Upholding governance, compliance & ethics

Our stakeholders expect robust corporate governance, consistent compliance and ethical conduct at all times, and we aim to conduct business to these high standards. From our Board of Directors through our Chief Executive Officer and all our employees, we operate in a culture of the highest standards of legal and ethical behavior and personal accountability.

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Upholding governance,
compliance & ethics

Board of Directors

At the end of 2018, Mexichem’s Board of Directors consisted of 13 members, including non-executive Chairman Juan Pablo del Valle Perochena. Five Board members were independent and two were women.

The Board of Directors maintains three Board Committees:

• Corporate Practices Committee: provides opinions and assistance to the Board of Directors in reviewing important reports and transactions; calling shareholder meetings; and in requesting and obtaining opinions from independent third-party experts.

• Audit Committee: supervises external auditors, analyzes their reports and reports back to the Board of Directors, among other duties.

• Finance Committee: supports the Board of Directors in fulfilling its responsibilities to shareholders regarding the policies, practices and strategies related to managing financial affairs.

• The Board of Directors receives regular reports on aspects of our sustainability practices from the Chief Executive Officer, as well as updates relating to current and emerging sustainability risks and opportunities. The Board of Directors provides input and guidance on sustainability matters as needed.

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Upholding governance,
compliance & ethics

Compliance

We aim for full compliance with applicable laws and regulations in every area of our business and maintain a strong corporate legal and compliance team consisting of 18 in-house lawyers and more than 20 auditors.

Our annual training program is designed to provide all employees with up-to-date training in general compliance topics. In 2018, we completed our compliance training reaching all available employees which we estimate was more than 95%. Our Board of Directors approved our compliance program in 2018.

Our compliance training pays particular attention to issues related to anti-corruption and antibribery, foreign trade, anti-trust matters, prevention of money laundering, respect for human rights and prevention of modern slavery, as well as compliance in all functional areas of the business including labor practices, health and safety, and environmental law. Those in specialized, higher-exposure roles received additional training. We maintain a team of more than 100 qualified in-house compliance training specialists from different functional areas in the business who ensure compliance training is conducted throughout the organization.

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Upholding governance,
compliance & ethics

Ethical conduct

Our Code of Ethics guides our company and is a binding requirement for all our Directors, executives and employees. Our global Ethics Committee, made up of senior executives at group level, meets at least once a month to review all ethical issues that arise and to consider responses to emerging issues. In 2019, we plan to reinforce this structure by adding a Business Ethics Committee in each Business Group. These committees will become formal points of accountability for upholding ethical conduct and ensuring training is conducted by Business Group.

We train new employees in our Code of Ethics and provide annual refresher training for current employees. Approximately 25% of employees complete this training online, while other employees participate in classroom training conducted by our in-house team.

Mexichem is firmly committed to the Universal Declaration of Human Rights adopted by the United Nations and condemns all forms of human rights abuse, as stated in our Human Rights Policy. Our decision to confirm our support for the United Nations Global Compact in 2018 is evidence of our ongoing respect for human rights and responsible conduct.

We operate a whistleblowing mechanism for all reports of breaches or suspected breaches of our Code of Ethics or any other violation of laws and regulations. Anyone may report such breaches without fear of retaliation, including reporting anonymously. All reports are investigated thoroughly and actions, disciplinary if necessary, are taken accordingly.

Maintaining product safety

Product safety is a key concern for our customers and therefore a top priority for Mexichem. We comply with all laws and regulations governing product safety and transparency and ensure we provide our customers with all the information they need to safely deploy and where relevant, safely dispose of our products. We also promote the reduction, replacement, or elimination of hazardous materials where feasible. We maintain regular safety reviews of all our products and assess them for potential safety improvements.
Mexichem supports the Strategic Approach for International Chemical Management (SAICM) from the United Nations Environmental Program (UNEP), whose goal is that: “By 2020, chemicals are used and produced in ways that lead to the minimization of significant adverse effects on human health and the environment.”

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Maintaining product safety

Operating to globally recognized standards

REACH:

We comply with the Registration, Evaluation, Authorization and Restriction of Chemicals (REACH) requirements for all substances produced or imported in Europe for all relevant operations.

SAICM:

We support and adhere to The Strategic Approach for International Chemicals Management (SAICM) of the United Nations Environmental Program (UNEP) which promotes the transparent exchange of data and information using a life-cycle approach.

OECD:

The Organization for Economic Cooperation and Development actively seeks to harmonize the international classification of hazardous chemical products. The classification divides the chemical substances and mixtures into different categories by their physical properties and the risks they pose to health and the environment.

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Maintaining product safety

Embracing a life-cycle perspective

We recognize the importance of identifying and managing the impacts of our products throughout their lifecycle. We perform a toxicological evaluation, when pertinent, of products that we develop, in order to prevent potential negative effects on health and the environment both in the production process as well as during their use. Mexichem adopts the precautionary principle for products intended for the medical and food industries through the validation of new raw materials by the U.S. Food and Drug Administration (FDA) based on a range of safety tests.

LIFECYCLE ANALYSIS OF PVC RESINS

In 2018, Mexichem performed a Life Cycle Assessment (LCA) to baseline and benchmark our specialty polyvinyl chloride (PVC) resin products and to understand the environmental impacts from cradle to gate, or from raw material extraction to the point of shipment from our facilities. The LCA was conducted according to ISO 14040 and 14044 and was scientifically and critically reviewed.

The key findings were:

1. The raw material and extraction phase, specifically the vinyl chloride monomer (VCM) production, is the key contributor of environmental impacts for PVC resin products.

2. Manufacturing is a secondary major contributor,whereby energy consumption (electricity, natural gas and coal) accounts for the majority of the impacts.

In addition to the efforts listed on the right, we communicated the completion of the LCA to customers through a detailed fact sheet for full transparency.

Furthermore, we conducted additional LCAs for different products and we continue to evaluate the potential opportunities for improvement, based on the outcomes of these analyses.

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Maintaining product safety

Considering these findings, we took the several steps to reduce the footprint of our PVC products, including the following:

1. Prepared to change our specialty resins operations in the USA to renewable electricity.

2. Diverted capital expenditure towards energy saving initiatives such as energy-efficient motors, lighting and more.

3. Increased our focus on waste minimization at manufacturing plants to include enhanced monitoring of material produced, off-grade resin use, and resin waste.energy-efficient motors, lighting and more.

Empowering our people

At Mexichem, we aim to create an empowering workplace, driven by people’s passion to be creative in delivering solutions to every-day problems and broader social and environmental needs. We cultivate a working environment that promotes innovation and creativity, and we encourage our employees to share in creating value for all those we serve across many industries, communities and societies around the world.

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Empowering our people

We aim to provide workplace conditions that are attractive, safe and rewarding, offering opportunities for personal growth and development while establishing accountability for meeting goals and targets. We believe in open and often informal channels of communication where all employees can hear and be heard, and all voices are valued. By providing a positive work environment, Mexichem is contributing to advancing Sustainable Development Goal #8: Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all.

Having grown in recent years through acquisition, we are continuing our journey as a leading global corporation with an objective to align our international workforce behind a single clear identity, with an inspiring shared purpose and collective values. In 2018, we examined our organization across several dimensions and started to map the processes we must put in place to create a future-fit organization and culture to attract, retain, develop and reward our people in a way that aligns with our business strategy, our values, and society’s pressing challenges.

During 2018, we defined people development as one of the key strategic pillars of our corporate strategy, supporting our transformation journey in four critical ways:

• Engage our employees in the evolution of Mexichem’s purpose and values.

• Build an environment to promote a positive employee experience.

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Empowering our people

• Ensure that employees have the right capabilities and competencies to be successful.

• Redefine our employer brand to support our business transformation. Additionally, in 2018 we concluded the implementation of a new technological platform to manage all key Human Resources processes. This initiative, M’People, is transformational in terms of global talent management and serves as a basis for many future people development programs.

At the end of 2018, there were 22,000+ Mexichem employees working in more than 40 countries, representing more than 60 nationalities.

17% of employees in 2018 in 2018 were women.

Our people spent more than 473,000 hours learning new leadership, professional and technical skills in 2018.

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Empowering our people

Employee engagement

In 2018, we conducted Mexichem’s first global employee engagement survey. The objectives of the survey were to assess the connection of our people to our company’s purpose and values and understand to what extent they feel engaged, enabled and energized.

Overall, employee feedback demonstrated a high level of sustainable engagement at 86%, which means employees feel engaged, energized and enabled to do their job. By way of comparison, high-performance companies in our vendor’s sample have 89% sustainable engagement. Following the survey, we communicated the results to our employees at all levels and created an action plan to improve our engagement results worldwide. Implementation started in 2018 and will continue through 2019.

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Empowering our people

Professional development

We know that a future-fit organization will require talented and competent people at all levels of the organization, so we invest in creating a workforce that has the skills to perform today and the potential to lead tomorrow. We aim to provide our people with the necessary knowledge and skills to perform their current roles effectively, while offering personal opportunity to enhance leadership and management skills. In this way, we create a platform for our people to progress and achieve their potential while contributing to advancing Mexichem’s strategic goals.

ADVANCING GLOBAL LEADERSHIP

In 2018, we launched a Global Leadership Program with a recognized business school in the United States, aiming to advance a common global mindset and business language, strengthen leadership skills and capabilities, and improve networking and communication among Mexichem’s top leaders from different businesses and countries. Our goal is to provide all top leaders with the opportunity to participate in this program in the coming years. One cohort, commenced in 2018 with 30 participants, and a second will start in 2019.

SHAPING FUTURE-FIT LEADERS

As a result of our focus on developing future leaders, we created the exp program, a unique opportunity for international career development that will contribute to the development of talented employees into future-fit leaders.

The program focuses on three areas:

Experience, exposure and education: During this 1-year program, participants gain experience and exposure by

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Empowering our people

leading two strategic six-month projects at an international location. They also participate in formal Leadership Programs with Harvard Business Publishing and Harvard Business School Online.

exp Participants are guided by a strong network of support from our current leadership:

Project Leaders guide participants in completion of the assigned project.

Subject Matter Experts are available to share expertise and advise on specific challenges.

Mentors provide year-long support for exp participants, mainly focused on the development of specific competencies.

In 2018, 14 participants from Mexico, Brazil, Ecuador, Peru, Colombia, UK, U.S., Israel and India representing different Business Groups were selected for this transformational program.

We believe this will accelerate their personal and professional growth, creating a cadre of capable young leaders who will play a significant role in Mexichem’s future, and a positive contribution to society.

PROMOTING DIGITAL LEARNING

We are committed to continuous employee learning and development, and provide tools to facilitate and promote self-development. Our Digital Learning Platform is a way to broaden access and accelerate learning at Mexichem.

In 2018, we launched a new Digital Learning Platform with more than 40 initial training modules, including a wide range of topics from leadership to communications, time management to teamwork to finance, compliance and project management, and many more.

More than 5,000 managers and employees benefited from the Digital Learning Platform in 2018.

PERFORMANCE MANAGEMENT

We promote a high-performance culture that values the professional development of our employees. We have developed a harmonized performance management process, which in 2018 was implemented globally using our talent management system M’People. For the first time, 100% of our employees in professional positions used the platform to set annual goals, review progress, document formal feedback and conclude the performance review cycle.

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Empowering our people

In 2018, we invested more than

473,000 hours

training employees,

equivalent to

22 hours of training

per employee per year.

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Empowering our people

Diversity and inclusion

We aim to create an organization that embraces diversity and inclusion and offers everyone the chance to advance. Where possible, we encourage the inclusion of local employees, as part of our commitment to strengthening local communities and taking an active part in local social and economic development. In each region of operation, we seek to understand the local fabric of society and aim to reflect it in our own operations.

In 2018, we created a new Diversity and Inclusion Policy that was communicated to all employees with a requirement for adoption throughout our organization and the establishment of KPIs to track progress.

See the policy on our website here.

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Empowering our people

Mexichem respects values and celebrates the unique attributes, characteristics and mindsets that make each person who they are. We consider diversity and inclusion a driver for purpose-driven organization. We are committed to creating an inclusive working environment. In which employees are able to fulfill their potential and maximize their contribution. We recognize and value the creative potential that individuals of different backgrounds and abilities bring to their work.”

Mexichem Diversity
and Inclusion Policy, 2018

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Empowering our people

WOMEN AT MEXICHEM

We aim to provide ample opportunity for women to join our business and offer development channels so that they may grow professionally. Overall, 17% of employees are women and we aim to increase the proportion of women in coming years. However, 73% of women at Mexichem are employed in management or professional roles, demonstrating that women are assuming roles of responsibility and advancing in our companies around the world.

In 2018, we also launched a suite of work-life balance policies to help take the stress out of meeting multiple responsibilities at home and at work and, encourage inclusion of all genders.

OUR SKILLED LOCAL WORKFORCE IN COLOMBIA

In Mexichem’s manufacturing operations in Guachené, Colombia, we have always invested in the local community by hiring local and providing them with the skills they need to perform operations in our factory, as well as enabling them to learn a profession that makes them employable in the wider market. We partner with government entities, municipalities and labor organizations to reach potential employees.

In 2018, the plant was recognized as an inclusive employer by ANDI (the National Business Association of Colombia) for providing quality employment opportunities.

WELCOMING REFUGEES IN SWEDEN

Our plant in Eskilstuna, Sweden saw an opportunity to support the integration of Syrian refugees, helping advance a culture of solidarity with our community, while addressing our own recruitment needs for our manufacturing facility which employs around 100 people.

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Empowering our people

We provided roles in our factory for 13 refugees, starting with a six-month trial period of internship where they learned about our operations and new skills to help them play a full role in our plant.

All 13 refugees are now part of our permanent workforce and most have been able to bring their families into Sweden. Other Mexichem manufacturing operations as well as other local businesses have shown interest in this model and may replicate such a program in their own operations.

Today, 92% of the plant workforce of 380 employees are locals and the plant in Guachené is considered a model of ethnic integration in Mexichem. We have also created the first generation of engineers, employed in a range of roles in production as well as in supervisory and management roles.

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Empowering our people

Employee Wellbeing, Health and Safety

We aim to provide a caring, and safe working environment for all our employees, so they can feel empowered to contribute at their best. We do so with a supportive and inclusive organizational culture and human resources policies and frameworks that provide employees with the tools and flexibility to be at their most productive. In 2018 we introduced new policies to enable employees in most of our locations to adopt flexible work hours (job requirements permitting) and to enable remote work within an agreed framework.

PROCESS SAFETY MANAGEMENT

We continue to engage our employees in process safety improvements to minimize risk in our manufacturing operations. All our operations have been assessed for process safety risks and we took a systematic approach to resolving all risks and hazards identified. We established an internal audit team with a specific focus on Process Safety Management (PSM) to support the creation of revised safety KPIs and monitor implementation progress at our sites. We revised safety

process management standards for our chemical facilities and 18 out of 19 Mexichem chemical facilities already have PSM implementation schedule. More than 300 employees received training in PSM in 2018 (a 50% increase from 2017).

A worst-case risk scenario analysis was completed for 16 Mexichem sites, providing opportunities to implement safeguards for potential safety hazards.

For the first time in 2018, we formally included contractor management in our PSM assessments and standards. We communicated these standards to our strategic contractors and have developed an audit plan to be implemented from 2019.

OCCUPATIONAL HEALTH AND SAFETY

We invest in occupational health and safety (OHS) and ensure robust processes are in place, always in compliance with legal requirements, and often beyond compliance. We aim to create an uncompromising culture of safety to prevent accidents and injuries, but if they occur, we examine each case thoroughly and implement corrective actions to prevent recurrence.

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Empowering our people

Several of our sites are certified to OHSAS standards, while others implement the same degree of care.

In 2018, 30 Mexichem operations were certified to OHSAS Standard.

Across our operations, we implement the International Safety Rating System (ISRS) and have aligned our global safety management systems to this standard, verified by Norske Veritas. We have been implementing ISRS on a phased basis with a plan to certify all sites by 2020.

By the end of 2018, 78 sites or 71% of our total operations were ISRS certified.

We have been working for several years to improve our safety results and set a target to achieve a 50% reduction of our global accident rate by 2020 (from 2016 levels).

In 2018, for Mexichem legacy operations, we exceeded our target two years ahead of schedule, achieving a 53% reduction versus 2016 (and a 39% reduction versus 2017).

This is a testament to the dedication of our safety leaders and all employees, supported by strong safety programs and continuous training.

However, this performance is not the whole story. In 2018, we were seriously troubled by fatalities in our operations. A Mexichem employee died when struck by a forklift truck in our factory in Finland. In addition, three contracted drivers died in road accidents while transporting materials in different parts of our operations. We deeply regret the loss of life while providing a service for our company.

These fatal incidents were investigated by our operations and safety teams and actions were taken to reinforce safety practices and prevent recurrence. We communicated the details of these incidents to our employees and third-party contractors, and intensified communication and training, including a special focus on road safety. We also communicated to road transport suppliers our expectations that they help keep their employees safe and ensure that all drivers involved in supporting our business are fully trained in all safety matters.

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Empowering our people

Protecting
the environment

We believe in a shared future in which we not only minimize our negative effects on the environment, but where we, as a large global business, have a regenerative effect. In other words, at Mexichem, we aspire to contribute in a positive way to our shared future and prosperity on the planet. That’s why, we integrate sustainable elements into decision making throughout our entire value chain and risk management processes.

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Protecting the environment

Many of our products and services contribute to advancing life while caring for the planet. For example, our drip irrigation systems help save energy and water, reduce the need for fertilizers that can leach into soil or runoff into rivers, prevent deforestation and more. Our innovative conduits and pipes, water and waste systems improve infrastructure and construction efficiently and sustainably. In all that we do, we aim to demonstrate environmental consciousness.

In addition to our approach to product development, we aim to deliver optimum environmental efficiencies in our own operations around the world. Our environmental management systems in each business unit provide a framework for action and support our quest for continuous improvement. Our Environmental Management System is supported through a range of formal standards and certifications in 18 countries. In 2018, 60 plants had a valid ISO 14001 certification.

In 2018, our sites were audited 48 times by external bodies representing standards institutions, customers and other parties, and 39 times by our internal auditors.

Mexichem also submits an annual report to CDP (formerly the Carbon Disclosure Project), the largest climate change database in the world.

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Protecting the environment

The year 2017 was one of the three warmest on record and was 1.1 degrees Celsius above the pre-industrial period. In October 2018, the Intergovernmental Panel on Climate Change (IPCC) released a Special Report on Global Warming, determining that achieving a target of 1.5° Celsius rise in temperature above pre-industrial levels will require deep reductions of greenhouse gas emissions and rapid, far-reaching and unprecedented changes in all aspects of society.

Sustainable Development Goal #13 requires us to take urgent action to combat climate change and its impacts.

In 2018, Mexichem invested
$41 million

in environmental control projects, consisting mainly: optimization and energy saving, water treatment systems, protection against chemical spills, noise reduction and industrial waste management.

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Protecting the environment

Environmental goals and targets

In 2018, we summarize our performance against multi-year energy, greenhouse gas emissions and waste reduction, as well as water reuse targets.The chart on the following page shows our cumulative performance against these targets, which expired in 2018.

As can be seen, we have failed to meet our energy target. There are multiple reasons for this, including the considerable degree of change in our business over the past 10 years, with several mergers and acquisitions, changes in manufacturing plants and processes, and a very different overall product mix and volume by product – all of which influence energy efficiencies on a per-ton of product basis. Notwithstanding, we sincerely regret that we have under-delivered against this commitment to our stakeholders.

In 2018, we undertook a robust review of our long-term energy and climate strategy as part of our business transformation. We analyzed the environmental impacts of

our current operational landscape in detail (now including Netafim, our most recent acquisition in 2018). We also subjected our sustainability performance data to rigorousexternal assurance in order to confidently establish a new baseline. Our CEO and Business Group leaders are firmly committed to driving energy and emissions reductions in the coming years, and, as we define new multi-year targets, we are establishing robust controls and more frequent internal reporting and review mechanisms in order to ensure we remain on track to meet renewed commitments. We will establish new targets for 2030.

We are pleased to report that we not only met our water and waste targets in 2018, but substantially exceeded them. In these areas, we have analyzed our performance in line with changes in the business over the past 10 years, and are in the process of establishing plans to improve even further in coming years.

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Protecting the environment

Performance against 2018 targets

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Protecting the environment

Improving energy efficiency

We support global efforts to mitigate climate change and continue to deliver energy efficiencies and reduce greenhouse gas (GHG) emissions throughout our operations. Some examples of continued improved energy performance in 2018 include:

• Installation of highly energy-efficient engines for pumping equipment in four vinyl manufacturing plants in Latin America.

• Installation of new speed controllers in engines in Mexico.

• Installation of PVC resin drying equipment with increased energy efficiency in two vinyl manufacturing plants.

• Installation of chilled water pipes in Mexico to reduce energy required for cooling.

• Improved control of downtime in the PVC pipe production process in Colombia.

A smart lighting solution

In 2018, we piloted a smart lighting solution in Germany: lighting as a service (LaaS). This enables our plant to procure lighting, rather than purchasing lightbulbs. With LaaS, our service provider installs and maintains all the necessary lighting solutions in our facility. The pilot proved itself even beyond expectation with a 78% reduction in lighting energy consumption over a period of six months. We expect to seek opportunities to scale this approach at other plants in Europe and beyond.

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Protecting the environment

Moving towards renewable energy

In 2018, we laid the foundation for significant adoption of renewable energy to support low-carbon manufacturing in the UK. Our Wavin UK operation contracted renewable energy specialists Ørsted to supply natural gas and 100% renewable electricity from April 2019. The renewable electricity will come from Ørsted’s 11 operational wind farms in the UK and is certified by REGOs (Renewable Energy Guarantees of Origin), which guarantee that energy is provided from a renewable source. The renewable energy supply will reduce our GHG emissions in the UK by almost 14,000 metric tons per year.

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Protecting the environment

Reusing steel to avoid landfill

We aim to prevent all waste at source and divert waste from landfill as much as possible through recycling, composting and other means. Dura-Line, our datacom conduit manufacturing arm, is the leader in this product category in the U.S. market. To serve our many customers at thousands of locations, we ship datacom conduits on large reels for use at the customer location.

For years we have maintained an active return program that enables reels to be reused rather than sent to landfill. In 2018, our customers returned more than 85,750 reels for reuse, representing almost 7,500 tons of waste avoided.

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Protecting the environment

Recycling as a priority

We continue to place emphasis on recycling as a way of conserving resources and reducing our impact on the environment. For example, our facility in Sao Jose dos Campos in Brazil manufactures polyester non-woven geotextiles, and over 20 years ago, we incorporated recycled polyethylene (RPET) bottles in our manufacturing process.

In Ecuador, in 2018 we commenced a pilot program for securing increased recyclable content for our manufacturing processes. We connected to a recycling organization that includes a local network of more than 5,000 microentrepreneurs, many of whom are in the vicinity of our manufacturing operations. We developed the specification for our plastic compound using collected recycled materials to be used in our production of molded and extruded products. During 2019, we are conducting extensive testing and expect to commercialize in 2020, selling PVC products with greater recycled content.

In Brazil, we have recycled more than 120 million PET bottles
for use in our manufacturing facility over the past 20 years.

Our geotextile manufacturing operation in Brazil
uses 100% post-consumer recycled plastics.

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Protecting the environment

In our Chinley facility in the UK, we operate a recycling plant capable of recycling 9,000 tons PVC products per year. To source raw material for recycling, we maintain a collection network with PVC window fabricators around the UK, placing cages for disposal of their window profile offcuts. We source approximately 1,200 tons of plastic per year this way. Our plant recycles these offcuts to deliver a high-quality powder ready for direct sale or use in PVC compounds that we manufacture. In 2018, recycled products represented 4.2% of our sales of compounds.

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Protecting the environment

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Protecting the environment

Protecting biodiversity

Our most significant impacts on biodiversity are related to our fluorspar mining operation in San Luis Potosi, Mexico. We maintain a strategy to protect biodiversity, including restoration of the natural habitats, relocation of species, reforestation and compensation for adverse effects based on the findings of environmental impact studies.

We work closely with the National Forestry Commission of Mexico (CONAFOR) and provide shared funding for environmental programs in the region of our mines. In 2018, this includes support for a broad range of initiatives, including:

• Rehabilitation of five kilometers of firewall protection and adding almost 16 kilometers of firewall.

• Provision of cameras for photo trapping and monitoring of animal species and vegetation.

• Purchase of equipment for radio communication, forest fire-fighting, six kilometers of fencing for conservation of forest areas and more.

• Conservation and maintenance of 12.8 kilometers of roads.

We also maintain our program for the rescue and relocation of affected species of forest vegetation and wild fauna, minimizing impacts and preserving the abundance and diversity of the region and its natural ecosystem.

Programs for
local impact

Wherever we are at Mexichem, across our 137 plants in 41 countries around the world, we aim to be a positive force in our communities, contributing to economic development, social empowerment and community solidarity. We believe this is the right way to do business, both considering the needs of our local communities and supporting them with our hearts and minds and our personal and company resources. We have a long tradition of philanthropy, community volunteering and business development that helps improve the quality of life in the communities we serve.

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Programs for local impact

Our approach to community investment is twofold:

• At a corporate level, we provide humanitarian assistance, working in partnership with nonprofits, to strengthen the fabric of our communities. Typically, this involves donations, multi-year strategic community projects that align with areas of our core business expertise and disaster relief.

• At a local level, we engage directly with communities, often through our employees who are closest to the local needs and engage with social programs, providing cash donations and employee volunteering or other technical support where required to help address the more complex challenges our communities face. Our employees volunteer in community activities in dozens of projects covering a wide range of needs, cleaning beaches in Peru; supporting the recovery and conservation of watersheds in Colombia; training community members in business management in San Luis Potosi, Mexico; and working with schools to cultivate community gardens in Israel.

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Programs for local impact

In 2018, Mexichem invested $3.71 million in communities around the globe. In addition, almost 8,000 employees spent more than 20,000 hours volunteering in our communities.

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Programs for local impact

Supporting conservation in Latin America

Founded in 2011, The Latin America Conservation Council (LACC) is a group of global leaders who advise on and invest in innovative solutions to the planet’s most pressing challenges at the intersection of people and nature: water security, sustainable food, and smart infrastructure. Mexichem’s Chairman of the Board, Juan Pablo del Valle Perochena, co-chairs the LACC, working in collaboration with The Nature Conservancy to protect and restore nearly 107 million hectares of land to date and 16,000 kilometers of rivers in Latin America by 2020. In addition to providing leadership and funding, Mexichem plays an active role in the LACC.

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Programs for local impact

Water security with water funds

Latin America has a population of around 650 million people, mainly living in cities. Water is a critical resource for the region. Continuous action is urgently needed to restore water sources and develop further mechanisms to conserve water so that the people of the region can enjoy access to water today, without compromising access to water for future generations.

In order to address this critical issue, the Water Funds model was developed. Water Funds are supported by the Latin American Water Funds Partnership, an agreement between the Inter-American Development Bank (IDB), FEMSA Foundation, the Global Environment Facility (GEF), The Nature Conservancy (TNC), and the International Climate Initiative (IKI). The Partnership operates throughout the region and has developed local initiatives across several countries.

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Programs for local impact

Since 2016, Mexichem has partnered with the Latin American Water Funds Partnership, contributing funding, resources and expertise. Mexichem has supported six of the 24 Water Funds in Latin America, focusing on those Water Funds in areas where Mexichem has a manufacturing presence.

Our direct total investment in Water Funds in 2018 was $172,685

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Programs for local impact

According to the World Bank, Latin America’s urban rivers and waterways are among the most polluted in the world, since 70% of the wastewater discharged in the region receives no treatment. As a result, millions of people lack access to safe drinking water.

More than 40% of water is lost in leaks in Mexico City. 18% of the population gets just a few hours of water from their taps every week. The water extracted annually from the city’s aquifers is more than double their recharge, according to Mexico’s National Water Commission.

In 13 years, more than 9,000 hectares of forests and natural areas pertaining to the basins that supply water to the Valley of Mexico have been lost.

Every year, between 150 and 200 hectares of conservation land is lost in Mexico City.

The World Health Statistics 2018 report by the World Health Organization indicates that only 43% of the population in Mexico uses safely managed drinking-water services.

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Programs for local impact

Significant progress includes:

In Mexico City:

• Launched in April 2018.

• Agua Capital aims to protect targeted watersheds and forests that are critical for aquifer recharge, as the main source of water in the Valley of Mexico.

• Mexichem’s Chairman of the Board, Juan Pablo del Valle Perochena, chairs this new fund, and Mexichem and other Board members have together contributed $1.7 million seed capital for the operation of the Water Fund, including a conservation-restoration pilot in San Miguel Topilejo.

• In 2018 progress under that pilot project included 90 hectares of conservation and restoration, and 41 hectares of agricultural best practices with local farmers.

In the Cauca Valley:

• Agua por la Vida y la Sostenibilidad Water Fund has taught agroforestry and sustainable ranching practices to more than 2,536 rural families. Due to better management,

sediment runoff has been reduced, soil health has improved and natural habitats have been preserved.

• Mexichem has supported this fund in previous years and in 2018, more than 22,024 hectares were protected through conservation efforts, designed to benefit more than 3.5 million local inhabitants.

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Programs for local impact

In Bogota:

• Agua Somos Water Fund aims to guarantee the effectiveness of the water ecosystem services in the city of Bogotá and its neighboring municipalities.

• Activities involve restoration of soil, landscape management, improving agricultural practices and protecting and restoring river water sources.

• Mexichem’s support has allowed the installation of rainwater harvesting systems, drip-irrigation technology for vegetable gardens and workshops for the local population.

• So far, around 1,300 hectares of land are under conservation.

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Programs for local impact

Good neighbors in Mexico

Our main fluorine mine - established in 1957 - is located in the municipality of Zaragoza, in the state of San Luis Potosi, Mexico. Since day one, we have engaged with our local community around the mine and contributed to life in several ways. We have maintained trusting relationships with our neighbors, addressing concerns promptly. As an example, we revised the routes for trucks moving to and from the mines upon requests from those affected by their passing through the neighborhood.

In 2018, Mexichem progressed several initiatives:

• Supported the restoration of a historic building in the community, and helped renovate two educational institutions.

• Maintained our Environmental Services program including installation of fire prevention structures, flora and fauna monitoring, workshops for charcoal production and kiln construction, an ecotourism workshop and more.

• Volunteered to train the youth of the community in the use of fire extinguishers and supported youth cleaning campaigns and volunteer camps.

• Supported a volunteer campaign “Fulfilling Wishes 2018” for more than 80 elderly people.

• Helped bring the internet into many homes for the first time.

• Invested in improving and maintaining roads and other infrastructure.

• Mentored local farmers to become food suppliers for our facility.

• Donated our limestone rock by product for construction use in the community.

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Programs for local impact

Rewarding social innovation

Every two years since 2011, in Colombia, our Pavco Water Awards seek solutions to challenges of water scarcity in the region through recognition for initiatives that offer transformative, sustainable solutions for the use, protection and recovery of water. The Awards also seek to foster social innovation and entrepreneurship. We invite young people to submit their innovative ideas to compete for a grant that will help them realize their initiative.

Recent winning projects include a waterless toilet that generates compost, wetland recovery techniques and grey water recovery.

Between 2011 and 2018, we received
210 proposals from 17 districts of Colombia, and awarded grants to 14 winning projects.

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Programs for local impact

Helping kids get healthier

As an organization committed to sustainable agriculture and advancing life, in Israel, we identified an opportunity to change the eating habits for better health, support food security and inspire young children to respect the land. The Arab city of Baqa al-Gharbiyye, less than 10 kilometers from our Magal factory in Israel, has 30,000 inhabitants. Life expectancy in Baqa al-Garbbiyye was estimated at 65 years, where in Israel, the average life expectancy is 80 years. The prevalence of obesity in kindergarten children in this city is very significant, increasing as they grow. Lifestyle and nutritional habits play a major role, so we sought a sustainable way to help our local community be healthier and live longer.

In 2014, our drip irrigation specialist, Netafim, joined forces with the local municipality, a local academic college and partnering nonprofits to establish a program of community vegetable gardens in local kindergartens.

Netafim provided the drip irrigation kits for the vegetable gardens and more than 60 employee volunteers supported the training of the kindergarten staff in their installation and use. Once established, the children and their families tended the gardens to grow fresh produce.

Parents were also offered training on healthy dietary habits for their children and for the entire family.

By 2018, this collaborative community effort had yielded more than 80 community gardens, covering all the kindergartens in the city,benefiting more than 1,200 kindergarten children.

A further outcome of this ongoing initiative is that, the local government now mandates that every new kindergarten established in the city will have a community vegetable garden. Netafim’s Magal Plant was granted the Social and Environmental Leadership Award for this project by the Manufacturers Association in Israel.

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Programs for local impact

Drip irrigation is not only about saving water. It’s a way to transform the lives of entire communities, whether this is through sharing our knowledge with farmers to generate better yields and improve their livelihoods or teaching young children to cultivate vegetables that they can enjoy eating as part of a healthy diet. Our initiative in Baqa-al-Gharbiyye was also significant, bringing Arab and Jewish communities together in a collaborative, long term project that benefits us all”.

NATY BARAK
Chief Sustainability Officer,
Mexichem Precision Agriculture

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Programs for local impact

Developing local tradespeople

An innovative way we support local economic development in our community is through supporting local tradespeople and businesses.

In 2018, Mexichem continued to strengthen our ongoing Training Programs for Plumbers in several countries, including Ecuador, Colombia, Peru, Brazil and Turkey. As a leading provider of water and waste sanitation systems, we have a keen interest in contributing to the success of these skilled tradespeople who are involved in the deployment of our products. Many plumbers are independent tradespeople who did not complete elementary schooling and have had no formal business education.

The training program is tailored to different needs in each country, often in partnership with a local professional organization. It provides support in areas of business planning, customer service and efficient water management.

By 2018, more than 11,600 plumbers had participated in the training program, supported by Mexichem volunteers and our investment of more than $300,000.

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Programs for local impact

In Colombia, we support small family-owned hardware stores where family members have not had formal training in business management or product trends. Competing with larger players in hardware supplies, these small stores need to manage their operations effectively to survive. Our Pavco brand in Colombia established a digital learning platform for store owners to provide education in marketing, inventory management, accounting and more. The menu of courses is available to all hardware store owners for them to use at their convenience. In 2018, we added four new courses to the program.

Since 2016, 1,351 store-owners or family members have taken at least one course, more than 8,700 have visited the training website and 221 participants have received a certification showing they have completed a program of courses.

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Programs for local impact

Supporting our communities when disaster strikes

When disaster strikes, Mexichem is there to offer immediate and critical assistance. We show our solidarity with our neighbors by acting quickly and without hesitation to provide funds, resources and in many cases, the volunteer efforts of our employees, in support of disaster relief efforts.

In Mexico, in 2018, we continued to support the ongoing community relief efforts following the 8.1o magnitude earthquake that struck off the Mexican coast in late 2017. Over 200 people were killed in the earthquake which was the second-most devastating earthquake in Mexico since 1985. Two weeks later another earthquake hit central Mexico. As a result of these two disasters, tens of thousands of people and their families lost their homes and entire villages were wiped out.

Following this crisis, our parent company Kaluz, and its charitable foundation, Fundación Kaluz, rapidly established the Reconstructing Mexico Initiative (Iniciativa Reconstruyendo México), to provide a framework for all our group companies to provide immediate and medium-term relief.

This initiative was the largest charitable effort in the history of our company, with a total donation of more than $1.26 million, of which more than $38,000 was donated by 2,107 Mexichem employees from 24 countries.



For more info visit: https://fondodereconstruccion.mx/en/

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Programs for local impact

During 2018, as part of this initiative, and together with key partners:

• 6 schools were rebuilt, 7 more are in progress.

• 2,200 elementary and junior high students returned to their classrooms.

• A health and a community center were rebuilt, benefitting more than 300 children per year. An additional community center will be ready in 2019.

• Soft skills for resiliency were taught in 16 schools to 7,400 children.

• Mexichem and its employees contributed $1.2 million* to the fund. Together with Kaluz, the initial seed capital leveraged funds from others to a total of $4.1 million*.

• Thanks to strategic partnerships, projects undertaken represent over $13 million* in infrastructure.

*All figures as of Dec. 31, 2018. Peso/dollar exchange rate, used for information purposes only, is 18.00 MXP per USD.

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Programs for local impact

After the eruption of the Fuego Volcano in Guatemala left almost 200 dead and thousands more displaced, we swiftly joined forces with the humanitarian assistance organization CADENA to support the people in need. More than 2,850 employees from 20 countries donated funds which were matched by Mexichem to reach a total value of $90,000 which was used by CADENA to support local medical, water, sanitation and other reconstruction needs. CADENA also provided medical consultations and individual and group psychological sessions, benefiting more than 1,500 people, helping them cope with the anxiety and stress associated with this disruption to their lives.