positive actions - ALFA · mass market in Mexico. Newpek, an oil and gas exploration and production company with operations in Mexico and the United States. Our company In 2017, our

2 0 1 7 S O C I A L R E S P O N S A B I L I T Y R E P O R T

positiveactions

ALFA is a company that manages a diversified business portfolio:

Sigma, a leading multinational refrigerated food company, focused on the production, marketing and distribution of quality foods through recognized brands in Mexico, Europe, United States and Latin America.

Alpek, one of the world’s largest producers of polyester (PTA, PET and fibers), and the leader in the Mexican market for polypropylene, expandable polystyrene (EPS) and caprolactam.

Nemak, a leading provider of innovative lightweighting solutions for the global automotive industry, specializing in the development and manufacturing of aluminum components for powertrain, structural components and for electric vehicles.

Axtel, a provider of Information Technology (IT) and Communication services for the enterprise, government and mass market in Mexico.

Newpek, an oil and gas exploration and production company with operations in Mexico and the United States.

Ourcompany

In 2017, our revenues and assetswere distributed as follows:

2017 2016

REVENUE 16,804 15,756

EBITDA 2,018 2,322

TOTAL ASSETS 18,189 16,868

OPERATING INCOME 557 1,313

CAPITAL INVESTMENT 1,101 1,491

TAXES PAID 255 290

DIVIDENDS 170 172

PAYMENTS TO SUPPLIERS 354 247

EMPLOYEE WAGES AND BENEFITS 1,977 1,687

OPERATING COSTS 13,457 12,140

DIRECT ECONOMIC VALUE GENERATED 16,857 15,787

RETAINED ECONOMIC VALUE 698 969

PAYMENTS TO PROVIDERS OF CAPITAL 2,678 1,805 TOTAL CAPITALIZATION, IN TERMS OF DEBT AND EQUITY 18,176 16,890

Highlights

The company is a source of employment for

86,200employees.

The shares of ALFA are listed on the Mexican Stock Exchange and on Latibex, on the Madrid Stock Exchange.

ALFA ownership percentage:Sigma 100% Alpek 82% Nemak 75% Axtel 53% Newpek 100%

(U.S. $ millions)

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1,240 students enrolled in the Extracurricular Centers and the ALFA Foundation High School.

30 man/hoursaverage of training.

94.1% of ALFA's direct energy consumption comes from natural gas, the cleanest fuel to date.

Highlights 2017

2,729 tof food donated by Sigma to Food Banks in Mexico.

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Presence and Businesses(GRI Standards 102-2, 102-4, 102-6, 102-7, 102-9)

The company produces and offers more than 40 main products and services, marketed mainly for the food beverages, consumer products, automotive, packaging, textiles, construction, furniture, information technology and communication, and energy sectors, among others.

Main products• Cooked and cured meats:

Ham, sausages, bacon.• Dairy products: Cheese,

yogurt, cream, butter.• Other refrigerated and

frozen foods.

MarketsFoods

Relevant figures 2017Revenues: U.S. $6.1 billionPlants: 70, in 14 countriesEmployees: 45,443

Main products• Polyester: PTA, PET,

polyester fibers.• Plastics and chemicals:

Polypropylene, EPS, Caprolactam, chemical specialties and industrial chemicals.

Markets• Containers for beverages,

food and consumer products, packaging for electronic or appliances, textiles, construction and automotive

Relevant figures 2017Income:U.S. $ 5.2 billionPlants: 23, in 6 countriesEmployees: 5,290 employees

Main products• Aluminum heads and

blocks for internal combustion engines.

• Transmission cases.• Structural components.• Components for electric

vehicles.

MarketsAutomotive

Relevant figures 2017 Revenues:U.S. $4.5 billion Plants: 38, in 16 countries Employees: 23,647

Main products• Data centers.• Security.• Networks management. • Systems integration.• Cloud services.• Collaborative services. • VPN and Ethernet.• Internet.• Pay-TV.• Voice service.

MarketsEnterprise, Government and Mass market

Relevant figures 2017 Revenues:U.S. $ 822 millionEmployees: 7,044

Main products• Hydrocarbons.• Oil and gas services.

MarketsEnergy, oil and gas

Relevant figures 2017 Revenues:U.S. $107 millionPresence: USA and MexicoEmployees: 64

ALFA operates 131 plants in 28 countries: Argentina, Austria, Belgium, Brazil, Canada, Chile, China, Costa Rica, Czech Republic, Ecuador, El Salvador, Dominican Republic, France, Germany, Hungary, India, Italy, Mexico, Netherlands, Peru, Poland, Portugal, Romania, Russia, Slovakia, Turkey and United States of America.

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We are pleased to share this document with you, in which we present the most relevant achievements in terms of social and environmental responsibility, achieved by ALFA during 2017, the challenges we face, as well as the ongoing strategies to continue advancing in an area that we consider key for the development and permanence of the company.

Operating in almost thirty countries and in such diverse industries represents a challenge for ALFA, which we assume with the firm responsibility to meet the expectations of our stakeholders, a task we undertake every day.

ALFA’s social responsibility history starts at its foundation, more than four decades ago, as part of a philosophy of the companies that gave rise to it at the end of the 19th century.

During 2017, ALFA once again faced a difficult economic environment, due to factors such as volatility in the prices of commodities and lower growth in certain markets, which limited the expected results of some of its businesses.

Facing this, the company continued working to improve its performance and lay the foundations for its future growth. This was done through investments to expand

the capacity in several of its facilities, in cutting-edge technologies to improve its efficiency and add value to its products and services, as well as to promote initiatives in all of its sustainability management areas.

Towards our employees, health, safety and training continued to be a priority, to which ALFA dedicates important resources in order to improve the standards in the matter.

Regarding health care, medical infrastructure continued to expand, as well as preventive medicine programs, including medical examinations, vaccination campaigns and physical activities programs. As per industrial safety, 12 plants concluded the year without zero disabling accidents, highlighting Styropek Mexico, that turned 11 years without these kind of accidents.

Employees' training and development programs at all levels and functions were also promoted. Throughout the year, employees received 30 hours of training on average. In addition, programs that support talent attraction and retention within the company, including young talent, were reinforced.

Regarding communities, ALFA Foundation's educational project continued to expand its reach, with 1,240 students enrolled in its three Extracurricular Centers in Monterrey and one high school, from which the first generation is about to graduate. Students from these Centers continued to participate and obtain awards in several national and international academic competitions.

In addition, more than 200 schools of the surrounding communities received support from ALFA’s companies, from talks about ecology and values, to supports to higher-level academic institutions through internships and joint research agreements.

ALFA continued paying special attention to the environmental issues that considers of special relevance such as water management, emissions and recycling.

In 2017, more than 94% of energy directly used in our operations came from clean sources, like natural gas and wind.

Looking ahead, ALFA will continue to face ever more challenging scenarios as its operations and geographic diversification increases. Our main interest will continue to be the safeguarding of the health and physical integrity of our employees, a task to which we will continue to pay special attention.

Regarding environmental policy, stricter regulations in general, particularly in terms of emissions, water management and waste management will remain a constant.

Another issue that has become more important is the value chain, where we seek to work closely with our suppliers, as well to better meet the expectations of customers and consumers.

ALFA's commitment to sustainability is reiterated, with the support of our 86,200 employees who strive every day to build a better company, a better community and a better environment for all.

Armando Garza SadaChairman of the Board of Directors

Álvaro Fernández GarzaPresident

Letter from the Chairman of the Board and the President(GRI Standards 102-11, 102-14, 102-15, 103-2)

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VISION

ShareholdersTo achieve outstanding long-term value creation through profitable growth, continuos portfolio improvement, and selective investments on new opportunities.

EmployeesTo be a great place to work. To attract and develop the most talented, motivating them to achieve their full potential.

ClientsTo exceed expectations with superior experiences and innovative offerings.

SuppliersTo build long-lasting, mutually beneficial relationships.

CommunityTo encourage safe and sustainable operations. To contribute to the development of our communities.

SustainabilityModelALFA has maintained a tradition of sustainability since its foundation. The companies that originated it were pioneers in Mexico regarding the provision of health services, housing, training and quality of life for their employees and their families.

THE SOCIAL RESPONSIBILITY MODEL IS BASED ON FOUR PILLARS: VALUES

IntegrityOur actions are governed by our commitment to ethical conduct and social responsibility.

Respect and EmpathyWe consider diversity as a strength. We seek to incorporate individuals with different backgrounds and experiences. We aspire to provide a work environment that promotes trust and cooperation.

Results OrientedWe are committed to value creation and to the continuous improvement of our businesses. All our employees embody a personal commitment to improving the performance of the company.

Innovation and Entrepreneurial Approach Encourage and reward innovation and development of new business opportunities.

Client BasedDedicated to exceeding our clients’ needs.

MISSION

Become a source of pride for our workers and shareholders; exceed stakeholder expectations through leadership, innovation and long-term exceptional performance.

Mission, Vision and Values(GRI Standards 102-16, 102-40, 102-42)

INTERNAL WELL-BEING To provide health and safety conditions, as well as development opportunities for our

employees.

ECONOMYObtain an adequate return

of the business, considering the investment and the risk

assumed.

COMMUNITYTo be a responsible

citizen towards community.

ENVIRONMENTTo control and

reduce our emissions into air, soil and

water.

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Materiality Analysis (GRI Standards 102-11, 102-46, 102-47, 103-1a, 103-1b, 103-1c, 103-2, 103-3)

LOW RELEVANCE

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

IMPA

CT

FOR

ALF

AA

B

C

D

J

F

G

HI

KE L

M

MEDIUM RELEVANCE HIGH RELEVANCE

THE UN GLOBAL COMPACT

Ever since its foundation in 1974, ALFA has assumed the commitment of being a responsible company from each and every of its action areas: economic, social and environmental. In accordance with this principle, ALFA adhereds to the UN Global Compact, which promotes economic and social development while supporting universal human values. ALFA’s commitment is to act within the 10 principles of this initiative.

Relevance matrix

Top priorities in matters of social responsibility.

MATERIAL ASPECTS• A • B • C • D• E • F • G• H• I• J• K• L• M

ALFA operates within an ethical and responsible framework. This includes continuous interaction with stakeholders for the purpose of understanding their needs and concerns.

ALFA’s social responsibility programs and initiatives have improved over the years to respond more closely to stakeholder’s expectations. ALFA’s way of communicating this performance has also evolved to adopt the reporting standards most commonly accepted by organizations around the world.

Accordingly, ALFA has prepared its corporate social responsibility report by applying the criteria, parameters and methodology developed and established by the Global Reporting Initiative (GRI). As part of this effort, ALFA conducted a materiality analysis in 2015, which allowed it to identify its stakeholders’ most important opinions and expectations regarding the company’s activities. This allows it to prioritize the most relevant aspects resulting from that analysis.

The study was conducted by an independent firm, in coordination with ALFA and its companies’ social responsibility areas.

Responsible marketingEnergy efficiencyClimate change and emissions strategyWater managementEnvironmental managementLabor practicesRelationship with NGOs and regulatory agenciesRelations with customers and suppliersHealth and securityWealth distributionOperations and risks strategyRelationship with investorsCommunity engagement

RELEVANCE FOR STAKEHOLDERS

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SUPPLIERS

EMPLOYEES

COMMUNITIES

AUTHORITIES

SHAREHOLDERSCLIENTS

Ourstakeholders(GRI Standard 102-43)

ALFA defines its stakeholders based on the direct or indirect impacts the company has or may have on specific groups. For ALFA, all of these groups deserve special atention, which is the reason why the company has made the commitment to maintain a respectfull, ethic and transparent relationship with each one of them.

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In addition, we promoted and open and above-board relationship with all the organizations and authorities which we interact with. The feedback received allows us to detect opportunities to improve our performance. There channels of interaction and results we obtained in 2017 were as follows:

PUBLIC MEDIA FREQUENCY CONCERNS EXPRESSED ACTIONS TAKEN

STOCKHOLDERS • Shareholders Meeting• Annual Report• Quarterly Reports • Email• Telephone Hotline • Press releases / press

Annual AnnualQuarterlyContinuousContinuousRecurring

• Profitability and business growth.• Adherence to corporate governance practices.

• Monitoring compliance with indicators.• Business development plans. • Compliance with the Mexican Securities Market Law.• Code of Best Corporate Practices.

CUSTOMERS AND CONSUMERS

• Visits to plants• Email• Surveys• 01 800 Hotline• Fairs and exhibitions• Focus groups• Social networks• Web page• Press releases / press

RecurringContinuousContinuousContinuousRecurringRecurringContinuousContinuousContinuous

• More innovative products and services at a fair price.

• Product information.• Safety and prevention in productive processes.• Quality services and products.

• Development of products / services that meet their needs.

• Investment in product improvement. • Effective response and advice. • Research and problem solving. • Coordination with other plants to replicate best

practices. • Improvement of quality.

EMPLOYEES AND THEIR FAMILIES

• Surveys• Transparency mailbox• Face-to-face meetings• Workshops / Training• Intranet• Letters to the Editor• Line 01 800• Open door policy• Focus groups

RecurringContinuousRecurringRecurringContinuousContinuousContinuousContinuousRecurring

• Industrial safety.• Competitive wages and benefits.• Development opportunities.• Life-work balance.• Preventive tasks.• Timely information on current projects.

• Industrial safety programs.• Salary reviews / benefits program• Training and training programs• Family development programs Benefits such as

flex-time, scholarships• Establishment of KPI’s for clearer results.

COMMUNITIES • Surveys• Discussion panels• Visits to plants• Email• Web page• Recreational and sporting events• Emergency Drills• Response to / emergencies• Security Committee with neighboring

companies

BiannualRecurringRecurringContinuousContinuousContinuousContinuousAnnual/biannualContinuousContinuousRecurringContinuous

• Air pollution.• Noise and odor pollution.• Safety and roads.• Biodegradable and sustainable products• Emergency response.• Preservation of surrounding areas.

• Programs to reduce emissions.• Installation of new technologies to reduce noise

and odors.• Investments in safer equipment and technologies.• Partnerships with companies to generate strategies

in favor of the community.• Community engagement programs. • Participation in projects to improve safety and

the environment.• Training of neighborhood brigades.• Emergency Drills.

SUPPLIERS • Suppliers portal• Face-to-face meetings• Surveys• Audits• Supplier Fairs• Email

ContinuousRecurringRecurringRecurringRecurring Continuous

• Support for development. Sustainability initiatives.

• Feedback when tenders are rejected. • Safety measures.

• Supplier development program. • Supplier certification.• Talks and courses. • Improvements to Suppliers portal. • Generation of joint projects. • Security measures in the plants.

EDUCATIONAL INSTITUTIONS

• Visits to the plant• Talks in schools• Job fairs• "Open doors" days

RecurringRecurringRecurringContinuous

• Promotion of job opportunities. • Recruitment of potential candidates. • Cooperation in projects.

• Partnerships with universities and community schools to promote the development of young people.

• Generation of joint projects. • Internship programs. • Research agreements.

Communication with ourstakeholders (GRI Standards 102-3, 102-43, 102-44)

Theme Association Mission

Environmental Pronatura Noreste, A .C. Conservation of natural habitats.

Wildlife Habitat Conservation Conservation of wild life.

PROFEPA (Procuraduría Federal de Protección al Medio Ambiente)Better performance regarding environmental, legal and operational matters.

Earth Day Organization Celebration of Earth Day.

UNFCC (UN Climate Action) Actions for climate improvement, carbon bonus program.

Community United Way Support to vulnerable communities.

Food Banks Food donations to disadvantaged communities.

Hagámoslo Bien Promote a culture of legality in ALFA Corporativo.

CONARTE (Consejo para la Cultura y las Artes de Nuevo León) Cultural programs.

Red SumaRSE Reconstruction of the social structur.e

Movimiento Congruencia Promotion of employment of handicapped people.

Habitat Construction of housing for communities.

Participation in national and international initiatives(GRI Standard 102-12)

In order to contribute to the sustainable development of the planet and society, ALFA subscribes to letters, principles and other economic, environmental and social initiatives. This allows the company to measure, detect areas of opportunity and promote ongoing improvement in its management.

Partnerships and dialogue with bussines associations(GRI Standard 102-13)

Dialogue with business organizations and nonprofits, authorities and other related institutions is key to improving ALFA's performance, including sustainability. This is done through participation in chambers and associations, as corporate members or in specific committees and governing bodies. ALFA participates in about 80 associations worldwide.

An important project in 2017 was our participation in creating the Monterrey Sustainability Group, which was created together with other companies in the city for the purpose of exchanging ideas, recommendations and forming a business community that promotes and reinforces awareness of sustainability, not only with their employees, but in their communities and throughout their supply chain.

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The Board of Directors comprises 11 proprietary members with no alternates. Each member was chosen based on their academic background, professionalism, business record and consistency with ALFA’s values. All Board members are Mexican men of ages ranging from 45 to 70 years old. There are no other relevant diversity indicators in the Board, such as gender, race, nationality and/or personal beliefs.

In order to correctly perform its duties, three committees assist the Board of Directors: a) Audit, b) Corporate Practices, and c) Planning and Finance. Each committee is headed by an independent board member and meets from four to six times a year to discuss relevant matters.

All board members participate in at least one of these committees. The Audit and the Corporate Practices committee is formed by independent members only. The three committees follow up on topics related to the company’s social and environmental performance.

The Planning and Finance Committee evaluates all matters related to its particular area and advises the Board on topics such as feasibility of investment, the company’s strategic positioning, alignment of investment and financing policies, and review of investment projects.

The Human Capital and Audit department, as well as the Audit and Corporate Practices committees of the Board of Directors, are responsible for monitoring the Board Members' ethical performance. Salary compensation for directors is set by comparing the standards of companies similar in size and industry.

The company complies, in time and form, with all the disclosure requirements and obligations of the Mexican Stock Exchange, S.A.B. of C.V. In addition, it adheres to the Code of Best Corporate Practices in force in Mexico.

Conflicts of interest

ALFA has a Conflict of Interest Policy that seeks to promote total transparency in all business activities carried out by members of the Board of Directors and by employees. This policy states that members of the Board of Directors who might have a conflict of interests in deciding over any matter are compelled to inform the Chairman and the rest of the Board. ALFA’s policies state that employees must avoid any situation in which their interests might differ from those of the company. All employees who might have interests or relations with current or potential clients and suppliers must immediately inform their superior.

Ethics and Anticorruption(GRI Standards 102-17, 205-2, 205-3)

ALFA’s policies and procedures are led by the Executive Management, which establishes programs and initiatives aimed at strengthening the ethical culture and integrity in the company.

In addition, ALFA has a Code of Ethics and an Anti-Corruption Policy that dictate the behavior guidelines expected of its companies and its employees.

For more information, please refer to:http://www.alfa.com.mx/down/CODIGODEETICA.pdf http://www.alfa.com.mx/down/PoliticaAnticorrupcion.pdf

In 2017, 100% of the employees were trained in ethical and anti-corruption matters.

The company also has a series of anonymous, internal and external grievance mechanisms to receive, attend and follow up on the reports reported. One of them is the ALFA Transparency Mailbox: http://www.alfa.com.mx/buzon.html which operates 24 hours a day, 365 days a year by email or telephone in the languages of all countries where ALFA operates.

In 2017, 1,023 incidents related to non-compliance with ALFA's policies and values were presented. 100% of the cases were attended and investigated. As a result, 177 people were separated from the organization. None of the cases involved interaction between employees and government authorities. There were no cases of cancellations or failure to renew contracts with business partners for reasons not in keeping with ALFA policies and values . There were also no cases in which ALFA was reported for matters related to corruption.

Corporate governance (GRI Standards 102-18, 102-19, 102-20, 102-22, 102-24, 102-25, 102-26, 102-33)

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U.S. $19.7millions invested in training

for our employees.

12 plants completed the year without

incapacitating accidents.

77,000 employees and relatives attended

recreational events.

Positiveactions for our employees

Since it was founded, ALFA has pursued a policy of promoting the well-being and integral development of its employees, considered the most important resource for the company's permanence and growth.

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Workforce and diversity(GRI Standards 102-8, 405-1)

ALFA has operations in 28 countries and a workforce of 86,200 employees of more than 60 nationalities, with a great diversity of origins, races and beliefs that enriches their work culture and strengthens the performance of the company.

ALFA has promoted initiatives that provide its employees with the necessary tools to reach their maximum potential, develop themselves more fully in their working environment and improve their quality of life, through work-family balance.

Throughout the last five years, the number of employees has increased by 34%, and 30% of these new hires were women. This is supported by initiatives that provide opportunities for growth, as well as the efforts in attracting and retaining talent that is continually being made, such as "ALFA Live", "Together ALFA", "Young Talent" (Sigma), "Women in Nemak" and "Equal Employment Opportunity Policy" (DAK Americas), which also contribute to boost the potential of the employees.

REGION OR COUNTRY MEN WOMEN TOTAL

NORTH AMERICA 43,629 17,896 61,525

SOUTH AMERICA 3,160 1,076 4,236

ASIA 2,270 227 2,497

CENTRAL AMERICA 2,462 1,000 3,462

EUROPE 11,213 3,267 14,480

62,734 23,466 86,200

Employees by contract

Permanent Temporary

74%

26%

MEN

WOMEN

58%42%

MEN

WOMEN

82,644Employees

3,556Employees

Graphs by employee type

2017 2016

62%

38%

EMPLOYEES

UNIONIZED

62%

38%

EMPLOYEES

UNIONIZED

2017

86,200Employees

2016

81,612Employees

73%

27%

75%

25%

MALE

FEMALE

MALE

FEMALE

Employees by gender

ALFA actively participates in Movimiento Congruencia, an institution that supports the social-labor integration of people with permanent disabilities. Since 2011, the hiring of this type of employees has increased from 151 to 534 people by the end of 2017.

Employees by geographic zone

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Remuneration practices and policies (GRI Standard 102-36)

Employee remuneration policies and practices are based on the standards of the industries in which they participate and their historical levels. The process for determining the remuneration of each position involves a variety of factors, including: the level of responsibility of the position, the capacity and experience of the person who holds the position, and the job market for similar positions.

The ratio between the base salaries of men and women is 1: 1, meaning no difference.

Health and safety(GRI Standards 403-1, 403-2)

Employee health and safety is a priority for ALFA. Every year it invests substantially in initiatives to promote health care, reducing the number and severity of accidents, including the maintenance and acquisition of safety equipment.

Safety rates in 2017 show the following results:

Safety

Indicator 2017 2016

Accident Rate 236.26 243.68

Frequency Rate 9.68 9.50

No. of disabling accidents 1,277 873

No. of non-disabling accidents 632 258

Lost Days rate 31,154 22,397

Fatalities 3 5

All plants have Health and Safety Committees

which include objectives, action plans, monitoring and review of results. More than 90% of employees are represented on these Committees and participate in activities throughout the year. The percentage of employees who supervise that these committees meet their objective varies from 2% to 4% of the total workforce.

Likewise, there is medical service available in all the facilities, where in addition to consultations and care, preventive activities are carried out, such as health fairs, vaccination campaigns and nutritional advice.

The Styopek Mexico plantcompleted

11yearswithout disabling

accidents.

50%of reduction in the accident rate at Nemak Brazil and Tennessee.

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Training and development(GRI Standards 404-1, 404-2, 404-3)

ALFA devotes special support to the development of its employees of all levels and positions. The company has its own programs for training and skill development, and others provided by external institutions, and it supports scholarships so that employees can improve their academic background at different educational levels.

Average hours of training per employee

2017 2016

Total 30 31

Women 25 25

Men 31 19

Unionized 27 22

Non-unionized 33 29

As a basis for development programs, employees are evaluated on their performance in order to identify strengths and opportunities. In this way, the company can focus its programs more precisely.

Evaluation and performance table

2017 2016

Women 75% 75%

Men 79% 58%

77%of employees received feedback on their strengths and areas for improvement in their jobs.

The ANSPAC programs that Sigma operates in 37 locations in Mexico, USA and Latin America promote personal improvement and skills enhancement. In 2017, more than 5,500 employees benefitted from this program.

Work-Family balance

ALFA also promotes an adequate balance between work and family activities. To this end, initiatives such as flex time have been designed, as well as maternity and paternity leave, in addition to those established by labor laws.

In 2017, 466 men and 147 women took advantage of this leave and the return to work rate was 100%.

Family development and recreation

2017 2016

Investment (U.S. $ million) 4.1 4.9

Number of employee’s children benefited with financial support 3,323 3,961

Investmentin training(U.S. $ millions)

2016

2017

13.1

19.4

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Positiveactions for the community

ALFA assumes its responsibility toward the communities where it is present, with an attitude of solidarity and with the goal of promoting a harmonious, respectful and collaborative relationship that benefits all parties.

Its engagement with the communities includes, in particular, strong support for educational projects, cultural events and programs, assistance to public welfare institutions, and support for communities affected in case of natural disasters. The last through the donation of food, basic supplies and volunteer work by employees.

3 Extracurricular Centers and one

high-school ran by ALFA Foundation.

25,000 students of 206 schools

benefited from grants given by ALFA’s companies.

70,800people from more than

340 social assistanceinstitutions benefited.

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Education

ALFA supports schools of all levels and in many parts of the world, seeking to strengthen the educational platform in the countries where it operates. It does so by providing in-kind assistance, improvement of classrooms and physical spaces, conferences and talks on environmental issues, values, as well as agreements and practices in high-level academic institutions.

• The environmental education programs carried out by Univex impacted 2,300 primary school children in central Mexico.

• More than 10,100 students from schools surrounding Alpek Polyester operations benefited from actions in favor of education in Mexico and the US.

• Nemak supported 40 schools through donations and signed 72 agreements with universities to support the development of their students. More than 350 students completed their internships at Nemak.

Supported Schools

2016

2017

166

290

Benefited Students

ALFA Foundation

This institution, which operates with funds contributed by the ALFA companies, arose out of a concern for taking actions that would have a greater impact and permanence in the community. After analyzing various alternatives and faced with the problem of the high school dropout rate in Mexico, the foundation decided to support education in order to generate greater social mobility and development.

As a result of this effort, in 2013 the first of the Extracurricular Talent Centers was created, a facility offering free academic support, outside of school hours, to outstanding junior-high students.

ALFA Foundation’s Educational Project

2017

Extracurricular Centers 3

ALFA Foundation High School 1

Students 1,240

Teachers 76

ALFA extended the reach of its Educational Project through the School for Parents, an initiative focused on the parents of the students in the Extracurricular Centers, which seeks to reinforce their understanding of their adolescent children and the challenges they face today. The instructors of this program are ALFA volunteer employees trained by the Tecnológico de Monterrey.

The students of the Centers participated and won several awards in national and international academic competitions, including:

• Physics Olympics• Gold medal: Mexican Olympics• Bronze medal: International Olympics in

Indonesia• Bronze medal: Ibero American Olympics in

Colombia

2016

27,42625,000

2017

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Social care

ALFA maintains a long tradition of support to the communities, which begins with constant interaction to know and understand their concerns and needs. This allows the company to design and implement the initiatives that respond effectively and promptly to them.

2017 2016

Charities and social assistance institutions supported 340 405

Employees 785 1,562

Amount of contributions(U.S. $ million) 2'504,114 1,198,330

• Axtel provided support to victims of earthquakes in Mexico, through donations in cash and in kind, and making available to the community all of its facilities and equipment to transport food and other aid materials.

• The Nemak plants in the USA. and Canada participate in United Way, an institution that carries out activities in favor of the education and health in their communities.

• Through its participation in RED SumaRSe, an institution that supports the reconstruction of the social fabric of disadvantaged communities, 6 communities were supported, benefiting more 7,047 people.

ALFA Planetarium

This institution, located in Monterrey, Mexico, was established in 1978 to promote appreciation for science, technology, art and nature, mainly.

The ALFA Planetarium includes an Imax screening room, a five-levels museum, interactive games, an aviary, a telescopeand a pre-Hispanic park.

2017

No. Of events 28

Workshops 15

Conferences 6

Exhibitions 6

Attendees 247,541

Students 112,000

In addition to the general public, in the mornings the ALFA Planetarium receives hundreds of students, mainly from elementary school, as well as the Network of Community Centers of Nuevo León, offering the screening of educational films and tours of its facilities, including an aviary.

240,000 attendees to the “LEGO Exhibit”

In response to the earthquakes and cyclones that affected the center and southeast of Mexico in the month of September, ALFA companies actively contributed supporting the recovery of the affected areas, including food and economic contributions.

$4.8million pesos Donations in cash

140 Participating volunteer employees

• 37 collection centers were installed to receive food and basic necessities that were distributed to the affected population through the Mexican Red Cross. Also, a group of volunteers assisted this institution by receiving and distributing provisions.

• The "Peso X Peso" campaign entered in operation again, through which the company matched donations by its 4,000 employees one for one. A total of $ 4,763,096 pesos were collected for the reconstruction of the homes of 140 affected employees, as well as contributions to the Mexican Red Cross and the reconstruction of homes and schools in the state of Puebla in coordination with the Puebla Community Foundation.

• Sigma provided 19,000 kits to volunteers who participated in the collection centers of the Red Cross.

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U.S. $58.6million invested on initiatives for

environmental improvement.

7energy efficiency projects that reduce

the consumption of 10.6 million of kWh and 42,752 GJ of steam per year.

98%of reduction on generated waste sent to landfill, as a result of the Zero Waste

program in Alpek Polyester USA.

Positiveactions for theenvironment

ALFA and its companies continued to work on the strengthening, transparency and communication of their policies and practices towards the environment, through their websites and answering information request from their stakeholders.

18

It does so through initiatives that:

• Comply with environmental legislation in the countries where it operates.

• Promote continuous improvement in practices and procedures to makes its operations more environmentally friendly.

• Invest in preventing, reducing or eliminating the negative impact of the company's activity on nature.

• Incorporate the environmental issue into the company’s daily activities.

• Respond in a timely and responsible manner to contain incidents that may pose a risk to the environment.

• Contribute to a better environmental performance in the value chain.

• Promote an environmental culture among employees and the community.

Investments in environmental issues (U.S. $ million)

2017 2016

Waste reduction and disposal 8.9 10.1

Reduction of emissions 13.5 4.4

Prevention and remediation costs 23.7 10.7

Environmental management 4.5 5.9

Other environmental action 7.9 3.7

Total 58.6 34.8

To ensure compliance in its environmental standards, ALFA has supervision mechanisms, including internal and external audits.

ALFA and the environment

Aware of its responsibility to climate change, it is a matter of principle for ALFA to conduct business in a framework of respect and protection of the environment, while preventing, reducing and controlling negative impacts related to its business activity, with special emphasis on the smart and responsible use of natural resources.

Axis of action:

• Use of efficient and clean energies• Efficient water management• Reduction of greenhouse gases• Rational use of non-renewable resources • Control and responsible handling of waste• Recycling of materials• Protection of biodiversity

19

Energy efficiency(GRI Standards 302-1, 302-2, 302-3, 302-4, 302-5)

ALFA companies use energy intensively. Given the relevance of this issue and in order to optimize its consumption and promote the use of increasingly clean energies, in 2007 the Energy Department was created.

In 2017, ALFA started up seven energy efficiency projects that reduce energy consumption by 10,631,680 kWh and 40,521 millions of BTUs of steam per year, and consequently reduce the use of fossil fuels and emissions into the atmosphere.

• 76 of Sigma operations use wind energy, avoiding the emission of 48,000 t of CO2, equivalent to the emissions of 11,500 cars in the same period.

• 22% of the energy consumed in Axtel comes from clean energies: wind, geothermal and cogeneration.

• Thanks to the change of fuels and efficiencies in the distribution of its products, Sigma received for the fourth time the recognition "Excellent Performance Environmental" for its application to the Transporte Limpio program established by the Government of Mexico.

Energy Consumption

2017 2016

Direct energy consumption (GJ) 40.32 x 106 39.27 x 106

Indirect energy consumption (GJ) 19.40 x 106 19.61 x 106

Indirect consumption of natural gas (GJ) 8.48 x 106 8.39 x 106

Energy produced based on natural gas (GJ)

37.92 x 106 (94.1%)

36.20 x 106 (92.2%)

Energy generated in cogeneration plants 667 GWh 686 GWh

Energy consumption per ton of product (average) 7.32 GJ/Ton 5.6 GJ/Ton

Primary energy sold 554 GWh 500 GWh

Energy obtained through wind processes (GJ) 378,000 GJ No cuantificado

The increase in emissions was due to new acquisitions in Turkey, Romania and Peru. Company actions to optimize processes, resulted in a reduction of 104,000 t CO2 of emissions.

Consumption by energy type

2017 (GJ 2016 (GJ)

Natural gas 37.92 x 106 36.2 X106

LP Gas 0.12 x 106 0.21 X106

Gasoline 0.13 x 106 0.19 X106

Diesel 1.16 X 106 1.40 X106

Coal 0.20 x 106 0.50 X106

Biofuel 0.31 x 106 0.34 X106

Others 0.48 x 106 0.43 X106

Emissions(GRI Standards 305-1, 305-2, 305-4, 305-5, 305-7)

ALFA also invested in projects aimed at reducing emissions, such as gas recovery equipment, dust covers, more efficient boilers and lower use of diesel in transport equipment.

• Alpek reduced its CO2 emissions by 70,000 t, which is equivalent to those emitted by 14,700 cars in a year.

• Indelpro started a flare gas recovery unit that, together with improvements in the operation of the plant, reduced CO2 emissions by 20,700 t.

• The cogeneration system of the Querétaro Data Center of Axtel that operates on the basis of natural gas supplies 11% of its energy needs, avoiding the emission of 4,168 t of CO2 , against conventional energy.

• Alpek’s second cogeneration plant will allow it to reduce 300,000 t of CO2 of emissions per year, once its construction is finished.

• Alpek, Nemak and Axtel reported to the Carbon Disclosure Project (CDP), the generation of GHG emissions and the strategies underway to continue reducing them.

2017 (ton CO2 eq) 2016 (ton CO2 eq)

Direct Emissions 2.32 x 106 2.25 x 106

Indirect emissions 1.97 x 106 1.92 x 106

Emissions per ton produced (average) 0.53 0.47

Total emissions 4.29 x 106 4.17 x 106

20

Water management(GRI Standards 303-1, 303-3, 306-1)

The efficient consumption of this resource is crucial for most of ALFA's operations. In 2014, in order to strengthen the responsible use of this input and share best practices among plants, the ALFA Water Commission was created, where all business groups are represented.

In 2017, ALFA consumed 112.9 millions m3 of water, 7.4% of which came from recovered or treated sources.

• Univex managed to produce the same volume of caprolactam using 2.5 m3 less per t.

• Alpek reduced its water consumption by 7% versus 2016.

• Sigma managed to reduce 270,000 m3 water consumption in its operations.

• Terza reduced its water consumption by 77%, equivalent to 125,000 m3 of the vital liquid, which is equivalent to the consumption of 400 Mexican families in a year.

• In 2017, Nemak began the construction of the sixth waste water treatment plant, which will allow the reuse of 189,200 m3 per year.

Fuentes de consumo

2017 (m3) 2016 (m3)

Municipal water supply 17,514,470 17,028,266

Rivers, lakes and seas 90,371,348 96,434,042

Wells 4,393,516 6,574,931

Rain 0 194,900

Sewage water 635,550 606,485

Others 0 1,077,114

Total 112,914,885 121,915,738

Recycling

Recycling is an activity that generates multiple benefits at ALFA, including more efficient operations, since this results in reduces energy consumption and emissions.

Nemak and Alpek operate consumer aluminum recovery programs for recycling, as well as PET recycling plants, respectively.

• In 2017, Nemak used 939 thousand tons of aluminum from recycled sources.

• Alpek PET recycling plants processed 71,236 t of said material.

• Styropek plants in Mexico and South America recycled 35% of the expandable polystyrene used in their operations.

Water treatment

plants

2016

2017

49

60

Discharge and destination

ALFA is careful about the water it consumes, and that it returns to the environment. To this end, it invests heavily in the construction, operation and maintenance of the 60 wastewater treatment plants. This allows the treatment and its reuse pf water in its processes. Before being discharged, ALFA's plants ensure that they comply with current regulations and quality controls established by the country where they operate.

DESTINATION 2017(m3) 2016 (m3)

Rain water 0 50,719

Retention ponds 0 0

Watering gardens 387,067 5,400

Rivers, lagoons and sea 90,097,571 98,486,897

Public drainage services 886,950 1,541,506

Subsoil 0 0

External treatment 1,412,109 263,232

Total 95,576,630 100,347,754

In its Mexican operations,

NEMAKrecycles in its furnaces the equivalent to one out of every two aluminum cans consumed in Mexico.

21

Waste management(GRI Standards 301-2, 306-2, 306-3)

This activity has become increasing important in ALFA. Companies have been improving their waste management in their plants and several of them made great strides forward in this area.

We work on programs for a better use of raw materials and inputs, adding value to the waste so it can be used in other processes, in a confinement aligned with the current regulations in the matter. In 2017, no significant spills derived from its operations were recorded.

• The Zero Waste program at Alpek Polyester in the U.S., reduced the generation of waste sent to landfills by 98%,

• Three Sigma plants in Europe made progress in their "Zero Discharge" project, managing to recycle 100% of solid waste.

• The redesign of the liquid yoghurt containers reduced their weight from 13 to 11 grams, maintaining their capacity and strength.

Biodiversity and conservation actions(GRI Standards: 304-1, 304-2, 304-3, 304-4)

The vast majority of ALFA's operations are located in areas zoned for industrial use. Only seven plants operate or are close to protected areas or high biodiversity:

• Nemak Monterrey, Mexico• Nemak Dillingen, Germany• Petrotemex Cosoleacaque, Mexico• Petrotemex Charleston, USA• DAK Americas Columbia, USA• DAK Americas Zárate, Argentina• Styropek Guaratinguetá, Brazil

These plants have plans in place to protect each habitat: The Columbia plant, which is located 24 km from the Congaree National Park, holds the Wildlife Habitat at Work certification for its efforts in favor of biodiversity; Nemak Monterrey operates a preservation program in its 7,500 m² of yucca-cassava gardens

In addition, actions of care and protection of biodiversity are carried out. The Nemak plant in Saltillo, which is not near a protected area, carries out conservation activities in a 1.5-hectare nursery.

Every year Alpek Polyester performs a sea turtle release event in the Gulf of Mexico, where employees and communities participate in this rite in favor of animal life.

Through its reforestation program, Polioles planted 600 trees, and established activities for the preservation of them. In 2017, 90% of the trees reforested in 2016 were identified as healthy.

68%of Axtel's invoicing is done electronically, avoiding the printing of 3.3 million physical invoices and saving 430 trees.

22

Positiveactions for the ValueChain

ALFA participates in a wide range of industries, markets and geographies in almost thirty countries. Its investments in productive and commercial facilities, the supply of products and services, coupled with the generation of direct and indirect jobs, favorably impact the economy of each community.

Given its relevance to operations and development, ALFA has implemented various initiatives aimed at strengthening the value chain, including suppliers, customers, distributors and consumers.

120dairy and livestock producers Mexico

supported by Sigma's Fomento Lechero

Program.

100% of ALFA’s companies

have a Suppliers Policy.

72%of suppliers were examined

on environmental,labor, human rights and

social criteria.

23

Investments

In 2017, ALFA invested U.S. $ 1.1 billion in assets in order to expand its capacity, add value to its products and services and improve its technologies. This represented a significant economic spillover to industries such as petrochemicals, automotive, energy, food, telecommunications, and generated both direct and indirect jobs.

The largest investments of the year were:

• Completion of a cooked and cured meats plant in Spain.• Acquisition of two cold cuts companies, one in Romania and another in Peru.

• Expansion of the expandable polystyrene plant in Mexico.• Construction of two propylene storage spheres in Mexico.• Expansion of the Queretaro Data Center.• Three auto parts plants, two in Mexico and one in Slovakia.• Progress in the construction of the second cogeneration plant in Mexico.

Responsible supply

By working hand in hand with suppliers we can help them improve their processes, and also ensure that their products and services meet the required quality standards. In 2017, we continued to fine-tune the Supplier Selection Policy, paying special attention to suppliers’ alignment with ALFA's Code of Ethics, which includes respect for human rights, fair labor practices, prohibition of child labor and compliance with current environmental requirements, among others.

• The Fomento Lechero Program supported more than 120 dairy and livestock producers in Mexico, through technical advice to meet quality standards, improve efficiency and increase production.

• Alpek Polyester in Mexico carried out safety training for 100% of external transport contractors of its PTA operations in Mexico.

• Nemak reinforced the distribution of and compliance with its Sustainability Code for Suppliers.

• ALFA’s Sustainability Committee continued to promote the formation of a responsible supply chain to raise environmental and social standards. The goal for 2018 is to move from a compliance stage to efficiency and innovation stage.

Support for economic growth

Axtel's business accelerator, NAVE (the first of a corporate ICT in Mexico), successfully completed the second generation of accelerated companies in 2017. Through NAVE, Axtel is taking an active role in the entrepreneurial ecosystem of Mexico and Latin America, promoting innovation in the participating companies and promoting the digitalization of organizations.

Value Chain(GRI Standard 201-1)

There is a constant dialogue and communication with our clients and consumers with the purpose of better knowing and understanding their needs and expectations about products and services.

100%meat supplies from Sigma certified in Mexico, Europe and the USA.

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1.7million tons of food distributed to more than 580,000 commercial sites.

Responsible marketing(GRI Standards 416-1, 417-1)

ALFA’s responsibility toward the products and services of its companies goes beyond their quality, incorporating not only communication of their benefits but information referring to their entire lifecycle.

For example, all packaging and labels of the products and services offered contain the following elements, depending on the legal requirements of the country where they are distributed: origin of the components, substances that could have an environmental impact, and safety and appropriate disposal instructions.

Sigma also complies with the provisions of the Self-Regulation Code for Advertising Food and Non-Alcoholic Beverages (PABI Code); with the placement of front labeling in their products in order to raise nutritional awareness, and adheres to the National Agreement for Food Health strategy against overweight and obesity in Mexico. Our other companies are not required to supply this level of detail in products for industrial use.

ALFA does not sell prohibited products, or that are the subject of discussion among its stakeholders, or subject of debate in public opinion. As a result, in 2017 there were no fines or sanctions related to breaches of the regulations and voluntary codes related to information and labeling of products and services, nor to marketing regulations.

Engagement and dialogue with clients(GRI Standards 102-43, 102-44)

100% of ALFA companies have customer service and support mechanisms for a prompt response adapted to the needs they present. Toll-free hotlines, E-mail and the transparency mailbox are just some of the communication channels, in addition to personalized attention.

In Sigma, due to the nature of its industry, the Service Centers are aimed at both customers and consumers, as well mechanisms for offering specific solutions. In 2017, these Centers answered calls, fielded questions, accepted thanks and congratulations, complaints, concerns and doubts. The new mechanisms to speed up the responses made it possible to continue reducing the rate of unspecified calls, a percentage well below the industry average.

In Axtel in addition to the continuous training received by customer service personnel, the company has special lines so that service users can communicate with any question, need or service failure. In 2017, Axtel performed 2,897,449 interactions with these.

• Sigma’s Nutrition Institute of Sigma launched a new website and published 29 scientific notes.

• 70% of the products of the ALFA companies were subjected to improvement processes.

• Axtel is part of the DJSI MILA (Dow Jones Sustainability Index and the Integrated Market Exchange of Latin America), which at present includes only 12 Mexican companies, considered as the most sustainable in the country.

• Since 2014, Sigma has distributed more than 43,400 last generation refrigerators in commercial establishments were their products are sold.

25

GRI INDEX

GRI STANDARD

DESCRIPTION ANSWER/PAGE MATERIAL ASPECT

SDG 2030

REPORTING LEVEL

STRATEGY

Strategy and analysis

102-14 Statement from senior decision-maker. Letter from the Chairman of the Board and the President, page 4.

Operations and risk strategy

SDG 8 Decent work and economic growth; SDG 12 Responsible consumption and production

Fully

102-15 Key impacts, risks, and opportunities. Letter from the Chairman of the Board and the President, page 4.


SDG 9 Industry, Innovation and Infrastructure; SDG 13 Climate action

Fully

Organizational profile

102-1 Name of the organization. ALFA, S.A.B. de C.V. Obligatory Fully

102-2 Activities, brands, products, and services. Presence and businesses, page 3. Obligatory Fully

102-3 Location of headquarters. Ave. Gómez Morín 1111 sur, Col. Carrizalejo, San Pedro Garza García, N.L. México. C.P. 66254.

Obligatory Fully

102-4 Location of operations. Presence and businesses, page 3. Obligatory Fully

102-5 Ownership and legal form. ALFA, S.A.B. of C.V. is a public limited stock company with variable capital, whose bylaws are framed in the General Law of Commercial Companies and in the Mexican Securities Market Law.

Obligatory Fully

102-6 Markets served. Presence and businesses, page 3. Obligatory Fully

102-7 Scale of the organization. Presence and businesses, page 3. Obligatory Fully

102-8 Information on employees and other workers. Workforce and diversity, page 12. Labor practices SDG 8 Decent work and economic growth

Fully

102-41 Collective bargaining agreements. 35.7% globally. Labor practices SDG 8 Decent work and economic growth

Fully

102-9 Supply chain. Presence and businesses, page 3. Relations with costumers and suppliers

SDG 8 Decent work and economic growth

Fully

102-10 Significant changes to the organization and its supply chain.

In the reporting period, there were no significant changes in the structure, size, ownership or supply chain. However, the Sigma plant in Burgos, Spain, continued to increase its production capacity; Nemak inaugurated two new auto parts plants in Mexico and one in Slovakia; Alpek expands the production of its expandable polystyrene plant in Mexico to 75 thousand tons per year, and started the operation of two propylene storage spheres in Mexico, and Axtel expanded in 700 M2 the capacity of its Data Center in Querétaro.


SDG 9 Industry, Innovation and Infrastructure

Fully

27

102-11 Precautionary Principle or approach. Through programs of dialogue and engagement with its stakeholders, as well as with the preparation of the Materiality Study in 2015, ALFA identifies those areas that present risks for and from its operations. The analysis allows to create and / or adjust the management strategy and generate new actions that mitigate those risks. See letter from the President and CEO, p. 4 and 5; Materiality analysis, p. 6.


SDG 17 Partnerships for the goals

Fully

102-12 External initiatives. Participation in national and international initiatives, page 9. Relationship with NGOs and regulatory agencies


Fully

102-13 Membership of associations. Partnerships and dialogue with bussines associations, page 9. Relationship with NGOs and regulatory agencies


Fully

Material aspects and report coverage

102-45 Entities included in the consolidated financial statements. This report covers the activities of all the entities reported in the financial statements, with the exception of: • Newpek (Newpek S.A. de C.V. and Alfasid del Norte, S.A. de C.V.).

Relationship with investors

SDG 8 Decent work and economic growth; SDG 17 Partnerships for the goals

Fully

102-46 Defining report content and topic Boundaries. Materiality Analysis, page 6. Fully

102-47 List of material topics. Materiality Analysis, page 6. Fully

103-1b Explanation of the material topic and its Boundary. Materiality Analysis, page 6. Fully

103-1c Explanation of the material topic and its Boundary. The option chosen for this report is Comprehensive, according to the parameters of the G4 version of the Global Reporting Initiative. This means that each indicator of each identified material aspect is fully answered.

Fully

102-48 Restatements of information. Accident rate data was updated from that reported in 2016 due to the inclusion of several plants.

Obligatory Fully

102-49 Changes in reporting. This is ALFA's first report based on the Global Reporting Initiaitve standards version, so the scope of the reported issues is based on the results of the materiality analysis carried out for this purpose and the scope of the information provided adapts to the new requirements of the standard.

Obligatory Fully

Stakeholders engagement

102-40 List of stakeholder groups. Mission, Vision and Values, page 5. Relationship with NGOs and regulatory agencies


Fully

102-42 Identifying and selecting stakeholders. Mission, Vision and Values, page 5. Relationship with NGOs and regulatory agencies


Fully

102-43 Approach to stakeholder engagement. Our stakeholders, page 7. Relationship with NGOs and regulatory agencies


Fully

102-44 Key topics and concerns raised. Communication with stakeholders, page 8. Relationship with NGOs and regulatory agencies


Fully

28

Report profile

102-50 Reporting period. January 1st to December 31st, 2017. Obligatory Fully

102-51 Date of most recent report. Publication date: February 28th, 2017, includes the reporting period from January to December 2016.

Obligatory Fully

102-52 Reporting cycle. Annual. Obligatory Fully

102-53 Contact point for questions regarding the report. Humberto Estrella, Media Relations Manager, Grupo ALFA, tel. 8187481111.

Obligatory Fully

102-54 Claims of reporting in accordance with the GRI Standards. Comprehensive. Obligatory Fully

102-55 GRI content index. http://alfa.com.mx/RS/reportes.htm Obligatory Fully

102-56 External assurance. This report does not have external verification. Obligatory Fully

102-56 External assurance. In ALFA we do not have an established policy regarding external verification practices, but this practice is put into consideration for each reporting cycle. It is important to mention that once it has been decided that it will be carried out, the verifying agency is expected to have the necessary competences and not have a working relationship with the consulting agency that supports us in the development of the report.

Obligatory Fully

103-1a Explanation on how the material aspects were identified as such.

Materiality Analysis, page 6. Fully

103-2 The management approach and its components on Materilaity.

Letter from the Chairman of the Board and the President, page 4; Communication with stakeholders, page 8; Materiality analysis, page 6.

SDG 12 Responsible consumption and production

Fully

103-3 Evaluation of the management approach on the materiality analysis.

Materiality analysis, page 6. COMPLEMENT: For the correct application of an effective materiality methodology, we rely on the external consulting agency Ética y Estrategia Consultores, SC, experts in the implementation of the sustainability guidelines of the Global Reporting Initiative and other guides such as RobecoSam and CDP, all considered in the methodology developed by said agency.

Fully

Governance

102-18 Governance structure. Corporate Governance, page 10. Obligatory Fully

102-19 Delegating authority. Corporate Governance, page 10. Corporate governance, page 10.

SDG 13 Climate action Fully

102-20 Executive-level responsibility for economic, environmental, and social topics.

Corporate Governance, page 10. Environmental management


102-21 Consulting stakeholders on economic, environmental, and social topics.

The communication channels with our stakeholders are summarized in standard 102-44. The results of these communication programs, including those related to economic, environmental and social issues, are transmitted to the Board of Directors in order to take the necessary actions to resolve the relevant concerns.

Fully

102-22 Composition of the highest governance body and its committees.

Corporate Governance, page 10. Fully

102-23 Chair of the highest governance body. The Chairman of the Board does not occupy an executive position in the company. He is responsible for convening and preparing the agenda, as well as chairing the meetings. Likewise, he is responsible for the proper functioning of the Board and for organizing the annual evaluations.

Fully

29

102-24 Nominating and selecting the highest governance body. Corporate Governance, page 10. Fully

102-25 Conflicts of interest. Corporate Governance, page 10. Fully

102-26 Role of highest governance body in setting purpose, values, and strategy.

Corporate Governance, page 10. Fully

102-28 Evaluating the highest governance body’s performance. There are several evaluation methods for directors that measure various factors. These include attending the Board meetings and the committees to which they belong, as well as their participation in the deliberations and the effectiveness of the strategic decisions taken, among others.

Fully

102-29 Identifying and managing economic, environmental, and social impacts.

Risk management and assessment is based on compliance with ALFA criteria in its business strategy and investment policy: business related to current operations, strengthening of the competitive position, attractive markets (profitability and growth), generation of synergies and assurance of the competitiveness of the value chain.

Fully

102-30 Effectiveness of risk management processes. The Board of Directors follows procedures in accordance with those established by the corporate governance standards contemplated in the Mexican Securities Market Law and the Code of Best Corporate Practices. In addition, it relies on the Audit, Corporate Practices, and Planning and Finance committees to review the company's strategy, management, and results, which include environmental and social issues.

Fully

102-31 Review of economic, environmental, and social topics. These issues are considered and analyzed in the meetings of the Board of Directors, which are bimonthly and occur six times a year. It is important to highlight that the guidelines established in the ALFA Code of Ethics and the 10 Principles of the UN Global Compact are considered in all decisions and actions taken by the members of the Board.

Fully

102-32 Highest governance body’s role in sustainability reporting. The Human Capital and Services Management. Fully

102-33 Communicating critical concerns. Corporate Governance, page 10. Fully

102-35 Remuneration policies. Corporate Governance, page 10. Wealth distribution Fully

102-36 Process for determining remuneration. Remuneration practices and policies, page 13. Wealth distribution SDG 8 Decent work and economic growth

Fully

Ethics and Integrity

102-16 Values, principles, standards, and norms of behavior. Mission, Vision and Values, page 5. Obligatory Fully

102-17 Internal an external pro ethics mechanisms related to enhance the integrity of the organization.

Ethics and Anticorruption, page 10. Fully

102-17 Internal and external echanisms for advice and concerns about ethics.

Ethics and Anticorruption, page 10. Fully

30

ECONOMICEconomic performance201-1 Direct economic value generated and distributed. Our company, page 1; Value Chain, page 24. Wealth distribution SDG 8 Decent work and

economic growthFully

201-2 Financial implications and other risks and opportunities due to climate change.

ALFA's companies are subject to risks and opportunities arising from climate change. The petrochemical production business faces fluctuations in the prices of petroleum inputs, Nemak is exposed to the changes that are generated in the automotive industry that forces car assemblers to look for increasingly lighter components and technological advances. In general, all ALFA companies face risks of greater environmental regulation. In all these cases, ALFA keeps innovating to mitigate risks and take advantage of opportunities in an optimal way. For more information, see Letter from the Chairman of the Board and the President, page 4.


ODS 13 Climate action Fully

201-3 Defined benefit plan obligations and other retirement plans.

The pension plans, support for education and medical assistance are available to 100% of ALFA's employees. The pension system is a fixed contribution plan to which the company and the employees contribute the same amount, which goes from 4 to 17% of the total salary of the employee and varies according to applicable labor regulations. The resources to cover these benefits are contributed 100% by the company.

Labor practices SDG 8 Decent work and economic growth

Fully

201-4 Financial assistance received from government. In 2017, ALFA received no significant financial support from governments, except for fiscal stimuli related to technology development projects.

Relationship with NGOs and regulatory agencies

Fully

Market presence

202-1 Ratios of standard entry level wage by gender compared to local minimum wage.

Country: Mexico 3.5 to 1, United States 1.85 to 1. Information from Mexico and the United States is reported as the most significant, since more than 72% of the labor force is in these two countries.

There is no difference between ALFA minimum wages for men and for women.

Wealth distribution SDG 8 Decent work and economic growth

Fully

202-2 Proportion of senior management hired from the local community.

Information not available by the end of 2017. Community engagement

SDG 11 Sustainable cities and communities

Fully

Indirect economic impacts203-1 Infrastructure investments and services supported. Each ALFA operation site engages with their communities

through projects that meet their specific needs.

Examples are: support for school infrastructure, support to community centers, environmental care initiatives, among others.

Community engagement


Fully

203-2 Significant indirect economic impacts. Some of the actions of ALFA that have been identified as generating significant indirect economic impacts are the following:

Sigma dairy and goat projects that support milk producers and the smallholders training through the Center for the Development for Smallholders and Retailers.

Wealth distribution SDG 11 Sustainable cities and communities

Fully

Acquisition practices204-1 Proportion of spending on local suppliers. Mexico: 59%; United States: 80%; Europe 47%; South America

79%. Asia is not considered a significant region for this indicator.Community engagement


Fully

31

ENVIRONMENT

Materials

301-2 Recycled input materials used. Waste management, page 22. SDG 12 Responsible consumption and production

Fully

Energy

302-1 Energy consumption within the organization. Energy efficiency, page 20. Energy efficiency SDG 7 Affordable and clean energy

Fully

302-2 Energy consumption outside of the organization. Energy efficiency, page 20. Energy efficiency SDG 7 Affordable and clean energy

Fully

302-3 Energy intensity. Energy efficiency, page 20. Energy efficiency SDG 7 Affordable and clean energy

Fully

302-4 Reduction of energy consumption. Energy efficiency, page 20. Energy efficiency SDG 7 Affordable and clean energy

Fully

302-5 Reductions in energy requirements of products and services

Energy efficiency, page 20. Energy efficiency SDG 7 Affordable and clean energy

Fully

Water

303-1 Water withdrawal by source. Water management, page 21. Water management SDG 6 Clean water and sanitation

Fully

303-2 Water sources significantly affected by withdrawal of water. ALFA does not significantly affect any of its water sources. Water management SDG 6 Clean water and sanitation

Fully

303-3 Water recycled and reused. Water management, page 21. Water management SDG 6 Clean water and sanitation

Fully

Biodiversity

304-1 Operational sites owned, leased, managed in, or adjacent to, protected areas and areas of high biodiversity value outside protected areas.

Biodiversity and conservation actions, page 22. SDG 15 Life on land Fully

304-2 Significant impacts of activities, products, and services on biodiversity.


304-3 Habitats protected or restored. Biodiversity and conservation actions, page 22. SDG 15 Life on land Fully

304-4 IUCN Red List species and national conservation list species with habitats in areas affected by operations.


Emissions

305-1 Direct (Scope 1) GHG emissions. Emissions, page 20. Climate change and emissions strategy


305-2 Energy indirect (Scope 2) GHG emissions. Emissions, page 20. Climate change and emissions strategy


305-3 Other indirect (Scope 3) GHG emissions. Not applicable. Climate change and emissions strategy


305-4 GHG emissions intensity. Emissions, page 20. Climate change and emissions strategy


305-5 Reduction of GHG emissions. Emissions, page 20. Climate change and emissions strategy


32

305-6 Emissions of ozone-depleting substances (ODS). ALFA's operations do not release this type of emissions into the atmosphere.

Climate change and emissions strategy


305-7 Nitrogen oxides (NOX), sulfur oxides (SOX), and other significant air emissions.

NOX: 541; SOX:436; COV: 821; CAP: 439; MP: 559. All in tons of CO2 eq.



Products and services

306-1 Water discharge by quality and destination. Discharge and destination, page 21. Water management SDG 6 Clean water and sanitation

Fully

306-3 Significant spills. In 2017 there were no significant spills from ALFA's operations. SDG 12 Responsible consumption and production

Fully

306-5 Water bodies affected by water discharges and/or runoff. In 2017, there were no habitats significantly affected by water discharges or runoff by ALFA's operations.

SDG 15 Life on land Fully

Materials

301-3 Reclaimed products and their packaging materials. Recycling, page 21. SDG 12 Responsible consumption and production

Fully

Compliance

307-1 Non-compliance with environmental laws and regulations. In 2017, no fines were recorded for this concept. Relationship with NGOs and regulatory agencies


Transport

NA Significant environmental impacts of the transport of products and other goods and materials used for the activities of the organization, as well as the transportation of personnel.

Information not availabe by the end of 2017. Climate change and emissions strategy


General

NA Breakdown of environmental expenditures and investments.

ALFA and the Environment, page 19. Climate change and emissions strategy


Supplier environmental assesments

308-1 New suppliers that were screened using environmental criteria.

74% of all suppliers (new and current) were examined based on these criteria.

Relations with clients and suppliers


Fully

308-2 Negative environmental impacts in the supply chain and actions taken.

In 2017, these types of impacts were not identified in ALFA's value chain.



Fully

Compliance

103-2 The management approach and its components (Policies, commitments, targets and goals, responsibilities and grievance mechanisms of environmental report).

ALFA and the Environment, pgs. 19-22. COMPLEMENT: Environmental well-being is one of our most important priorities. The communication channels described on p. 8, as well as through compliance with laws and regulations, audits by the authorities, etc., we keep the communication channels open regarding our environmental performance.



33

LABOR PRACTICES

Empleo

401-1 New employee hires and employee turnover. The workforce increased by 15% from 2016 to 2017. Labor practices SDG 8 Decent work and economic growth

Partially

401-2 Benefits provided to full-time employees that are not provided to temporary or part-time employees.

The plant workers have bonuses, holiday bonus, pantry bonuses, savings fund, recognition for years of service and pension plan. Temporary and part-time employees are not provided with the pension plan. In the case of Sigma, benefits vary according to the region and the employee's position.

Labor practices SDG 8 Decent work and economic growth

Fully

401-3 Parental leave. Work-Family balance, page 14. Labor practices SDG 5 Gender equality Fully

Labor management relations

402-1 Minimum notice periods regarding operational changes. The minimum term is two weeks. Labor practices Fully

Health and Safety

403-1 Workers representation in formal joint management-worker health and safety committees.

Health and Safety, page 13. Labor practices Fully

403-2 Types of injury and rates of injury, occupational diseases, lost days, and absenteeism, and number of work-related fatalities.

Health and Safety, page 13. Labor practices SDG 3 Good health and well-being

Fully

403-3 Workers with high incidence or high risk of diseases related to their occupation.

Due to the industrial nature of ALFA's operations, there are some roles played by our employees that imply a relatively greater risk. In all cases, ALFA and its companies work constantly and together to mitigate risks through the use of the latest safety technologies, continuous feedback among employees at all levels, and a reliable and exhaustive incident analysis process.

Labor practices SDG 3 Good health and well-being

Fully

403-4 Health and safety topics covered in formal agreements with trade unions.

ALFA has Health and Safety Committees in which a high percentage of employees, including union members, participate in different capacities. These committees carry out a permanent work dedicated to reducing accidents and occupational diseases. Workers are provided with the safety equipment, training and programs they need to perform their duties in the safest manner.

Labor practices Fully

Traning and development

404-1 Average hours of training per year per employee. Training and development, page 14. Labor practices SDG 8 Decent work and economic growth

Fully

404-2 Programs for upgrading employee skills and transition assistance programs.

Training and development, page 14. Labor practices SDG 8 Decent work and economic growth

Fully

404-3 Percentage of employees receiving regular performance and career development reviews.

Training and development, page 14. Labor practices Fully

Diversity and equal opportunities

405-1 Diversity of governance bodies and employees. The ratio between the salary of men and women in ALFA is 1:1, that is, without any difference when it comes to a job with identical conditions.

Labor practices SDG 5 Gender equality; SDG 8 Decent work and economic growth

Fully

34

Equal remuneration for men and women

405-2 Ratio of basic salary and remuneration of women to men. The ratio between the salary of men and women in ALFA is 1:1, that is, without any difference when it comes to a job with identical conditions.

Labor practices SDG 5 Gender equality; SDG 8 Decent work and economic growth

Fully

Labor practices assesment

414-1 New suppliers that were screened using social criteria. 54% of all suppliers (new and current) were examined based on these criteria.



Fully

414-2 Negative social impacts in the supply chain and actions taken.

In 2017, these types of impacts were not identified in our value chain.



Fully

Grievance mechanisms

103-2 The management approach and its components (Policies, commitments, targets and goals, responsibilities and grievance mechanisms of labor practices report).

Ethics and anticorruption, page 10. Labor practices Fully

HUMAN RIGHTS

Investment

412-1 Significant investment agreements and contracts that include human rights clauses or that underwent human rights screening.

100% of the investment contracts entered into by ALFA and its companies include human rights clauses.

Fully

412-2 Employee training on human rights policies or procedures. In total, 146,923 hours were given in human rights training to 42% of the employees, in addition to training each new employee.

SDG 16 Peace, justice and strong institutions

Fully

No discrimination

412-3 Incidents of discrimination and corrective actions taken. In 2017 there were no cases of discrimination. SDG 10 Reduced inequalities

Fully

Freedom of association

407-1 Operations and suppliers in which the right to freedom of association and collective bargaining may be at risk.

In 2017, these types of impacts were not identified in the operations nor value chain.


Fully

Child labor

408-1 Operations and suppliers at significant risk for incidents of child labor.



Fully

Forced labor

409-1 Operations and suppliers at significant risk for incidents of forced or compulsory labor.



Fully

Security practices

410-1 Security personnel trained in human rights policies or procedures.

58% of the security personnel hired externally received training in human rights from ALFA companies.

SDG 10 Reduced inequalities

Fully

Indigenous rights

411-1 Incidents of violations involving rights of indigenous peoples.

In 2017, there were no cases of violation of the rights of indigenous peoples.


Fully

35

Assesment

412-1 Operations that have been subject to human rights reviews or impact assessments.

100% of the operation centers make sure not to violate the human rights of their employees and communities.



Fully

Grievance mechanisms103-2 The management approach and its components (Policies,

commitments, targets and goals, responsibilities and grievance mechanisms of human rights report).

Ethics and anticorruption, page 10. Relations with clients and suppliers

Fully

COMMUNITIESLocal community413-1 Operations with local community engagement, impact

assessments, and development programs.See pages 15 - 17. The majority of ALFA's operations carry outengagement activities and programs with their communities, from working with civil and government organizations (Red Cross, Civil Protection, health institutions), to internal programs to contribute to the development of their communities.

Some examples are: ALFA Foundation, Community Advisory Panels (Alpek Polyester, USA), School-Business Plan CAINTRA (Axtel), Program of neighboring companies (Axtel), Employment Fairs and Volunteer Programs (Sigma and ALFA), Geese Community and Institute of Sigma Nutrition (Sigma).



Fully

413-2 Operations with significant actual and potential negative impacts on local communities.

ALFA's comanies make a constant effort to enrich their interaction with local communities. No operation center has significant negative impacts on the communities. When a potential impact on the community is detected, ALFA companies work to solve it.



Fully

Anticorruption practices205-1 Operations assessed for risks related to corruption. 100% of the centers are evaluated internally or externally on

risks related to corruption.SDG 16 Peace, justice and strong institutions

Fully

205-2 Communication and training about anti-corruption policies and procedures.

Ethics and anticorruption, page 10. SDG 16 Peace, justice and strong institutions

Fully

205-3 Confirmed incidents of corruption and actions taken. Ethics and anticorruption, page 10. SDG 16 Peace, justice and strong institutions

Fully

Politcal contributions415-1 Political contributions. ALFA does not grant political contributions. Relationship with

NGOs and regulatory agencies

Fully

Unfair competition practices206-1 Legal actions for anti-competitive behavior, anti-trust, and

monopoly practices.In 2017 there were no demands for this concept. Relationship with


Fully

Compliance419-1 Non-compliance with laws and regulations in the social

and economic area.In 2017 there were no demands for this concept. Relationship with


Fully

Grievance mechanisms103-2 The management approach and its components (Policies,

commitments, targets and goals, responsibilities and grievance mechanisms of communities report).

Ethics and anticorruption, page 10. Relationship with NGOs and regulatory agencies

Fully

36

PRODUCT RESPONSIBILITY

Costumer health and safety

416-1 Assessment of the health and safety impacts of product and service categories

Responsible Marketing, page 25. Supplement: The criteria of offering products and services that do not have an impact on the health and safety of customers and consumers is always present at each stage of their development. ALFA companies constantly work to mitigate these impacts through the search and implementation of new technologies and the use of more sustainable raw materials, among others.


Fully

416-2 Incidents of non-compliance concerning the health and safety impacts of products and services.

In 2017 there were no demands for this concept. SDG 12 Responsible consumption and production

Fully

Etiquetado de los productos y servicios

417-1 Requirements for product and service information and labeling.

Responsible Marketing, page 25. Responsible marketing


Fully

417-2 Incidents of non-compliance concerning product and service information and labeling.

In 2017 there were no incidents for this concept. Responsible marketing


Fully

102-43 / 102-44 Approach to stakeholder engagement and key topics and concerns raised (clients' satisfaction rate).

The overall result of satisfaction was 92%. Relations with clients and suppliers


Fully

Responsible marketing

102-2 Activities, brands, products, and services (products or services in dispute).



Fully

417-3 Incidents of non-compliance concerning marketing communications.



Fully

Clients privacy

418-1 Substantiated complaints concerning breaches of customer privacy and losses of customer data.

In 2017, no claims were filed for this concept. Operational and risk strategy

Fully

Compliance

419-1 Non-compliance with laws and regulations in the product and services supply and use.

There were no such cases in 2017. Operational and risk strategy

Fully

37

ALFA, S.A.B. DE C.V.Av. Gómez Morín 1111 sur / Col. Carrizalejo

San Pedro Garza García, N.L., México / C.P. 66254, MéxicoTel.: +52(81) 8748 1111

www.alfa.com.mx

Documents

positive actions - ALFA · mass market in Mexico. Newpek, an oil and gas exploration and production company with operations in Mexico and the United States. Our company In 2017, our