Merck Sustainability Report 2021

Sustainability strategy & goals

TAG overview

Numerous global challenges such as climate change, resource scarcity and unequal access to health in various countries are also decisive for our company. In order to address them, we continuously seek solutions made possible by science and technology. At the same time, we are working to make our business models more resilient.

Our approach: sustainable progress

Our ambition is to leverage science and technology to achieve progress for mankind. For us, sustainable entrepreneurship and profitable growth go hand in hand; we can remain competitive only by creating added value for society. Through our innovative and high-quality products, we want to help meet global challenges. At the same time, our products secure our financial performance capability.

Responsible action is an integral part of our company culture. This also includes respecting the interests of our employees, customers and investors, as well as society. For more than 350 years, our company has been shaped and guided by strong values. Our success is built on courage, achievement, responsibility, respect, integrity, and transparency – values that underpin our understanding of sustainable entrepreneurship.

Safety and ethics matter just as much to us as business success. We mitigate ethical, economic and social risks as far as possible. During the manufacture of our products, we aim to keep our impact on the environment as low as possible, which is why safe production techniques, high environmental standards and strict quality management are of course so important to us. Furthermore, we aim to strengthen our company by recruiting, developing and motivating talented employees. We want to set an example for ethical conduct.

We closely monitor new global trends and challenges. For example, in order to clearly understand the complex nature of the expected changes, we make use of the so-called scenario technique, which enables us to identify and incorporate aspects of strategic relevance. We also participate in dialogues and initiatives, consult with other organizations in our industry and assess media and news coverage. This allows us to minimize risks while also leveraging new business opportunities.

Implementing the strategy globally

The rapidly growing challenges facing society and the environment require a clear objective for the coming years. That is why we have integrated sustainability into our enterprise strategy as an essential component and have set ourselves three strategic sustainability goals.

Our sustainability strategy

Our sustainability strategy (Graphic)

In order to achieve our sustainability goals, we have defined seven focus areas. Within these focus areas we are currently implementing numerous initiatives and projects and are measuring our progress.

Measuring progress made with the sustainability strategy

In 2021, we defined various key indicators in order to record and measure progress made through our three sustainability goals.

As of 2022, we will be adding a sustainability factor to the Merck Long-Term Incentive Plan (LTIP). The 2021 Annual General Meeting approved a revised compensation system for the members of the Executive Board. For the sustainability factor, the company uses the three key indicators marked in the table. Details on how this sustainability factor is calculated can be found in the Compensation Report.

Our key indicators

Goal 1: In 2030, we will achieve human progress for more than one billion people through sustainable science and technology.

Focus area

 

Sustainability key indicators

 

Further details

Sustainability innovation and technology

 

Percentage of newly published patent families with positive sustainability impact

 

 

 

 

 

 

Health and wellbeing impact

 

People treated with our Healthcare products1

 

Goal 2: By 2030, we will integrate sustainability into all our value chains.

Focus area

 

Sustainability key indicators

 

Further details

Sustainability culture and values

 

Percentage of women in leadership positions

 

 

 

Percentage of employees trained on sustainability

 

Reporting as of 2022

 

 

 

 

 

Sustainable and transparent supply chain

 

Percentage of relevant suppliers (in terms of number and purchase volume) that are covered by a valid sustainability assessment1

 

 

 

 

 

 

Securing our social license to operate in all regions

 

Environment, Health and Safety (EHS) Incident Rate

 

 

 

Incidents related to Global Social and Labor Standards Policy"

 

 

 

Lost Time Injury Rate (LTIR)

 

Goal 3: By 2040, we will achieve climate neutrality and reduce our resource consumption.

Focus area

 

Sustainability key indicators

 

Further details

Climate change and emissions

 

Greenhouse gas emissions (Scope 1+2)1

 

 

 

Indirect greenhouse gas emissions (Scope 3)

 

 

 

Percentage of purchased electricity from renewable sources

 

 

 

 

 

 

Water and resource intensity

 

Waste Score

 

 

 

Water Intensity Score

 

 

 

Water quality

 

Reporting as of 2022

1

The key indicator is used to determine the sustainability factor for the Merck Long-Term Incentive Plan (LTIP).

Goal 1: In 2030, we will achieve human progress for more than one billion people through sustainable science and technology.

Focus area

 

Sustainability key indicators

 

Further details

Sustainability innovation and technology

 

Percentage of newly published patent families with positive sustainability impact

 

 

 

 

 

 

Health and wellbeing impact

 

People treated with our Healthcare products1

 

Goal 2: By 2030, we will integrate sustainability into all our value chains.

Focus area

 

Sustainability key indicators

 

Further details

Sustainability culture and values

 

Percentage of women in leadership positions

 

 

 

Percentage of employees trained on sustainability

 

Reporting as of 2022

 

 

 

 

 

Sustainable and transparent supply chain

 

Percentage of relevant suppliers (in terms of number and purchase volume) that are covered by a valid sustainability assessment1

 

 

 

 

 

 

Securing our social license to operate in all regions

 

Environment, Health and Safety (EHS) Incident Rate

 

 

 

Incidents related to Global Social and Labor Standards Policy"

 

 

 

Lost Time Injury Rate (LTIR)

 

Goal 3: By 2040, we will achieve climate neutrality and reduce our resource consumption.

Focus area

 

Sustainability key indicators

 

Further details

Climate change and emissions

 

Greenhouse gas emissions (Scope 1+2)1

 

 

 

Indirect greenhouse gas emissions (Scope 3)

 

 

 

Percentage of purchased electricity from renewable sources

 

 

 

 

 

 

Water and resource intensity

 

Waste Score

 

 

 

Water Intensity Score

 

 

 

Water quality

 

Reporting as of 2022

1

The key indicator is used to determine the sustainability factor for the Merck Long-Term Incentive Plan (LTIP).

In order to assess the sustainability of our products, technologies and business activities, we developed the Sustainable Business Value (SBV) method. It enables us to evaluate the positive and negative impacts of our activities on society along our entire value chain. This gives rise to a monetary value that quantifies the societal benefits a product offers, for instance. In addition to ESG (Environmental, Social, Governance) parameters, SBV also incorporates economic and ethical aspects as well as digitalization and the benefits of the product itself. The data help us drive sustainability across our business operations and position ourselves for future success. At the end of 2021, we launched a computer app that enables us to further embed this Sustainability Impact Valuation method in the company. This provides employees with a structured process that they can use to assess the sustainable contribution to value made by their product or project.

Our operational sustainability goals

Our three strategic goals make our long-term sustainability ambition clear. In order to achieve them, we have also defined operational sustainability goals. These are more specific, may apply for a shorter time frame and are aligned with our current business activities.

Our three strategic goals make our long-term sustainability ambition clear. In order to achieve them, we have also defined operational sustainability goals. These are more specific, may apply for a shorter time frame and are aligned with our current business activities.

Goal 1: In 2030, we will achieve human progress for more than one billion people through sustainable science and technology.

Focus area

 

Operational target

 

Actions 2021

 

Status

 

Material topic

Impact of our technologies and products on health and well-being

 

By 2030, we will make sufficient praziquantel treatments available to treat up to 90 million school-aged children per year.

 

182 million tablets provided in 2021, enabling the treatment of 73 million school-aged children

 

In progress

 

Health for all

Impact of our technologies and products on health and well-being

 

By 2023, test our equitable and value access strategy with pilot programs for two products of our innovative product portfolio in at least two low- and middle- income countries.

 

Development of the equitable and value access strategy

Alignment and endorsement of internal stakeholders for the strategy

Selection of pilot products and countries

 

New target

 

Health for all

Impact of our technologies and products on health and well-being

 

By the end of 2022, pilot outcome-based contracting models in one to two markets for our Fertility product portfolio.

 

Dialogues with third parties

Obtained internal and external approval

 

New target

 

Health for all

Impact of our technologies and products on health and well-being

 

By 2023, we will develop and implement new key strategies in proactive benefit-risk management, process optimization, automation, and pharmacovigilance oversight.

 

Implemented a tiered portfolio management on the basis of a risk-based approach to further concentrate resources on safety activities where it is of most value for the patients

Implementing real-time pharmacovigilance intelligence to enable the adaption of our methods, processes and deliverables to the continuously changing global legislative requirements for pharmacovigilance and patient safety

Practice proactive and predictive safety by developing a robust, cross-functional benefit-risk strategy that helps us deliver therapies that are truly differentiated and provide transformational value to patients

Optimizing and automating the processing of individual case safety reports (ICSRs) from collection to reporting in order to significantly reduce manual efforts and further improve quality, while maintaining a high level of timely compliance in reporting

 

In progress

 

Product safety & quality

Goal 2: By 2030, we will integrate sustainability into all our value chains.

Focus area

 

Operational target

 

Actions 2021

 

Status

 

Material topic

Sustainability culture and values

 

Aim for gender parity in leadership by 2030.

 

We conducted a pay equity analysis in 2021

 

New target

 

Diversity & inclusion

Sustainability culture and values

 

Aim for 30% nationals from Asia, LATAM and MEA in leadership (Role 4+) by 2030.

 

We launched DE&I toolkits for HR and managers. Additionally, we trained recruiting and sourcing employees

 

New target

 

Diversity & inclusion

Sustainability culture and values

 

Aim for 30% of underrepresented ethnic colleagues in United States leadership (Role 4+) by 2030.

 

We enhanced mentoring/sponsoring programs and supported internal employee networks for employees of various ethnic origins and international employees. Additionally, we increased referral bonuses for ethnic talent in the US depending on market needs

 

New target

 

Diversity & inclusion

Sustainability culture and values

 

By 2026, all leaders will have participated in inclusive leadership workshops.

 

37 % of our leaders took part in the Inclusive Leadership Training

 

New target

 

Diversity & inclusion

Sustainability culture and values

 

We aim to bring our LTIR (Lost Time Injury Rate) below 1.0 by 2025.

 

Through our BeSafe! program we continuously raise employee awareness of workplace dangers and teach them rules for safe behavior

 

New target

 

Health & safety

'Sustainable and transparent supply chain

 

By 2022, we will introduce a Group-wide security audit management program.

 

Planning and conducting nine internal pilot security audits

Process established that makes it transparent as to how we comply with the legal, official or industry-specific requirements

Definition of performance indicators to ensure process capability as an essential basis for risk minimization

 

New target

 

Product safety & quality

Securing our social license to operate in all regions

 

By end of 2023, all subsidiaries of our company will have a new Third Partner Risk Management process and tool to conduct business only with legally compliant third parties.

 

Launch of the new Third Partner Risk Management process and tool for pilot countries

 

In progress

 

Governance & compliance

Securing our social license to operate in all regions

 

By 2022, we will roll out a risk identification process in a staggered, top-down approach to get a better risk overview on bribery and corruption related risks.

 

Start of risk assessment with global functions

 

In progress

 

Governance & compliance

Securing our social license to operate in all regions

 

By 2024, we will roll out the process and tool which will help to further streamline the centralized governance for the interactions with healthcare stakeholders and will further increase monitoring as well as risk control capabilities.

 

No actions to report as the target was defined at the end of 2021. Progress towards target achievement will be presented in the Sustainability Report 2022

 

New target

 

Governance & compliance

Securing our social license to operate in all regions

 

By 2030, we will make a substantial impact on the 4R (reduction, replacement, refinement and responsibility) and make our success visible by meaningful performance indicators implemented in our three business sectors.

 

Group-wide 4R program is in place. Program management has been set up and dedicated 4R projects started. KPIs are under development

 

New target

 

Ethical conduct

Securing our social license to operate in all regions

 

By 2025, we will have all our animal facilities AAALAC accredited and will have established an Animal Affairs Academy which provides knowledge in Animal Science and Welfare and drives progress towards our 4R ambitions.

 

No actions to report as the target was defined at the end of 2021. Progress towards target achievement will be presented in the Sustainability Report 2022

 

New target

 

Ethical conduct

Securing our social license to operate in all regions

 

By 2025, we will strengthen Group-wide governance of all animal using functions and increase transparency by introducing IT-based solutions to measure progress and optimize data management.

 

Regular Group-wide plenary sessions implemented to inform and engage employees

Digitalization process in progress to achieve data accessibility, knowledge exchange, risk management and reporting

Project management has been set up and a digital animal work approval process has been implemented

 

New target

 

Ethical conduct

Goal 3: By 2040, we will achieve climate neutrality and reduce our resource consumption.

Focus area

 

Operational target

 

Actions 2021

 

Status

 

Material topic

Climate change and emissions

 

By 2030, we intend to reduce direct and indirect greenhouse gas emissions (Scope 1 and 2) by 50% (2020 baseline).

 

Systematic examination of the energy consumption at our individual production sites

Reduction of process-related emissions

Shifting transportation to shipping

Emission reduction through green fleet

Training more employees in energy management

Implementation of electrification opportunities

 

New target

 

Climate action

Climate change and emissions

 

By 2030, we aim to cover 80 % of our purchased electricity with renewables.

 

Purchasing electricity from renewable sources

Signing of a virtual power purchase agreement for the realization of a wind farm in the USA

 

New target

 

Climate action

Water and resource intensity

 

Until 2025, improve water efficiency in manufacturing sites by 10% (measured by the Merck Water Intensity Score).

 

Treating the production of wastewater and reusing it

 

In progress

 

Resource efficiency

Water and resource intensity

 

Reduce environmentally relevant trace substance residues in the wastewater of all production sites to below the no-effect threshold.

 

Expanding the Darmstadt central wastewater treatment plant and adding a fourth treatment stage

 

In progress

 

Resource efficiency

Water and resource intensity

 

Until 2025, reduce the environmental impact from waste disposal by 5% (measured by the Merck Waste Score).

 

Continuously looking for ways to improve our production processes and disposal methods

 

New target

 

Resource efficiency

Roles and responsibilities

Our Executive Board has Group-wide responsibility for our sustainability strategy. It has adopted our three strategic goals (see above).

The Group Corporate Sustainability unit is responsible for developing and shaping the sustainability strategy and regularly informs the Executive Board about the progress made and the need for action. It is part of the newly created Group function “Corporate Sustainability, Quality and Trade Compliance”, which reports to the Chair of the Executive Board. Consequently, overarching Executive Board responsibility for Environment, Social, Governance (ESG) also lies with the Chair of the Executive Board.

Group Corporate Sustainability is also responsible for the Corporate Sustainability Council. The committee consists of representatives from our business sectors and from key Group functions, such as Procurement, HR and Strategy. Council members from various countries provide input on regional sustainability aspects. The Corporate Sustainability Council steers and monitors the Group-wide implementation of the sustainability strategy. It aligns the strategy with the individual business strategies, defines priorities, specifies globally applicable sustainable guidelines, and recommends corresponding initiatives to the Executive Board. With their respective area of responsibility, each Executive Board member is also responsible for sustainability.

Moreover, the Corporate Sustainability Council ensures that the initiatives of our various business sectors, Group functions and subsidiaries align with our Group-wide sustainability strategy. In 2021, the Corporate Sustainability Council met four times by video conference. The participants addressed the following topics: Implementing the sustainability strategy in the business sectors, key indicators for measuring and steering sustainability within the company, lowering greenhouse gas emissions, and developing reporting requirements.

The measures adopted by the Corporate Sustainability Council are implemented by our line managers as well as by interdisciplinary project teams. To achieve our operational sustainability goals and depending on the topic, responsibility is assigned to specific teams, functions and business units. Those responsible for implementation exchange ideas and coordinate actions in an overarching committee. They identify synergies between the projects and tailor their direction to our sustainability goals.

In November 2021, we established an external expert committee for sustainability issues. The Merck Sustainability Advisory Panel (MSAP) consists of six independent international experts on sustainability-related topics. They advise the company on selected issues and assess related sustainability aspects as well as the company’s planned activities. Moreover, they apply their knowledge to help address societal and political challenges and developments that could have strategic relevance for our businesses. This panel is chaired by the Head of Group Corporate Sustainability.

Members of our Sustainability Advisory Panel

The Merck Sustainability Advisory Panel (MSAP) members (Graphic)
EHS
Short for “Environment, Health and Safety”, this refers to environmental management, health protection and occupational safety throughout a company.
Environmental, Social, and Corporate Governance (ESG)
ESG represents an evaluation of a company’s collective conscientiousness for environmental, social and governance factors. An ESG score is compiled from data collected surrounding specific metrics related to intangible assets within the enterprise.
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).
LTIR
The lost time injury rate measures the number of accidents resulting in missed days of work (one or more days) per one million working hours.
Pharmacovigilance
The science and activities related to the detection, evaluation, understanding, and prevention of adverse reactions or other drug-related problems.
Process-related emissions
Greenhouse gases released into the atmosphere during manufacturing operations.
Role
Our company uses a market-oriented system to rate positions within the company. To facilitate consistency across the organization, each position is assigned a specific role, with an overarching job architecture classifying each role as one of 11 levels, 15 functions and an array of career types (Core Operations, Services & Support Groups; Experts; Managers; Project Managers).
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 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.
Security
This relates to all necessary measures and governance activities to detect, analyze, handle, and mitigate security- and crime-based threats to the company. It is integral to protecting both our employees and the tangible and intangible assets of the company.
Stakeholder
People or organizations that have a legitimate interest in a company, entitling them to make justified demands. Stakeholders include people such as employees, business partners, neighbors in the vicinity of our sites, and shareholders.
Traces
Substances dissolved in water that are present only in minute amounts. Also referred to as micropollutants, these are synthetic substances present in concentrations ranging from one nanogram to one microgram per liter of water.

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