Corporate Social Responsibility And Sustainability Report

Fans at the Santiago Bernabéu stadium.1.2 Sustainability at Real MadridFounded in 1902, the Real Madrid FootballClub is an institution with over one hundredyears of history. Its corporate purpose and theunerring will of its membership endow it witha permanent and perpetual character. To dothis, the club focuses on its long-term future,firmly committed to a corporate culture ofsustainability in all its decision-taking processesand understanding social trends and challengesas a strategic lever.This sustainability is demonstrated in thefollowing aspects:- Good Governance and Transparency: strictcompliance with these principles, which are thepillars on which the day-to-day activity of theclub is based. Therefore, the club ensures thatthe culture of compliance and good governancepermeates throughout the structure and at alllevels of the organisation. All this while carryingout a responsible economic management thatensures the indefinite continuity of its activities.- Environmental: minimising the environmentalimpact of the club's activities to stop theadvancement of climate change and preservebiodiversity.- Social: maximising the club's contribution tosociety in terms of prosperity through qualityemployment, promotion of sport and its values:as well as contributing to community activities8that reflect Real Madrid's commitment to humanrights and the fight against discrimination,violence and inequality.Real Madrid today, is the accumulated legacyof previous generations of members, players,coaches, staff and followers who havebequeathed to us this world-class club wehave inherited from them. For Real Madrid,sustainability implies accepting this inheritance,along with a pledge to manage it well for thefuture generations of Real Madrid members andsupporters, to ensure that our present resultsdo not jeopardise, but rather assure future ones,and that the management of every one of ourresources we are undertaking today does notput at risk the enjoyment of them that the futuregenerations who follow us have the right toBased on widely accepted definitions of theterm, Real Madrid considers sustainability tobe the management of the impacts its businessgenerates on the groups with whom it frequentlyinteracts. Through continuous dialogue withthese groups, this impact management aimsto achieve sustainable relationships basedon mutual benefit and continually striving togenerate synergies and balance founded onrespect for the legitimate interests of all parties.With this in mind, Real Madrid has defined allthe groups it considers as its stakeholders andwith whom it undertakes to seek long-termcommitments, which will be explained later onin this report.CORPORATE SOCIAL RESPONSIBILITY AND SUSTAINABILITY REPORT REAL MADRID 2019-20201.3 Real Madrid Corporate Governanceand Transparency Policy1.3.1 Corporate structureReal Madrid Football Club is a nonprofit privatesports entity formed by its members in order topromote and practice the sports established inits Articles of Association.1.3.2 Administration of the clubThe management and representation of theentity corresponds to the General Assembly,the President and the Board of Directors. Thesethree bodies are democratically elected bythe members, whose wishes are representedin the way that the club is administered. Theprinciples of accountability and transparencyare systematically applied in all the areas of theclub in accordance with the standards of goodgovernance.Good corporate governance manifests itself inthe administration of the club by way of crosscutting policies and procedures that ensure thecontrol of key decisions such as appointments,remunerations, purchases and investments.As far as all critical processes are concerned,the procedures to be followed have been definedin such a way that their implementation is fullyverifiable, traceable and auditable. The applicationof good corporate governance principles ensuresthat key decisions are endorsed and are firstlysubjected to the scrutiny of the director of thecorresponding area, secondly to the validation ofthe operational management structure that actsacross the entire organisation (Human Resources,Legal Services, Procurement, ExpenditureControl, etc.), and thirdly to the approval ofcommittees formed by senior club executivesand members of the Board of Directors. AnExecutive Committee, a Procurement Committeeand a Financial Committee have been setup, who meet periodically to make decisionsregarding appointments, transfers, terminations,staff salaries, purchases of goods and services,investments and budget tracking and measuresto minimise risks. Likewise, the Board of Directorsreceives regular reports from the ProcurementCommittee and the Economic Committee, drawsup the action plans and implements the operatingdecisions in order to meet the establishedobjectives. It also supervises and heads up theadministration and management of the clubin the broadest sense of the word. Finally, thecorrect implementation of all the processes issupervised by the Department of Complianceand Internal Auditing. All these steps ensurethat the correct decisions are taken, that theseconcur with the strategy and do not exceed theapproved budget.Mandatory and auditable procedures exist withthe same objective as regards the approval ofinvoices received, the settlement of expensesand attentions to protocol so as to preventabuses from occurring in sensitive areas.This exhaustive operational control is not limitedto expenditure. The follow-up of the collectionof invoices issued is also systematised in orderto keep arrears and non-payments under strictcontrol in all of the club’s revenue areas, with thisbeing initially supervised by administration and,ultimately, by the Economic Committee.REAL MADRID C.F.9

1.3.6 Election of the president and Board of DirectorsThe Board of Directors is the body directly responsible for the administration, governance, management and representation of the club. The Board ofDirectors oversees the actions of the club’s executive managers and in turn reports its findings to theGeneral Assembly, thereby ensuring the principlesof good corporate governance are applied to themanagement of Real Madrid at all times.The President and the Board of Directors are democratically voted in as a result of the corresponding elections for which those members who are incompliance with that established in the articles ofassociation put themselves forward as candidates.Elections to choose a new President and Boardof Directors are called under the followingcircumstances:Florentino Pérez during theReal Madrid General Assembly.1.3.3 The club's Transparency policyReal Madrid fully assumes its obligations ofaccountability, publication of relevant data anddisclosure of its corporate activities. In this regard,over recent years, it has gradually introducedan integrated Transparency Policy, culminatingin the website http://www.realmadrid.com/sobre-el-real-madrid el/club/transparencia. Thewebsite publishes considerable institutional,financial, organisational and contract relateddata as required under Spanish and internationalregulations, such as the Law 19/2013 onTransparency, public information and goodgovernance, and the Transparency InternationalINFUT indicators. Additionally, in 2019 RealMadrid was awarded the degree of excellence inthe transparency of its labour relations issued bythe prestigious Institute for Transparent LabourRelations.The transparency policy forms part of a broaderrange of corporate responsibility obligationsand good governance. It is accompaniedby the Code of Ethics and monitoringprogrammes to ensure compliance, as well asquality assurance systems and stakeholderparticipation.10Also, the club’s policies include a Criminal RiskManagement System, the purpose of which is,on the one hand, to lay down the procedures foridentifying and managing risks to prevent crimesbeing committed that could affect the club, andon the other, to establish the fundamental antibribery principles. An executive summary of thepolicy is published on the Transparency portal inthe Compliance and Good Governance section.The General Assembly consists of all themembers who are eligible to vote in accordancewith the system of democratic representationestablished in the club’s bylaws.1.3.4 Members’ rightsThe General Assembly is the top institutionalbody which systematically applies the principleof accountability and guarantees goodgovernance for how Real Madrid is managed.All members have the right to enjoy the club’sactivities in accordance with the rules establishedfor doing so, and to choose not only the bodiesthat represent and govern the club, but also themost senior bodies which monitor and controlthe corporate governance of Real Madrid in ademocratic manner.1.3.5 General AssemblyThe General Assembly is the most senior of theclub’s governance bodies and its duties includethe approval and ratification or the censure ofthe President and of the Board of Directors.CORPORATE SOCIAL RESPONSIBILITY AND SUSTAINABILITY REPORT REAL MADRID 2019-2020The General Assembly examines and, whereappropriate, approves the Annual Report,Balance Sheet and Profit and Loss Accountof each financial year, as well as the followingyear’s budget.Other exclusive powers of the GeneralAssembly include the amendment of articlesof association, taking the most importanteconomic decisions, passing a motion of noconfidence in the President or in the Board ofDirectors, and the calling of a referendum amongthe members in order to decide upon matters ofextreme importance. All the foregoing endowsthe General Assembly with an extremely widerange of powers, all of which go towardsguaranteeing the sound corporate governanceof the club.a. Due to the term of office of the former Presidentand Board of Directors having expired.b. Upon the decision of the President or of theBoard of Directors.c. When so agreed by the General Assembly dueto the resignation or disqualification of theBoard of Directors, or whenever the numberof Board members falls below a total of fivedue to resignations, abandonments, deaths orphysical disabilities.d. Due to a vote of no confidence approved inaccordance with that stipulated in the articlesof association - bodies, and with the controlprocedures implemented by the GeneralAssembly to ensure the good governancepractices of the club.The Board of Directors remains in office for aperiod of four years as of its announcement,and its members can put themselves forward forre-election, either as a single unit or separatelyas parts of other candidacies. The Board ofDirectors is endowed with the widest range ofpowers with which to govern, administrate andrepresent the entity as the maximum body forexpressing the will of its members, with the onlylimit upon these being those matters that canonly be decided upon by the General Assembly.REAL MADRID C.F.11

1.3.7 Control systemsAs mentioned above, Real Madrid is atransparent institution that is committed to theprinciples of good corporate governance and,above all, with the principle of accountabilitybeing systematically applied at all levels of clubmanagement. The control activity is the result ofthe workings of the club coming under constantscrutiny by its internal executive bodies, by allof its members, by the authorities, and even bypublic opinion via the communication media.The internal executive body is the InternalControl and Auditing Board, reporting to thePresident and the Board of Directors. It definesand audits the control procedures and systemsthat are required to ensure a maximum degree ofinstitutional diligence. The membership exercisescontrol via the Delegate Members’ Meeting andthe Board of Directors. The sports authorities(national and international federations, nationalleagues and the (Spanish) National SportsCouncil) also permanently supervise the club’sactivities, which are also under the constantscrutiny of the different communication media,further proof of the club’s transparency withrespect to the management of all its activities.As a whole, the control systems implementedby Real Madrid ensure that the way in which itis run is permanently adapted to the principlesof good governance and transparency to whichthe club unreservedly adheres. The control,the degree of consultation with respect todecision taking and the policy of accountabilityare rigorously applied to prevent the taking ofarbitrary decisions and ensure that nobody cantake decisions that compromise the good nameand administration of the Club.The Real Madrid Organisation and ManagementModel for crime prevention has been in forcesince the 2013-14 season, which the clubnamed the Criminal Risk Management System(Sistema de Gestión de Riesgos Penales SGRP). This document resulted from the currentsituation regarding the prevention of risk arising12from the organisations’ liabilities. The modeldescribes the club’s existing control protocols,the delegation of authority, the sanctionssystem and the supervisory bodies. This way, itis made clear to the entire organisation, the wayin which decisions are made and powers andresponsibilities are assigned in accordance withinternal approval procedures, the way in whichthe correct application of these procedureswill be supervised and monitored, and lastly,the sanctions system to be applied to respondto any unlawful behaviour or failure to complywith the regulations established by the club.The Organisation and Management Modeldescribes the club’s existing control systems,and defines the functions of the bodies involvedin matters of internal control. Delegate MembersAssembly, Board of Directors, MembershipDisciplinary Commission, Ethics Committee,Executive Committee, Financial Committee,Procurement Committee and Internal Controland Auditing Board.The Board of Directors as the body responsiblefor establishing the control policy, has appointeda person responsible enforcing compliance withthe regulations, (a Compliance Officer). Thisperson will have ultimate responsibility in theorganisation for oversight and control to preventunlawful behaviour and to ensure compliancewith the regulations.In a further step towards monitoring compliancewith the regulations, and as a clear sign of RealMadrid’s commitment to ensuring the crimeprevention model is properly installed, the clubobtained in the 2017-2018 season accreditationfrom the Spanish standards agency AENOR,certifying full compliance with all requirementsof the Criminal Compliance ManagementSystem in accordance with the UNE 19601:2017standard. This made Real Madrid one of thefirst membership organisations in Spain toobtain it, and it is confirmation of its ongoingpledge to stay at the forefront in adoptingthe best practices of good governance andtransparency. It has become a benchmark inthe introduction of criminal risk management inthe sports industry.One crucial area in the crime prevention model,is that of cybersecurity. During 2017-2018season, a Cybersecurity Committee was setup, comprising representatives from the legal,technology, human resources and controldepartments, invested with responsibility fordetecting and blocking unauthorised actionsand for development of specific regulationsrelating to technological risks.Meanwhile, in accordance with what isdescribed in the following point, since RealMadrid has joined the United Nations GlobalCompact, this control activity has been furtherreinforced, with a commitment to the periodicalreporting in a Progress Report of the sustainabledevelopment actions implemented.The club has likewise established a Criminal RiskPrevention System, the purpose of which is, onthe one hand, to lay down the procedures foridentifying and managing risks to prevent crimesbeing committed that could affect the club, andon the other, to establish the fundamental antibribery principles. The executive summary of thepolicy is published on the Transparency portal inthe Compliance and Good Governance section.Another key aspect in relation to the controlsystems is the introduction of the TransparencyPolicy, which aims to go beyond the legalrequirements established by the Law 19/2013on transparency, by publishing all the data andindicators required by the INFUT InternationalTransparency Index, in which Real Madridhas obtained the highest score in the lastaudit conducted. This enables and activatesan on-going corporate control based on thepermanent and updated publication of theclub’s relevant information, increasing its ownlevel of demands and promoting the excellenceof its control systems.CORPORATE SOCIAL RESPONSIBILITY AND SUSTAINABILITY REPORT REAL MADRID 2019-2020REAL MADRID C.F.13

2. REAL MADRIDCORPORATE SOCIALRESPONSIBILITYThe expectations and needs of our stakeholdersare at the heart of Real Madrid's CorporateSocial Responsibility. Identifying these andestablishing priorities on which to act will beessential work to developing a sustainablestrategy that allows us to advance in thecreation of economic, social and environmentalvalue.As a result, in accordance with this strategy andthe founding values of the club, Real Madridhas joined the United Nations Global Compact,becoming the first football club to sign it as aparticipant, the highest level of commitment.The Global Compact is the world's largestcorporate sustainability initiative: a globalmovement of sustainable companies andorganisations committed to creating the worldwe all long for, working to generate positiveresults in all three dimensions of sustainabledevelopment: the economy, society and theenvironment.Its actions are based on the 10 Principles ofthe Global Compact and its strategy is orientedtowards the achievement of the 17 SustainableDevelopment Goals (SDGs), which make upthe so-called 2030 Agenda. These goals areinterrelated to cover the three dimensions ofsustainable development: economic growth,social inclusion and environmental protection.2.1 Stakeholders servedby Real Madrid2.1.1 MembersThe Members of Real Madrid Football Club areindividuals who, upon meeting the regulationsapproved by the General Assembly, join the entityand are bestowed with the rights and obligationscontained in the statutes. The members arethe owners of the club and, as such, its mostimportant stakeholders.2.1.2 Players and refereesReal Madrid’s corporate purpose is to promotesport. Therefore, all the players and referees area group of great importance to the club.2.1.3 Employees2.1.8 SuppliersReal Madrid not only depends on its players inorder to pursue its business, but also on the restof the staff who provide their services to the club.Suppliers are also a group of strategic interestin our value chain, as essential partners in orderto offer goods and services that comply with setparameters and assist in achieving the club’soverall objectives.2.1.4 Sporting and public administrationsOur sporting activity entails a continuousrelationship with sporting administrations:national and international federations, theprofessional leagues in which we participateand the National Sports Council. Our economicactivity also entails a continuous relationshipwith public administrations at all levels: national(Inland Revenue, Social Security), regional(Community of Madrid) and municipal (MadridCity Council).2.1.5 Other clubsReal Madrid’s sporting activity inevitably entailsparticipation in local, national and internationalcompetitions. The other clubs we competewith are another of our priority interest groupswith whom we aim to establish and fulfil firmcommitments.2.1.6 ClientsOur activity requires economic income thatoriginates from our clients. Our clients are bothcompanies and individuals. These companiesinclude television channels, sponsors, licensees,and lessees that rent boxes and facilities forall kinds of events. The club’s individual clientsare those that purchase a ticket for any of thesporting events that we organise, a ticket to visitour facilities and exhibitions or buy the productswith our brand.2.1.7 FansProcurementmanagementandservicecontracting are regulated by internal rules, controlsystems and procedures in order to achievethe best possible supply option, optimizing theinvestment made.2.1.9 SOCIETY AND THE ENVIRONMENTWe also feel a great responsibility that we look toarticulate in the form of commitments made withsociety at large. Real Madrid is the institution it isbecause of the community it belongs to, whichoffers it considerable support. In response, RealMadrid commits itself to helping the needy andassisting community projects in which its valuesand sporting experience may be useful.Real Madrid is also committed to trainingnew generations of sports managers that willcontribute to improving their communities’health, recreation and economies.Our present and future vocation leads us to workwith youngsters and commit ourselves to theirfuture. We are therefore careful that our impacton the environment does not compromise itsenjoyment by future generations.2.1.10 The mediaThe club is aware of the interest it attracts fromsociety and public opinion. The club is awarethat social media fulfills an essential role and iscommitted to it as a relevant stakeholder.The fans are those that support our teams in thevarious competitions in which we participate.Real Madrid is a club that is open to everyone.Among the fans, of particular interest for RealMadrid are the Fan Clubs and other followerswho have a direct relationship with the clubthrough the Madridistas Loyalty Programme.14CORPORATE SOCIAL RESPONSIBILITY AND SUSTAINABILITY REPORT REAL MADRID 2019-2020CO

4 corporate social responsibility and sustainability report real madrid 2019-2020 real madrid c.f. 5 Real Madrid's 23 European Cups, in the boardroom of Real Madrid City's new corporate office .