Merck Sustainability Report 2021

Climate action

TAG overview

Climate change is one of the major challenges facing us in the 21st century. In 2015, 195 nations collectively agreed to take action to significantly limit the rise in global temperatures. Because climate action and energy efficiency will pay off in the long run – for both the environment and our business – we have also made it our mission to help stem the tide of climate change.

How we are taking climate action

We want to do our part to preserve the climate and achieve the Paris Agreement on Climate Change. In 2020, we therefore drew up new objectives:

By 2030, we intend to lower our direct (Scope 1) and indirect (Scope 2) greenhouse gas emissions by 50% compared with 2020. This is to be achieved by reducing process-related emissions, implementing energy efficiency measures, and purchasing more electricity from renewable sources. We are also aiming to cover 80% of our purchased electricity with renewables by 2030.

Moreover, we plan to lower our indirect emissions along our entire value chain (Scope 3) by 1,500 metric kilotons of CO2 equivalents (CO2eq) by 2030. By 2040, we intend to have achieved climate-neutral operations throughout our entire value chain, a target that covers our Scope 1, 2 and 3 emissions.

In November 2021, our company decided to join the Science Based Targets initiative. In becoming part of this effort, we have committed ourselves to taking concrete steps to reach the Paris Agreement targets.

Roles and responsibilities

Corporate Sustainability, Quality and Trade Compliance (SQ), is responsible for overseeing all climate action efforts throughout the Group, with our individual sites and business units worldwide implementing the necessary measures at the local level. You can find more information under "Environmental Stewardship".

Our commitment: Standards and legal frameworks

We have three EHS standards in place to manage energy and process-related emissions consistently across the Group, specifically “Energy Management”, “Emissions” and “Emissions of Refrigerants”. We utilize an internal audit process to randomly check compliance with all EHS standards.

In addition to our own standards, we are subject to a wide array of national and international energy and climate regulations. At European level, for instance, we are required to comply with the EU Energy Efficiency Directive 2012/27/EU, which stipulates that companies must conduct regular energy audits or implement an ISO 50001-certified energy management system. The sites subject to these requirements are responsible for taking the requisite actions and furthermore undergo audits conducted by internal and external experts. In total, 14 sites have been certified to ISO 50001 thus far.

Our co-generation plant in Darmstadt and heating plant in Gernsheim (both in Germany) have made it necessary for us to participate in EU emissions trading since 2005. The EU’s 2030 Climate and Energy Framework is designed to achieve the objectives of the 2015 Paris Agreement, with EU emissions trading playing a key role in reaching the greenhouse gas reduction targets. The amended EU Emissions Trading Directive (2003/87/EC) took effect in April 2018, thereby updating the legal framework for the fourth phase of the EU emissions trading program (2021-2030) and tightening the rules for free CO2 allowances. Going forward, we will therefore increasingly have to purchase CO2 emission allowances.

Emissions Reduced

In 2021, we emitted approximately 1,843,000 metric tons of CO2 equivalents (CO2eq) (2020: 2,028,000 metric tons). Our direct emissions (Scope 1) totaled 1,522,000 metric tons of CO2eq, with process-related emissions accounting for 1,261,000 metric tons of CO2eq and fuel use accounting for the remainder. Indirect emissions (Scope 2) totaled roughly 321,000 metric tons calculated according to the market-based method, (approximately 385,000 metric tons according to the location-based method, which does not specifically take renewable energy sources into account). Greenhouse gas emission intensity (Scope 1 and 2) amounted to 0.09 kg of CO2eq per € of net sales in this period.

In 2020 and 2021, we focused on creating more transparency on our Scope 3 emissions. The Greenhouse Gas Protocol defines 15 categories for Scope 3 emissions from upstream and downstream activities. In 2021, our emissions totaled 5,716,000 metric tons of CO2eq. Categories 1 and 2 (Purchased Goods and Services and Capital Goods) accounted for the lion’s share, representing 68% of our total Scope 3 emissions in this period.

Greenhouse gas emissions in metric kilotons of CO2 equivalents, Scope 1 & 21

(Scope 1 and Scope 2 of the Greenhouse Gas Protocol)

Greenhouse gas emissions, Scope 1 & 2 (metric kilotons) (Bar chart)
1) In line with the Greenhouse Gas Protocol, for all previous years greenhouse gas emissions were calculated based on the current corporate structure as of Dec. 31 of the reporting year and retroactively adjusted for acquisitions or divestments of (parts of) companies, or for changes in emission factors (portfolio-adjusted).
2) The increase in greenhouse gas emissions as of 2020 is attributable to the acquisition of Versum in 2019.

Greenhouse gas emissions 2021 in metric kilotons of CO2 equivalents, Scope 3

Greenhouse gas emissions, Scope 3 (Pie chart)

Reducing process-related emission

With the integration of Versum Materials, acquired in 2019, into the Electronics business sector, our process-related emissions increased sharply – mainly in the production of special chemicals for the electronics industry. In 2021, we continued the investigations into reduction measures that we had begun in the previous year. In the process, we found new solutions for process optimization and for waste gas purification. We launched an initial pilot project for the thermal treatment of waste gas streams at the end of 2020.

In our Life Science business sector, we are recording process-related emissions primarily from the release of perfluorinated hydrocarbons (PFCs). In response, we have already replaced some emission-intensive production lines with equipment that does not emit PFCs.

Reducing emissions within our supply chain

You can find more information on the Supplier Decarbonisation Program under “Sustainable supply chain”.

Shifting to ocean freight

In 2019, our Healthcare business unit initiated a major transformation of its means of transport, which is expected to significantly reduce not only our CO2 emissions but also our logistics expenses. As part of the “Spezzatino” initiative, we reduced greenhouse gas emissions by switching all our products from air to sea transport wherever possible. We set ourselves the goal of transporting less than 10% of our healthcare products by air by 2023, thereby reducing our annual CO2 emissions by 10,000 metric tons. We already achieved this target by the end of 2021 and structurally reduced our transport-related emissions by 10,000 metric tons of CO2.

Transparency on CO2 emissions and energy consumption

We report to the Carbon Disclosure Project (CDP) on an annual basis. This organization assesses the ways in which companies are working to lower greenhouse gas emissions and minimize the risks and consequences of climate change, along with their success and strategy for doing so. Companies are rated from A to D-, with A being the top score. As in 2020, we received a B for 2021.

Green mobility

We aim to transition our car fleet primarily to lower emission engines by 2025 and are working to reduce the average emissions of our vehicles by approximately 50% relative to 2020 levels. Through our Green Fleet pilot, we are seeking to conserve resources and help employees at our German sites make the change to electric vehicles. Our employees can recharge their company, department or personal cars at 66 charging stations across six sites in Germany. We intend to double the number of charging stations by 2022. We also provide our employees in other countries with access to charging facilities, such as France, Switzerland, the United Kingdom, and the United States.

For those on the road, we offer the “Laden@road” program, which allows our employees to charge their company cars or personal vehicles at roughly 160,000 stations across Europe.

Through “Laden@home”, an initiative launched in Germany in April 2021, we provide € 1,700 to help cover the use of home wall charging stations and also pay for the resulting electricity costs.

Energy efficiency

In 2021, a variety of energy efficiency initiatives helped us save around 1,700 metric tons tons of CO2eq at our global headquarters in Darmstadt. For instance, we updated heating, ventilation and air conditioning systems, implemented energy-saving lighting concepts.

As part of the energy and water efficiency program of our Life Science business sector, we rolled out new tools in 2021 to help us assess projects for saving energy and water. In addition, we trained 40 employees from sites outside of Germany on energy management.

Slight rise in energy consumption

We consumed 2,454 gigawatt hours of energy in 2021, versus 2,374 gigawatt hours in 2020. Our energy intensity relative to sales totaled 0.12 kWh/€ in 2021.

Purchasing electricity from renewable sources

In 2021 we increased our focus on purchasing electricity from renewable sources. In this period, we sourced 30% of our purchased electricity from renewable energies (2020: 27%). Renewables represented 13% of our total energy consumption.

In 2021, we announced our lead role in one of the world’s largest buyer-organized aggregated procurements for renewable electricity to-date. We joined three other companies to sign 12-year Virtual Power Purchase Agreements (VPPAs) – bringing new renewable electricity to the grid. Construction of the 350-megawatt Azure Sky Wind and Storage project, which is located in the United States, is on-schedule with commercial operation planned for April 2022. We contracted for 68 megawatts of the 111 megawatts of capacity purchased by our buyers’ consortium. The Renewable Energy Certificates received through this agreement will match 65% of our total electricity consumption across all business sectors in the United States – and 100% of our Life Science sector in the United States. Starting in 2021, we also covered the power needs of our Brazil sites entirely through renewables. In line with our renewable energy strategy, we completed an assessment of the European renewable electricity markets to determine our best path forward. This assessment will guide our renewable electricity purchasing strategy in the coming years.

Employee incentives

We encourage our people to do their part to preserve the climate. Aside from regularly reporting on our Group-wide climate actions in our EHS newsletters, we also provide all employees with helpful information and tips on our Intranet. Moreover, we support members of our workforce who are seeking greener modes of transportation.

  • At our German subsidiaries, we offer a subsidy of € 150 towards monthly lease payments to employees who opt for a greener car model.
  • At our German sites, we also encourage workers to use climate-friendly forms of transportation through “bike4me”, a program enabling them to lease a bike at discounted rates with payments coming out of their pre-tax income.
CO2 equivalents
CO2 equivalents (CO2eq) indicate how much a specified quantity of a specific greenhouse gas contributes to the greenhouse effect using the global warming potential of carbon dioxide as a reference.
EHS
Short for “Environment, Health and Safety”, this refers to environmental management, health protection and occupational safety throughout a company.
Greenhouse gases
Gases in the atmosphere that contribute to global warming. They can be either naturally occurring or caused by humans (such as CO2 emissions generated by burning fossil fuels).
ISO 50001
This international standard defines defines globally recognized requirements for energy management systems.
Location-based approach
Location-based figures are calculated on the basis of the average emission factors of the area in which the electricity consumption takes place. In most cases, this method utilizes the national average.
Market-based approach
Marked-based figures are calculated on the basis of emission factors provided by electricity suppliers specifically for the electricity they sell.
Process-related emissions
Greenhouse gases released into the atmosphere during manufacturing operations.
Scope 1
This includes emissions that occur in our company, for instance by generating energy from fossil fuels or by releasing process-related emissions.
Scope 2
This includes emissions from purchased energy such as electricity, heat, steam, or cold.
Scope 3
Scope 3 includes indirect greenhouse gas emissions, such as the extraction and production of purchased materials, transport-related activities, waste disposal, and employee travel.

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