Engro Sustainability Report 2010

enabling sustainability.enabling excellence.

Sustainability Report 2010

Engro's commitment to sustainability is the commonthread that runs through all of our actions. This reportstitches together the various elements of our triplebottom-line approach over the course of 2010.

© 2010, Engro Corp.

All Rights Reserved. No part of this publication may be reproduced

without the prior written permission of the publisher.

contents

02 scope of the report

05 chairman's message

06 president &ceo’s message

09 core values

13 sustainability strategy

17 sustainability framework

20 profit

56 people

106 planet

122 stakeholder engagement

128 gri performance

126 awards

18 objectives andperformance 2010

Sustainability Report ‘10

scope of the report

02

This report covers the corporate social responsibility and sustainability initiativesof Engro Corporation Limited and its subsidiaries.

The period covered by the report is Engro's financial year 2010, endingDecember 31, 2010.

Engro's standards for reporting data in this report are based on the “GlobalReporting Initiative” (GRI) standards, an international set of guidelines initiatedwith the support of the United Nations Environment Programme (UNEP).

An adherence to these global standards ensures that the company retainsconsistency in the depth and scope of reporting across time periods. It will alsoensure that Engro lives up to its commitments it makes: by having to reportdata along the same parameters every year, our stakeholders will be able tomonitor our progress on the promises we make to invest in their future.

Ultimately, this report is a product of, and produced for, our engagement withour various stakeholders and partners in sustainability. The company frequentlyengaged in surveys and studies designed to ensure that we listen to what ourstakeholders have to say about their needs, before we craft a social investmentstrategy that helps them realise their potential.

In 2009, the company engaged Gallup to conduct a detailed survey where wesolicited opinions from our stakeholders, based upon which the companyformulated its social investment strategy for 2010.

Engro Corporation's report for 2010 has been assured by the United Registrarof Systems, one of the world's leading inspection, verification, testing andcertification companies.

Engro Corporation is committed to transparency. This report is a reflection ofour beliefs and principles, and provides the platform from where we will buildour reporting for the future. This report is part of a dialogue between us andall who might be interested in our social responsibility initiatives. We welcomefeedback, suggestions and queries, which can be directed to the followingperson:

Naila KassimCorporate [email protected]+9221-35296049

This report covers thecorporate social responsibilityand sustainability initiativesof Engro Corporation Limitedand its subsidiaries.

We developed our brand ofsustainability that links howwe do business, thestakeholders we interact withand the planet we live on.


chairman's message

At Engro, our foundations have beenbuilt on the pillars of integrity and ethicsand an unwavering belief in the needto create an environment that promotesexcellence, as a means of corporate,social and personal success.

This commitment to excellence buildsupon the vision of those who first setthe foundations of Engro and isconsolidated by the current leadership,who continuously strive to raise thestandards of the frontiers in business.As one of Pakistan's leadingconglomerates, Engro has enhancedits level of engagement with allstakeholders, ranging from ouremployees to our suppliers, frominvestors to shareholders andextending beyond our consumers intothe communities in which we operate.

At Engro, we have developed our ownbrand of corporate sustainability. Ourapproach has been proactive anddriven by the desire to create asymbiotic relationship between ourbusiness practices, the stakeholderswe directly impact, our country andthe planet we live on. For Engro, profitis the reward for doing what's best forthis country, as responsible employersand dutiful taxpayers.

Our commitment to excellence haswithstood the tests of numerouschallenges. I am particularly elated atour efforts in 2010, to help our nationovercome the devastation caused byfloods. The company's response tothis national tragedy was defined bycompassion for and empathy with theplight of our fellow citizens. It is aprivilege to be able to acknowledgethe Engro employees, hundreds ofwhom selflessly devoted their time,energy and resources to help thosemost in need. I am also grateful to ourpartner organisations that made thisherculean effort possible.

Engro's commitment to corporatesocial responsibility is a value thatpermeates all levels of our business,inculcated by an enabling culture thathas been conscientiously developedacross the organisation. This report isa reflection of that culture and of ouruncompromising commitment totransparency in all that we do.

Hussain DawoodChairman

Our comittment to Pakistanhas never wavered and weproudly serve the nation asa company that believes inenabling excellence.


president andceo’s message

For over 45 years, Engro has been apart of Pakistan's economiclandscape. In that time, we havesurvived the many economicchallenges and shared in some of thetriumphs that the country has beenthrough. Our commitment to Pakistan,however, has never wavered and wehave proudly served the nation as acompany that believes in achievingand enabling excellence in everyaspect of what we do.

The company's investments inagriculture, energy and chemicals aredesigned to take advantage ofPakistan's competitive strengths andcore economic needs. To ensure thatthe company is able to harness thefull potential of each of its diversebusiness lines, Engro moved to aholding company structure in 2010,creating Engro Corporation to manageits businesses and the EngroFoundation to consolidate andmanage its social investments.

More than any time in its history,Pakistan needs to create, sustain andexpand economic opportunity for itscitizens and to do so through utilisingthe country's competitive advantages.Engro is attaining excellence in thebusinesses and in serving thecommunities that host us.

Engro's brand name and reputationtoday are the result of the tireless effortsof our employees who have felt apersonal stake in our success. Withdiversified businesses, we are betterpositioned than ever before to enhance

that sense of ownership and to offerenriching, highly rewarding careers toour team members.

Our commitment to the well-being ofour team members is reflected in thecompany's stellar record on safety,including setting a national record for29.8 million safe working hours duringthe construction of our fertilizerexpansion project.

In an era of global climate change, Engrois cognizant of the need to invest inprotecting the environment. Thecompany has taken several initiativesto reduce our carbon footprint andensure that Engro is a greener anda more planet-friendly companyevery year.

In short, Engro's commitment to all itsstakeholders is strong, deep and multi-faceted. We stand by not just ourshareholders and employees but alsoour host communities and thenation that has given us theopportunity to thrive amidst themyriad challenges it faces.

This report is part of Engro'scommitment to transparency as wellas engagement with our stakeholders.It is part of the process by whichwe solicit feedback on thesuccesses (and failures) of oursustainability efforts.

Asad UmarPresident & CEO

Safety, Health &EnvironmentWe will manage andutilize resources and

operations in such a way that thesafety and health of our people, ourneighbors, our customers and ourvisitors is ensured. We believe oursafety, health and environmentalresponsibilities extend beyondprotection and enhancement of ourown facilities, and we are concernedabout the distribution, use and afteruse disposal of our products.

Quality & ContinuousImprovementWe believe that qualityand a relentless

commitment to continuousimprovement are essential to ourongoing success. To this end, we definequality as understanding the customer'sexpectations, agreeing on performanceand value, and providing products andservices that meet expectations ahundred percent of the time. Our mottois, ‘Quality in all we do’.

LeadershipWe have leaders of highintegrity, energy andenthusiasm, who have

the necessary managerial, professionaland people skills to inspire a group oran organization to set high goals andachieve them willingly. We believe thatleadership skills need to bestrengthened at all levels within ourorganization and that managerial andprofessional competence is anecessary foundation.

Ethics & IntegrityWe do care how resultsare achieved and willdemonstrate honest and

ethical behavior in all our activities.Choosing the course of highest integrityis our intent and we will establish andmaintain the highest professional andpersonal standards. A well-foundedreputation for scrupulous dealing isitself a priceless asset.

Enthusiastic Pursuitof ProfitSuccessfullydischarging our

responsibilities to our shareholders toenhance the long-term profitability andgrowth of our company provides thebest basis for our career security andmeaningful personal growth. We canbest accomplish this by consistentlymeeting the expectations of ourcustomers and providing themwith value.

External & CommunityInvolvementWe believe that societymust have industrial

organizations that it can trust. Trustand confidence are earned by ourperformance, by open and directcommunication, and by activeinvolvement in the communities wherewe live and conduct our business.


core values

Engro’s core values defineevery aspect of our way ofdoing business.

Engro is passionatelycommitted to not just attainingexcellence in business butalso serving the communitiesthat host us.

Candid & OpenCommunicationsWe valuecommunications that

are courteous, candid and open andthat enable each of us to do our jobsmore effectively by providing informationthat contributes to the quality of ourjudgment and decision making.Effective communication should alsoprovide the means for gainingunderstanding of the company's overallobjectives, its plans and the thinkingbehind them.

Enjoyment & FunWe believe thatexcitement, satisfactionand recognition are

essential elements of a healthy,creative and high-performing workenvironment. Having fun in our workshould be a normal experience foreveryone.

InnovationSuccess requires us tocontinually strive toproduce break through

ideas that result in improved solutionsand services to customers. Weencourage challenges to the statusquo and seek organizationalenvironments in which ideas aregenerated, nurtured and developed.

Individual Growth &DevelopmentWe strongly believe inthe dignity and value of

people. We must consistently treateach other with respect and strive to

create an organizational environmentin which individuals are encouragedand empowered to contribute, growand develop themselves and help todevelop each other.

Teamwork &PartnershipWe believe that high-performing teams

containing appropriate diversity canachieve what individuals alone cannot.Consciously using the diversity ofstyle, approach and skills afforded byteams is a strength, which we mustcontinue building into our organization.

Diversity &International FocusWe value differencesin gender, race,

nationality, culture, personality andstyle because diverse solutions,approaches and structures are morelikely to meet the needs of customersand achieve our business goals.



sustainabilitystrategy

12

Engro Corporation's sustainabilitystrategy is centred on our triple bottomline approach with a focus that goesbeyond Profit to encompass thePeople directly or indirectly connectedto us as well as the Planet we live on.

Our motivation for adopting the triplebottom line approach is simple: inmodern times, no company can ignorethe fact that its operations have animpact not just on the welfare of itsshareholders, but also on the lives ofthe people in its host communities,as well as the environment of theplanet. We believe that the interestsof our broader stakeholder community,as well as the environment, are asimportant as the interests of ourshareholders.

In crafting our core sustainabilitystrategy, Engro Corporation seeks toensure a seamless integration betweeninvestments in our business, ourstakeholders and the planet. Whencrafting business strategy, for instance,Engro Corporation sees itself first andforemost as a corporate citizen ofPakistan that can best serve the nationby taking advantage of the country'scompetitive strengths as well asaddressing its weakness.

By ensuring that our business modelis geared towards Pakistan'seconomic needs, Engro createsopportunity for a far wider communitythan our direct suppliers andcustomers: we help fulfil the economicpromise of the nation as a whole.

Our fertilizer, foods, chemical andcommodity trading business helpimprove the productivity of Pakistan'sagricultural sector while our investmentsin energy, chemicals and industrialautomation fulfil core economic needsof the country. Going forward, we planto diversify even further and enterbusinesses where we feel the countryhas the greatest need or provides thegreatest opportunity.

As a corporate entity, however, weare mindful that our success reliesvery heavily on our ability to attract,recruit, and retain the highest qualityof human capital. This is why, as partof our commitment to People, the firstgroup of stakeholders we haveidentified are our own employees.Simply put, without them, Engro'sbrand name would not be what it istoday.

As Engro grows beyond its historicalpresence in fertilizers and into a muchwider array of businesses that includefood, chemicals, energy and industrialautomation, there has never been agreater need for Engro to ensure thatits human resources policies aredesigned to provide our employeesthe ability to have highly rewardingcareers at the firm. The diversity of ourbusinesses ensures that we are ableto redeploy talent far more productivelythan ever before.

The second set of stakeholders wehave identified are the communitiesthat host our businesses. We aremindful of the fact that our business

Our fertilizer, foods,chemical and commoditytrading business helpimprove the productivity ofPakistan's agriculturalsector.

Engro seeks to ensure aseamless integrationbetween investments in ourbusiness, our stakeholdersand the planet.


and our negligence may be equallydamaging to them.

We view it as our responsibility to caterto their needs and be mindful of theirinterests, and the company hascommitted itself to creatingsustainable, long term partnershipswith our host communities. We havestepped in to provide access tohealthcare, education and even basicinfrastructure to ensure that ourstakeholders can live better, healthierand more productive lives. The safetyof both our employees amdcontractors is paramount during anyoperational process.

Even as the group's businesses werereorganised under a holding companystructure in 2010, we created theEngro Foundation, a non-profit entitydesigned to manage and sustain ourpartnership with our stakeholders, aswell as the several government andnon-government organisations withwhom we collaborate in order to makeinvestments in the needs of ourhost communities.

Engro takes particular care to ensurethat we engage our stakeholders in

the social investment projects that weundertake. Our communityparticipation model is designed toensure that our host communities feelthat they have a stake in theinvestments we make on their behalf.

To this end, Engro is proud to haveundertaken partnerships with severalleading non-profit organisations, aswell as government agencies. Wehave worked alongside the Punjaband Sindh governments, the PakistanPoverty Alleviation Fund, the SindhRural Support Organisation, HANDS,and USAID among others.

But being mindful of the interests ofour stakeholders - in addition to ourfinancial investors - is not enough. Asthe world's climate begins to change,oftentimes rapidly and dramatically, nocompany can afford any longer toignore the impact it has on theenvironment. This is especially true ofcompanies like Engro, whichhave significant industrialmanufacturing facilities.

Engro Corporation has committeditself to some of the most stringent ofstandards when it comes to

environmental safety. In addition totaking responsibility for ourenvironmental footprint, we have foundthat, quite often, our commitment tothe planet results in cost savings andimproves our ability to track andmeasure risks to our businesses.

We are also committed to investingin mitigating the effects of bothmanmade and natural disasters, thelatter of which is made more likely bythe incidence of globalclimate change.

To summarise, Engro iscommitted to taking a widerview of what constitutessuccess and how wechoose to define it forourselves. We arecommitted to deliveringprofits to our shareholders,but we will do so whileensuring that we are ableto invest in the needs ofour broader stakeholdercommunity as well as theplanet we live on.


The following framework outlines Engrosapproach towards sustainability.

sustainabilityframework

The Corporate Board (1) has a topdown view as the representative ofshare-holders' interest, and works withthe Corporate CEO & President (2) indeciding the overall strategic visionand direction of the company.

The Corporate Center (3) provides theCorporate Board and CEO & Presidentwith a shared set of functionalstrengths. The Corporate Centreenables a 'portfolio-oriented'management of independentbusinesses, as well as integrating themanagement of businesses, wheremost skills can be shared acrosssimilar business systems. Thiscentralization of skills allowsadvantages, such as improvedmanagement and decision making,assessment of expansions, andinvestments as well as maintainingoperating flexibility for companies.

The Board is assisted by a number ofBoard Committees (4) in makingdecisions related to ExecutiveCompensation & Remuneration,Investment and Oversight. A numberof Functional Committees (10) act atthe operational level in an advisorycapacity to the Corporate CEO &

President, providing recommendationsrelated to business and employeematters. Additional details of thesecommittees can be found on page39.

The Engro Foundation (6), also detailedon page 39, serves as a singleplatform for community engagementactivities and social investments ofEngro subsidiaries, which pool theirfinancial and managerial resourcesunder the Foundation to create largescale social impact.

Each Engro business is governed byan independent Subsidiary Board (7),led by a Subsidiary CEO (8) who isresponsible for translating the directionset by the Board into results.

The company has put a number ofMonitoring & Reporting Mechanismsin place at every level of theorganization, including EngroFoundation, to provide a robustprocess of planning and measuringresults. These mechanisms providea bottom-up and top-down approachto review, and measure, theachievement of objectives and todecide future action.

The operations of each function aregoverned by an Internal Process (9),which focus on the areas that areintegral for business continuity and fordelivery performance based growth.A number of Operational Committees(10) provide recommendations onbusiness areas such as health &safety, management, businessinvestment, budgetary matters,employee compensation anddevelopment.

The senior management of theCompany considers feedback to bea significant contributor for the reviewof objectives and for the developmentof future plans and strategies. Thecompany has put in place an ExternalProcess (11) of gathering informationthrough various external functionsincluding the Foundation, CorporateCommunications and Finance, whichensure a flow of information both inand out of the company

16

engro’s approachto sustainability

corp center (3)

corp board (1)

board committees (4)

auditinvestment compensation

corp ceo & president (2)

audit

human resources

public affairs

finance

legal

social investments

engro foundation (6)

board of trustees

managment committee (10) coed (10)corp hse (10)

employeesfinancial communityshareholdersmediagovernmentcustomerssupplierscommunity / society

stakeholders (11)

health, safety & environmentsocial investmentgovernment relationsstrategy & planningsales & marketingbuisness performancefinanceaudit / compliancelegalcorporate communicationsmanufacturing / supply chain

our internal processesgoverning sustainability (9)

ceos of each company (8)

board committees (4)

audit compensation

subsidiaries bod (7)

business investments

excom (5)corp function (5)

*Connecting lines indicate flow of information

objectives andperformance 2010


Engro is committed totaking a wider view of whatconstitutes success andhow we choose to defineit for ourselves.

Objectives Performance

Implement Central Safety System after obtaining Boardapproval

Achieve Consolidated Profit after tax as per corporate plan

Complete viability study for Thar mining and launch detailedfeasibility study for mining and power

Deliver Engro Fertilizers' expansion project on time andwithin budget

Pursue fertilizer opportunities in N Africa

Launch public debt product

Implement rice project

Continue expansion of domestic foods portfolio and beginimplementation of overseas opportunity

Demonstrate strategic viability of outsourcing model inAvanceon

Transition of executives and top talent to Engro Corp

Implement and roll out HR policies based on guidingprinciples approved by BCC

Position Engro Foundation as key social spend vehicle

Leverage contribution budget through PPAF and executionthrough partner organizations

Obtained Board Approval for making all businesses DuPontSystem aligned, as well as deciding that all businessesto achieve a 3.0 rating.

PAT Achievement for 2010 is Rs 6.79 billion

Block 2 DFS completed in time, viability assessment stillincomplete on account of delays by GoS and GoP infinalizing infrastructure related issues

Production achieved by end December

Feasibility conducted, other options being considered

Our Public Debt Product, Engro Rupiya Certificate waslaunched and generated Rs. 4 billion with Greenshoeoption exercised.

Rice plant start up initiated in November

Domestic foods portfolio expanded. Board approval wasobtained for the negotiation for acquisition of Al Safa Halal.

Value addition based on outsourcing model established

All executives and top talent converted to Engro Corp

Salary survey conducted with specific policy instituted forexecutives and top talent. Institutional structure ofEngro Corp in alignment with subsidiaries to ensure onefirm culture across all companies

Organization in place, active involvement in implementingcompany's social programs (basic services, education,health, livelihood) and flood relief / rehab activities (disastermanagement)

Total funding from external sources is Rs 140 millionincluding USAID funding of USD 800,000. Multi-year MoUsigned with PPAF (valued at Rs 320 million)

Profit

As a profitable company, our managementstructure has evolved to create a moretransparent organization.



our investmentsin businesses

For over 40 years, Engro has beenan integral part of Pakistan's agriculturallandscape. As the business has grown,we have continued to diversify ourbusiness lines to make ourorganisation economically sustainable.While Engro continues to have asignificant presence in the fertiliserbusiness, Engro is now a leading firmin Pakistan's chemical, energy andindustrial automation sectors.

Even within the agribusiness-relatedindustries, Engro has continued todiversify its holdings. Engro has enteredthe consumer foods business as wellas trading agricultural commodities.

Our management teams take a longterm view of our financial success,which we view as intrinsically linkedto the growth prospects of Pakistan.In growing our own bottom line, wehelp expand the horizon of economicopportunity for the nation as a whole.

Yet even as we grow our businesses,we recognise that the sustainability ofour success depends on a stronggovernance structure. To ensure thatwe hold ourselves to the higheststandards of corporate governance,Engro has adopted a two-tieredapproach: in addition to buildinginstitutional capabilities to implementand monitor our governance policies,Engro seeks to create a culture whereemployees hold themselves to highstandards and report any activity thatthey feel does not conform to our values.

22

Our management teamstake a long term view of ourfinancial success, which weview as intrinsically linkedto the growth prospectsof Pakistan.


our economicinvestment strategy

The progress of Engro as a company,and its diversification into variousbusinesses has been essentialintertwined with the opportunities andsuccesses of Pakistan itself. Thecompany's investments in agriculture,energy and chemicals were designedto take advantage of Pakistan'scompetitive strengths and coreeconomic needs. We identify what thecountry needs and what it has to offerand then create business strategiesin order to capitalise on the opportunitybefore us. In pursuing profit for itself,the firm also creates economicopportunity for countless others andhelps put the country on a pathtowards creating, sustaining andgrowing a middle class.

Agriculture is at the heart of Pakistan'seconomy and is the country's keycompetitive advantage. Over 45% ofthe country's workforce is engaged inagriculture. It is no accident that,despite minimal levels of investment,the country still ranks as a top tenproducer in nearly every majoragricultural commodity in the world.

Engro has been serving Pakistan'sfarmers for the last 40 years throughits fertilizer business. By expandingour fertilizer production, capacity, Engrois reducing Pakistan's need for imports,helping the country conserve its vitalforeign exchange reserves.

As a natural corollary to the fertilizerbusiness, Engro has expanded itspresence in Pakistan's agribusinesssector by entering the food business.

By identifying the key strengths of themarkets we operate in, Engro hasbeen able to serve both our suppliersand our customers well.

For example, Engro Foods and EngroEximp are engaged in helping dairyand rice farmers improve the qualityand quantity of their product, directlyhelping raise rural incomes. In addition,Engro Foods Supply Chain is engagedin creating a domestic supply chainthat disintermediates some of the grossinefficiencies in the agricultural sector,cutting out several layers of middlemenand ensuring better prices for suupliers.

Engro is also committed to helpingPakistan fully develop its own domesticresources. Engro Powergen has set upa power production facility at Qadirpur,utilizing as fuel gas that was previouslybeing wasted, creating energy with areduced carbon footprint andcontributing towards a solution to thenation's chronic energy crisis.

The company is also willing to go intohitherto unexplored sectors. The TharDesert in Sindh, for example, has oneof the largest coal reserves in theworld, which were first discovered inthe early 1990s and have not beendeveloped for lack of a risk appetiteamongst investors. Engro, however,is willing to take on the challenge.Through its joint venture with the Sindhgovernment, Engro Powergen is alsolooking to develop the vast coalreserves at Thar, in order to increasethe availability of domestic energysources and reduce the need for

expensive fuel imports.

Our role in Pakistan's economicdevelopment is further highlighted bythe significant advisory role that Engro'smanagement is asked to engage forthe reform of economic policy inPakistan, ranging from meeting thecountry's fertilizer needs to thedevelopment of alternate energysolutions for the long term.

Engro executives are part of an effortby leading businesses of Pakistan thataim to help advise the government onshaping pro-growth economic policies.We also advise the government onthe impact of their fiscal and monetarypolicy decisions to the businessclimate of the country.

In short, we find opportunity in fulfillingPakistan's economic needs, givingback not just through business strategybut also through philanthropy.

In persuing profit forourselves, we also createeconomic opportunity forcountless others.


our businessesat a glance

Engro Corporation Limited is a holdingcompany, created following theconversion of Engro Chemical PakistanLimited on January 1, 2010. EngroCorp is one of Pakistan's largestconglomerates with the company'sbusiness portfolio spanning acrosssectors including chemical fertilizers,PVC resin, a bulk liquid chemicalterminal, industrial automation, foods,power generation and commodity trade.

Engro Fertilizers Limited, a wholly ownedEngro Corporation subsidiary, is oneof the leading fertilizer manufacturingand marketing companies in thecountry. It is primarily engaged in themanufacturing and marketing of ureaand NPK fertilizers. As an example ofthe synergies between Engro'sbusiness lines, Engro Eximp importsphosphate based fertilizers, which aredistributed and marketed through EngroFertilizer’s network as an extension ofEngro's overall fertilizer portfolio.

The business offers a wide variety offertilizer brands, which include someof the most trusted brand names byPakistani farmers. These include EngroZarowar, a high-phosphate fertilizerdeveloped for alkaline soils. EngroZarkhez is a high-end blended fertilizerproduct that offers a unique balanceof nutrients for a wide variety of crops.Zingro is an imported zinc micro nutrient,meant to overcome zinc deficiency ina diverse range of crops.

Engro Foods Limited is a wholly ownedsubsidiary engaged in themanufacture, processing andmarketing of dairy products, ice creamand fruit juices. The business ownstwo milk processing plants in Sukkurand Sahiwal, operates a dairy farm inNara and has completed constructionof a rice processing facility in Muridke.

As an example of Engro's pursuit ofexcellence, the business hasestablished several brands that have

already become household names inPakistan such as Olpers (milk), Omore(ice cream), Owsum (flavoured milk),Olpers Lite (low fat milk), Tarang (teawhitener) and Olfrute (fruit juice).

The business has also acquired Al SafaHalal, a meat processing companybased in the Canada, and plans toenter the North American market forhalal meat with its own brand.

Engro Powergen owns and operatesEngro Powergen Qadirpur Limited, a220 megawatt power plant and thegroup's first initiative in the power sectorof Pakistan, which is 10% directlyowned by the holding company and85% owned by Engro Powergen. Theremainder is owned by the InternationalFinance Corporation (IFC), a subsidiaryof the World Bank.

In 2010, Engro Powergen's jointventure with the Sindh government,the Sindh Engro Coal Mining Company

Corporate Performance (Rs millions)

2008

2009

2010

Revenue

40,973

58,152

79,976

Net income

4,126

3,807

6,790

Taxes paid

964

1,258

2,378

Dividendsdeclared

1,278

1,788

1,965

Salesgrowth

20%

42%

38%

No. ofshareholders

13,163

13,980

13,939

Limited, completed a detailed feasibilitystudy (DFS) analysing the technical,social and environmental viability ofthe Thar coal mining project.

Engro Polymer & Chemicals Limitedis a 56% owned subsidiary of the groupand the only manufacturer of polyvinylchloride (PVC) in the country, in additionto manufacturing and marketing causticsoda. The business's vinyl chloridemonomer (VCM) plant beganproduction in the first quarter of 2010and was able to achieve commercialproduction capacity by September2010, making the entire integratedfacility fully operational. The firmproduces 150,000 tonnes of PVC ayear and markets its products underthe name of “SABZ”.

Engro Eximp Limited is the group'scommodity trading business that dealsprimarily in the import and trading ofphosphate-based fertilizers for EngroFertilizers Limited such as DAP, MAP,MOP and SOP, and also imports micro-nutrients like Zinc Sulphate, which itsupplies as raw materials to EngroFertilizer's Zarkhez plant formanufacturing blended fertilizers.

In addition, Eximp also manages theprocurement, processing and exportof rice to markets in the Middle Eastand the European Union. The businesshas built relationships of trust with itsclients and is also in the process oflaunching its own brand of rice inpartnership with Engro Foods Limited.Over the past five years, Engro Eximphas become the single largest importerof phosphates and potash fertilizersin Pakistan.

Engro Vopak Terminal Limited is a jointventure with Royal Vopak of theNetherlands, Engro owns 50% ofEngro Vopak Terminal Limited, abusiness engaged in the handling andstorage of chemicals and liquefied

petroleum gas (LPG). In November2010, the business completed 13years of safe operations without asingle employee losing a day's worthof work due to injury.

The business launched Pakistan's firstcryogenic import facility for ethylene,in line with the group's overall mottoof pursuing and enabling excellence.

Avanceon Limited is a wholly ownedsubsidiary of the group that engagesin automation and control engineeringservices. The business operates aUAE-based subsidiary out of the JebelAli Free Zone which, in turn, has a70% stake in a US-based subsidiary.

Subsidiaries Performance (Rs millions)

Engro Fertilizers

Engro Foods

Engro Powergen

Engro Polymer

Engro Eximp

Engro Vopak

Avanceon

Revenue

19,018

21,050

5,720

14,618

17,720

2,303

1,828

Net income

3,730

177

1,100

(770)

1,732

1,109

(195)

Engro’s investments in agriculture, energyand chemicals were designed to takeadvantage of Pakistan’s economic needs.

engro at a glance

Investment

Total Employees

3,202

Total Business Investmentto date in USD Million

2,160

Employees

40 70

200

50

400

1400

639 750

1152

65

152

193

251

Daharki Karachi Sukkur Qadirpur Muridke & Lahore Sahiwal Others

PeopleInvestmentReliefLivelihoodModel VillageDisaster ManagementHealthEducationInfrastructureEnvironment

Thatta

Sukkur

Khairpur

Layyah

Muzzafargarh

Larkana

Daharki

Sahiwal

Ehsanpur

Qadirpur

Muridke

Lahore

Sheikupura

Rajnapur

Jang

Karachi

Swat

Abbottabad

Peshawar

Baluchistan


our corporate strategy& performance

28

Engro, despite being in a period oftransition, was able to achieve nearlyall of its strategic and financial goals.Engro Corporation's consolidated netincome for the fiscal year that endedDecember 31, 2010 was Rs 6.8billion, which is 19% more than thetarget set out by the management atthe beginning of the year.

The year was a landmark for EngroFertilizers, which successfullycompleted the world largest single-train ammonia urea manufacturingfacility, an achievement that representsa $1.1 billion investment, the singlelargest private sector investment inthe Pakistani industrial sector.

Engro Fertilizers' strategy of capturinga larger share of the fertilizer marketin Pakistan has been stymied by thegovernment's restricted gas suppliesto several large industries.Nevertheless, Engro Fertilizers willcontinue, through a more efficient use

of resources, to maximise domesticproduction while continuing to fulfil thegap between the agricultural sector'sdemand and the domestic industry'sproduction capacity through thejudicious use of fertilizer imports.

Having successfully expanded itsdomestic line, Engro Fertilizers hasbeen actively pursuing the prospectsof generating production capacityabroad. The company has conductedfeasibility studies on options in NorthAfrica, given the region's abundantdeposits of phosphorous. The businessis continuing its due diligence of otherpossible options as well and will finalizean investment decision after havingconsidered all multiple dimensions.

Engro Powergen achieved its goal ofbeginning power production at its 220-megawatt power production facilityin Qadirpur.

In 2010, Engro Corporationwitnessed the successfulcompletion of theworld’s largest singletrain ammonia-ureamanufacturing facility.


With rising oil prices and depleting gasreserves, the need for cheaper energyresources has become imperative.Engro Powergen has been exploringthe possibility of coal-based powerthat utilises the vast reserves in Tharin order to maximise the use ofdomestic resources and reduce thecountry's dependency on foreignsources of fuel. The business hassuccessfully completed a detailedfeasibility study (DFS) that assessedthe technical, social and environmentalviability of the Thar Coal MiningProject, a joint venture with theSindh Government.

Engro Foods achieved overallprofitability in 2010, ahead of schedule,and continues to expand its cold-chainacross the country. The key to successfor a food business in Pakistan is todisintermediate the inefficiencies in thecountry's agrarian supply chain, a taskfor which Engro Foods has expendedconsiderable time, effort and money,an investment that has now begun topay dividends.

Engro Foods is now moving to thenext stage, by becoming the firstPakistani consumer goods businessto move up the global value chain andacquire a foreign brand. With the

successful acquisition of Al Safa Halal,a Canada-based halal meatprocessing company, Engro Foods ispoised to become a significant playerin the halal food business.

In keeping with the company's strategyof developing endogenous productcapacity in the products it creates, Engrohas successfully completed and beganoperations of its own rice processingfacility in Muridke, located at the heartof Punjab's rice-growing region. Theproject, owned by Engro Foods SupplyChain and operated for Engro Eximp,was completed on time and cost 14%less than what was originally budgeted.With the new plant coming online, thecompany will have the ability to marketits rice product to customers in Europeand the Middle East.

The group's industrial automationbusiness, Avanceon, continued to facetough competitive environment. Thecompany has tried to overcome thechallenge of slow growth in theeconomic sectors it serves by exploringthe option of horizontal expansion intooutsourcing.

In order to continue financing its rapidexpansion across several businesslines, the company has been raising

capital in numbers that the ordinarybanking sector of the country has, attimes, been unable to keep pace with.Rather than accepting exogenouslimitations on its growth potential, Engrohas crafted its own innovative solutionand tapped a hitherto unconventionalsource of capital: a retail bond - EngroRupiya - which was launched in late2010 and was able to raise Rs 4 billionfrom individual and institutional investors.

The success of the bond offering is atestament to the trust that the publichas in Engro's brand and the faith theyhave in the continued commitment ofthe company to the pursuit ofexcellence. That the company wasable to complete the offering withminimal assistance of financialintermediaries is a testament to Engro'scontinued ability to surmount theunique challenges it faces in itsmacroeconomic environment.

Engro foods is now movingto the next stage bybecoming the first Pakistaniconsumer goods businessto acquire a foreign brand.


Engro's objectives for 2011 are acontinuation of our overall strategy togrow our business in sectors wherewe have identified opportunities andneeds. This year will also see Engroexpanding out of its Pakistani base ina significant way, entering globalmarkets, on the path to geographicallydiversifying our revenue streams.

Despite a difficult macroeconomicenvironment, Engro Corporationexpects 2011 to be a year ofcontinued growth and expansion. Themanagement expects the group'sconsolidated revenues and netincome to continue to rise for the yearending December 31, 2011.

The success of Engro Rupiya, coupledwith the profitability of our corebusiness lines, means that the groupcan seriously explore the possibilityof publicly listing three of itssubsidiaries: Engro Fertilizers, EngroFoods and Engro Powergen. Offeringthree high-performing businesses tothe public equity markets will allowinvestors to participate in the growthopportunities that we foresee in someof the most exciting segments ofPakistan's economy.

Engro Fertilizers will begin commercialproduction on its new plant, thoughit will be unable to function at fullcapacity due to the government'sdecision to curtail gas supply to severallarge industries, owing to a chronicshortage of gas in the country. Inaddition, Engro Fertilizers will continueto explore a strategy to expand its

production activities internationally.

Engro Foods will seek to complete allregulatory approvals in Pakistan aswell as Canada to complete theacquisition of Al Safa Halal. Thebusiness is in the process ofdeveloping a strategy for expanding its operations into North America.Closer to home, Engro Foods will seekto continue its domestic businessexpansion and continue improvementson its supply chain.

Engro Eximp will expand its riceprocessing capabilities in addition toexploring the prospects of a value-added rice product, increasing itsrevenues by moving up the value chain.

Engro Vopak will explore the possibilityof setting up an LNG import terminal.The government of Pakistan hasrecently announced that it plans tocreate an offshore LNG import terminalin order to mitigate the chronic gasshortage due to the depletion ofdomestic natural gas reserves. EngroVopak will liaise with the IFC to bringthem on as an equity partner in theventure in addition to completing thelegal and financial due diligence.

In 2011, Engro Powergen aims tosecure investors for its power projectsby the end of the fourth quarter.

Engro Polymer will continue its planto remove the bottlenecks in its supplychain and production process inaddition to expanding its overallproduction capacity.

our corporateobjectives for 2011

Despite a difficult macro-economic environment.Engro corp expects 2011to be a year of continuedgrowth and expansion.


As part of the company's commitmentto the ethical pursuit of profit, as wellas in keeping with Engro's consistentdrive towards excellence, the grouphas sought to institutionalise some ofthe highest standards of corporategovernance in Pakistan, in line with theworld's most responsible companies.

Our governance strategy relies oncreating mechanisms designed toensure that the firm lives up to itscommitments and responsibilities toeveryone with whom the firm interacts,whether it be our customers, suppliers,employees, host communities or thegovernment.

When it comes to governance, ourfirst objective is to ensure that weremain compliant with all laws andregulations that govern our activities.All of our governance policies -whether they relate to humanresources, the environment, or ourfinancial reporting - first and foremostensure that they are in line with thelaw of the land.

Yet, in keeping with Engro's traditionof enabling excellence, the companyaims to hold itself to a higher standardthan merely what is legally permissible.

The firm's policies with respect toprotecting our shareholders go beyondour obligations to the law. Being apublicly listed company, we have aresponsibility to ensure that ourmanagement and employees are nottaking unfair advantage of theirposition. Engro has instituted strictmeasures to inhibit and discourageinsider trading, monitoring the activityof all concerned employees carefullyto ensure compliance with both thelaw and Engro's own policies.

We also monitor and restrict directemployment in other organisations, toensure that their commitment to Engrois not compromised. Board approvalis required for directorship ofcompanies where there could be adirect conflict of interest. Ouremployees are required to complywith our policy on receiving gifts toensure that they cannot fall victim torent-seeking behaviour fromprospective suppliers and contractors.

Yet even as we monitor the behaviourof our employees and suppliers, wealso make it a point to ensure thatEngro treats them fairly. The companymakes it a point to pay its supplierson time and has a specific policy to

ensure that payments are made andapproved without inordinate delays.We believe our commitment to livingup to our financial obligations in atimely manner sets us apart from manyof our competitors.

Engro is also committed to fairnesstowards our customers, through acommitment to a competitivemarketplace that benefits consumers.In addition to complying with theCompetition Act of 2010, the firm hasits own, more extensive, Anti-Restrictive Trade Practises, designedto ensure that our employees do notengage in activities that would conflictwith Engro's commitment to a freeand fair marketplace.

In essence, Engro's governancestrategy is designed to ensure thatthe company lives up to its core valuesand principles, institutionalising Engro'scommitment to enabling excellencein everything we do.

our governancestrategy

Our governance strategycreates mechanismsdesigned to ensure that thefirm lives upto its comittmentsand responsibilites.


Engro Corporation's governanceapproach is two-pronged: we haveput in place a system of audits andreporting designed to catch anyirregularities in time, while also tryingto inculcate a culture of voluntaryreporting so that incidences ofirregularities are reduced. Engrobelieves that this continued emphasison transparency and ethical practiceshas played a significant role indeveloping our employees asresponsible professionals and citizensfor the benefit of Pakistan.

Board of DirectorsEngro's institionalization of ourgovernance policies begins with ourboard of directors. Engro’s Board ofDirectors includes eight non-executivedirectors and five executive directors,who share the collective responsibilityof ensuring that the affairs of theorganization are managed competentlyand with integrity. The Board has beenreconstituted as of April 2009,supplementing the number of non-executive directors. The board isassisted by several comittees that areresponsibile for monitoring andensuring complance with all of thecountries laws and the companiespolicies.

Our board committees are made upof independent, non-executivedirectors who are supported in theirefforts by reporting mechanisms thatare designed to ensure that anyproblems are caught early and dealtwith effectively.

Board Audit CommitteeThe audit committee meets at leastonce every quarter to review andendorse the company's financialaccounts before they are sent to thefull board for approval. The CFO isrequired to attend the meetings uponthe invitation of the committee'smembers and presents the company'saccounts. The audit committee is oneof the most critical of governing bodiesof the corporation, ensuring theadequacy of the financial reportingprocess, maintaining the integrity ofinternal audits and control systems,as well monitoring compliance withSECP regulations. In addition, thecommittee assesses the effectivenessof the risk management strategies ofboth the holding company as well asall of the group's subsidiaries.

Board Investment CommitteeThe investment committee at the boardof director's level is charged withmanaging the group's capital andfinancial resources, as well asreviewing investment decisions,transactions and their performance.While the committee meets at leastthree times a year, it can meet morefrequently as and when the need mayarise. The committee also advises onthe company's overall strategy andreports regularly to the full board ofdirectors.

Board Compensation CommitteeThe compensation committee meetsonce every quarter to monitor, assessand evaluate the group's policies withregard to human resources, includingcompensation, organisationaldevelopment, and employee training.

The BCC is also responsible for theselection of members of eachsubsidiary board. In addition, thecommittee is charged with decidingon matters of remuneration for allexecutives and CEOs.

Executive CommitteeThe EXCOM is headed by thePresident and CEO of EngroCorporation and comprises the group'sheads of human resources and financeas well as the CEOs of all of thegroup's subsidiaries. EXCOM servesin an advisory capacity to the Presidentand meets to discuss performanceappraisals. As the primarymanagement committee, EXCOM hasjurisdiction over a myriad of policyareas, including business developmentstrategies, human resource policies,corporate ethics & compliance, andcorporate social responsibility initiatives.There is a also special sub-committeeon health & safety, chaired by theCEO.

COEDCOED is responsible for the review ofcompensation, organization andemployee development matters of allpeople excluding directors andsenior executives.

Engro Foundation TrusteesEngro subsidiaries and affiliates pooltheir resources through EngroFoundation, which was created toensure maximum effectiveness for thegroup's social investment activities. Thefoundation's activities are governed bya board of trustees, which includes thePresident of the company asits chairman.

our governancestructure

36

Our transparency andethical practices haveplayed a significant role indeveloping employees asresponsible citizens.


our governanceperformance

For 2010, the company's primaryobjective with regard to governancerevolved around ensuring that themanagement teams were effectivelydistributed and deployed between theholding company and its subsidiaries.This objective was achieved with thesuccessful completion of thetransition process.

In addition, the company aimed tocontinue expanding its whistleblowerprogram, an endeavour in which Engrohas had a considerable degreeof success.

SpeakOut PolicyWhen it comes to encouraging highstandards, Engro ensures adherenceto the codes of ethics and governancelaid out in the company's guidelines.There is an active policy thatencourages employees to speak outwhen they see violations of the codeof corporate governance or ethics.

Engro is one of the very few companiesin Pakistan that has a whistleblowerprotection policy. It is part of ourcommitment to our people that wewant to create the environment wherepeople do not feel that their job wouldbe at stake if they report negativeinformation.

The whistleblower policy ensures thatemployees are able to lodge complaintsthrough e-mail as well as through a toll-free telephone number. Each complaintis taken up by the Board AuditCommittee and thoroughly investigated.

While Engro is devoted to the idea ofachieving excellence in everything itdoes. To this end, we are making publicthe data collected by our reportingmechanisms, so that all of ourstakeholders can be aware of our efforts- and the degree of success we havehad - in achieving the highest standardsof corporate ethics and governance.

The data in the table below has beenmade available to its stakeholders, inorder to ensure a high level oftransparency, which we believe willinculcate a culture of responsibility andethical behaviour across the entireorganisation.

Of these irregularities, thefts are anexogenous factor - dependent uponthe law and order situation in thecountry-over which the company hasno control. The reports here simplyhighlight that employees are diligentin reporting any losses of companyproperty.

The increase in whistleblower-linkedinvestigations is an example of the

2008

2009

2010

Fraud

18

15

6

Ethics/legalviolations

10

45

68

Theft/loss

91

137

133

Violations ofprescribedprocedures

73

103

82

Total

192

300

289

Whistleblower &Other Investigations

4

11

26

Governance Data (number of incidents)

Irregularities

The company encouragesemployees to speakoutwhen they see violationsof the code of corporategovernance or ethics.

38

success of the SpeakOut campaign,which created awareness within thefirm's employees of a policy meant toprotect them and the firm. Of the casesreported, many were found to lack merit.

Audit report resultsThe core of Engro's governancestructure revolves around the thoroughand frequent audits of every department,where every financial transaction isscrutinised, and system complianceaudiets are conducted. Each

department is regularly audited andissued audit reports. Based on thedegree of compliance with thecompany's policies, the departments'reports are rated, with a total of fourpossible ratings: (in descending orderof acceptability) Good, Satisfactory,Management Attention Required (MAR)and Unsatisfactory.

As is evident from the data in the tablesbelow, in 2010 Engro was successfullyable to improve its governance to the

point where none of the company'sbusiness lines got an “unacceptable”rating on any of their audit reports,despite the fact that the company keptincreasing the number of internal auditsthat it conducted.

In addition, the company has also beenable to significantly reduce the incidenceof MAR reports, which suggests thatmore and more of our businesses areconducting themselves in compliancewith the company's policies.


Good Satisfactory

ManagementAttentionRequired Unacceptable

2010 Audit Report Ratings

35

36

19

20

20

5

135

79.4%

6

6

15

6

0

0

33

19.4%

0

0

0

0

0

0

0

0%

Engro Fertilizers

Engro Foods

Avanceon

Engro Polymer

Engro Powergen

Engro Eximp

Total

Percentage

2

0

0

0

0

0

2

1.2%

The company hasestablished an enterpriserisk management system toanticipate, analyze andmitigate risks.

0%

10%

20%

30%

40%

50%

60%

70%

80%

Good Satisfactory ManagementAttention Required

Unacceptable

Historical Audit Report Ratings Summary

2008

2009

2010

Total reports

130

152

170

3.1 2.61.2

59.2

78.3 79.4

36.2

17.819.4

1.5 1.3 0.0


our governanceobjectives for 2011

For the financial year 2011, EngroCorporation has two primary goalswith respect to its governance structure.

Engro has established an EnterpriseRisk Management (ERM) systemthroughout the company, its subsidiariesand joint ventures. This system willensure that the company has anenhanced capacity to anticipate, analyseand mitigate risks. In addition, thecompany will be better able to controlits costs, improve its efficiency anddeliver greater value to its shareholders.

The second initiative is to ensure thatall departments, subsidiaries and jointventures attain a level of efficiency intheir corporate governance wherebyno more than 10% of their audit reportsreceive an MAR rating or below.

The internal audit department willcontinue its expansion in order toimplement both of these initiatives. Theaudit committee of the board ofdirectors are cognisant of the need toimprove the Governance Risk Control(GRC) function of the company andwill take steps to ensure an increasedfootprint for both the GRC and theinternal auditors.

The core of Engro’sgovernance structurerevolves around thethorough and frequentaudits of every department.

42

Engro Excellence AwardsEngro Corp hosted its first EngroExcellence Awards in January 2011.The Engro Excellence Awards aim atgiving Pakistan a platform to presentitself as a talented and knowledgeablenation to the world.

The First Engro Excellence Awardsrecognized contributions of three worthyrecipients, from the fields of Social &Humanitarian Services, Literature andPhysical & Applied Sciences. Nomineeswere selected by a jury of five ofPakistan's most esteemed andrespected personalities, considered assymbols of excellence and beacons ofhope in their relevant fields. Dr. IshratHussain was the Chairman of the jury,

assisted by Dr. Iqbal Chowdhry, Dr.Nafis Sadik, Prof. Anita Ghulam Ali andMr. Iftikhar Arif.

Winners were awarded on the basis ofnominations from educated civiliansacross Pakistan. The winners wereAbdul Sattar Edhi for Social &Humanitarian Services, Mushtaq AhmedYusufi for Literature and Dr. Atta urRehman for Physical & AppliedSciences. Each winner received PKR5 million in recognition of theircontributions towards their respectivefields. The Engro Excellence Awardswill be an annual event, awarding a hostof prestigious civilians across Pakistan.

Role of Engro Companies inPublic Policy AffairsOur efforts to give the workplace a moregender-friendly environment has resultedin the 'Protection against Harassmentof Women at Workplace' Bill, 2010 thatwas signed into law this year.

Engro Foods was heavily involved inrevision of the Pure Food Laws to bringthem up to date with internationalfood laws

Engro Polymer's Green Pakistan drivehas been joined by various government

agencies and NGOs in a bid to be apart of a bigger afforestation project.The company plans on planting 100acres every year with an aim to reach16,000 hectares to restore forests andassist in the preservation of biodiversity.

Engro Vopak is a member of thePetroleum institute of Pakistan andactively provides inputs for PakistanEnergy Policy. Engro Vopak is alsoproviding inputs to finalize the LNGPolicy of Pakistan.

Making Procurement TransparentEngro companies make certain thattheir procurement mechanisms aretransparent. Milk is collected fromfarmers and payment is made eitherdirectly through cash or as credit totheir account. Engro Foods makessuch payments to small and big dairyfarmers on time and thus building andsupporting society through them. Thepayment system is being automatedwith a live recording of all thetransactions.

Every farmer will have a Smart Cardwhich they can swipe and their dailytransactions will be recorded. ThisSmart Card can then be even be usedfor bank transactions. Engro Foods isusing United Bank Limited's OmniServices for direct payment to farmers.

Agricultural raw materials are sourcedfrom many thousands of small farmers.For agricultural products, Engro Eximpensures that paddy is procured througha transparent mechanism which alsoallows for a price premium for betterquality paddy. For this reason, EngroEximp has partnered with a leadingcommercial bank to improve creditavailability and provide low interestloans to farmers so as to reduce thestranglehold and dependence that theaarthi (middleman) system has on suchfarmers through high interest loans.Along with paddy procurement, EngroEximp also buys unfinished rice fromthe local market thus giving businessto the local farmers as well. Thecompany also gives out professionalfarm management advice through itsqualified representatives.

Good Agricultural Practices (Engro Eximp)

Engro Eximp in its business practiceshas ensured seed multiplication andprovision of good quality registeredseeds for basmati rice to farmers inorder to enhance their crop yields andincome in the process. It has alreadygrown various varieties of seeds andaims to supply fresh, pure seed to itscontract farmers. Engro Eximp starteda pilot project of contract farming withfifteen farmers with mostly small landholdings. The company received theirpaddy in the last few months of 2010.The company plans to procureapproximately 300,000 tons of paddy

in its 5th year of operation and willpurchase this from 15,000 to 20,000farmers having land holdings ofapproximately 10 acres per farmer. Thesustainability of this effort will be drivenby company's ability to fetch betterprices which should be possible basedon better quality raw material purchasedfrom the farmers. The company willcreate a dedicated team comprising ofagricultural professionals tasked to workvery closely with the farmers to providehelp in improving the quality and quantityof their crop.

Innovations in dairy farmingSmall dairy farmers were not reapingthe benefits of their production due tocontractor control over pricing, paymentand milk quantity made available forsale. Engro Foods developed a milkcollection infrastructure which improvedpayment cycles, guaranteed collectionsand improved margins directly for thedairy farmers. In less than 3 years, thenetwork has grown to 750 milk collectioncentres, 1,100 village milk collectorsand a wide network of milk tankers thatensures uniform quality of milk suppliedto the company.

In addition, the company has developeda team of veterinary doctors and villageworkers, who have helped 116,000farmers in aspects such as improvedmilk yield, awareness on foddercultivation, balanced feed, and animalhealth and breeding. The company alsofocuses on providing opportunities forrural women and a cadre of Lady Livestock Worker (LLWs) has beendeveloped to deliver primary livestockmanagement, production andextension services.

Good Agricultural Practices (Engro Fertilizers)

For many years now, Engro Fertilizershas been advocating GAP with the aimto have safe and healthy food whilemaking sure that it is environmentallysustainable. Training of farmers throughon-the-ground activities as well asliterature such as the 'Behtar Zindagi'magazine has resulted in improvementsin yield and profitability and preventedthe degradation of soil. This in effecthas helped them boost their incomesas well as helping the company inachieving targets to sell fertilizers tosupply the right nutrientsto the soil.

Engro Fertilizers, through its agronomists,promotes the right dosage of zinc(Zingro) and potassium carbonate(Zorawar) by educating farmers on thejudicious use of these products.

Farmers are taught through educationand awareness how to achieve theirtarget yield through a mix of the rightingredients for the soil and crops. EngroFertilizers's Zarkhez (NPK) bags containfertilizer recommendation cards for useto help farmers in giving the correctdosage to ensure optimum yield fordifferent crops.

In 2010, Engro Fertilizers reached outto over 90,000 farmers, providinginformation on best practices andimproving farm yield. Engro'sagronomists conducting 64 seminarsand 13 workshops, and over 9,000farm visits in their efforts to createawareness. In 2010, 135 demo plotswere developed, and over 8,600 soilsamples were taken to provide farmerswith detailed advice on crop practices.


People

Our employees are our biggest asset.Their passion and dedication is thedriving force behind our success.


our investmentsin people

58

As part of our triple bottom lineapproach to sustainability, EngroCorporation takes a broader view ofwho our stakeholders are. While theinterests of our shareholders form thebasis for our business strategy, weare mindful of the fact that, in today'sera, it would be short-sighted of thecompany to assume that our impact,and therefore our responsibility, endsat our financial investors.

Engro has identified two broadcategories of stakeholders: ouremployees and the communities thathost us. We view it as incumbent uponourselves to keep the interest of thesestakeholders in mind in every decision

In 2010, we created Engro Foundation,a non-profit organisation whose soleraison d'etre is to serve as a singleplatform to unify Engro's civicengagement activities as well as itssocial investments. Engro subsidiariesand affiliates pool their resources

through the foundation, which in turncan ensure maximum effectiveness forthe group's social investment activities.

Yet even as we cater to the needs ofour host communities, we remainmindful of our own team members.For any organisation, its most valuableasset is its ability to attract, hire andretain the best people. Engro has arich history of taking care of its people.

Engro's goal with regard to its positionas an employer is not just to remainone of the most sought after employersin the country, but to hold itself tostandards that would make it globallycompetitive in the world-wide marketfor talent.

Engro Corporation believesthat the impact of ouractions and ourresponsibility extends toall those whose liveswe touched.


Engro's success thus far can beattributed to one factor above others:we have consistently sought to attract,hire and retain some of the mosttalented people in Pakistan. Our abilityto create high performance teams in aculture of inclusiveness, professionalismand excellence is what drives oursuccess more than anything else.

Engro is in the process of seamlesslyintegrating the human resourcesfunctions of each of our businessesto streamline both our own capabilitiesin terms of recruiting candidates andour ability to serve our employees.Engro hopes to leverage the strengthsof each company in terms of what weoffer our team members.

To make Engro the employer of choicefor college graduates as well asexperienced professionals, thecompany has made significantinvestments in a six-pronged strategy.

We aim to enhance governanceacross the enterprise whilst ensuringthat each business has the ability tomake its own decisions based on itsunique dynamics. We create synergiesacross the human resource functionthrough the implementation of astandard set of guiding principles,which continue to be reinforcedthrough forums and continuouscapability enhancement of humanresource teams.

We provide growth opportunities inan effort to enhance our culture. Thisis achieved through organization

development interventions such astraining, the ability to engage insecondments, travel opportunities andsupport for volunteer andphilanthropic work.

We adhere to the strictest principlesof merit in recruitment, compensationand promotion decisions to ensurethat all of our employees feel that theorganisation treats them fairly. We alsoaim to provide recognition for superiorefforts through an awards program andseek to retain the best of our talent byproviding them with leadershipopportunities. Engro ensures a focuson successive leadership developmentby managing the careers of highperformance employees and givingthem additional responsibilities as abuild up to leadership positions.

We ensure that our work environmentis inclusive and diverse, with theincreasing recruitment and retentionof women.

We ensure the highest standards ofhealth and safety at our manufacturingfacilities, monitoring carefully everypotential risk to our operations andour employees so that we can providea safe working environment to ourteam members.

We seek to hold ourselvesaccountable by allowing freedom ofassociation by actively encouragingour employees to unionise and seekthe benefits of collective bargaining.

Engro’s one firm cultureleverages the stregnths ofeach company andhelps us to serve ouremployees better.

our human resourceinvestment strategy


our human resourceperformance

In a year of transition, EngroCorporation set itself tough goals for2010, realising that if the companywas to succeed in its overall corporatestrategy, it would need to have asustainable institutional mechanism tohire and retain people. We are proudto say that the company wassuccessful in achieving nearly all of itsgoals with respect to its investmentsin human resources,

HR governance, synergies & integrationWith the formation of Engro Corp, theCompany's human resource functionestablished and enhanced itsgovernance across the enterprise toenhance the organization's ability tofully utilise the potential of enterprise-wide synergies. This approach ensuredthat Engro's processes are alignedand the Senior Management andBoard are actively engaged inmaintaining a sound talent pipelineacross the enterprise.

In addition to the governance process,Engro Corp recognizes the value inthe uniqueness of each business andprovides significant room for eachsubsidiary to make its own decisionsconsistent with its own businessdynamics.

In order to have a seamless humanresource function across theenterprise, Engro focused on thestandardization of talent inductionmechanisms, creating a unified Engroemployer brand, homogeneity inevaluating employee performance &career management as well as

alignment in compensation strategy.

As a part of this process, Engro alsoinitiated HR synergy forums in 2010,designed to promote coordination andcollaboration across business linesand ensure that the company is ableto deploy its synergies effectively toserve its employees.

Creating an enhanced company cultureEngro has strived to ensure that everyemployee of our businesses feels thatthey are part of the wider Engro family.This goal is achieved through a seriesof orientations, beginning with one onthe employee's first day andsupplemented by several company-wide orientations at periodic intervalsthat include addresses by seniorexecutives of the company.

The company has conductedemployee engagement surveys, andis planning to conduct one in 2011 toassess our employees' levels ofmotivation and morale.

The company also pays close attentionto employee development throughperiodic training, which is conductedon a needs analysis following annualappraisals. Trainings are conductedboth in-house and through externaltrainers. Employee synergy andbonding is also developed through anumber of out-of-office initiativesspanning across department, businessand cross business levels,

The company also has a policy thatallows employees who have been at

the company for a substantial periodof time to take sabbaticals, whichallows them to explore differentopportunities while retaining theirconnection to Engro, helping thembuild a well-rounded, holistic, andsustainable career while ensuring thatthe company retains its best peopleon its team.

The company also encourages andsupports employees in their volunteerefforts through a company-wideprogram known as EnVison (EngroVolunteers in Service of the Nation).The initiative is managed by a team ofself-appointed council members whoselect different volunteer opportunitiesfor company employees. This initiativegives employees opportunity to showleadership as well as inculcating asense of social responsibilitythroughout the company.

Recognising & rewarding employeesTo ensure that our compensation &benefits philosophy are in line with ourstrategy, we conducted a detailedsalary survey in 2010. We haveselected as our peer group some ofthe most prestigious multinationalcompanies in Pakistan as well as thebest-regarded local ones, holdingourselves to the same high standardswe expect of our employees.

The company also made a major shiftin introducing a new retirement policywith shorter vesting conditions, toimprovee employee attainability of thebeneifts whilst ensuring higher financialsecurity for the organization.

62

Engro seeks to ensure a fairprocess towards measuringour employee progressand believes in recognizingtheir efforts.


We also conduct an annual survey toensure that our increments are in linewith market increases to ensurecompany compensation is competitivewith its peers.

In addition, the company has severaltypes of awards at every level of thecompany, to ensure that employeesget recognition for extraordinary effortsor work that goes beyond the call ofduty. This includes performance basedawards across departments anddivisions, as well as acknowledgmentof best safety practices. In short, Engroseeks to ensure a fair process towardsmeasuring our employees' progressand believes in recognising theirefforts.

Despite continuing attrition due to themacro economic environment of thecountry, the success of our strategyis reflected in a consistent decline inour overall attrition over the last fewyears (see Employee Retention table).

Employer of Choice & encouragingworkplace diversityA conscious effort was made toensure a single brand image inrecruitment, even as the variousbusinesses retained their autonomy.As part of our effort to create the one-company brand, Engro conductsrecruitment activities at leadingacademic institutions in the countryas a single company, a process thatis due to be accelerated in 2011.

In 2010, Engro ‘achieved Employerof Choice’ status, with the graph

highlighting Engro’s rise to becomethe Most Admired Company.

The company believes in leveragingthe diversity of its operations to provideour employees with opportunities tobroaden their horizons and serve onsecondments at different areas withinthe company, whether it is a differentdepartment or a different subsidiary.

In terms of the company'sculture, a particularemphasis has been placedon diversity. The companymakes it a point to recruitpeople from differentbackgrounds, and hasmade it a point to increasethe number of women inthe company.

In 2010, the company introducedflexible hours, a day-care centre, anda spouse employment policy. In doingso, Engro Corporation puts intopractise our belief that family is to betreasured and that women shouldnever be forced to choose betweenwork and family commitments.

As part of our commitment to ourfemale employees, in 2010, thecompany also introduced a nondiscrimination and anti-sexualharassment policy to ensure that thewomen at Engro feel safe at work.We also took step further towardsempowering our female employees


In terms of the company'sculture, a particular emphasishas been placed on diversity.

in 2010 with the launch of “Weave”,a network of women working at Engro,which holds quarterly meetings to helpcoordinate the promotion of female-friendly policies at the company.

An initiative the company is particularlyproud of is the implementation of anaffirmative action program for disabledpeople. While no quota has beenestablished for disabled persons, allsubsidiaries are encouraged to employdisabled personnel. All subsidiariesare required to comply with the lawby paying an amount equivalent tominimum wage of 1% of totalemployee population to designatedgovernment offices.

Freedom of associationThe Company is one of the few thatpermits freedom of association andactively encourages our employees toparticipate in collective bargaining byforming unions.

Our progressive attitude towards unionactivity stems from our understanding

of the fact that companies best servetheir interests by working with unionsrather than against them. A healthyrelationship with unions can result in abalance of accountability between themanagement and employees' interests.

Focused leadership development &succession risk mitigation2010 proved to be a defining year inEngro's History with significant stepstaken to understand and improve thefocus on talent identification andsuccession planning.

A new talent management system isin the process of being implementedto ensure a focus on leadership

development as well as improvementin the talent identification process.

This was made possible through across functional and cross companyteam of human resourceprofessionals, who used research onlocal and global best practices toidentify and incorporate legacysystems and develop the talentmanagement framework.

Employee Retention2009

15.0%

2010

12.7%Attrition (TIII & above)

2008

16.3%

Diversity2009

15:1

2010

10:0.7Gender Ratio (Men: Women)*

2008

16:1


our health &safety performance

We are proud to achieve anew national safety record of29.8 million safe man-hoursat our urea manufacturingfacility in Daharki.

Man-hours(in millions) TRIR

Lost-workinjuries

39

2

0

31

1

0

0

73

0

0

0

1

0

0

0

1

1

0

0

10

0

0

0

11

Health & Safety record- by business line

Recordableinjuries Fatalities

25.70

3.70

1.31

16.32

0.37

0.50

0.23

48.10

0.30

0.11

0.00

0.53

0.00

0.38

0.00

0.30

Fertilizers

Polymer

Powergen

Foods

Vopak

Avanceon

Eximp

Total

Engro is committed to providing thesafest work environment to ouremployees and contractors, in allaspects of business, and is applyingsafety practices in alignment withDupont best standards. The fertilizersbusiness has been the first to take theinitiative and has implemented thesestandards at its manufacturing andmarketing functions, with other sites atvarious levels of implementation. Dupontsafety practices are also implementedwithin our non-manufacturing activitiessuch as safe driving by employees inthe field, and safety practices andawareness of employees at the HeadOffice in Karachi.

We recognise that, without adequatesafety measures, both our employeesand our operations would be put insevere jeopardy. The firm holds itselfto some of the highest standards ofand has implemented the Dupont bestpractises system at its manufacturingfacilities for fertilisers at Daharki, an effortwhich is already beginning to have apositive impact on our safety record.

During 2010, the company continuedits endeavor to align HSE managementsystems and processes to internationalbest practices including OccupationalSafety and Health Administration(OSHA) and Dupont Workplace SafetyStandards. All HSE systems andprocesses are regularly assessed andaudited internally as well as bythird parties.

Every employee involved in plantoperations at any of our manufacturingfacilities is given an overview of theprocess and operating procedures,with an emphasis on specific HSEhazards, emergency operations andsafe work practices. The OccupationalHealth program at Engro includesaspects of industrial hygiene andoccupational medicine. All employeesare also trained and kept up to dateon technological changes and safetyrelated aspects of their jobs.

The fertilizer business continued effortsto record healthy and safety successat its expansion project which was set

70 Sustainability Report ‘10

a national record of completing 29.8million man hours without a Lost WorkInjury (LWI) and a Total RecordableIncident Rate (TRIR) of 0.28.

The foods business has the mostchallenging safety environment and isworking towards full implementation ofDupont practices to ensure a safe,healthy and hygienic work environment.

The chemical terminal continued tomaintain health, safety and qualitystandards- per OHSAS 18001, ISO9001 and 14001 and Vopak StandardsTerminal Health Assessment wasconducted in 2010 by a team fromVopak Asia and company achievedhighest score of 95% amongst allterminals of Vopak in Asia.

The polymer business hadan exceptionally challengingyear in 2009 due to fatalitiesand a high TRIR. However,2010 was a comeback yearwith the Companyimplementing correctiveaction and achieving one ofthe best safety recordsamongst all Engrobusinesses.

Dupont safety audit rating

0.0

2.0

2.5

3.0

3.5

4.0

EFert Zarkhez EFertMarketing

EPCL EPQL Avanceon

PSRM

PSM

5 World Class vs. In-kind & Generic operations

4 Excellence in all results

3 Skills & Systems fully in place and practiced

2 Awareness of role, systems and expectations

1 Fundamental systems in place

0 Basic Instinct – no management focus

72

our human resourceobjectives 2011


We hope to strengthen ourbrand as an employer thattalented people across thecountry can look to as theplace they want to work for.

Engro Corporation's objectives for 2011focus on furthering our strategy ofrecruiting and retaining some of themost talented people in Pakistan,furthering our brand as one of the mostdesirable employers in the country. Asignificant part of our focus will be tofurther develop the quality of healthand safety mechanisms, to ensure thatwe continue to improve our exceptionalsafety record.

In order to ensure that the firm continuesto retain its best people and reducesits attrition rate, the company will alsoconduct a unified engagement surveyand craft a proposal on long termincentives. In addition, the survey willalso deliver useful data on ouremployees' priorities, ensuring thatthe company is able to stay one stepahead in terms of crafting policies thatwould enhance our ability to retain ourtalented team members.

Engro plans to roll out a uniform talentmanagement program with Hay tounderstand potential areas ofimprovement by studying internationalbest practices, as a step towardsupgrading our systems. The companywill ensure that our human capitalmanagement policies remainconsistent across the company, andidentifies top talent and leadershippotential. An exclusive leadershiptraining program for top talent will alsobe impemented in 2011,

The company's orientation programwill also be revamped to ensure thatit covers the changes that have takenplace in the organisation.

In 2011, the company will alsoconduct a survey with Mercer to offer

comparative compensation andbenefits packages for its employees.

The company will develop a guidelineand policy for the hiring of disabledpersons across the corporation.

As a company with industrialsubsidiaries, Engro strives to ensurethat it holds itself to the higheststandards of employee safety. Thecompany plans to continue itsimplementation of the DupontOccupation Health and IndustrialHygiene (OHIH) audit and bring theexpanded Engro Fertilizers site atDaharki on par with those standards.The firm also plans to conduct aninternal audit of 5 elements at EngroFertilizers, Zarkhez.

Keeping in line with our stellar safetyrecord, Engro plans on maintaining aTotal Recordable Injury Rate (TRIR) of0.30. The company also plans toimplement the action plan based onthe 2010 Dupont audit of the EngroFertilizers' Zarkhez plant and continueprogress towards achieving a Level 4on the revised Process Safety RiskManagement (PSRM) standards forour facilities at Daharki. Engro alsowants to attain a Level 3.0 in terms ofits Process Safety Management (PSM)for the Daharki plant and a DupontLevel 3 for its Zarkhez plant.

By holding ourselves to these higherstandards, we hope to burnish ourcredentials as an employer values thesafety of its team members. We hopeto strengthen our brand as anemployer that talented people acrossthe country can look to as the placethey want to work for.

74

our socialinvestment strategy


We have decided tomove the responsibilityto manage our socialinvestments to theEngro Foundation.

Engro Corporation is committed to theidea that our stakeholders include amuch broader category of people thansimply our employees and our financialinvestors. The company is committedto investing in helping address thesocial needs, firstly of our hostcommunities, but also of the nationas a whole.

As Engro Corporation moved towardsconsolidating its business under a unifiedholding company, the group has alsodecided to move the responsibility tomanage our social investments to asingle entity: the Engro Foundation, adedicated non-profit entity. EngroFoundation is creating a 5 yearstrategy process that the overalldirection of the Foundation is set toachieve goals and objectives as setout by its shareholders.

As a demonstration of the degree towhich our stakeholders matter to us,the board of trustees for the foundationis headed by the President and CEOof Engro Corporation and includes asits members the head of HR & PA aswell as three of the CEOs of Engro'ssubsidiaries.

The establishment of the foundationrepresents a shift in approach for Engro,away from philanthropy towards buildingmore sustained partnerships with ourstakeholders through long term socialinvestments. Instead of donations, Engroseeks to build sustained partnershipsto help improve the lives of the peoplewho neighbour our facilities.

We believe in giving back tocommunities addressing not just theirimmediate needs but also their longterm ability to lead healthy, productivelives. That is why Engro has investedheavily in providing education, technicaltraining, healthcare facilities and evenbasic infrastructure for ourcommunities.

Our social investments were designedwith active communities participation.Engro commissioned a Gallup surveyof our stakeholder communities to findout what their needs were before wedesigned our social investment.

We do not just want to help outstakeholders: we want to help themhelp themselves. Our communityparticipation model is designed toensure that our host communities feelthat they have a stake in theinvestments we make on their behalf.

To this end, Engro has built sustainedpartnerships with some of the leadingNGOs, international aid agencies andeven local governments to support usin our social investment strategies. Weare proud to have as our partners thePakistan Poverty Alleviation Fund, theSindh Rural Support Organisation, theCitizens Foundation, the Governmentof the Punjab, hands, NRSP, farmerdevelopment orgnaization and theUnited States Agency for InternationalDevelopment.

As the foundation begins to grow overthe years, our goal is to align our social

investment strategy more closely withthe Millennium Development Goals ofthe United Nations. As we continueto delve deeper into our areas of focus,we will attempt to align our socialinvestment projects with the broaderglobal effort to create a moreprosperous and environmentallysustainable society.

Engro Foundation is backed by apledge by Engro Corporation to donate1% of profit before tax, its net incomeevery year to our social investmentefforts.

And even that figure serves as abaseline. Faced with the devastatingfloods of 2010, Engro did not hesitateto increase the allocation to relief andrebuilding efforts, bringing up ourspending to nearly double our initialcommitment for the year, demonstratinga degree of responsiveness essentialto a vibrant social investment vehicle.


our social investmentperformance

The strength of Engro Foundation hasbeen built into its institutional architecture.The organisation has, in its first year,managed to put in place a separatemanagement team, and stringentreporting and audit mechanisms toensure the same level of dedication,professionalism and accountability inour social investment efforts as weexhibit in our business lines.

Despite being in its first year ofoperations, Engro Foundation hasalready begun to have an impact onthe lives of our communities. Whilemuch of the year's efforts weredominated by flood relief, thefoundation did ensure that it stayedon track with its approach to buildlonger-term, sustainable relationshipswith our communities.

The foundation was also successfulin being able to lay its own institutionalgroundwork.

foundation setupand governance

The Engro Foundation Board ofTrustees was constituted and formallycame into existence in December 1,2009. That it is made up entirely of thesenior-most executives of Engro Corpand subsidiaries, who have agreed to

take on this additional commitment, isa testament to the level of resourcesEngro is willing to commit to its socialinvestment strategy.

The foundation hired andput in place a dedicatedteam to focus on managingthe company's socialresponsibility engagements.Some were recruited fromwithin the group while othersjoined the organisation fromoutside the Company.

Engro put in place several policies forthe foundation, including a five-yearplan, human resource policies, andreporting formats, structure andresponsibilities, in essence ensuringthat the organisation itself becomessustainable before it can manage oursustainability initiatives.

In each of our five focus areas, thefoundation was able to get projectsoff the ground. And while some ofthem were in response to the floodsof 2010, others were part of the long-term strategy that had been initiallylaid out for the foundation. Engro foundation has

already begun to have animpact on the lives of ourstakeholders.


basicservices

Perhaps the single biggest impedimentthat most of our stakeholders face inleading productive lives is the lack ofsome of the most basic infrastructure.This is especially true in the smalltowns and rural areas that many ofEngro's businesses operate in andserve. Engro believes that by investingin the provision of services such asbasic healthcare, improvements inphysical infrastructure, etc thefoundation can help our communities lead healthier, more productive lives.

Our focus on basic services is areflection of our sustainability strategythat involves long-term engagements.We are not looking for quick solutions,so we take the time to start from theground up, helping our stakeholdersbuild what is necessary for them tolead healthy, productive lives.

Within basic services, our two primaryareas of focus are healthcare andphysical infrastructure.

Engro believes that byinvesting in the provisionof services such as basichealthcare will helpour stakeholders leadhealthier lives.


healthcare

80

As with many of the efforts of EngroFoundation, the genesis of our servicesin healthcare begin in Daharki, whereEngro has been operating the EngroClinic for decades. The company alsosupports the Sahara Clinic, which hasbeen one of the leading healthcareproviders of the region for many years.Among the unique attributes of the clinicis the Snakebite Treatment Facility,created in direct response to the needs

of our neighbours. The clinic is the onlyone its kind in the area, providing lifesaving treatment for snake bite victims.

The Foundation has also partneredwith government bodies and NGOsto run clinics providing basichealthcare, including specialised healthcare facilities for kidney dialysis, malariacontrol, polio immunisation, eye care,and thalassemia treatments.

Engro's healthcare investments

2008

-

-

4962

960

7

(in numbers)

Sahara Clinic patients

Medical Camp patients

Snake Bite Treatment

Eye camps

Polio Vaccination Campaigns

2009

1054

-

6540

1212

8

2010

4091

2815

7101

1089

9

Engro also fundsspecialised health carefacilities that provide avariety of treatments, suchkidney dialysis, malariacontrol to name a few.


infrastructure

Engro has undertaken severalinvestments in improving the quality ofthe physical infrastructure in ourcommunities around our manufacturingsites. A particular area of focus hasbeen clean water and sanitationservices, which far too many Pakistanislack. Only 40% of Pakistan's populationhas access to 'improved' water sourcesand 20% have access to some formof sanitation.

Our investments in healthcare wouldbe meaningless without the infrastructurethat our stakeholders would need to

ensure that they can stay healthy, hencethe importance of our investments insanitation and water supplies.

In line with our strategy of ensuringthat we invest in the needs of our ownneighbours first, the foundation is alsoinvolved in building paved roads andother infrastructure in several villagesclose to our manufacturing facilities inDaharki, Sukkur and Qadirpur. Elevenof these projects were undertaken, incollaboration with our partners, thePakistan Poverty Alleviation Fund andthe Sindh Rural Support Organisation.

The foundation is keenlyinvolved in building pavedroads and otherinfrastructure in severalvillages close to ourmanufacturing facilities.

Community Infrastructure(Brick Pavements, Water Courses, Open Drains)

12School Renovation & Construction7Model School Construction1

Engro's infrastructureinvestments(in numbers)


education andskill development

The goal is self-evident;without universalisingaccess to education,Pakistan can never hopeto train the next generationof citizens.

84


primary &secondary education

Engro is committed to improving thequality of education available toPakistan's children, particularly primaryeducation. Over the years, Engro hasdeveloped a strong partnership withorganisations such as The CitizensFoundation, sponsoring their effortsto both raise standards and makeeducation more widely available.

With the creation of Engro Foundation,however, the Company is in a positionto directly begin to impact theeducation system. Engro has initiateda Government School Adoptionprogram. With the support of the Sindheducation department, Engro currentlysponsors 10 schools with a combinedenrolment of over 1,600 students inthe Daharki and Qadirpur regions.

Engro is helping to spread theenlightenment of education to areashitherto completely un-served by even

the most rudimentary of schools. Inthe Katcha region, Engro supports 11schools with a combined enrolmentof 1,250 students. Each one of thosechildren receives a decent educationat absolutely no cost to their families.

No school, however, will amount tomuch without qualified teachers. Tothis end, Engro has sponsored aTraining and Resource Centre (TARC)for teachers working at schoolssupported by our partner NGOs.

All told, Engro spent Rs 15.9 million onits efforts in education in the financialyear 2010. At a total of 24 schools,Engro sponsors the education of 3,173bright young minds who we hope willgrow up to become the next generationof enlightened Pakistani leaders.

Engro is committed toimproving the quality ofeducation available topakistan’s children,particularly primary education.

Education

2009

25

3140

85

2010

25

3213

85

Total number of Schools

Number of Students

Number of teachers

2008

22

4079

85


technical andvocational training

To improve the productivity of the labourforce, however, primary and secondaryeducation is often not enough. This iswhy the company has actively investedin skill development. By creating accessto vocational training programs, we helpour stakeholders increase their skilllevels, command higher wages andthereby raise their own standard of living.

Engro's historical commitment to Daharkiis reflected in the fact that one of ourfirst efforts towards skill developmentwas the creation of a vocational trainingprogram in the area, which trains youngpeople in a variety of skills and improvestheir employability. The program has anexceptional record of job placement. In2010, nearly all of its graduates wereable to secure jobs, including manywho were employed by the engineeringfirm Descon and even some who wereable to secure employment overseasin the Middle East.

This effort has now been taken onestep forward, with the establishment ofthe Technical Training College (TTC), adiploma awarding institution in Daharki.The TTC will be a nationally andinternationally accredited institution thatwill offer 3-year diplomas to youngpeople in chemical and mechanical

skills.The Pakistan Chemical & Energy SectorSkills Development Company(PCESSDC) has taken the lead indeveloping the TTC, and has partneredwith organizations such as EngroFoundation, Pakistan IndustrialDevelopment Corporation (PIDC) andenergy sector firms like Mari Gas, ENISaipem and Descon to make theinstitution sustainable in the long run.

No nation can hope toprogress while half of itspopulation remainseconomically idle.Recognising the contributionof women to society, Engrohas created initiatives for theskill development of womenas well.

In 2003, Engro helped establish theSahara Arts & Crafts Centre, with thegoal of training women in a variety ofskills that would enable them to createproducts that they can sell, generatingincome and enhancing their ability tosupport their families.By vocational training, we

hope to help stakeholders,increase skill levels,command higher wages andraise the standard of living.


livelihoods

As a natural complement to our effortsin education and skill development,Engro Foundation is committed tomaking investments directly into theincome-generating capacity of ourcommunities.

Khushaal Livestock ProjectDuring the floods, there were manynews reports of villagers who riskedtheir lives to rescue their livestock.These stories may have seemedperplexing to urban dwellers but makesense when considering the fact thatcattle form a vital source of incomefor most rural households.

Given the importance of livestock,Engro Foundation is collaborating withthe United States Agency forInternational Development (USAID) andhas started a program called the“Khushaal Livestock Project” and isdesigned to help restore the productivityof farm animals to pre-flood levels.

The project is being run in technicalcollaboration with Engro Foods, who

have the expertise and businessknowledg given its direct relationshipswith dairy farmers across the country.This is yet in another example of howEngro leverages its commercialcapabilities to enhance the efficacyand efficiency of its social investments.

A total of Rs 77.4 million has beenallocated for the project, which aimsto help 15,000 households and helpover 100,000 animals over a six monthperiod ending in May 2011. Theinitiative will provide health andnutritional supplements such asmineral mixtures, multi-cut grass seeds(jowar), oat seeds, as well as fertilizersand vaccinations for foot and mouthdisease (FMD).

We hope that the success of this projectwill result in the signing of another projectfunded by USAID spanning over threeyears to build capacity in livestock andto develop a linkage of communitieswith dairy markets.

With our efforts ineducation and skilldevelopment, we areinvesting directly into theincome-generating capacityof our stakeholders.

Khushaal Project Intiatives

Households18,699Animal vaccinations95,386 animalsMineral mixtures12,482 householdsOat-seed and DAP fertilizer4,103 households


natural andmanmade disasters

92

In the summer of 2010, the countryexperienced the worst floods in over70 years, killing thousands of peopleand devastating millions of livelihoods.An estimated 20 million people wereimpacted by the flood.

Engro Corporation, its employees andtheir families played an admirable rolein responding to one of the biggesthumanitarian disasters in the world.Our relief effort was focused on, butnot limited to, the communities thathost our manufacturing facilities.

Engro Foundation took the lead ininitiating the relief work in Ghotki, Sukkur,Dadu, Jacobabad, Thatta (Sindh),Muzaffargarh, DG Khan, Rajanpur,Layyah (Punjab area). Several of ouremployees spent days delivering foodand essential supplies. Among theitems our teams delivered were handpumps, hygiene kits, tents, and latrines.

We partnered with organisationsincluding the Pakistan Army, the

Pakistan Poverty Alleviation Fund(PPAF), the Sindh Rural SupportOrganisation (SSRO), the FarmersDevelopment Organisation (FDO) and HANDS, Dist. govternment Ghotki,NRSP, NCHD.

Several of Engro's subsidiarycompanies initiated their own effortsto help the victims of the naturaldisaster. Engro Foods collected Rs7.5 million in donations for the reliefeffort. Engro Polymers providedmedical assistance to those whoneeded it and provided sodiumhypochlorite as a water purifier.

Using the 100 tonnes of sodiumhypochlorite that Engro Polymersdonated, UNICEF was able to provideup to 350 million gallons of safe drinkingwater to flood victims in Khyber-Pakhtunkhwa. Engro Polymer alsoprovided storage tanks with a totalcapacity of 3,000 gallons of water. ThePakistan Army helped in the distributionof this aid.

Engro Corporation, itsemployees and their familiesplayed an admirable rolein responding to one ofthe biggest disastersin the world.

Meals2,547,361Liquid Milk (Litres Equivalent)418,556Livestock Healthcare101,847Water (Litres)16,300*Patients Treated4,829Hygiene Kits4,192Medical Aid4,106Shelter Tents3,850Community Latrines47

Engro's floodrelief efforts By the numbers

94

model villageprogram


Engro Foundation is setting up amodel village in UC Rakh EshanpurTehsil Kot Addu (district Muzaffargarh),the single largest social investment inthe company's history.

Some of the core features of the villagewill be located in a manner that ensurethat it is not just model village thatbenefits from these but also thesurrounding villages. The UNMillennium Village Project goals - asubset of the MDGs - have beenincorporated into the design of themodel village.

The village, with 166 homes, isdesigned to provide adequate shelter,in addition to a local school and basichealth facilities. The model village will

also incorporate an improved civilinfrastructure in the form of roads andsanitation, as well as having off-gridenergy resources through solar power,providing electricity to all homes andstreet lights.Engro Foundation is also working ona project that will enable homes withinthe model village to harvest grey waterfor purification and recycling.

The village will particularly focus onproviding vocational and technicaltraining to farmers so that they canimprove the quality and quantity of themilk from their livestock.

In addition, a dairy hub will be createdin the village to develop livestock anddairy farming.

The village will providevocational and technicaltraining, nutrional balance,micro enterprise & dairy hubdevelopment and multipleskills to enhance income.


buildingpartnerships

In order to build long-term partnershipswith our stakeholders, Engro needsto be able to leverage the bestresources that are available, includingcreating strategic alliances withorganisations that can help us achieveour social investment goals.

The foundation recently signed a Rs350 million memorandum ofunderstanding with the Pakistan PovertyAlleviation Fund for communitydevelopment activities in Daharki,Sukkur, Sahiwal and Muridke. Weconcluded another Rs 200 millionagreement with the PPAF to collaborateon flood relief and rehabilitation activities.

Engro has also signed a Rs 77.4 millionagreement with the United StatesAgency for International Development(USAID) to enlist their assistance inthe livestock rehabilitation program.

The organisation has also been involvedin several infrastructure developmentprojects in collaboration with the SindhRural Support Organisation.

Each of these organisations brings tothe table a degree of expertise or otherresources that the Engro Foundationis able to utilise towards efficientlyrealising its social investment objectives.

Engro leverages the bestresources that are available,including creating strategicalliances with organisationsthat can help us achieveour social investment goals.


our sustainabilityobjectives for 2011

As the country continues to recoverfrom the devastating impact of the2010 floods, Engro will continue to bethere for our stakeholders, helpingthem rebuild their lives through tragedyand celebrating with them theirtriumphs over the challenges they face.

We plan to continue to utilise ourconsiderable resources for the goodof the communities that host us. Forthe upcoming year, Engro Corporationplans to build on the successfulgroundwork laid by the Foundationthis year and keep expanding oursocial investments.

As our manufacturing footprintcontinues to expand, we continue toadd new stakeholders in thecommunities we become part of.Bearing this in mind, the companyalso plans to adopt governmentschools in Muridke and Sahiwal.

Engro Foundation plans to completethe model village in Ehsanpur, includingthe construction of 166 houses withbasic amenities, as well as a dairyhub. The village intends to nurtureskills and non formal education, aswell as enabling flood affected studentsto join mainstream education througha speed learning process. The village’spower needs will also be self sustainingwith the incorporation of solar energy.

In addition, we plan to complete theTechnical Training Centre in Daharkiand commence classes bySeptember. Engro also plans to repairor reconstruct 11 schools damaged

or destroyed by the floods in theKatcha area.

Engro plans to continue the KhushaalLivestock program in Dadu andLarkana in collaboration with USAID.We hope to benefit 15,000households and 120,000 animals thisyear.

Engro Foundation is also working ona 5 year plan for villages based on themillennium development parametersadding basic necessities, health andlivelihoods.

We also plan to continue to invest inthe infrastructure and health of our hostcommunities and also plan to developa corporate social responsibilityframework for Thar Block II before weeven begin our coal-mining project.

In short, Engro has built the foundationfor a long-term, successful, andsustainable partnership with ourstakeholders. We keep their needs inmind not just when making decisionsabout our social investments, but alsowhen we make our businessdecisions. For in the end, we realisethat no company can truly succeedunless it keeps the interests all of itsstakeholders, not just its shareholders,as the driving force of its strategy.

USD 1.6 mn project with USAID forwomens empowerment throughlivestock development in south Punjabin 8 districts. This will be a 30 monthsproject.

Engro plans to build on thesuccessful groundwork laidby the Foundation in 2010and to keep expanding oursocial investments

beyond the call of dutyMuddassir Chaudhry had relocated toMultan only a few days before thefloods hit. Yet despite not having evenfully adjusted to his job as ZonalManager for Engro Fertilizers,Muddassir knew he had to help. Hetook charge of Engro's relief efforts inthe region and immediately decidedto focus on Muzaffargarh and Layyah,two of the worst hit areas.

The disaster had been particularly brutalto Muzaffargarh. Hundreds of villageswere completely flattened and morethan 700,000 people were displaced.Over 63% of the people in the areahad no food reserves, and those whodid, most had less than three days'supplies. The challenge was daunting,but Muddassir was ready.

He was aided in his heroic efforts bytwo gentlemen from the sales andmarketing department, Haseeb Durraniand Abid Ziauddin. Haseeb was

shrewd enough to realise that thenetwork of Engro dealers, based onrelationships that spanned severaldecades, would now come in handyas a source of both information as wellas logistical support. Using thisintelligence, Muddassir and histeammates were able to figure outexactly which areas needed assistanceand were able to deliver the suppliesto dealers, many of whom had initiatedtheir own relief efforts.

Muddassir also took the initiative ofcalling the Pakistan Army andcoordinating a plan to deliver dry rationsto 2,000 families in Muzaffargarhand Layyah.

But perhaps the most selfless ofMuddassir's efforts was the fact thathe made sure to keep visiting refugeecamps regularly to ensure that the floodvictims had enough to eat for Eid.

Flood Relief EffortsEngro Foods has collected more thanRs 7.5 million through volunteer for floodrelief (donations from business partnersand individuals)

This year, Avanceon's CSR team withother Avanceon employees investedtheir time to help affectees ofMuzaffargarh. Donations totaling Rswere also gathered for floodrelief activities.

Engro Polymer carried out various floodrelief activities. Apart from medical relief,Engro Polymer initiated two crucialprojects pertaining to maternal healthissues and using sodium hypochloriteas a disinfectant to provide purifieddrinking water to the flood victims. Formaternal health, Engro Polymer targeteddistricts in interior Swat and in theprovince of Khyber Pakhtunkhwa which

were especially hard to reach due tosecurity issues as well as destructioncaused by the floods. 65% of thewomen in this region were found to beanaemic. Women in these areas havealso been through tremendous stressand trauma and are more susceptibleto depression, hypertension and otherillnesses. Iron therapy was provided to700 women in the form of injectionsand oral supplements. To providepurified drinking water, Engro Polymerdonated 100 tonnes of sodiumhypochlorite to UNICEF to treat upto350 million gallons of contaminatedwater in Khyber Pakhtunkhwa. EngroPolymer also provided storage tankswith the capacity of 3000 gallons ofdrinking water in the regions. ThePakistan Army and Engro Polymerworked hand in hand to make this efforta tremendous success.

Livestock Relief effortsRamzan Buriro, National Agri-servicesManager, Engro Foods, is one of thesefew individuals. With over 200,000livestock already documented as beinglost and the final toll estimated to be inthe millions, Ramzan Buriro and histeam have made a tireless commitmentto “serve the deserving and theiranimals” in the devastated dairy hubsof Pakistan. Eye witnesses have seenthe team literally wade through muddywater, trek over rough terrain, and ridedonkey carts to reach 45,000 animalsand over 5,000 households in just amatter of weeks. Their objective is toincrease the health and productivity ofexisting livestock in order to mitigatethe loss to producers, consumers andmost importantly, to the affected peoplethemselves.

Ramzan's technical knowledge hasallowed him to choose the mostappropriate focus areas which include,endo & ecto parasites, foot rot &wounds, anti inflammatory, mastitis,fever, FMD cases, drenchingpneumonia and fever, and vitamins asnutritional supplements. The plan nowis to reach 100,000 animals to completethe relief phase and then move on torehabilitation which will be an evengreater challenge. Our appreciation,thoughts and prayers are with RamzanBuriro and his team, who have gonebeyond the call of duty to assist animals- a key asset to the common peopleaffected by the floods.


Being a socially responsible company,Engro has a continuous focus on theenvironment it operates in.

Planet


our investmentsin the environment

108

While a successful corporation musttake care of its shareholders andbroader stakeholder community, itcannot do so without being acutelyaware of its impact on the very planetwe all live on. Engro Corporation hasactively incorporated a keenawareness of our responsibility to theenvironment into everything we do.

According to the IntergovernmentalPanel on Climate Change, Pakistan isset to become one of the mostaffected countries by the global shiftsin climate. Taking care of ourenvironment for a Pakistani corporation,

therefore, is not just a question ofbeing more socially responsible: itmakes good business sense toaddress one of the most serious risksto our commercial operations.

Our commitment to the environment isyet another illustration of how EngroCorporation actively seeks to align itsinterests with those of the nation as awhole. By reducing our carbon footprint,our energy consumption and our useof natural resources, we are helpingpreserve the planet for future generations.

Our commitment to theenvironment is yet anotherillustration of how weactively seek to align ourinterests with those of thenation as a whole.


our environmentalinvestment strategy

110

As one of the largest industrialconglomerates in the country, EngroCorporation's environmental footprintis highly complex, and therefore requiresa multifaceted strategy to confront thechallenge of an environmentallysustainable business model.

The group, however, has institutedsome of the most progressive policieswith respect to climate change, bothamongst our local peers and evenwhen compared to other peercompanies. We view the measureswe take to help become a more eco-friendly company an investment in theplanet we live on.

Engro has adopted a four-prongedstrategy with respect to managing ourinvestments in the environment. Firstly,the company actively monitors itsgreenhouse gas emissions as well asother excursions into the atmosphereand has enacted several measuresto reduce our carbon footprint.

Secondly, the company ensures thatit is maximising the efficiency of itsresource utilisation - of everything fromwater to energy to raw materials - soas to minimise the wastage from ourmanufacturing processes, making ourfacilities greener, more planet-friendly.

Thirdly, as with so many other aspectsof Engro's business, the companyholds itself to some of the highestglobal standards by pursuinginternationally recognised certifications.Our facilities are frequently audited bythird parties to ensure that we areholding ourselves to the standardswe have committed ourselves to.

The company is also actively engagedin inculcating a culture of environmentalresponsibility amongst our employees,by launching campaigns to conserveenergy and save paper. We seek toensure that our employees becomeenvironmentally conscious citizenswho can help spread awarenessabout the need for action againstglobal climate change.

And lastly, the company ensures thatit designs its products to ensure thattheir end-use has a minimal impacton the planet, helping to make evenour customers lives and livelihoodsmore environmentally sustainable.

Engro’s enviornmentalfootprint is highlycomplexed and requiresmultifaceted strategy toensure sustainability.

Engro has implementedseveral policies that wouldreduce the company'scarbon footprint.


climate changecommitments

112

As one of the largest manufacturingcompanies in Pakistan, Engro'sgreenhouse gas emissions, as well asits carbon footprint, are one of thebiggest challenges we face when tryingto invest in environmental sustainability.

Engro Corporation has been able tosuccessfully implement several policiesthat would reduce the company'scarbon footprint and greenhouse gasemissions, thereby helping to slow thepace of climate change.

Engro Enven, the newest manufacturingfacility at Engro Fertilizers, has installedcarbon dioxide absorbers, whichcapture and retain approximately 300tonnes of CO2 per day. Engro hasfound a way to simultaneously reduceits environmental impact while alsoreducing its feedstock consumption,combining our investments inenvironmental and financial sustainability.

Yet perhaps the single best example ofhow Engro combines business strategywith environmental sustainability is EngroPowergen's plant at Qadirpur, whichuses as its fuel permeate waster gasto generate 220 megawatts of electricityat the lowest cost in the entire country.

While the company's greenhouse gasemissions have increased substantially,this is largely due to the fact that thecompany has substantially added newcapacity to its manufacturing facilities.

However, even so, the rise in ourgreenhouse gas emissions has beenslower than the rise in our revenues.Since 2008, revenues have risen by95.2% whereas carbon dioxideemissions have risen by a slower 89.9%.

Engro has also undertaken severalinitiatives in 2010 to reduce the carbonemissions of its vehicles. Employeesare encouraged to use bicycles or otheralternative modes of transportation withinour manufacturing facilities, wheneverfeasible. In addition, each vehicle ischecked sent in twice to ensure itscompliance with environmental policy.

2008

2009

2010

Greenhouse gas emissions(in tonnes of CO2)

865,937

955,223

1,644,577

Carbon Footprint Data


efficient resourceutilisation

114

Efficient resource utilisationmake our industrial unitsmore planet-friendly, helpreduce costs and improveour profitability.

Engro's vision of environmentalresponsibility stretches to beyondgreenhouse gases and alsoencompasses our use of nearly everytype of resource that goes into theprocess of manufacturing our products.

Our commitment to efficient resourceutilisation is perhaps where our holisticapproach towards strategy, and ourtriple bottom line approach, best shinesthrough: not only does efficiency makeour industrial units more planet-friendly,but they also help reduce our costs,thus improving our profitability.

Plant efficiencyEngro Fertilizer's Enven plant is the mostefficient plant in Pakistan, with the lowestenergy and gas feedstock usage pertonne of urea produced. As a result ofthe induction of Enven, gas usage hasgone down from 40 million Britishthermal units (mmBTU) per tonne ofurea to 27 mmBTU per tonne.

This efficiency has significantconsequences. At a time whenPakistan faces a dire shortage ofnatural gas, Engro is not only reducingits gas consumption but doing so whileincreasing the production of urea,another product that the country badlyneeds. In short, through the judicioususe of efficiency-enhancingtechnologies, Engro is expandingPakistan's production possibility frontier.

In 2010, Engro also initiated a projectto increase the use of electroniccommunications at our headquarters,with the goal of reducing our paper

consumption. We were highlysuccessful in our goal, with a 24%reduction in paper usage. In addition,at least 25% of the paper utilised inour offices is recycled. Taken together,these two initiatives will ensure thatEngro contributes to a mitigating thepace of deforestation in Pakistan.

Water consumptionIn a country where potable water isan increasingly scarce commodity,Engro Corporation is doing its utmostto ensure that its usage of waterremains as efficient as possible. Weare committed to improving water-useefficiency not just within our own plants,but also at the facilities of Avanceon'sautomation clients.

Our manufacturing facilities at Daharkihave installed a new reverse osmosisplant that reduces the flow of unsafeeffluents from our plant by up to 150gallons per minutes. The water is thenrecycled since it complies with nationalregulatory standards on waste water.In addition, the residential colony isexperimenting with efficient toilets toreduce the consumption of water (over33% of all domestic waterconsumption is used up by toilets).

Yet Engro is also a pioneer in offeringinnovative solutions to our clients forcutting down on water consumptionand the energy usage of water andsteam systems. For example,Avanceon has created two products:iWater and iBoiler, both of which aredesigned to save the use of water aswell as energy in water and steam

systems. Engro has installed 11 ofthese at client sites as well as our ownmanufacturing facilities in 2010.

Engro Foods has installed wastewatertreatment facilities at its sites in Sukkurand Sahiwal to ensure that any waterthat is discharged from the facility issafe and does not pollute the region'swater table. Engro Vopak wassuccessfully declared in 2010 to bea no-effluent site, meaning that all ofthe facility's wastewater wassuccessfully treated to ensure that itdoes not damage the surroundingenvironment. The facility has alsoplanted mangroves and trees toprotect the shoreline against erosion.

Energy consumptionAs an example of how efficiencytranslates into savings, Engro Vopakinitiated 15 projects that were designedto reduce its energy consumption andreduce the business' carbon footprint.

Engro Vopak also utilises ambient heatenergy for its ethylene vaporisers whichhas resulted in the potential savings of$1.4 million in energy costs as well as4.3 tonnes of CO2 emissions per year.

Our innovations in energy have notjust helped save money and reducegreenhouse gas emissions at Engro,but for our clients as well. Avanceon'siWater and iBoiler products help saveour clients energy and have beenresponsible for reducing CO2emissions by 13,000 tonnes a year.


2008

2009

2010

Solid waste generation(in tonnes)

254

382

20,646

Product packaging waste(in tonnes)

58

102

1,213

Waste generation data

2008

2009

2010

Energy consumption:feed or fuel

(000s standard cubic feet)

37,212,140

38,991,604

42,413,196

Electricity consumption(kilowatt hours)

17,727,227

34,097,192

44,522,894

Energy consumption data

2008

2009

2010

Water use(m3 per hour)

2,932

3,432

3,776

Effluent water discharge(in m3 per hour)

718

769

1,269

Wastewater excursions(number of times exceeded)

2

3

10

Water consumption and waste treatment data

PowergenName Fertilizers Foods EPCL EVTL NEQS

NH3

SO4

COD

BOD

PH

OIL

ZN

CL

TDS

SS

8.4

1

16

35

40.2

8.5

4.8

0.2

40

600

150

80

6-9

10

5

1000

3,500

200

120

80

68-8.3

8

2,200

130

168

129

8.3

1,126

10

990

36

12

8

0.9

0.3

244

1,564

46

NEQS

* Reporting as per industry standards

Our innovations in energyhave helped save moneyand reduce greenhousegas emissions at Engroand also for our clients.


standardsand certifications

118

As part of Engro Corporation'scommitment to holding itself to thehighest global standards, the companyhas gone beyond just complying withnational laws and pursued, attainedand maintained some of the moststringent international certifications withrespects to the environment.

The company is compliant withPakistan's National EnvironmentalQuality Standards (NEQS) and seeksto ensure that it follows, in letter andspirit, all regulations laid out by theprovincial Environmental ProtectionAgencies in the areas that it serves.

Engro Polymers are now compliant withISO 14001: 2004 standards and hasimplemented a comprehensiveenvironmental management system,which is regularly audited by third parties.

Engro Powegen's Qadirpur plant iscompliant with the IFC's environmental,health and safety (EHS) standards aspart of the agreement with the WorldBank subsidiary for its investment inthe plant. The standards also includerequirements for reduction in noisepollution, a condition that Engro hasbeen able to meet successfully.

Engro Foods is in the process ofgetting all of its facilities certified forISO standards. Six EnvironmentalImpact Assessments and InitialEnvironmental Examinations (EIA andIEE) studies were also conducted atthe Engro Foods plant sites and noobjections were raised.

With commitment tohighest global standards,we have some of the moststringent internationalcertifications with respectto the environment.


product stewardship

120

Engro Corporation is committed toensuring not only that the firm reducesits own environmental footprint, butthat of its customers as well. To thisend, the company has expendedconsiderable energy and research inproducing innovative solutions thatensure that our products minimise anypotential adverse impact on theenvironment even when they have leftour facilities and are in the hands ofour customers.

Engro Fertilizers, for instance, hasdeveloped a new packaging for itsproducts that uses less material whileholding the same amount of fertiliser

with the requisite tensile strength. Thereduction in one inch off our bags hasresulted in significant savings in the useof polypropylene, which in turn hasreduced the environmental footprint ofour company and our customers.

Engro Foods is working with Tetra Pakto ensure that it is using recycledpackaging by stripping one of the innerlayers of the boxes for our dairyproducts. This helps ensure that ourpackaging material is moreenvironmentally friendly and does lessdamage to forests and the eco-systemof the country's northern areas.

We ensure our productsminimise potential adverseimpact on the environmenteven when they have leftour facilities and are in thehands of our customers.


stakeholderengagement

122

Engro Corporation is not onlycommitted to making investments thatsupport all of our stakeholders’ needs:we have also institutionalised aconstant dialogue process with ourstakeholders to constantly refine andimprove our business, social andenvironmental investments.

InvestorsIn addition to holding the legallymandated annual general meeting forshareholders, Engro also conductsfour quarterly analyst briefings to keepour investors and the wider capitalmarkets community abreast withdevelopments. This voluntary measureis symbolic of how Engro is willing tohold itself to higher standards.

MediaEngro also holds media events toreach out to the broader public andinform them of our business and socialinvestment activities. By making moreinformation about our company public,we hope to make ourselves moreaccountable to the broader communitywe are a part of. In 2010, we initiateda series of formal and informalinteractions with the media, with fivemedia events and a series of one-on-one meetings between seniormanagement and members of themedia.

EmployeesEngro realises that the firm’s successdepends on the degree to which wecan keep our people motivated tocontinue performing at their potential.In addition to the multiple policies that

the firm has in place to ensure highmotivation levels, the firm alsoconducts frequent surveys ofemployee morale, preferences andaspirations. In doing so, Engro keepsitself a step ahead of emerging trendsin human resource management andis able to anticipate and meet ouremployees’ needs.

In addition, we hold multiple forumsthroughout the year in whichemployees are encouraged to sharetheir views with executives about avariety of issues within the company,a practice that allows Engro to addressareas of concern relatively early.Engro’s commitment to high qualityhuman capital is not restricted to ouremployees, however. We are alsoengaged in an effort to solicit feedbackfrom students at various colleges anduniversities throughout the country, togauge what the next generation ofprofessionals seeks from their futureemployer. To this end, we conductedsurveys in 2008 and 2009 incollaboration with Oasis, a researchcompany, to measure Engro’sreputation as an employer amongstudents and prospective employees.

Host communitiesThe creation of Engro Foundation hasmeant that the group now has a full-time staff dedicated to managing ourrelationships with our host communitiesas we continue to enhance andimprove our social investment strategy.Indeed, the creation of the foundationitself was the result of an extensiveexercise conducted by Engro in 2009

in which our host communities andpartner institutions were asked forfeedback about how the companycan improve its social investmentapproach.

Our social mobilization methodologyfocuses on first getting feedback fromthe host communities to understandtheir priorities and to develop projectsthat can address their needs. Onceprojects are implemented, we ensuresmechanisms are in place to monitorand sustain these social investments.

As the foundation moves into itssecond year of operations, we willinstitutionalise the mechanism ofseeking feedback from our hostcommunities on a regular basis,particular from the direct beneficiariesof our social investment projects in aneffort to continue refining ourengagement strategy.

SuppliersEngro is proud of its ability to mergeits business interests with its socialinvestment strategy, which we believemakes our engagement efforts moresustainable. To this end, Engro is keento bring its resources to bear in helpingPakistan’s farmer communities,particularly our suppliers, improve theirproductivity. Yet even as we do so,we are mindful of the need to assesstheir needs, both through directfeedback as well as through studiesof our own, before we can begin todesign our business/social investmentprogrammes.

Engro holds media eventsto reach out to the broaderpublic and inform them ofour business and socialinvestment activities.


In addition, Engro is actively engagedin a dialogue with farmers across thecountry to whom we sell our fertiliserproducts, particularly through our demofarm plots. We are in the process ofextending a similar approach to thesuppliers for our milk and rice products.

Engro Eximp has ensured seedmultiplication and provision of goodquality seeds to farmers in order toenhance basmati rice yields andincome in the process. The foodsbusiness has developed a milkcollection and automated paymentinfrastructure which has improvedpayment cycles, guaranteedcollections and improved marginsdirectly for the dairy farmers.

The fertilizer and foods business arealso working their packaging suppliersto improve the quality of fertilizer bagsand milk tetra pack as a means ofensuring product quality for endconsumers.

CustomersThe fertilizer business has beenworking on disseminating GoodAgricultural Practices amongst allfarmers who use their products toensure safe and healthy produce forend consumers, and also improvedyield and increased margins for thefarmers. The business trains farmersthrough on-the-ground activities aswell as literature, which has resultedin improvements in yield and profitabilityas well as preventing the degradationof soil. The business employs a teamof agronomists who educate farmers

on the judicious use of these products.In 2010, Engro Fertilizers reached outto over 90,000 farmers, providinginformation on best practices andimproving farm yield.

Avanceon launched a ‘CustomerDelight’ initiative in 2010, as part ofwhich it conducted a customer surveyto gauge their satisfaction with thebusiness’s products and services inPakistan.

GovernmentsEngro has always played a proactiverole in advising the Government ofPakistan in the framing of economicpolicy as well as reforms related toboth industry and business in Pakistan.

Engro’s executives have advised thegovernment from issues as diverse asfood and fertilizer security, gas supplyoptimization and alternate powergeneration.

The fertilizer businesshas been working ondisseminating GoodAgricultural Practicesamongst all farmers.


awards & recognition

126

Ranked Pakistan's leading company for Corporate Social Responsibility by thefirst Asian Sustainability Rating

Engro Corp has been awarded the Top 25 Companies Award for Excellenceby the Karachi Stock Exchange for a record 30 times

Received ACCA - WWF 'Best Sustainability' Award

Engro Fertilizers Limited wins 'Brands of the Year' Awards

Engro Corp honored with Investor Relations Award by CFA Association of Pakistan

Engro Foods Limited judged the 'Best Local Company to Work For' awardfrom PSHRM

Engro Polymer and Chemicals Limited wins ACCA - WWF award for 'BestEnvironment Report'

Engro Vopak Terminal Limited wins 'Best Practices - Occupational Safety andHealth' award

Engro Fertilizers Limited has won the NFEH Annual Environment ExcellenceAward on multiple occassions

Avanceon Limited won an award at OSI - SOFT conference in Bangkok

Olper's Milk has been adjudged 'Best Brand Campaign' and 'BestTelevision Commercial'

Engro Corporation's Communication on Progress (COP) was listed as one ofthe best COPs in the global chemical sector by the UN Global Compact


gri performance

128

EconomicPerformance

IndicatorDescription

EC1

EC2

EC3

EC4

EC5

EC6

EC7

EC8

EC9

Direct economic value generated and distributed

Financial implications and other risks and opportunities due to climate change.

Coverage of the organization's defined benefit plan obligations.

Significant financial assistance received from government.

Range of ratios of standard entry level wage compared to local minimum wage

Policy, practices, and proportion of spending on locally-based suppliers

Procedures for local hiring and proportion of senior management hired from the

local community

Development and impact of infrastructure investments and services provided primarily

for public benefit through commercial, in-kind, or pro bono engagement.

Understanding and describing significant indirect economic impacts, including the

extent of impacts.

EnvironmentalPerformance


EN1

EN2

EN3

EN4

EN5

EN6

EN7

EN8

EN9

EN10

EN11

Materials used by weight or volume.

Percentage of materials used that are recycled input materials.

Direct energy consumption by primary energy source.

Indirect energy consumption by primary source.

Energy saved due to conservation and efficiency improvements.

Initiatives to provide energy-efficient or renewable energy based products and services,

and reductions in energy requirements as a result of these initiatives.

Initiatives to reduce indirect energy consumption and reductions achieved.

Total water withdrawal by source.

Water sources significantly affected by withdrawal of water.

Percentage and total volume of water recycled and reused.

Location and size of land owned, leased, managed in, or adjacent to, protected areas

and areas of high biodiversity value outside protected areas.

PerformanceIndicator

Description

EN12

EN13

EN14

EN15

EN16

EN17

EN18

EN19

EN20

EN21

EN22

EN23

EN24

EN25

EN26

EN27

EN28

EN29

EN30

Description of significant impacts of activities, products, and services on biodiversity in

protected areas

Habitats protected or restored.

Strategies, current actions, and future plans for managing impacts on biodiversity.

Number of IUCN Red List species and national conservation list species with habitats in

areas affected by operations

Total direct and indirect greenhouse gas emissions by weight.

Other relevant indirect greenhouse gas emissions by weight.

Initiatives to reduce greenhouse gas emissions and reductions achieved.

Emissions of ozone-depleting substances by weight.

NOx, SOx, and other significant air emissions by type and weight.

Total water discharge by quality and destination.

Total weight of waste by type and disposal method.

Total number and volume of significant spills.

Weight of transported, imported, exported, or treated waste deemed hazardous under

the terms of the Basel Convention Annex I, II, III, and VIII, and percentage of transported

waste shipped internationally.

Identity, size, protected status, and biodiversity value of water bodies and related habitats

significantly affected by the reporting organization's discharges of water and runoff.

Initiatives to mitigate environmental impacts of products and services, and extent of

impact mitigation.

Percentage of products sold and their packaging materials that are reclaimed

Monetary value of significant fines and total number of non-monetary sanctions for

non-compliance with environmental laws and regulations.

Significant environmental impacts of transporting products and other goods and materials

used for the organization's operations, and transporting members of the workforce.

Total environmental protection expenditures and investments by type.

PageNumber

Flap 1&2

45, 116

54, 57, 58

None

54, 83

92

27, 84, 88,

90, 92

PageNumber

120

120

120

120

Nil

PageNumber

Nil

114

116

116

116

116

120

120

Nil

125

Nil

Nill


Social: Labor Practices and Decent WorkPerformance


LA1

LA2

LA3

LA4

LA5

LA6

LA7

LA8

LA9

LA10

LA11

LA12

LA13

LA14

Total workforce by employment type, employment contract, and region.

Total number and rate of employee turnover by age group, gender, and region.

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

employees, by major operations.

Percentage of employees covered by collective bargaining agreements.

Minimum notice period(s) regarding significant operational changes, including whether

it is specified in collective agreements.

Percentage of total workforce represented in formal joint management-worker health and

safety committees that help monitor and advise on occupational health and safety programs.

Rates of injury, occupational diseases, lost days, and absenteeism, and number of

work-related fatalities by region.

Education,training, counseling, prevention and risk-control programs in place to assist

workforce members, their families, or community members regarding serious diseases.

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

Average hours of training per year per employee by employee category.

Programs for skills management and lifelong learning that support the continued

employability of employees and assist them in managing career endings.

Percentage of employees receiving regular performance and career development reviews.

Composition of governance bodies and breakdown of employees per category according

to gender, age group, minority group membership, and other indicators of diversity.

Ratio of basic salary of men to women by employee category.

Social: Human RightsPerformance


HR1

HR2

HR3

HR4

HR5

HR6

HR7

HR8

HR9

Percentage and total number of significant investment agreements that include human

rights clauses or that have undergone human rights screening.

Percentage of significant suppliers and contractors that have undergone screening on

human rights and actions taken.

Total hours of employee training on policies and procedures concerning aspects of human

rights that are relevant to operations, including the percentage of employees trained.

Total number of incidents of discrimination and actions taken.

Operations identified in which the right to exercise freedom of association and collective

bargaining may be at significant risk, and actions taken to support these rights.

Operations identified as having significant risk for incidents of child labor, and measures

taken to contribute to the elimination of child labor.

Operations identified as having significant risk for incidents of forced or compulsory

labor, and measures to contribute to the elimination of forced or compulsory labor.

Percentage of security personnel trained in the organization's policies or procedures

concerning aspects of human rights that are relevant to operations.

Total number of incidents of violations involving rights of indigenous people and

action staken.

PageNumber

Flap 3

60

53

60

63, 64

63, 64

75

63

60, 83

100%

PageNumber

70

36,69

None

None

None

None

100%

None


Social: Product ResponsibilityPerformance


Social: SocietyPerformance


SO1

SO2

SO3

SO4

SO5

SO6

SO7

SO8

Nature, scope, and effectiveness of any programs and practices that assess and manage

the impacts of operations on communities, including entering, operating, and exiting.

Percentage and total number of business units analyzed for risks related to corruption.

Percentage of employees trained in organization's anti-corruption policies and procedures.

Actions taken in response to incidents of corruption.

Public policy positions and participation in public policy development and lobbying.

Total value of financial and in-kind contributions to political parties, politicians, and related

institutions by country.

Total number of legal actions for anti-competitive behavior, anti-trust, and monopoly

practices and their outcomes.

Monetary value of significant fines and total number of non-monetary sanctions for

non-compliance with laws and regulations.

PR1

PR2

PR3

PR4

PR5

PR6

PR7

PR8

PR9

Life cycle stages in which health and safety impacts of products and services are assessed

for improvement, and percentage of significant products and services categories subject

to such procedures.

Total number of incidents of non-compliance with regulations and voluntary codes

concerning health and safety impacts of products and services during their life cycle,

by type of outcomes.

Type of product and service information required by procedures, and percentage of

significant products and services subject to such information requirements.


concerning product and service information and labeling, by type of outcomes.

Practices related to customer satisfaction, including results of surveys measuring

customer satisfaction.

Programs for adherence to laws, standards, and voluntary codes related to marketing

communications, including advertising, promotion, and sponsorship.


concerning marketing communications, including advertising, promotion, and

sponsorship by type of outcomes.

Total number of substantiated complaints regarding breaches of customer privacy

and losses of customer data.

Monetary value of significant fines for non-compliance with laws and regulations

concerning the provision and use of products and services.

PageNumber

13, 14

100%, 36

100%, 36

None

18

None

PageNumber

125

Nil

125

None

125

125

None

None

None


gri disclosures

134

Strategy and AnalysisProfile

DisclosureDescription Cross-Reference

1.1

1.2

Chairmans message, CEO Message

Quality of objectives assesed

based on Balance between

aspects,Compatibility, Accuracy,

timeliness, clarity and reliability

Statement from the most senior decision-makers of

the organization

Description of key impacts, risks, and opportunities.

ProfileDisclosure

Description Cross-Reference

2.1

2.2

2.3

2.4

2.5

2.6

2.7

2.8

2.9

2.10

Subsideries and businesses

also mentioned

Our investment in our businesses



Reported

Reported

Businesses and People

Sustainability Reporting

investments in enviornment

Excellence awards

Name of the organization.

Primary brands, products, and/or services.

Operational structure of the organization

Location of organization's headquarters.

Number of countries where the organization operates

Nature of ownership and legal form.

Markets served

Scale of the reporting organization

Significant changes during the reporting period

Awards received in the reporting period.

PageNumber

5, 6

18

PageNumber

25

25

25

25

25

Flap 1

Flap 1 & 2

Flap In/Out

130

Report ParametersProfile


3.1

3.2

3.3

3.4

3.5

3.6

3.7

3.8

3.9

3.10

3.11

3.12

3.13

Reporting period for information provided.

Date of most recent previous report

Reporting cycle

Contact point for questions

Process for defining report content

Boundary of the report

State any specific limitations on the scope or boundary

of the report

Basis for reporting

Data measurement techniques and the bases

of calculations

Explanation of the effect of any re-statements

of information

Significant changes from previous reporting periods

Table identifying the location of the Standard Disclosures

in the report

Policy and current practice with regard to seeking

external assurance for the report.

provided for Financial as well as

sustainability

Financial Report

Scope of Report

Scope of Report

Scope of Report

Scope of Report

Scope of Report

Structure and Governance

Scope of Report

N/A

Scope of Report

Not found

Scope of Report

PageNumber

2

2

2

2

2

38, 42

2

2

132, 141

2


4.13

4.14

4.15

4.16

4.17

Memberships in associations

List of stakeholder groups engaged by the organization

Basis for identification and selection of stakeholders

with whom to engage.

Approaches to stakeholder engagement

Key topics and concerns that have been raised through

stakeholder engagement, and how the

organization has responded

None

Our investment in people



Businesses and People

ProfileDisclosure

Description Cross-Reference

Governance, Commitments, and EngagementProfile


4.1

4.2

4.3

4.4

4.5

4.6

4.7

4.8

4.9

4.10

4.11

4.12

Governance structure of the organization

Indicate whether the Chair of the highest governance

body is also an executive officer

The number of members of the highest governance body

that are independent and/or non-executive members.

Mechanisms to provide recommendations or direction

to the highest governance body.

Linkage between compensation and the

organization's performance

Processes in place to ensure conflicts of interest

are avoided

Process for determining the qualifications and expertise

of the members of the highest governance body

Internally developed statements of mission or values,

codes of conduct, and principles

Procedures of the highest governance body for

overseeing the organization's identification and

management of performance

Processes for evaluating the highest governance body's

own performance, particularly with respect to economic,

environmental, and social performance.

Explanation of the organization's precautionary

approach or principle

Externally developed charters, principles, or other

initiatives to which the organization subscribes or endorses




Governance Strategy,

Speak up policy

Engro foundation setup

and governance

Speak out policy and

governance strategy

No refrence found

As per the gloabal standards

Governance Objectives 2011

No refrence found

Governance Objectives 2011

International standards

and Certifications

PageNumber

38-42

38-42

38-42

41-42

36, 41-42

39

9, 10

45

39

45

123

PageNumber

127, 128

127, 128

127, 128

the green initiative

At Engro head office, the administrationlaunched an initiative to lower paperconsumption, resulting in a reduction of24% in 2010. This was done byencouraging double-sized printing andphotocopying and paperlesscommunication, recycling trays wereinstalled to collect used papers for reuse,paper consumption was tracked and25% of the paper quantitywas recycled paper.

WetlandsThe discharge of untreated wastewateris a major contributor to deterioratinghealth conditions and pollution ofnearby water bodies. The problem isexpected to increase due to rapid paceof urban growth, unless measures aretaken to control and treat effluents.Constructed Wetlands (CWs) are anatural, low-cost, eco-technologicalbiological wastewater treatmenttechnology designed to mimicprocesses found in natural wetlandecosystems, which is now standingas the potential alternativeor supplementary systems for thetreatment of wastewater.

Engro Polymer, in partnership withWWF Pakistan, agreed to sponsorconstruction of one CW located nearNawabshah town in the province ofSindh. A low cost version of CWs was

designed by Sindhica, a local NGOwhich was vetted by technical teamof UNHABITAT from Nepal. Sindhicaleveraged its local contacts andconvinced the community to replacethe existing depression where entirewaste water gets collected with aproper waste treatment facility. Theyalso brought in resources to improvethe drainage system for thesustainability of the project. First thewater from the depression was drainedand the field was cleared of weedsand wild vegetation. Based on theapproved design, the construction ofwetland took place. This facility nowprovides clean and environmentalfriendly treatment to household wastewater of community of Nehal Lashari.The recycled water from CW is nowadded to agricultural supplies for thecultivation in nearby fields.

Drip Irrigation MethodsVisiting the fruit and vegetable farms ofChacha Allah Bux at Gadap in Sindh isa good display of what has been donein the field of modern farming and forthe poverty alleviation of poor farmingneighborhoods. Using one of the mostmodern drip irrigation systems inPakistan, Chacha Allah Bux is growingvarious fruits and vegetables such aspapaya, sapodilla (chikoo), stone apple,custard apple and coconuts on 200acres of land.

The drip irrigation system he is usinginvolves a central pivot machine in thecentre of lots measuring 5 acresconnected to each other withunderground PVC pipes. The huge armfrom the central pivot machine spraysa fine mist of water while rotating aboutthe centre. According to Chacha AllahBux, water usage with drip irrigation ascompared to flood irrigation is only 25%and has had far superior results in termsof quantity and quality.

Chacha Allah Bux's efforts have notbeen without hitches. Over the years,water level in Chacha Allah Bux's farmhas fallen from a depth of 20 feet to250 feet which prompted him to lookat other methods of irrigation. When theChacha learnt about drip irrigation, he

quickly invested and experimented withit. At first, he lost his crop and had toremove whatever was installed. He lostmoney and time along with a full growingseason but persevered.

He sought the help of some studentsand researchers from a local universitywho studied his system and identifiedthe causes of failure. After educatingChacha Allah Bux about what wentwrong with the first trial, a new systemwas brought in. After installation andbeing provided guidance on its usage,Chacha Allah Bux got excellent resultsand became a strong advocate for dripirrigation. Drip irrigation also goes handin hand with good agricultural practices(GAP). To improve the water flow,strands of barley and holcus spicatus(bajree) have been removed from waterravines. This has helped in preventinga further lowering of the undergroundaquifer on Chacha Allah Bux's lands.

Now, the sizes of Chacha Allah Bux'sfruits & vegetable plants, the spacingbetween them, the uniform sizes andquality of the produce is comparableto anything that you see abroad. ChachaAllah Bux is a story of success with hisvegetables and fruits meetingexport quality.

Contact us:

Engro Corporation Limited8th Floor, Harbor FrontMarine Drive, Block 4Clifton, Karachi111 211 [email protected] : +9221-35295948

acknowledgementsAman ul HaqueAsghar NaveedAdnan MahmoodFarooq TirimiziHussain Ali TalibIrfan Manzur BhuttaJasmin KharasJiwan DasKaleem KhanNaila KassimNaveed A HashmiNida KhatriOmar Bin Abdul Aziz

Rameez Ahmed FarazShehla AsgharSuhel AkhtarSheikh Rehan AfaqSuhel AkhtarSanam Kubra SiddiquiSaud PashaTahir JawaidUmair ShamsiUmair Naveed IsmailYawar HerekarZia uddin

111-211-211engro.com

Documents

Engro Sustainability Report 2010