effective people management, orga- 10.03%, which prevented strike movements. Paulo (ABES-SP), technical chambers and also holds nizations need to question the manner in which five of the nine regional presidencies installed in the they manage their human capital, the coherence State of São Paulo. Chief executive officer Jerson SURVEYS THE POPULATION’S with their strategy and how this reverts to the ben- Freedom of Association and Kelman is also vice president of the Association of efit of the organization and society. Sabesp has Collective Bargaining State Basic Sanitation Companies, an entity in which EXPECTATIONS, IR ORDER been directing its efforts towards the model of Sabesp also participates through its executives in Competency-Based Management, investing in the G4-11 Of the total number of employees, approxi- the following technical chambers: Legal, Account- development of business critical qualifications. mately 70% are spontaneously unionized, with the ing, Communication, Water Quality Control, Water TO ALIGN THE COMPANY’S Since its adoption, the current model for peo- representation of the unions in the Company being Resources and the Environment and Regulation. ple management has been improved with the in the proportion of one union leader to every 405 Jerson Kelman also has a seat on the Brazilian purpose of offering to Sabesp a value proposition employees. The leading unions of the different pro- Association of Infrastructure and Basic Industry ACTIONS WITH LOCAL NEEDS. for employees, capable of increasing their com- fessional categories are: 78 79 SABESP SUSTAINABILITY REPORT 2016 RESPECT FOR CLIENTS AND THE FUTURE GENERATIONS

Service providers Representativeness Staff in the scope of direct government and autonomous Unions % OF SABESP MEMBERS MEMBERS IN (government) agencies, in accordance with State BASE THE BASE G4-10 The Superintendence for Human Resourc- Decree 61466. Sintaema – Union of Water, Sewage and Environmental Workers of the State of São 10,471 7,933 75.76 es is responsible for company-wide manage- The 624 job vacancies of Competitive Examina- 7,372 7,108 7,478 Paulo ment of personnel approved by the Government 7,372 7,108 7,478 tion No.01/2013 were filled by the end of May 2016, 6,345 6,418 6,345 6,418 Sintius – Union of Urban Industry Workers in do Estado de São Paulo. In 2016, Sabesp had a with the bank of qualified applicants Santos, the Santos Lowlands, the Southern 1,004 847 84.36 Coastline and the Vale do Ribeira region workforce of 14,137 employees, 690 trainees, and 430 apprentices. The make-up of the workforce is SEESP – Engineers’ Union in the State of São 711 664 93.38 Paulo as follows: Interns and Apprentices SASP – the São Paulo Lawyers’ Union 161 47 29.19 SINTEC – Union of High-School Level Indus- 2012 2013 2014 2015 2016 Periodically, there is a Competitive Examina- trial Technicians of the State of São Paulo 298 165 55.36 • 80%80 Gênero % Male Masculino Gender tion for hiring trainees and apprentices to carry Others 1,561 17 0.01 • 81% Brancos out activities aimed at learning and qualification, 81 % White • Média de 47,7 anos de Idade, Service providers targeting their insertion in the labor market. The • 47,7Média years de 18,8Age anos (average) de Tempo de Empresa programs are set up with a definite time frame and Representative Entities • 18,877,88% years das CompanyCategorias time Técnica (average) e Operacional Sabesp does not work with outsourced profes- show the following characteristics: sionals, but contracts companies for the provision 77,88 % Technical and Operational Categories Sabesp maintains an uninterrupted and friendly of services according to specific demands. The es- relationship with employees’ representation and as- timated number of service providers is 6,418. From INTERN APPRENTICE sociation entities in the search for improvements, so- 2012 to 2014, the figure has remained stable, with a Education lutions and advances in the Company’s management, Personnel Renewal significant reduction from 2015 onward. • Normal Senior High School, or Ensino Médio as well as their qualification and quality of life. The • Technical High School or main entities and associations are: In the period from 2012 to 2016 there was a re- • University Education duction of 374 employees, resulting from 2,756 dis- External Selection – Competitive Examinations Contract missals and 2,382 admissions, of which 226 refer to 2 years 18 months Entity and Purpose Members the takeover of Diadema. The process of recruiting and selecting employees, Sabesp Association – development of leisure, sporting, 6,684 We wish to point out that the number of redun- trainees and apprentices is carried out only by means Work load social and cultural activities dancies 246 (8.9%) refers to compliance with the of a competitive examination, thus guaranteeing staff 30-hour week 4-hour day Association of Sabesp Retirees and Pensioners – AAPS – (SENAI and SABESP) defends retirees and pensioners, as well as active employees conduct adjustment instrument (TAC) agreed with that are competent, qualified, motivated and in tune (6-hour day) 197 eligible for retirement, in addition to improving their the Prosecution Office, where a commitment was with the corporate objectives. In recent years, the fol- quality of life Scholarship given to carry out staggered redundancies of ac- lowing competitive examinations were held: Association of University Professionals of Sabesp/APU – tive retirees, assuring the transfer of knowledge represents employees from all backgrounds, so as to Normal Senior High School: R$967.55 1 current minimum wage collaborate with and influence sanitation management, 469 between the employees. Beginning January 2016, Technical High School: R$1,069.40, University: R$1,273.07 expand the channels for participating in the management of the employees who retired due to invalidities were no 2012 2013 2014 2015 2016 Company, in addition to staff enhancement and development longer factored in to the actual headcount. Benefits Association of Sabesp Administrators/ADMSABESP – defends the rights and desires, promoting professional enhancement The return rate of the 67 women who took mater- • Health Plan, 152 and ensuring strict observance of professional and functional nity leave in 2016 was 76%, while turnover was 4.5%. Employees - 624 - - - • Meal Vouchers, ethics • Travel Vouchers and • Accident Insurance Association of Sabesp Engineers /AESABESP – integration and defense of the interests of national and international projection 1,102 and the promotion of technical and cultural development Social inclusion Apprentices 552 565 - 565

Sabesp Employees Savings and Loans Cooperative /CECRES – 10,263 offers credit lines at more accessible interest rates Sabesp complies with applicable legislation re- Internal Selection and Opportunities Bank garding the right of reservation of job vacancies, Interns - 1,030 748 826 - Sabesp Social Security Foundation – Sabesprev – closed supplementary pension plan entity, responsible offered in the public selective processes for peo- Internal selection is used to identify a profes- 13,508 for managing the retirement (12,573) ple with disabilities. In 2016, we had 83 jobs held sional with the most appropriate profile for the and medical assistance (13,508) plans by people in these conditions, with 74% of employ- opening available, in addition to motivating and Brazilian Association of Sanitary and Environmental Engineering/ABES – ees having physical disabilities, 12% with hearing Employees offering professional development opportunities. contributes to the knowledge and better quality of life of Brazilian society. Participates at national and state level in the CONAMA, the National loss, and 14% with visual impairment. Selection also applies to leadership positions un- Council for Water Resources – CNRH, CONFEA, State Environmental We also have an agreement with associa- Another determining factor in headcount man- der the Succession and Career Program. In addi- Councils and others tions, through which 111 persons with disabili- agement was the veto by the state governor, on tion, it has a Bank of Opportunities, accessible to Brazilian Association of Infrastructure and Basic Industries/ABDIB – development of the Brazilian infrastructure market development and ties work in our public service units, an activity September 2, 2015, on admitting and hiring per- all employees, which receives statements of inter- domestic basic industries, strengthening them in terms of international for which they receive more than 108 hours of sonnel, in addition to taking up those left over from est for transfers and other professional opportuni- standards of competition previous training. competitive examinations which are still valid, with- ties in the company. 80 81 SABESP SUSTAINABILITY REPORT 2016 RESPECT FOR CLIENTS AND THE FUTURE GENERATIONS

Benefits and social service description Compensation and Career Benefits and Social Service

BENEFITS GRANTED Employee compensation consists of a basic sal- Sabesp adopts an additional benefits policy that ary plus a bonus for the position they hold, as well meets its employees demands. Meal Vouchers and In a flexible benefit format, the monthly credit of R$1,051.72, corresponding to 784.32 in MV Food Vouchers and 267.40 of FV, is distributed within the respective benefits according to the percentages available as all the benefits granted. Transportation Vouchers: To optimize processes After-Hours Snack R$32,68 for those who extend their working day by at least 3 hours

and reduce costs, these services are expected to be Additional credit of R$267.40 to all employees receiving the Basic Food Basket, Christmas Hamper Salary Policy outsourced in 2017. With the change, a reduction is in accordance with the 2016 Collective Agreement expected of up to 35% of the fixed costs involving Children’s Daycare Daycare centers managed by Sabesp using outsourced services, in the Lapa and The salary policy at Sabesp has used a single the benefit. Center – CCI Ponte Pequena districts. Capacity to attend to 100 children who have attained the age of five table for the entire company since 2014, prior Job stability for 98% of the full-time staff on May 1, 2016 (except for: dismissals with cause, Job stability to which two regionalized tables were used with Medical Assistance: During the collective bargaining resignations, retirements, death, end of contract and voluntary/incentivized redundancy programs ) a difference between them of 20%. Salary parity of 2015, it was agreed with the Regional Labor Court Payment of the difference between the amount of the salary and the amount of the benefit paid Supplementary was the outcome of the 2014-2015 collective bar- of Appeals (TRT) to create a specific commission to by the Social Security Department to those on leave of absence due to illness of work-related Sick Pay gaining agreement, in two phases, commencing look into matters involving the healthcare plan. This accident, for a period of up to 6 months May/2014 and ending in May/2015. From time to commission, which has discussed improvements to Vacation Bonus Fixed amount of R$1,717.07 + 50% of the difference between the fixed amount and the salary + ATS time, specialist consultants are retained to carry the Full Plan (for active employees) and the creation Medical Assistance Sabesprev All-In Health Plan – employee contribution of 3.21% of basic compensation out salary surveys, while improvements/adjust- of a single plan for both active and retired employ- OVER (Sabesprev with transfer from Sabesp. The benefit is extended to dependents, with no increase ments to compensation must be approved by the ees, will be responsible for accompanying, assessing, Foundation) in the amount. Sabesp contributes 7.4% of Gross Payroll 20 THOUSAND controlling entities for subsequent implementa- evaluating and issuing opinions on the general condi- Sabesprev Mais (CD) Plan: salaries up to R$4,618.00, contribution of 0.5% or 1%. Above this amount, Private pension PEOPLE SIGNED ON an additional 8% is payable on the difference. Basic Benefit (BD) Plan – Admissions suspended, tion at the company. tions of medical assistance plans and the healthcare scheme (Sabesprev compensation-linked. Formula: Compensation up to R$4,618.00 x 1.2396% and above R$4,618.00 x Foundation) THE COMPANY’S policies offered to the employees, former employees 10.5520% – R$430.05 PRIVATE and their family members, in addition to any changes LEGAL PENSION PLAN. Profit sharing – PPR to or remodeling of the plans. Extra night work Additional 20% of the nightly rate, in accordance with current legislation The Profit Sharing Program (PPR) is a stra- Private pension scheme: Sabesp also offers the op- payment tegic tool used annually to stimulate the efforts tion to participate in a Private Pension Plan, whose Weekly Remunerated Remuneration for overtime worked on public holidays and DSRs at 100% of the regular of employees adhering to organizational goals. purpose is to supplement retirement. There are two Rest (DSR) hourly rate, where it is impossible to grant a compensating day off the following week It follows the general guidelines established by pension plans in the Company managed by Sabe- Overtime Paid with an increase of 100% of the regular hourly rate Federal Law No. 10101/2000, and by State Decree sprev: Benefit Plan – G1 and Defined Contribution Additional for Paid to employees exposed to chemical, physical and biological agents (domestic sewage, No. 59598/2013, being negotiated annually with Plan – Sabesprev Mais. Since 2010, the employee health hazard noise, humidity, chlorine and others). Additional 20% and 40% of the basic salary the Unions. has been able to opt only for the Sabesprev Mais private pension plan, since the Benefit Plan (G1) was Additional Paid to employees exposed to hazardous agents (inflammable fuel, explosives, ionizing radiation Risk Pay and electricity). Additional 30% of the employee’s basic salary suspended due to its deficit characteristics. Cur- Breakdown of the annual average Profit Sharing payment Reimbursement of daycare expenses for female employees with children in the age group: rently, the Private Pension Plan has 20,926 employ- Daycare and Special up to 01 year = R$994.98; who have not yet reached their 6th birthday = R$332.17 in R$ Daycare Allowance ees who have signed on, of which 11,443 are from and for employees with invalid children = R$664.35 Benefit Plan – G1 and 9,453 from Sabesprev Mais. Professional category 2012 2013 2014 2015 2016 Washing Monthly supply of products for laundering and disinfecting uniforms, to employees engaged of Uniforms in activities with risks of contamination by biological agents (sewage) In addition to the direct benefits, the Company, Remote Stand-by Additional payment at the rate of 1/3 of the regular hourly rate for employees on stand-by through the Sabesp’s Corporate University, offers Operational 2,344 2,285 2,755 2,552 3,128 subsidies for courses at the most varied levels of Transportation Provided to employees that opt for the system, where the Company subsidizes expenditures Vouchers in excess of 6% of the employee’s basic salary, in accordance with legislation training and formal education, with the agreements

Technical Personnel 3,122 3,054 3,698 3,382 4,082 being extended to family members of all ages. These subsidies include graduate degree programs, techni- OTHER BENEFITS cal education, languages, professional development, PARE – Intended for chemical-dependent employees: Alcohol, tobacco and other drugs, with subsidized treatment in specialized clinics (internment, out-patient appointments and University 5,416 5,262 6,533 5,958 6,995 distance education, and educational agreement. Social Service social service) Financial allowances in exceptional circumstances: Medication allowances, donations and loans The Sabesp Association offers a group life insurance plan that guarantees compensation in case Managers 10,849 10,870 13,161 11,435 13,781 Job Structure Group Life Insurance of death or disability, up to 20.9 times the employee’s base salary (without subsidies from Sabesp) Arrangements with supermarkets and drugstores, fully discounting the amount used Supermarket/Drugstore Cards Positions are allocated in three categories, ac- on the following month’s payroll (without subsidies from Sabesp) Sabesp Average 3,585 3,542 4,281 3,904 4,703 cording to the characteristics of the activities per- According to the collective agreement (8.5 minimum salaries applied at base date – May) Minimum Salary for Engineers formed and the educational background required May 2016 = R$7,480.00. 82 83 SABESP SUSTAINABILITY REPORT 2016 RESPECT FOR CLIENTS AND THE FUTURE GENERATIONS

G4-LA12 Composition of the groups responsible for governance and breakdown of employees Positions Chacacteristics Assessment of Competencies Per functional category, according to gender, age group, minorities and other indicators Category: OPERATIONS and Performance Positions and activities 2012 2013 2014 2015 2016 Environmental Sanitation Agent; requiring manual dexterity MEN WOMEN TOTAL MEN WOMEN TOTAL MEN WOMEN TOTAL MEN WOMEN TOTAL MEN WOMEN TOTAL Driver-Operator of Automotive or muscular strength, whose At Sabesp, professional growth occurs from Equipment; Head of maintenance basic requisite is to have Governance bodies Competency and Performance Assessments con- completed elementary school. Board of directors 14 1 15 2 11 13 13 2 15 14 1 15 11 1 12 Category: TECHNICAL ducted annually and directed to 100% of employ- and Fiscal Council Customer Service; Technical activities in core, ees. Employed since 20002, the purpose of this Audit Comitee 3 0 3 3 0 3 3 0 3 3 0 3 3 0 3 Occupational Safety Technicians; management or administrative instrument is to identify the degree of knowledge Manager Occupational Nursing Technicians; support areas. Basic requisite Management Technicians; is senior high school or technical and the development of the competencies re- Non-commissioned 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Sanitation Systems Controller; school education, according quired for carrying out corporate strategies and Commissioned 485 117 602 485 114 599 493 119 612 474 117 591 478 120 598 Sanitation Systems Technicians to the area where they work. for achieving the stipulated results. Its principles Category Category: UNIVERSITY LEVEL are: valuing people; career management; and en- Managers 485 117 602 485 114 599 493 119 612 474 117 591 478 120 598 Lawyers, Management Analysts; Engage in complex activities University level 1,733 973 2,706 1,735 983 2,718 1,702 957 2,659 1,607 902 2509 1,627 902 2529 Sanitation Systems Analysts; hancement of competencies. like preparing and analyzing Biologists; Occupational Nurses; Technical Personnel 4,499 1,768 6,267 4,434 1,754 6,188 4,358 1,714 6,072 4,143 1,667 5810 4,196 1,670 5866 reports and projects, The assessment process takes place through Occupational Physicians; Chemists; and are differentiated by having Operations 5,284 160 5,444 5,314 196 5,510 5,223 187 5,410 5,132 181 5313 4,960 184 5144 Technologists; Engineers; dialog between the employee and their manager, a university-level education. Subtotal 12,001 3,018 15,019 11,968 3,047 15,015 11,776 2,977 14,753 11,356 2,867 14,223 11,261 2,876 14,137 Occupational Safety Engineers while the competencies to be assessed are de- Interns 443 445 888 443 481 924 446 496 942 447 412 859 360 330 690 fined and constantly reassessed, bearing in mind Apprentices 362 198 560 317 174 491 359 200 559 327 183 510 265 165 430 the demands and challenges of the business. Total 12,806 3,661 16,467 12,728 3,702 16,430 12,581 3,673 16,254 12,130 3,462 15,592 11,886 3,371 15,257 To hold each position, employees must meet Through this, we expect greater contribution to Age specific minimum requirements, such as school managing the business; providing the managers Upt to 17 years 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 education, ability to handle more complex activities, with people management instruments and with 18 to 30 years 743 327 1,070 708 314 1,022 576 242 818 497 197 694 576 226 802 and improvement courses information for taking decisions; recognizing hu- 31 to 40 years 2,589 705 3,294 2,402 679 3,081 2,109 638 2747 1,819 579 2,398 1,708 548 2,256 man capital; and encouraging competition among 41 to 50 years 4,498 1,137 5,635 4,429 1,129 5,558 4,310 1,080 5390 4,222 1,075 5,297 4,092 1,035 5,127 the staff, as well as responding to the evolution of Over 50 years 4,171 849 5,020 4,429 925 5,354 4,781 1017 5798 4,818 1016 5,834 4,885 1067 5,952 Functions with Bonus Payments the business. Average age 45.9 43.9 45.5 46.5 44.5 46.1 47 45 47 48.0 46.1 47.6 46.2 48.1 47.7 Commencing 2012, the Assessment System Lenght of service CAREER IN Y To guarantee the results of each areas, Sabesp was structured objectively and in radar format. Up to 3 years 2,028 571 2,599 2,068 610 2,678 1,358 461 1,819 975 293 1,268 835 240 1,075 4 to 10 years 764 194 958 546 91 637 950 188 1,138 1312 338 1,650 1803 493 2,296 ENABLES THE has a managerial and leadership/supervisory body At each stage, employees and managers define 11 to 20 years 5,262 1,301 6,563 4,889 1,183 6,072 4,957 1,166 6,123 4,435 1,065 5,500 4,251 1,004 5,255 EMPLOYEES that arranges for, monitors and manages the ma- the ratings according to the concept of each item Over 20 years 3,947 952 4,899 4,465 1,163 5,628 4,511 1,162 5,673 4,634 1,171 5,805 4,372 1,139 5,511 TO CONTINUE terial, financial and human resources required for assessed. At each cycle, it is possible to advance Average time 17 16.3 16.9 17.4 16.7 17.3 18 18 18 18.9 18.2 18.8 18.9 18.3 18.8 reaching the targets that have been set. in the career in one, two or event three salary SPECIALIZING IN Education Functions with bonus payments are referred to references corresponding to a salary increase of THEIR FIELD. Elementary school 2,198 101 2,299 1,712 58 1,770 1,589 52 1,641 1,595 53 1,648 1,375 43 1,418 as Managerial or Leadership/Supervisory and are 5%, 10% or 15%, respectively. According to the Senior high school 6,164 1,121 7,285 6,462 1,125 7,587 6,346 1,073 7,419 6,079 1,053 7,132 6,104 1,043 7,147 performed by employees from the three catego- competency phase evaluated in the Assessment Higher education1 3,639 1,796 5,435 3,794 1,864 5,658 3,841 1,852 5,693 3,682 1,761 5,443 3,782 1,790 5,572 ries of positions, according to the profile, experi- of Competencies and Performance, the manager Working day ence and complexity of the function. and the employee agree an Individual Develop- Part-time 1,224 261 1,485 1,337 302 1,639 1326 296 1,622 1301 294 1,595 1302 300 1,602 Managerial functions are defined based on the ment Plan – PID which, with each cycle, enables a Full-time 10,777 2,757 13,534 10,631 2,745 13,376 10,450 2,681 13,131 10,055 2,573 12,628 9,959 2,576 12,535 hierarchical structure and performed by employees new level of development to be reached in the es- (1) 1,931 professionals hold graduate /MBA degrees, of whom 9.4% are masters and/or PhDs in the university education category. Leadership/su- sential competencies, in line with the challenges (2) Working in the operations and customer service areas. pervisory functions engage directly in the relationship assumed with society as a whole. between unit management and the teams. In the op- Assessment Cycle G4-LA12 Number of employees by region erations category they are referred to as leaders; in 2012 2013 2014 2015 2016 the technical category as departmental heads; and in Region Set-up and classification of the 2012 MEN WOMEN TOTAL MEN WOMEN TOTAL MEN WOMEN TOTAL MEN WOMEN TOTAL MEN WOMEN TOTAL the university category as supervisors, with a specific 14,658 employees in the new PCS 1 (SPMR, Vale do amount being established for each function. Paraíba and 8,777 2,569 11,346 8,790 2,605 11,395 8,638 2,542 11,180 8,369 2,463 10,832 8,,322 2,478 10,800 Assessment and Deployment of 2012-2013 Baixada Santista) 5,340 employees (2% of the payroll) 2 (Regional Systems except Vale do Paraíba and 3,224 449 3,673 3,178 442 3,620 3138 435 3,573 2987 404 3,391 2,939 398 3,337 Assessment and Deployment of Career in Y 2013-2014 Baixada Santista) 3,640 employees (1% of the payroll) Total 12,001 3,018 15,019 11,968 3,047 15,015 11,776 2,977 14,753 11,356 2,867 14,223 11,261 2,876 14,137 Assessment and Personal Advantage This is adopted in the case of professionals in the 2015 to those eligible (1% of the payroll) university category, enabling the employee to contin- Note 1: Sabesp hires by employing competitive examinations, as established in the 1988 Federal Constitution, in which the positions, prerequisites, region, openings and salary are described. Currently 78% of our managers work in Region 1 and 22% in Region 2. ue specializing in their field of operation, receiving the Assessment and Deployment of 2016 Note 2: G4-EC8 Sabesp does not hire third parties directly. It engages in contracts in which third-parties are allocated as required. equivalent compensation to a managerial career. 4,530 employees (1% of the payroll) Under these terms, it has an available headcount of 6,400 professionals that are not registered on the Sabesp data base. 84 85 SABESP SUSTAINABILITY REPORT 2016 RESPECT FOR CLIENTS AND THE FUTURE GENERATIONS

G4-LA12 Breakdown of employees by gender and ethnicity For the IV Assessment Cycle that occurred in Leadership Development and Men Women Total November/2016, 1% of the payroll was allocated to Managerial Succession Program 2012 2013 2014 2015 2016 % 2012 2013 2014 2015 2016 % 2012 2013 2014 2015 2016 % promotions and applied to eligible employees to be Caucasian 9,889 9,790 9,637 9,225 9,072 81% 2,540 2,545 2,491 2,387 2,374 83% 12,429 12,335 12,128 11,612 11,446 81% defined in February 2017, after discussions with the Sabesp, consistent with its corporate and pro- Afro-Brazilian and 1,870 1,928 1,893 1,899 1,950 17% 357 379 368 364 380 13% 2,227 2,307 2,261 2,263 2,330 16% brown-skinned Salary Policy Commission. In this assessment, the spective strategy in relation to future scenarios, Yellow-skinned 202 209 206 187 194 2% 116 118 113 111 117 4% 318 327 319 298 311 2% organizational climate was also identified, and the di- defined in its Strategic Plan, among the business Indigenous 7 7 7 11 11 0% 0 0 0 0 0 0% 7 7 7 11 11 0% mensions that presented the lowest index were Rec- guidelines, the value of people as a competitive Not declared 33 34 33 34 34 0% 5 5 5 5 5 0% 38 39 38 39 39 0% ognition/Appreciation and Communication, which will differential for making available, in a sustainable Total 12,001 11,968 11,776 11,356 11,261 100% 3,018 3,047 2,977 2,867 2,876 100% 15,019 15,015 14,753 14,223 14,137 100% receive proposals for improvement actions in 2017. and responsible manner, water and sewage services and the development and spread of solutions G4-LA12 Breakdown of employees by job category, gender and ethnicity in search of the vision of making Sabesp a global Managers University level Sabesp’s Corporate University (UES) benchmark in sanitation. Men Women Men Women The evolution to a new level of achievement re- Year 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 The creation of the Sabesp Corporate University- quires that our leaders have a clear understanding Caucasian 450 451 455 436 437 111 108 111 110 112 1,493 1,487 1,459 1372 1388 827 832 810 756 751 Afro-Brazilian and UES, at the end of 2000, is an historical precedent of the changing context of the current world. It also 17 16 19 22 23 4 4 4 4 4 139 143 141 140 140 86 89 89 88 91 Brown skinned in the policy for strengthening the level of our pro- requires the ability to take advantage of opportu- GOOD Yellow-skinned 18 18 19 16 17 2 2 4 3 4 96 100 97 90 94 60 62 58 58 60 fessionals and for expanding the offer to them of nities for re-invention, to deal insistently with the RELATIONSHIP Indigenous 0 0 0 0 0 0 0 0 0 0 1 1 1 1 1 0 0 0 0 0 career development possibilities. duality of public management under the aegis of Not declared 0 0 0 0 1 0 0 0 0 0 4 4 4 4 4 0 0 0 0 0 WITH CUSTOMERS The syllabus offered by the UES is established ac- results, and to act on the principles and values of Total 485 485 493 474 478 117 114 119 117 120 1,733 1,735 1,702 1607 1627 973 983 957 902 902 cording to the guidelines and requirements indicated the organizational culture that ensure sustainabil- AND EMPLOYEE by the organization’s strategic planning along three ity and the creation of productive relations with the APPRECIATION Technical personnel Operations Men Women Men Women axes: competencies essential for the business, tech- different players in the process. ARE DIRECTIVES Year 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 nical training and culture and organizational strategy. Reflection on these demands has led Sabesp to THAT GUIDE THE Caucasian 3,750 3,683 3,622 3,438 3,444 1,485 1,472 1,439 1,396 1,383 4,196 4,169 4,101 3,979 3,803 117 133 131 125 128 Its pillars are Corporate Education, Knowledge Man- invest in programs focused especially on develop- COMPANY ALONG Afro-Brazilian and 671 671 658 634 679 227 226 221 218 231 1,043 1,098 1,075 1103 1108 40 60 54 54 54 agement and Socioenvironmental Responsibility. ing its leadership, promoting the improvement Brown skinned WITH ITS MAIN For its syllabus to be effective, the UES employs of the managers who are now leaders and at the Yellow-skinned 65 67 66 58 60 52 52 50 49 52 23 24 24 23 23 2 2 1 1 1 PUBLICS. Indigenous 3 3 6 4 4 0 0 0 0 0 3 3 3 6 6 0 0 0 0 0 a learning architecture that combines classroom same time, initiating the preparation of their poten- Not declared 10 10 9 9 9 4 4 4 4 4 19 20 20 21 20 1 1 1 1 1 methods with self-development, knowledge shar- tial successors. Total 4,499 4,434 4,361 4,143 4,196 1,768 1,754 1,714 1667 1670 5,284 5,314 5,223 5132 4960 160 196 187 181 184 ing practices and distance learning. These different With the establishment of partnerships with teaching methods foster both formal and informal renowned educational institutions and special- G4-EC5 Variation in the ratio G4-LA13 Mathematic ratio of the wages learning, with the latter contributing to the reten- ized consultancies, in 2012 the UES started an of the lowest salary and compensation between women and men tion and sharing of knowledge that is relevant to initiative for training senior management: the broken down by gender, broken down by functional category to local minimum salary at important operating units and relevant operating units Sabesp. In 2016, Sabesp’s Corporate University Management Excellence Program, with the 2012 2013 2014 2015 2016 provided courses and strategic programs related objective of broadening the integrated vision of General (in R$) 2012 2013 2014 2015 2016 Lowest Salary to Sustainability, Corporate Governance, Environ- management, focused on the development of the ment, Social Responsibility, Occupational Safety management body based on the primary leader- Region 1 1,321 1,427 1,501 1,625 1,788 Basic Starting Salary 1,100 1,189 1,376 1,625 1,788 Region 2 1,101 1,189 1,376 1,625 1,788 and Health and the essential business skills; with ship competences for the transformation of Sa- Minimum Salary 622 678 724 788 880 Average Salary 3,828 4,173 4,559 4,974 5,479 investments totaling R$6,202 million. besp of the future. Ratio Region 1 2.12 2.1 2.07 2.06 2.03 Minimum Salary 622 678 724 788 880 Region 2 1.77 1.75 1.9 2.06 2.03 Note: There is no difference in basic salary between women Ratio (%) 1.77 1.75 1.90 2.06 2.03 Results of the Leadership Development Program and men 2010 to 2016 Managerial Managerial Per Ratio of the lowest salary Total Average Salary 2012 2013 2014 2015 2016 Activities Excellence Succession capita participants to the minimum salary – General Program – PEG Program hours in R$ Operations 2,012 2,212 2,443 2,722 2,996 Managerial Excellence Course (FUNDAP) 415 73 488 174 h 2012 2013 2014 2015 2016 Technical 3,139 3,461 3,757 4,153 4,522 94 110 204 360 h Lowest salary* 1,101 1,189 1,376 1,625 1,788 MBA Enterprise Management (FIA and BSP) 92 156 248 20 h Minimum Salary 622 678 724 788 880 University 6,412 7,076 7,742 8,342 9,108 Coaching (FIA/FUNDAP) Ratio 1.8 1.8 1.9 2.1 2.0 Languages (Cel Lep, Alumni, Berlitz...) 200 130 330 up to 600 h Managers 15,170 16,388 17,295 19,001 20,885 * – Lowest starting salary paid to an Environmental International Module (Un. Catalunya/Babson College) - 51 51 40 h Sanitation Agent I. There is no difference in basic salary Average 3,828 4,173 4,559 4,974 5,479 between women and men. Profile Assessment (FIA/FUNDAP) 415 157 572 6h 86 87 SABESP SUSTAINABILITY REPORT 2016 RESPECT FOR CLIENTS AND THE FUTURE GENERATIONS

The implementation of the Management Succes- Organizational Climate Management Occupational Health and Safety Training and Awareness: sion Program was a pioneering initiative at Sabesp, given that it introduced a model in the cultural prac- Organizational climate management enables an The Health and Safety actions seek to promote the We had 20,789 participations in both live and vir- tices of people management that is aligned with the analysis of the internal environment and monitoring development of the culture of prevention with em- tual training sessions at the UES. Distance cours- modern concepts of planning and management of of employee satisfaction, so that practices and pro- ployees and service providers, aiming to ensure the es were intensified, bearing in mind the ease and the succession process. cesses can be improved. Building a climate of engage- improvement of working conditions and quality of life. speed of access for employees. The Program’s differential is the process ment and making progress in people management The main actions developed are: structure based on the model of assessment and practices is a constant challenge for businesses. In Prevention Minute: Rapid discussions organized by training of potential successors in a cycle of di- 2016, a Sabesp used the results of the climate per- the CIPA, SESMT and departmental heads with the versified and integrated activities. As a result, ception identified in the Assessment by Competencies Establishing Rules and Regulations employees about specific issues. In 2016, we had identification of professionals, different types of and Performance, from which the outcome was:: and Programs 45,326 participations and new topics have been made IN 2016, assessment, training and career guidance were available for the Minuto da Prevenção Virtual (Minute THE COMPANY articulated in order to provide the best conditions Occupational Health and Safety Procedures: Set out for Virtual Prevention), broadcasted by UES, with a APPLIED so that people and the Company could structure the specific policy, directives and rules for activities broadcast by TV Corporativa. Work 16,264 DOSES their decisions about the future. environment 4.28 involving risks and service providers. They were revised and updated in 2016, thus improving how they Internal Week for Occupational Accident Preven- OF INFLUENZA VACCINE FOR Work are applied and their compliance with the legislation. tion – SIPAT: Using the Olympic games spirit, this Overall Results Achieved conditions 3.95 year’s innovation was due to the 2016 Sipat Olym- EMPLOYEES, in Training and Development Environmental Risks Prevention Program (PPRA): pics, which divided SIPAT’s actions into modalities APPRENTICES Managed by a computerized system, it covers more that rewarded employees in the categories of Gold, Activities AND INTERNS. In 2016, the current context of budget restric- 4.07 than 500 Sabesp facilities, identifying the environmen- Silver and Bronze Medals. The virtual activities were tions had a huge impact on our training and de- tal risks by Homogenous Exposure Groups – GHE, de- intensified, allowing a great adhesion and decreased velopment indicators. To tackle the water crisis, Institucional fining control measures and corrective actions. the movement of employees. aspects 4.03 UES allocated strict priority to core business-re- There was a division of modalities, which pre- lated training, mandatory courses in Health and Unhealthy and hazardous work procedure: The sented figures like: 8,016 in-person actions, 759 Safety at Work and Leadership Development. For Comunication 3.99 classification of employees in the unhealthy and haz- phrases sent to the SIPAT 2016 Slogan Contest, 37 the other areas, the guidelines were to ensure ardous GHEs is periodically revised by the SESMT, so video-lessons with internal knowledge attended by training using virtual methods, with the support that the information is always kept up to date and vali- 11,666 people, and 25 photos for the Image Contest Recognition of technology, as well as the use of strategies for dated by the Superintendence areas. for Wallpaper, which received 254 votes. /Appreciation 3.39 internal transfer of knowledge. Occupational Health Medical Control Program (PC- Health and Safety Campaigns: Take place through MSO): Enables profiling of the health of every employ- newsletters, lectures and preventive actions with ee, apprentice and intern, and provides input for the themes such as: fight against Aedes aegypti mosqui- Average number of hours of training healthcare and quality of life programs, in addition to to, Ergonomics, You in the Traffic – Safe riding for mo- per year, per employee broken down by gender and functional category complying with the law. torcyclists, Conjunctivitis, Influenza, among others. 2012 2013 2014 2015 2016 Category The Vaccination Program against infectious dis- The actions against the Aedes aegypti mos- MEN WOMEN TOTAL MEN WOMEN TOTAL MEN WOMEN TOTAL MEN WOMEN TOTAL MEN WOMEN TOTAL eases applied in 2016, 16,264 doses of influenza vac- quito were intensified with the Campaign Xô Managers 50.4 58.6 52 86.3 94.9 87.9 58.4 72.3 61.1 19.9 33.7 22.6 208.8 167.8 193.0 cine for employees, apprentices and trainees, and Mosquito (Go away, mosquito!), which developed

University level 61.3 82.7 69 96.6 106.4 100.1 91.1 98.5 93.8 40.9 44.5 42.2 90.1 102.3 95.9 1,872 doses of typhoid vaccine for all employees with activities such as D-Day, with weekly inspections potential for exposure to sewage. carried out by the CIPAs throughout the Compa- Technical Personnel 44.2 61.2 49 58.5 60.3 59 60.5 66.6 62.2 23.4 23.1 23.3 26.1 38.6 28.6 ny, the creation of promotional images released Operations 29.7 37 29.9 44.6 58.7 45.1 37.2 55.5 37.9 19.0 26.3 19.2 20.7 26.2 20.9 CIPA in Action Program: The 2015-2018 strategic as wallpaper on microcomputers, among oth- planning process resumed at the 144 Internal Acci- ers. With Decree 62130 having come into effect Apprentices 77.5 75.6 76.8 114.3 153.9 128.4 449.9 460.6 453.7 158.7 170.6 163.0 31.1 33.9 31.9 dent Prevention Committees– CIPA, involving preven- on July 29, 2016, creating the “Anti-Aedes aegypti Interns 77.1 83.8 80.5 109.3 102.5 105.8 64.1 62.5 63.3 89.1 86.0 87.6 59.3 60.2 59.6 tative actions and contributing to improving working Brigade”, the CIPAs are now responsible for com- Total 42.9 69.4 48.8 62.2 83.6 67 66.2 94.9 72.7 29.8 44.5 33.0 36 53.6 39.9 conditions and reducing the rates of occupational ill- plying with this legislation. nesses and accidents.

2012 2013 2014 2015 2016 Emergency Brigades: The 290 brigades deployed at Safety Control and Audit Participations 92,372 128,903 134,986 63,948 87,157 every Sabesp unit engaged in actions such as meet- Total Investment (R$ thousands) 8,442 10,669 11,642 4,716 6,202 ings, inspections and simulated emergencies, so as Safety inspections: Carried out by the SESMT and to ensure the readiness of the brigade members and the CIPA, and entered onto systems so as to en- Per capita investment 510 646 708 330 406 to respond to emergency situations. hance the reliability and bolster the information to 88 89 SABESP SUSTAINABILITY REPORT 2016 RESPECT FOR CLIENTS AND THE FUTURE GENERATIONS

OHS Main Performance Indicators facilitate managerial controls. In 2016, 4,916 safety Of the total number of employees, about 25% This relation has meant that, last year, the turnover 2012 2013 2014 2015 2016 inspections were carried out. work in formal safety and health committees, and rate was 3.8% and the percentage of redundancies to Accidents (number) 143 169 160 133 158 engage in activities such as systematization, mon- headcount was 5.4%. Frequency rate 5.5 6.74 6.51 5.76 6.78 Occupational Health and Safety Module: Com- itoring and specific programs. Company-wide, in Severity rate 147 982 334 445 238 prises the Computerized Human Resources Sys- recent years Sabesp has enhanced the occupa- Occupational medical exams tem, enabling planning, control and management tional health and safety prevention programs, so Personnel Renewal 12,475 15,456 15,119 16,130 16,313 carried out (number) of the activities. as to ensure and enhance the working conditions Personnel Retention 2011 2012 2013 2014 2015 2016 Employees vaccinated 11,343 12,256 13,037 13,417 16,264 of its staff by adding and integrating quality of life. against influenza (number) The professionals who work in the Specialized Hires 723 915 536 26 300 605 Opportunities for 42,033 38,363 37,606 24,662 49,632 Safety Engineering and Occupational Medicine OHS training (number) Redundancies 1,148 791 545 300 832 288 Services – SESMT demonstrate that they actually Quality of life Participations in the 39,967 39,338 36,860 47,553 45,326 Prevention Minute (number) participate by providing advice to the managers Hires / Headcount (%) 4.8 6.1 3.6 0.2 0.5 4.3 Inspections carried out by the at each Business Unit on how to comply with and Sabesp’s Quality of Life Program was put to- 3,916 4,271 3,582 4,135 4,916 Redundancies / Headcount (%) 7.7 5.2 3.6 2.1 5.4 2.0 SESMT and the CIPA (number) foster the culture of prevention where health and gether to encompass actions that are integrated Voluntary Redundancies/ Investments (R$ million) 11.8 11.9 10.3 9.9 11.7 safety are concerned. The Company also counts and in tune with the key aspects influencing peo- 1.3 1.1 1.1 0.9 0.5 0.7 Headcount (%) on the commitment and involvement of the 3,874 ple’s quality of life and full conditions for human Per capital investment Involuntary Redundancies/ 799 799 695 692 825 professionals who act as CIPA brigade people, development in order to go about their work. 6.4 4.1 2.5 1.2 5.1 1.3 in prevention (R$) Headcount (%) with 1,444 being in 144 CIPAS, and 2,430 brigade Its main objective is “To create a work environ- This information will be used for adapting the programs to be under- people. Their role makes the difference in the ment with productivity, quality of life and well-being, taken next year. outcome obtained. contributing to the reduction of absenteeism and Staff profile the improvement of the organizational climate”. Average (years) Staff Several actions are carried out with the objec- Number % Lenght of Types and rates of occupational injuries and illnesses, days lost, absenteeism and the number of Profile Age tive of promoting behavioral changes, lifestyle, service work-related deaths, broken down by region and gender and arousing concern about health: the Blood Managers 598 4% 50.0 24.1 Employees facing a high incidence or high risk of occupational illnesses Donation Campaign, and the Pink October and University level 2,529 18% 49.2 21.6 Blue November campaigns, which are awareness Technical personnel 5,866 41% 47.0 19.2 2012 2013 2014 2015 2016 and prevention campaigns regarding breast and Operations 5,144 36% 47.5 16.3 Men Women Total Men Women Total Men Women Total Men Women Total Men Women Total prostate cancer. As was the case throughout the Total 14,137 100% 47.7 18.8 Sabesp world, several Sabesp sites were lit with the re- Frequency rate 6.32 1.72 5.5 7.23 4.58 6.74 7.65 1.79 6.51 6.68 4.28 5.76 7.47 3.72 6.78 spective colors, and on October Fridays the em- Severity rate 175 20 147 1,102 443 982 389 85 334 537 32 445 284 34 238 ployees dressed in pink, and in November in blue. Occupational illness 64 15 79 68 5 73 13 67 80 10 30 40 20 2 22 Actions were also carried out, such as informa- In the case of average length of service, the Absenteeism (%) 2% 3% 2% 2% 1.8% tive lectures, videos and testimonies on the im- headcount reveals a prevalence of professionals Deaths 1 0 1 3 0 3 1 0 1 2 0 2 2 0 2 portance of prevention and early diagnosis. with 16 to 20 years, followed by an increase in em- Region 1 (SPMR, Vale do Paraíba and Baixada Santista) ployees with up to 5 years. Frequency rate 5.17 4.76 4.6 6.81 4.56 6.54 7.95 2.21 6.75 7.09 1.76 5.98 7.09 2.71 6.19 Severity rate 133 25 112 831 447 750 342 105 292 695 39 558 249 16 199 Strategic Indicators Occupational illness 34 12 46 35 3 38 48 11 59 23 10 33 16 2 18 Over 30 All information referring to people management 1,944 Absenteeism (%) 3% 3% 2% 2% 1.8% is centrally generated and made available to all Deaths 1 0 1 2 0 2 1 0 1 2 0 2 2 0 2 managers as an input for the strategic manage- 26 to 30 1,812 Region 2 (Regional Systems except Vale do Paraíba and Baixada Santista) ment of the Company. In the case of headcount, this Frequency rate 8.79 4.53 7.78 8.11 4.63 7.7 6.71 1.2 5.94 5.9 1.31 5.36 8.31 7.77 8.25 indicator has shown as continuous and progressive 21 to 25 Severity rate 264 0 234 1,681 427 1,535 490 0 434 191 2.62 169 362 119 334 1,755 reduction, primarily due to fact that there has been Occupational illness 30 3 33 32 2 34 2 19 21 7 0 7 4 0 4 an increase in the number of redundancies, which Absenteeism (%) 2% 3% 2% 2% 1.8% 16 to 20 3,910 has exceeded new hires. Deaths 0 0 0 1 0 1 0 0 0 0 0 0 2 0 2 11 to 15 Definitions: 1,345 Frequency rate: Number of work-related accidents with injuries and with absence from work, per million man hours worked per Headcount year. 6 to 10 1,067 Severity rate: Days lost plus days attributed to work-related accidents, per million man hours worked per annum. 2012 2013 2014 2015 2016 1,067 Occupational illness: Number of employees on leave due to illness caused or triggered by the job they do. The figures from 2011 to 2013 include cases where normal illnesses were converted to occupational illness by the Social Security Office INSS, on account of the technical epidemiological nexus defined by that entity. 15,019 15,015 14,753 14,223 14,137 Up to 5 2,304 Absenteeism: Percentage that measures the reduction in the total work load due to absences from work. 90 91 SABESP SUSTAINABILITY REPORT 2016 RESPECT FOR CLIENTS AND THE FUTURE GENERATIONS

G4-LA1 Total number and the rates of new hires and turnover Since 2014, the company has adopted a single Suppliers Evaluation by age group, gender and region salary policy for the entire state of São Paulo, where the ratio of the smallest salary paid and the The purchasing processes carried out by the 2012 2013 2014 2015 2016 Turnover minimum salary is 2.0, there being no difference Company are widely disclosed in our electronic Men Women Total Men Women Total Men Women Total Men Women Total Men Women Total between the basic salary of men and women. bidding site, available on our internet site, guaran- Gender 5.50% 4.40% 5.30% 3.60% 3.60% 3.60% 1.90% 2.60% 2.00% 3.78% 4.05% 3.84% 3.00% 3.68% 3.14% teeing equal participation conditions for suppliers. Age group The hallmark of our relations with our suppliers Salary policy are ethics, transparency and socioenvironmental 20 to 40 years 5.10% 5.60% 5.20% 3.90% 5.20% 4.20% 2.20% 3.30% 2.50% 2.40% 2.50% 2.43% 9.20% 8.12% 8.93% in R$ criteria, for which reason we encourage the com- 41 to 55 years 3.00% 2.60% 3.00% 2.10% 2.20% 2.10% 0.80% 1.70% 1.00% 2.14% 2.80% 2.27% 1.10% 1.11% 1.10% 2012 2013 2014 2015 2016 panies with whom we have business relations to Over 55 years 15.30% 10.80% 14.70% 8.30% 6.10% 8.00% 4.40% 4.60% 4.50% 9.52% 11.51% 9.83% 2.21% 5.16% 2.66% sign up to practices for managing and reducing Basic Starting Salary 1,100 1,189 1,376 1,625 1,788 Region greenhouse gas emissions. We are the first public Average Salary 3,828 4,173 4,559 4,974 5,479 company to implement an electronic procurement SPMR 5.40% 4.00% 5.10% 4.10% 3.30% 3.90% 1.40% 1.20% 1.40% 4.69% 4.36% 4.61% 3.61% 4.27% 3.78% Minimum Salary 622 678 724 788 880 process in Brazil. Besides reducing costs, the Interior and 5.60% 5.30% 5.60% 3.10% 4.40% 3.30% 2.40% 5.60% 2.80% 2.75% 3.37% 2.84% 2.30% 2.33% 2.30% Ratio of Minimum x coastal area 1.8 1.8 1.9 2.1 2.0 system affords our suppliers and the population Starting (%) greater transparency, efficiency and agility. Company 5.50% 4.40% 5.30% 3.60% 3.60% 3.60% 1.90% 2.60% 2.00% 3.78% 4.05% 3.84% 3.00% 3.68% 3.14% Benefits total 255,236 285,832 307,550 331,077 379,783 Sabesp’s on-line electronic procurement sys- (R$ thousands/year) tem continues to offer suppliers the same condi- Employees 697 218 915 405 131 536 19 7 26 237 63 300 477 128 605 Benefits / Headcount hired 16.9 19.0 20.7 23.5 26.9 tions for competing and participating, regardless (R$ thousands/year) Hires (%) of size or location, in addition to significant cost 5.80% 7.20% 6.10% 3.40% 4.30% 3.60% 0.20% 0.20% 0.20% 2.01% 2.12% 2.03% 4.20% 4.46% 4.25% reduction, waste and obsolescence. 1 – Hires that occurred in 2015 include 226 coming from the EAED (ex-Saned) 2 – Turnover rate from Jan/15 takes into account the market formula: ((HIRES + DISM)/2)/ (EMPLOYEES DURING THE PREVIOUS PERIOD)) In the case of labor laws, it should be pointed 3 – Beginning January 2016, employees who retired due to disability were no longer factored in to the actual headcount. The ratio of overtime and regular hours worked out that all requirements for proving supplier has been declining (13.2%), as well as absenteeism compliance with the obligations imposed by the which has shown a slight reduction. law on public tenders are part and parcel of our procedures for contracting out civil works, ser- tion of suppliers with the same level of quality volving measures taken to contribute to the effective vices, material and equipment. and, within this context, the lowest price. eradication of child labor, for the 13th year we have 2012 2013 2014 2015 2016 While the supplier is performing the contract, The Sabesp Normative Qualification Guide- renewed the certificate conferred by the Fundação when each tax invoice is presented, proof must be lines are re-evaluated and published on a quar- Abrinq (an entity that promotes children’s well-being). Overtime / 15.2 15.4 16.5 14.9 13.2 Regular Hours Worked (%) presented that the monthly social charges have terly basis, with the aim of developing suppliers. The Company has its own process for qualifying been paid over, as required by law. The contrac- Furthermore, Sabesp encourages the develop- suppliers and their respective products, in the case Absenteeism (annual average – 2.5 2.6 2.2 2 1.8 active employees %) tual instrument contains labor law, occupational ment of micro and small businesses, fostering of purchases of strategic materials, such as chemi- safety and environmental caveats. Sabesp con- the participation and contracting out of local sup- cal products. Furthermore, the supplier qualifica- tractors also undertake to only create partner- pliers in the regions where we operate. Further tion process evaluates several requisites, including ships (subcontractors or outsourced services) information about our tendering process is avail- the production process, from the raw materials, to Taking into account the people management with companies that are up to date with their able at www.sabesp.com.br the final product, verifying aspects involving social practices adopted, it is clear that the productivity social security and labor law obligations, as well responsibility with regard to child labor. indicator, in other words, the ratio of the number of as their tax obligations at local, state and federal connections per employee has shown a continually level, and the contractor is exclusively liable for Child labor rising curve over recent years. any irregular acts or facts performed by the sub- Forced or compulsory labor contracted and/or outsourced in its own name, of Sabesp’s bidding procedures establish, as a condi- its employees and agents. tion for qualification, that bidders confirm they are not The measures adopted by Sabesp to eliminate Productivity Regarding environmental liability, Sabesp in breach of Ministry of Labor rulings on the prohibi- all forms of forced or slave labor are the outcome of number of connections by employee evaluates compliance with the local environmen- tion of nighttime, hazardous or unhealthy work involv- the study by the National Compact of the production tal legislation of its suppliers, and the toxicologi- ing those under the age of eighteen, and that they do chains of employers that use forced or compulsory 1,114 1,008 1,074 cal risks of the product to be supplied, in order not employ anyone under the age of sixteen6. During labor. Actions involving the register of suppliers 919 948 to guarantee the safety of use in the water treat- bidding, failure to comply with this rule will disqualify and participation in tenders and bidding processes ment plant and for the final consumer. Sabesp the bidder and, when the contract is being performed, were forwarded at the time to the Steering Commit- also assesses the supplier’s manufacturing pro- the discovery of any violation of this rule may result tee of the National Compact for the Eradication of cess, from the raw material to the final product, in the contract being rescinded. On another front in- Slave Labor. Worthy of note among the actions are: for aspects involving social responsibility, especially where child labor is concerned, technologi- 6 – Law 8666/93 – section 27, subsection V – Compliance with the provisions of subsection XXXIII of section 7 of the 2012 2013 2014 2015 2016 cal development, promotion of fair trade (selec- Federal Constitution. (Included by Law 9854, of 1999). 92 93 RELATÓRIO DE SUSTENTABILIDADE SABESP 2016 AWARDS RECEIVED IN 2016

a) consultation by our registration department improving the quality of the information it holds on of the “ dirty list” of the Ministry of Labor and its customers’ records. In December, 2016, 93% of Employment, to verify whether any Sabesp the bills contained the name of the owner. suppliers are using compulsory labor; b) the obligation that those interested in partici- ANEFAC TRANSPARENCY TROPHY 2016 pating in bids, or in qualifying their respective Ombudsman / Procon – category of Publicly-Held Companies granted by products in Sabesp, declare that they do not the National Association of Finance Businessmen AWARDS use labor analogous to slavery in their produc- Ombudsman is a qualified client relationship chan- (Anefac), due to the transparent and trustworthy way tive chain and; nel intended for addressing complaints, suggestions, it presented its financial statements c) caveats in the contract whereby the contracted reports, criticisms and information, through which company will be liable for any use of labor anal- more than 139 thousand statements were made in QA QUALITY ASSESSMENT CERTIFICATE, RECEIVED ogous to slavery in its productive chain. to that 2016. This total refers to statements made before the granted by the Institute of Internal Auditors in Brazil end, we wish to stress that employing forced or water crisis, a sign that it is returning to normality. (IIA Brazil), a branch of The Institute of Internal Audi- compulsory labor constitutes reason for the ter- As a result of the intense and continuously im- tors (IIA), to the Audit Superintendence COMPLAINTS mination of contract(s) with Sabesp. proved work in the provision of a quality service REGISTERED BY for clients, Sabesp was once again not included FRIEND OF JUSTICE COMPANY CERTIFICATE, THE CONSUMER on the list of the 50 companies with the highest created by the Court of Appeals of the State of São 2016 PROTECTION Client Relationship number of complaints registered in the State of Paulo with the purpose of stimulating the organiza- FOUNDATION São Paulo as disclosed by Consumer Protection tions to add practices that contribute to the improve- DECREASED Aware of the importance and of the environmental and Defense Foundation (Procon-SP). In 2016, the ment of client service and, consequently, to the 52% COMAPARED and social impact of its relationship actions with cli- Company registered only 41 grounded complaints, reduction of the number of judicial disputes ents, Sabesp has been investing in projects of auton- a decrease of 52% compared to 2015. Among the VALOR 1000 AWARD, in the category TO 2015. omy, accessibility, reduction of inputs and digital and five essential service providers with the highest “THE 100 MORE INFLUENT OF ENERGY” AWARD “water and sanitation”, granted for the 8th time social inclusion. The Sabesp virtual agency is acces- number of complaints, the sanitation company – category sustainability, granted by Grupo Mídia, by the Newspaper Valor Econômico. Sabesp is one sible to those with total or partial sight impairment, was also out of the ranking. through the magazine Full Energy, for the project of the top winners of this award. that is, the virtual service is compatible with and ad- Waste to Energy Barueri, intended to transform justable to the specific software used by customers sludge and biogas from sewage treatment in raw NATIONAL AWARD OF QUALITY® (PNQ), with this need. These customers can also request Satisfaction Survey material for the production of electricity granted by the National Foundation of Quality (FNQ), their bills to be sent in Braille. These steps foster the for the South business Unit, level world class inclusion of the customers and empowers them. This GR-PR5 Sabesp carries out an annual satisfaction Ethics in Business Award, category Sustainability, is Sabesp working in a socially responsible manner. survey among its customer base and, based on the granted by the Brazilian Institute of Ethics 1ST PLACE IN THE RANKING OF SANITATION In 2016, the Sabesp Virtual Agency began provid- results obtained, it is possible to improve the servic- in Business to the project “Processing of Biogas for the 100 Biggest Cities in Brazil, granted by ing a bill installment payment service for which there es we provide to customers and the way we provide Generated in STPs for Car Use (case Franca)” the Institute Trata Brasil to the city of Franca for hav- is a high demand at the physical branches. Provid- them. In 2016, we carried out 5,928 interviews were ing the best indices in the main indicators ing this service represents convenience for the cus- carried out throughout the State of São Paulo, which “THE 100+ INNOVATIVE COMPANIES of basic sanitation tomer by eliminating the time and money spent in allows measuring the results with a margin of error IN THE USE OF IT” AWARD, held by IT Midia (con- getting to a physical agency, in addition to making it of 1.3%, and a 95% confidence level. The overall sat- sulting PwC). The study is recognized by the market MODERN CONSUMER OF EXCELLENCE easy for customers to pay their debts and ensure the isfaction indicator was 82%, which means that 8 out as the most important indicator of technology ap- IN SERVICES TO THE CUSTOMER AWARD, normal water supply to their property, in addition to of every 10 customers declared they were satisfied plication focusing on business innovation, pointing to category ‘public services’, granted by reducing the resources involved in providing a live or very satisfied with Sabesp. companies that use IT as a strategic element Consumidor Moderno Magazine to the Service customer service. Today, over 80% of the services In this same survey, 57% of customers agreed with Center of the Regional Systems Office accepted at physical branches are also available at the assertion “Sabesp is a company concerned with “THE BEST AND THE BIGGEST” AWARD, the Sabesp Virtual Agency. preserving the environment, rivers, water sources category Infrastructure, granted by Exame NATIONAL AWARD OF SANITATION QUALITY Having a utility bill for their property with their and vegetation Another 63% agreed that “Sabesp is a Magazine, which places the company in the (PNQS) 2016, granted by the Brazilian Association name on it is seen by customers as a sample of their company concerned with improving people’s quality of leadership of the sector and on the list of Sanitation and Environmental Engineering (Abes) citizenship and, with this in mind, and to improve its life and social well-being.” These results demonstrate of the leading companies in the country relationship actions, Sabesp has been investing in that Sabesp’s mission is perceived by the customers. DATACENTER DYNAMICS AWARDS – “COMPANIES THAT BEST COMMUNICATE BEST DATACENTER DESIGN in the category WITH JOURNALISTS” AWARD, from the Center ‘Enterprise’, granted by Datacenter for Communication Studies and the magazine Dynamics (DCD), for the design of IT innovations Negócios da Comunicação, for maintaining in basic sanitation 2016 a good relationship with the press

95 SABESP SUSTAINABILITY REPORT 2016 ANNUAL SOCIAL BALANCE 2016

6 – Relevant information on the exercise of corporate 2016 2017 ANNUAL SOCIAL BALANCE – 2016 citizenship

1. Tax Basis 2016 Amount (R$ thousand) 2015 Amount (R$ thousand) Ratio of the highest to the lowest compensation in the company 16.8 nd Net revenues (RL) 14,098,207 11,711,569 Total number of occupational accidents 158 126 Operating income (RO) 3,429,607 3,043,991 Gross Payroll (FPB) 2,199,352 2,193,908 ( ) officers ( ) officers Social and environmental projects developed Amount % on Amount % on ( X ) officers and managers ( X ) officers and managers 2. Internal Social Indicators % on RL % on RL by the company were defined by: (thousand) FPB (thousand) FPB ( ) all employees ( ) all employees Food 167,698 7.62% 1.19% 149,836 6.83% 1.28% ( X ) officers and managers ( X ) officers and managers The occupational security and health standards Mandatory social charges 192,713 8.76% 1.37% 183,295 8.35% 1.57% ( ) all employees ( ) all employees were defined by: Private pension plan -198,873 -9.04% -1.41% 110,181 5.02% 0.94% ( ) all + CIPA ( ) all + CIPA Healthcare 155,689 7.08% 1.10% 143,424 6.54% 1.22% ( ) does not get involved ( ) will not get involved Occupational security and health 11,133 0.51% 0.08% 11,597 0.53% 0.10% In relation to freedom of association, right to collective ( ) follows ILO rules ( ) will follow ILO rules Education 2,445 0.11% 0.02% 1,335 0.06% 0.01% agreement and internal representation of, the company: ( X ) encourages and ( X ) will encourage and Culture 476 0.02% 0.00% 375 0.02% 0.00% follows ILO rules follow ILO rules Professional training and development 4,661 0.21% 0.03% 4,402 0.20% 0.04% ( ) officers ( ) officers Nursery or nursery allowance 2,284 0.10% 0.02% 2,124 0.10% 0.02% The private pension plan includes: ( ) officers and managers ( ) officers and managers Profit sharing 68,379 3.11% 0.49% 54,727 2.49% 0.47% ( X ) all employees ( X ) all employees Others 4,799 0.22% 0.03% 3,231 0.15% 0.03% ( ) officers ( ) officers Total – Internal social indicators 411,404 18.71% 2.92% 664,527 30.29% 5.67% Profit sharing includes: ( ) officers and managers ( ) officers and managers Amount Amount 3 – External social indicators % on RO % on RL % on RO % on RL ( X ) all employees ( X ) all employees (thousand) (thousand) Education 61 0.00% 0.00% 118 0.00% 0.00% ( ) are not considered ( ) will not be considered Upon selecting suppliers, the same ethical and social and ( ) are suggested ( ) will be suggested Culture 16,186 0.47% 0.11% 6,571 0.22% 0.06% environmental responsibilities standards adopted by: ( X ) are required ( X ) will be required Health and sanitation 1,191 0.03% 0.01% 81 0.00% 0.00%

Sports 3,764 0.11% 0.03% 450 0.01% 0.00% ( ) does not get involved ( ) will not get involved With regard to employees’ participation Fight against famine and food security 0 0.00% 0.00% 0 0.00% 0.00% ( ) supports ( ) will support in volunteer programs, the company: Other 14,762 0.43% 0.10% 4,009 0.13% 0.03% ( X ) organizes and encourages ( X ) will organize and encourage Total contributions to the society 35,964 1.05% 0.26% 11,229 0.37% 0.10% At the company: 50,873 At the company: n/a Total number of complaints and criticisms received Taxes (excluding social charges) 2,569,052 74.91% 18.22% 1,103,828 36.26% 9.43% At Procon: 2,125 At Procon: n/a from consumers Total – External social indicators 2,605,016 75.96% 18.48% 1,115,057 36.63% 9.52% At the Court JEC/Conc 578 At the Court n/a Amount Amount 4 – Environmental indicators % on RO % on RL % on RO % on RL (thousand) (thousand) At the company: 99.45% At the company: n/a % of complaints and criticisms solved or fulfilled At Procon: 91.05% At Procon: n/a Investment related production/operation of the company 17,470 0.51% 0.12% 13,580 0.45% 0.12% At the Court: 78.03% At the Court n/a

Investment in external program and/or projects 3,704 0.11% 0.03% 4,833 0.16% 0.04% Total value added to be distributed (R$ thousand) In 2016: 7,984,170 In 2015: 7,108,524 Total investments in the environment 21,174 0.62% 0.15% 18,413 0.60% 0.16% (X) no targest established (X) no targest established 31.5% – Govern; 16.0% – Govern; With regard to the establishment of “annual targets” for wate ( ) 0 to 50% are met ( ) 0 to 50% are met reduction, consumption in general in production/operation, and 21.8% – employees; 28.5% – employees; ( ) 51 to 75% are met ( ) 51 to 75% are met increased efficiency in the use of natural resources, the company: Value Added Distribution (DVA): 8.8% – shareholders; 1.8% – shareholders; ( ) 76 to 100% are met ( ) 76 to 100% are met 6.7% – thir parties; 47.9% – thir parties; 5 – Staff indicators 2016 2015 28.1% – retained 5.8% – retained Number of employees at the end of the period 14,137 14,223 7. Other Information Number of employees hired during the period 605 300 Number of outsourced employees 6,418 6,343 The number of outsourced employees is estimated based on labor assigned to services agreements, Number of interns 690 859 given that Sabesp does not hire third parties directly. Investment and expenditures with environmental protection directly associated with development and implementation of Number of employees over 45 years old 8,710 8,649 major corporate environmental management programs, as well as with the Programa de Uso Racional da Água – PURA, Number of women working in the same company 2,876 2,867 among other local environmental initiatives taken by the Company’s Business Units were taken into account. Other investment and expenditures associated with environmental protection are included in total operating expenses and % of leadership positions held by women 20.07% 19.80% investments reported herein, given the direct relationship between environmental activities and the Company’s Number of African descendants working in the company 2,330 2,263 core business. HR7 This company does no use child or slave labor, does not engage in prostitution or sexual exploitation of children % of leadership positions held by African descendants 4.81% 4.40% or adolescents, and is not involved in corruption. Number of disabeled people or people with especial Our company values and respects diversity internally and externally. 194 180 needs(includes employees and partnerships with AME) 96 97 SABESP SUSTAINABILITY REPORT 2016 ABOUT THE REPORT

Market Analyst 4 The final aggregation of the material issues Employee/Associate 425 resulted in the current materiality matrix, which was constructed based on the average position of Consumer 18 each material issue for each dimension analyzed Sector Specialist 54 and bearing in mind the main aspects and con- Supplier 67 cerns raised through the engagement described above. The material issues identified by the ma- Minority groups 3 trix were ratified by the Company’s most senior ABOUT Investor 10 internal decision makers. Community Leader 7 THE REPORT Regulatory Body 2 Government 14

Professor/Researcher 5

Private Sector 2

Civil Society 2

G4-17/18/19/20/21/22/23/24/25/26/27/28/29/30/32 Material Aspects Identified Third Sector / Associations 20 The purpose of this report is to disclose the and Stakeholder Engagement Grand Total 633 633 Company’s actions and results in the year covered by the report, so as to address the main demands A common challenge in defining the information and expectations of the Sabesp stakeholders in for inclusion in the report and for constructing the adopting the GRI-G4 principles for defining and re- materiality matrix in every organization that engages porting content. with stakeholders is the consideration of multiple For the tenth year, Sabesp is publishing its An- agents with multiple perspectives and who engage MATERIALITY MATRIX nual Sustainability Report, while this is the sixth at different levels. Starting from the previous report edition published simultaneously with the Com- published on March 28, 2016, Sabesp opted to review The final aggregation of the material issues resulted in the current materiality matrix, which was constructed pany’s Management Report. The report covers the the materiality matrix, with the collaboration of an in- based on the average position of each material issue for each dimension analyzed and bearing in mind the main period from January 1, to December 31, 2016, pre- dependent specialized consulting company, since the aspects and concerns raised through the engagement described above. The material issues identified by the senting data on the Company’s economic, social previous review dated from 2014. matrix were ratified by the Company’s most senior internal decision makers. and environmental performance in every munici- For 2016, the review of the materiality matrix pality where it operates. used a much wider-ranging range of strategies, Relevan- ce in the Material Theme Associated GRI Aspect The data were collected and provided by the in synergy with the G4 version of the FRI, which matrix various departments that manage the activities took into account: involving the aspects and indicators responded • The Company’s viewpoint in 2015 – since Sabesp 1 Water Water to, updating and clarifying the Company’s perfor- publishes its Sustainability Report annually, as- 2 Losses/ Wastage/ Leakage Products and Services mance since its last report, published on March 28, sumed that a hierarchical structure existed of the 2016. The results of the Company’s equity interests material issues from the Company’s perspective, 3 Effluents and Waste Effluents and Waste in investee companies have been evaluated using as revealed in its 2015 Sustainability Report de 4 Shortage/ Water crisis/ Water security Economic performance the equity accounting method and published in the 2015, with the historical perspective of the mate- 2016 financial statements. rial issues already notified considered material General (Environmental) 5 User Education This report presents general disclosures for topics for the current review process. Local communities (Social) the GRI Guidelines on Sustainability Reporting. • The external audience’s vision of the Company – The indicators covered in each aspect are high- analysis of information on the Company published 6 Universal access (water and sewage) Indirect economic impacts lighted throughout the text, while the remissive in different media instruments and a detailed 7 Biodiversity/ The Environment/ Natural Resources Biodiversity index can be found in the final pages of the publi- analysis of the sectorial benchmarking. cation. The report has not been submitted to ex- • Public consultation – extracted from the stake- 8 Products and Services Products and Services ternal assurance. holder survey carried out in early 2017 and made 9 Anti-corruption Anti-corruption available on-line on the site and social networks of Sabesp, to validate the issues already identified 10 Technological innovations Indirect economic impacts and to enable other issues to be identified. The 11 Satisfaction Product and Service Labeling survey had 633 valid responses from the following sections of the public: 12 Energy Energy 98 99 SABESP SUSTAINABILITY REPORT 2016 LOCATION OF THE GRI INDICATORS

GRI G4 Indicator Page

ECONOMIC CATEGORY

Economic performance

G4-EC1 Direct economic value generated and distributed 60

G4-32/33 This report presents General Disclo- Financial implications and other risks and opportunities for the organization’s G4-EC2 33 LOCATION OF THE sures for the GRI Guidelines on Sustainability Re- activities due to climate change porting. The location of the indicators covered is GRI INDICATORS identified in the following tables. Market Presence Ratios of standard entry level wage by gender compared to local minimum wage at G4-EC5 86 significant locations of operation General Standard Disclosures Page Strategy and analysis Indirect economic impacts G4-1 6, 8 G4-2 24 G4-EC7 Development and impact of infrastructure investments and services supported 50 Organizational profile G4-3 10 G4-EC8 Significant indirect economic impacts, including the extent of the impacts 40, 76, 85 G4-4 10 ENVIRONMENTAL CATEGORY G4-5 10 G4-6 10 Materials G4-7 10 G4-8 10 G4-EN1 Materials used by weight or volume 14 G4-9 10 G4-10 80 G4-EN2 Percentage of materials used that are recycled input materials 14 G4-11 79 G4-12 10 Energy G4-13 No significant changes to be reported G4-EN3 Total electricity consumption 14 G4-15 76 G4-16 78 G4-EN5 Electricity consumption/m³ for water and sewage 14 Identified material aspects and boundaries G4-17 98 G4-EN6 Reduction in energy consumption for water and sewage 14 G4-18 98 G4-19 98 G4-EN7 Reductions in energy requisites /m³ for water and sewage 14 G4-20 98 G4-21 98 Water G4-22 98 G4-EN8 Total water withdrawn – Surface and Underground Sources 14 G4-23 98 Stakeholder engagement G4-EN10 Percentage of water consumed in treatment at the WTPs 14 G4-24 98 G4-25 98 G4-EN10 Percentage of water recovered from washing the filters and decanters at the WTPs 14 G4-26 98 G4-27 98 Biodiversity Report profile G4-EN11 Reserves within protected areas 68 G4-28 98 G4-29 98 Emissions G4-30 98 G4-31 104 G4-EN15 Direct Greenhouse Gas (GHG) emissions (Scope 1) 14, 65 G4-32 98, 100 G4-33 100 G4-EN16 Energy indirect Greenhouse Gas (GHG) emissions (Scope 2) 14, 65 Governance G4-34 18 G4-EN17 Other indirect Greenhouse Gas (GHG) emissions (Scope 3) 14, 65 G4-51 20 Ethics and integrity G4-56 18 100 101 SABESP SUSTAINABILITY REPORT 2016 LOCATION OF THE PRINCIPLES OF THE GLOBAL COMPACT

GRI G4 Indicator Page

Effluents and Waste

G4-EN22 Volume of water for reuse supplied 14

G4-EN22 Ratio of water for reuse sold to sewage treated in STPs with reuse 14 G4-EN22 Ratio of water for reuse supplied to installed capacity 14 LOCATION OF THE Products and Services PRINCIPLES OF THE G4-EN27 Rational Use of Water 38, 40 GLOBAL COMPACT G4-EN27 Reuse of Effluents 40

General Principles Pages

G4-EN31 Total environmental protection expenditures and investments. 14, 64 1 – To respect and protect Human Rights 74, 93 SOCIAL CATEGORY 2 – To prevent violations of Human Rights 93 Labor practices and decent work

Employment 3 – To support freedom of association in the workplace 79

Total number and rates of new employee hires and employee turnover G4-LA1 93 4 – To eliminate forced labor 93 by age group, gender and region

Diversity and Equal Opportunity 5 – To abolish child labor 93

Composition of governance bodies and breakdown of employees per 6 – To eliminate discrimination in the work environment 84, 93 G4-LA12 employee category according to gender, age group, minority group membership, 85, 86 and other indicators of diversity 7 – To support a precautionary approach to environmental challenges 36 Equal Remuneration for Women and Men 8 – To promote environmental responsibility 14, 92 Ratio of basic salary and remuneration of women to men by employee category, G4-LA13 86 by significant locations of operation 9 – To encourage environmentally-friendly technologies 40, 50, 65 Society 10 – To work against corruption in all its forms, including extortion and bribery 18 Local communities

Percentage of operations involving the implementation of local community 78 G4-SO1 engagement programs, impact assessment and local development.

Anti-corruption

Total number and percentage of operations subjected to risk assessments regarding 19 G4-SO3 corruption and the significant risks identified

Public policy

Total financial contributions to political parties and politicians, broken down by country Sabesp does not G4-SO6 and recipient/beneficiary entertain this practice

Product responsibility

Product and Service Labeling

G4-PR5 Results of customer satisfaction surveys 94

102 103 CORPORATE INFORMATION

G4-31 Sunstainability Report 2016 Suggestions/comments: [email protected]

SOCIAL NETWORKS TELEPHONE HOTLINE

youtube.com.br/user/saneamentosabesp 195 (toll-free) flickr.com/sabesp In the case of emergencies facebook.com/oficialsabesp like water interruptions, leaks twitter.com/ciasabesp and blocked sewers. 24 hours, every day.

SERVICE CONMERCIAL SERVICES Virtual Agency: your service outlet on the internet. Ask for a second copy IInformation about bills, of your bill, repair leaks, check your requests for second copies consumption track record and find out (in case of loss or non-receipt), where to make payments. services request, addresses, https://www9.sabesp.com.br/ useful telephones agenciavirtual and explanatory leaflets.

Sabesp Mobile São Paulo Metropolitan Region App compatible with Android or iOS. 0800-0119911 (toll-free) Request second copy of bills, From Monday to Friday, consumption track record, from 7:00 am to 9:00 pm, and Saturdays, instructions about direct debits from 8:00 am to 5:00 pm. and notices about debits falling due and high consumption. Customers can Interior and the coastal area also report water and sewage leaks. 0800-0550195 (toll-free) 24 hours, every day Online service Talk to our agents and clear up your doubts about our services. From Monday OMBUDSMAN to Friday, from 8:00 am to 9:00 pm, and Saturdays, from 8:00 am to 5:00 pm. 0800-0550565 (toll-free) sabesp.com.br • Option: atendimento online With the case number to hand, users can file complaints regarding services Service outlets already requested. find the service outlet closest to In addition, you can end criticisms, complaints where your live, via the site or or compliments. on the water bill delivered From Monday to Friday, to your home. from 8:00 am to 6:00 pm sabesp.com.br • Option: clientes e serviços sabesp.com.br • Option: ouvidoria

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