Transcript Novartis Global Compact - World Environment Center

Using HSE as a Model for
Corporate Citizenship
Presentation to WEC
North American Workshop:
Global Corporate Citizenship:
Multi-sector Partnerships for Progress“
April 25, 2003
Jim Thomas
Executive Director- Health, Safety, Environment & Business Continuity
Novartis Corporation
Novartis Corporation
A World Leader in Healthcare
Our Purpose
We want to discover, develop and
successfully market innovative
products to cure diseases, to ease
suffering and to enhance the quality of
life. We also want to provide a
shareholder return that reflects
outstanding performance and to
adequately reward those who invest
ideas and work in our company.
Novartis in the US
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Novartis Pharmaceuticals
Corporation — branded
pharmaceuticals
Novartis Consumer Health, Inc. —
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Infant & Baby Care: (Gerber baby
foods and baby care products )
• OTC: over-the-counter medications
• Generics: Geneva Pharmaceuticals,
Inc.
• CIBA Vision: contact lenses, lens care
and ophthalmic surgical products
• Animal Health: companion animal care
products
• Animal Vaccines - vaccines for the farm
animal market
Novartis Biomedical Research Institute
- worldwide pharmaceutical research
headquarters in Cambridge, MA
Headquarters in New York City
Approximately 15,000 employees
US accounts for more than 40% of
worldwide sales.
Why is Corporate Citizenship
Important to Novartis?
• Conducting business in
an ethical and socially
responsible manner is
part of our core values
Why is Corporate Citizenship
Important to Novartis?
• Our business is based on
innovation and our “license to
innovate” is granted us by
governmental authorities and civil
society based on their acceptance
of the benefits that we provide
through our products and of the
levels of risks that remain in our
activities. This is also influenced
by our reputation which is directly
impacted by our business actions
and ethics.
Building
Trust
Globalization and Corporations
Income disparities, environmental damage,
and cultural degradation are pointing the
spotlight on companies
Slide courtesy of BSR
Main Issue - Globalization
KEY FINDINGS
 Of the 100 largest economies in the world, 51 are corporations
(based on a comparison of corporate sales and country GDPs).
 The Top 200 corporations’ combined sales are bigger than the
combined economies of all countries minus the biggest 10.
 The Top 200s’ combined sales are 18 times the size of the
combined annual income of the 1.2 billion people (24 percent o
the total world population) living in “severe” poverty.
Source: “Top 200 - The Rise of Corporate Global Power”
by Sarah Anderson and John Cavanagh (Institute for Policy Studies - 12/2000
Importance of Reputation
Factors Most Influencing Public Impressions of Companies
(Answers are percent of respondents mentioning factor as one of their top two)
Social
Responsibility
49%
Brand/Quality
Reputation
Business
Fundamentals
40%
32%
Both corporate reputation and sales are at risk when customers
have negative perceptions of a company’s behavior.
Environics International’s CSR Monitor, 2001 /BSR
Impact of Consumer Demand
95%
66%
Believe that
Agree that profits are
companies should
more important to
sacrifice some profit
companies than
for the sake of
developing safe,
making things better
reliable, quality
for their workers
products
and communities.
for consumers.
72%
Say business has
too much power
over too many
aspects of life.
August 2000, Business Week/Harris Poll Data,
4058 surveyed in U.S./BSR
Pressure Point: Public Interest
90% want companies to focus on more than profitability
(US respondents only; 68% worldwide)
49% form an impression of a company based
on its social responsibility
39% respond negatively to companies that are
perceived to be not socially responsible
20% have actually avoided or spoke
out against products of
companies perceived not
socially responsible
Environics International’s CSR Monitor, 2001/BSR
John Elkington -CEO of SustainAbility
“The speed of
globalization often
means that companies
are moving ahead of
the ability of current
governance systems to
monitor and police.
Companies will be
expected to fill at least
some of the gap.”
Quote from the Novartis Health, Safety Environment Report 2000:
Sustainability and the UN Global Compact
Kofi Annan and the UN Global Compact
“…let’s choose to unite the powers of
markets with the authority of universal ideals.
Let us choose to reconcile the creative forces
of private entrepreneurship with the needs of
the disadvantaged and the requirements of the
next generations…”
Kofi Annan, UN Secretary General
Dr. Dan Vasella
Novartis Global Compact Initial Implementation Steps
• Public statement “Our Commitment to the Global Compact” (signed by
Daniel Vasella, Chairman and CEO)
• Participation in first UN Global Compact Meeting (New York, July 26, 2000)
• Formation of a Novartis - UN Global Compact Steering Committee
• Questionnaire produced, sent out, evaluated
• Management Briefing papers on major principles
•Database and Intranet website established
• Internal launch process planned, regional conferences to be conducted,
budget allocated
Management Involvement
• Executive Committee Novartis (ECN)
• Corporate Citizenship Steering Committee
(chaired by U. Bärlocher)
• Board of Directors
• Audit and Compliance Committee
• Global divisions/business units (BUs)
• Annual citizenship review
• Corporate Citizenship Executive
• Country level
• Annual review meetings within the local BUs
• Country-wide coordination among all Novartis BUs
• Formal compliance organization
Novartis Internal Policy Statement
•Policy on Corporate Citizenship as internalization of
the commitment to the UN Global Compact.
•Chairman’s Message on the Policy and the commitment
to the UN Global Compact.
“…as well as our belief that all our commercial
activities must be pursued in a responsible way
and that we should be ‘good citizens’ in all
respects.”
(it is part of our purpose, strategy and aspirations, our
management processes and code of conduct and
procedures.)
Health, Safety and Environment is the role model
• Policy ()
• Line management responsibility ()
• Management Process
• Standards (Guidelines, Guidance Notes) (WIP)
• Performance Data, Audits
• Business Unit Reviews (performance assessment)
• Target Setting, Incentives
• Reporting and Communication
• Corporate Citizenship Report ()
• External auditing or verification
• Stakeholder input
Novartis Corporate Guidelines
HSE Guidelines
Citizenship Guidelines
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Accountability and Reporting
Favorable Working Conditions
Discrimination/ Child and Forced Labor
Bribes, Business Entertainment, Gifts
•
Third Party Management
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HSE Management
Emergency Management
HSE in Development & Production
Biosafety
Occupational Health
Warehousing
Hazardous Waste Management
Selection and Management of 3rd Party
Contractors
Incident reporting and Learning
Setting and Reviewing Provisions for
Environmental Liabilities
Transportation
Triple Bottom Line Reporting
CONTENTS
Topic
Page Number
Financial Highlights
News in 2002
Letter from Daniel Vasella
Amazing Patient Stories
2
3
5
9
Pharmaceuticals
Joining Forces in the Quest for Cures
Consumer Health
Corporate Citizenship
Animal Welfare
Health, Safety and Environment
Human Resources
14
22
29
37
46
49
60
Corporate Governance
Board of Directors
Executive Committee
Business Unit Heads
67
79
82
84
Operating and Financial Review
Equity Strategy and Share Information
Group Consolidated Financial Statements
and Notes
Principal Companies
Reconciliation to US GAAP
Financial Statements of Novartis AG
Due Dates for Reporting and Contacts
87
98
Division and Product Review
Corporate Governance
Financial Report
104
138
140
151
157
Novartis Annual Report Verification
HSE & Social
Financial
Potential Issues for Novartis
Based on the initial survey in the spring of 2001, several
issues have been identified:
• Access to treatment
• Compliance of suppliers
• Living wages
• Child labor
• Human rights
• Diversity / Discrimination / Harassment
Issue: Access to Medicine
“Improving the health and standard of living of all people
is a shared responsibility between the private sector, the
public sector and other stakeholders. Novartis actively
supports efforts towards the improvement of access to
treatment”
• Leukemia - patient assistance program (Gleevec)
• Malaria - partnership with WHO (Coartem)
• Leprosy - partnership with WHO (through Novartis Foundation)
• Tuberculosis - donation of DOTS (Daily Observed Treatment,
Short course)
• New Novartis Research Center in Singapore for neglected tropical
diseases
Issue: Compliance of Suppliers
“We give priority to business partners, suppliers and contractors who share our societal and environmental values,
and we support their efforts to promote these values through
their business activities.”
• A focus area for improvement throughout the organization
• HSE guideline established; implementation is under way
• Additional issues may materialize (e.g. living wages, etc.)
• Analysis of suppliers initiated (~50’000 parties); detailed
process under development
• Top-down as well as bottom-up approach
Global Compact Management Cycle
Novartis
Commitment
Preparatory
Compliance Review
Novartis Policy Statement
Global Compact
Steering Committee
Communications
Committed Novartis
People
Global Compact
Clearinghouse
Committed Business
Partners
Audits
Stakeholder Relations
& Issues Management
Benchmarking & competitor
analysis
Continuous
Improvement
Corporate Social & Environmental
Responsibility Tools
Novartis Corporate Values
UN Global Compact
Governance
Corporate Citizenship
Code of Conduct
(Company Responsibilities)
(Employee Responsibilities)
HSE
SOCIAL
LABOR
COMPLIANCE
Accountability
ETHICS
CEO Survey:
The Business
Case
"Please list among the following factors the three
that you consider the most important in making
the business case for your corporate citizenship
activities."
License to
Operate
Operational
Efficiency
Competitiveness
& Market Position
Access to Capital
Source: Responding to the Leadership
Challenge: Findings of a CEO Survey on
Global Corporate Citizenship
World Economic Forum & Prince of Wales
International Business Leaders Forum, 2003
Learning &
Innovation
Reputation &
Brand
Employee
Motivation
Risk
Management
0
20
40
60
80
% of CEO Replies
100
CEO Survey:
Integration
Tools
"What do you consider the three most important
steps or tools to embed your corporate citizenship
values and policies throughout the company's
management structure."
Dialogue with External Stakeholders
Manage Supply Chain Relationships
Integrate into Innovation Process
Build Internal Skills
Source: Responding to the
Leadership Challenge:
Findings of a CEO Survey on Global
Corporate Citizenship
World Economic Forum & Prince of
Wales International
Business Leaders Forum, 2003
Establish Performance Measures
Integrate into Incentive structure
Communicate Values Internally
Gain Board Support
0
20
40
60
80
% of CEO Replies
100
Strategic Business Issues
“These issues are now recognized not
as social and environmental issues, but
as strategic business issues.”
-
Linda Descano -2002, Director and Portfolio Manager, Smith
Barney Asset Management - $ 2 billion in Social Awareness
portfolios
Innovest Comparison of Pharma Industry
20%
SPREAD
15%
10%
5%
May-02
Apr-02
Mar-02
Feb-02
Jan-02
Dec-01
Nov-01
Oct-01
Sep-01
Aug-01
Jul-01
-5%
Jun-01
0%
May-01
Companies receiving
above
average EcoValue21®
ratings have
outperformed companies
with below average
ratings by approximately
17 percentage points
(1700 basis points) since
May 2001.
-10%
TOP HALF
-15%
-20%
BOTTOM HALF
-25%
-30%
May-01 Jun-01
Jul-01
Aug-01 Sep-01 Oct-01 Nov-01 Dec-01 Jan-02 Feb-02 Mar-02 Apr-02 May-02
Difference
0.0%
4.0%
3.7%
3.9%
7.1%
5.8%
5.2%
5.9%
9.0%
16.9%
16.5%
15.5%
17.2%
Top Half Average
0.0%
-1.4%
-0.2%
-3.5%
-1.5%
-0.8%
-2.3%
-3.0%
-8.3%
-3.5%
-4.7%
-7.7%
-8.2%
Bottom Half Average
0.0%
-5.4%
-3.9%
-7.4%
-8.6%
-6.6%
-7.5%
-8.9%
-17.2% -20.4% -21.2% -23.3% -25.4%
Source: Innovest Strategic Value Advisors,
2002
Business Value - Dow Jones Sustainability Index
Socially Responsible Investing (SRI)
• World-wide total value of SRI managed assets is over
US$ 2 trillion
• Last two years have seen growth rates of 85% in the
US and 64% in the UK
• In 2001, 11% of the social funds tracked by
SocialFunds.com were ranked in the top 10% of all
mutual funds (28% in top quarter of all funds)
• Shareholder resolutions on social & environmental
issues were at a 9-year high in 2001
UK Leadership in CSR Requirements
UK Regulation, in effect since 7/00, requires UK Pension Fund
trustees to disclose how they account for social responsibility
issues in their investment strategies (Germany has a similar
regulation and The Netherlands has a voluntary program)
The Association of British Insurers (ABI) issued guidelines that
its members will require the companies that they invest in to
disclose their external social, ethical, and environmental risks
and their policies for managing these risks (ABI members
account for more than 20% of the London stock exchange
investment)
Morley Fund Management, a major London-based asset
manager which manages approximately 2.5% of the UK stock
market, announced on 3/10/01 that it would begin requiring
large UK companies to publish environmental reports
The business case - or the right thing to do ?
• It’s not a question of “either or” - it’s a positive
feedback loop
• Successfully managing these complex interactions is
an indication of leadership and thus a leading
indicator for sustained, future economic success
• Successfully managing corporate citizenship is a
proxy for superior management in general.
• Corporate Citizenship has the power to align
company performance with personal values
Novartis Corporate Citizenship
Source: Pathways: The Novartis Journal April/June 2002
Success in the 21st Century
Who you are and
what you stand for
are becoming just as important
as the quality of your products
and services
“We also want to benefit society
through our economic contribution,
through the positive environmental
and social consequences of our
activities and through an open
dialog with our stakeholders.”
Dr. Daniel Vasella,
Chairman & CEO, Novartis AG
Quote from the Novartis Commitment to the UN Global Compact - July 14, 2000