2014 External Assurance

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EDC 2014 Performance Report Assurance Statement of the external review committee University of Asia and the Pacific Renewable energy such as wind, hydro-, and geothermal is a critical resource for a developing country such as the Philippines. To reduce its dependence on oil imports, the Philippine government launched its renewable energy exploitation program in the 70s, following the steep oil price triggered by the Arab oil embargo directed at Western countries. The government, from then on, operated geothermal and later hydrothermal power plants until the wave of privatization of energy generation assets, a result of the electricity power reforms under the Electric Power Industry Reform Act (EPIRA). The EPIRA Law unbundled the electricity sector into generation, transmission, distribution, and supply for efficiency reasons, and resorted to privatization to harness private sector resources and expertise in energy. The EDC is one of those private power companies that participated in the government’s energy privatization program. The EDC’s 2014 operation of the hydro- and geothermal power plants under long-term contract agreements, extensive capital expenditures to improve plant performance, and improvements in internal financial, governance and risk management systems all contributed to a good economic performance. Thus, profitable operations for the year resulted in higher economic value generated and distributed. The prime beneficiaries were the providers of capital (private shareholders) and, secondarily, labor and the government (mainly, the national government, and in a smaller scale, the local governments hosting the hydroand geothermal power plants). It is conscious about improving its market presence to provide better benefits to host local communities. Apart from direct economic impacts to shareholders, labor, and government, company operations resulted in indirect economic impacts realized in terms of higher level of community welfare and a healthier ecosystem in its areas of operation. Significant socio-economic benefits have accrued as well to the local communities where the hydro- and geothermal power plants are located. Positive externalities were identified during the assessment: beneficial impacts to local suppliers of labor, goods and services with multiplier effects to the larger communities, social and political stability in host communities, and protection and preservation of the environment. EDC in its operations is committed to environmental sustainability and stewardship. The sustainability culture of EDC is manifested not only in its development programs and business endeavors but also in its commitment to protect and preserve the resource base of geothermal and renewable energy. A geothermal reserve can only be sustained foremost by an intact and healthy forest ecosystem. As a company, EDC has endeavored to enhance the forest cover in its project sites and of its vicinity by continuous reforestation and protection, as well as its forest biodiversity through the BINHI and HELEN programs and their attendant advocacy campaigns. The watershed management program is notable as it not only ensures forest regulatory compliance with strong support from external stakeholders/partners such as the Department of Environment and Natural Resources and the Local Government Units but also does not lose sight of the harmony in geothermal field operations that adhere to best practices in energy extraction and waste management, business and labor that look into the interest and welfare of stockholders and the households in the host communities, and most especially the importance of the environment epitomizing EDC’s mission of environmental stewardship. Overall, work at EDC is carried out under conditions of freedom, equity, security, and human dignity. This is the concept of decent work according to the International Labor Organization. The low employee turnover rate is indicative of the level of job satisfaction and the existence of voice mechanisms that make leaving the firm very unlikely. Compensation is competitive with a good variety of employment benefits above the minimum set in the GRI G4 Manual. The collective bargaining agreements provide ample for a for social dialogue on employment terms 2 This page contains the following GRI indicator(s): G4-32, G4-33.
EDC 2014 Performance Report and conditions. These are separate and distinct from the quarterly Employee Council, expanded Labor-Management Committee, Town Hall and Union Leaders’ meetings, which are very good practices. There is a rather broad coverage of participatory mechanisms. Institutional memory is reinforced regularly by a substantial number of continuing, relevant employee training programs. Although, regular training on human rights policies is imperative due to EDC’s accession rate. Age, gender, ethnicity, and religion are among the vital aspects of workforce diversity in EDC, which may develop further through greater collaboration with host communities. A standard provision in the contracts of services on contractors’ compliance with labor standards and other applicable laws is well in place, albeit, wider dissemination of the Department of Labor and Employment’s new rules on labor laws compliance system and contracting/subcontracting is expected to yield significant outcomes. The EDC’s Safety Passport Training (SPT) remains an innovative and veritable medium for ensuring occupational safety and health. The cost of the SPT may be, however, shifted or imputed as part of the contract of service or administrative fee, which has the potential to expand stakeholder engagement. In this context, collaborative governance, involving exchange of information, harmonization of activities, sharing of resources, and enhancement of capacities among stakeholders, is an indispensable approach that is worth enhancing for more meaningful and empowering grievance-handling, productivity-gains sharing and other participatory programs. EDC’s community partnerships programs on health, education, livelihood, and environment (HELEN) in 44 partner barangays in five project sites in 2014 is commendable. The same can be said of the in-house Emergency Response Teams and Disaster Preparedness and Response Unit that train partner communities and help organize the Barangay Emergency Response Teams (BERT) to prepare and respond to disasters and emergency situations. been provided as initial capital with an eye on a strategy of making those cooperatives and farmers’ associations selfsustaining within a planned period of assistance. The EDC is helping the communities build their social capital through democratic organizations such as cooperatives. It is important to recognize the need for “patient” capital in the initial stages of their development and to help nurture those cooperatives to become self-sustaining organizations. It is good to note that the company has committed to provide a package of assistance to cooperatives designed to help them become sustainable organizations. In sum, the environment and socio-economic benefits generated by EDC seem to exceed the social costs of operating the hydro- and geothermal power plants - cost of extraction of natural resources, e.g., pollution, degradation of environment. However, while the economic performance of the company in 2014 seems to have exceeded expectations, there are areas for generating greater socio-economic value that the company may want to consider. The immediate area of concern is the assistance provided to host local communities. There should be a greater scope for investing in human capital—elementary, high school and tertiary education, and health and nutrition especially for indigenous peoples in those communities, e.g., Manobos in Kidapawan City and immediate areas. This type of intervention strengthens its community relations and ensures an atmosphere of peace and stability in host communities. More importantly, such interventions help address the development goal of inclusive growth. Finally, EDC adopted a full disclosure of its management approaches in all aspects of operations. As such, EDC has put premium on its commitment as a good steward of the environmental sustainability, and better socio-economic performance. The 2014 EDC Performance using the GRI G4 Framework complies with the standard disclosure indicator protocols. Continued support and even more funding to the host communities are worth pursuing. Likewise, the scale of assistance given to local communities could be further increased, especially those directed at livelihood projects. Apart from the technical assistance provided by EDC CSR program, financial assistance to start up cooperatives has This page contains the following GRI indicator(s): G4-32, G4-33. 3
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2014 External Assurance

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