Climate Change Data

Environmental Metrics

ESG Focus Areas

• Patients
• People and Communities
• Environment
• Ethical Business Conduct

Environmental Achievements

• United Nations Framework Convention on Climate Change approves Novartis carbon-offset project in Argentina under the UN Clean Development Mechanism, with more than 3 million trees planted.
• Novartis begins planting for additional carbon-offset project in the Sichuan region of China.
• Novartis and collaborators including the Nature Conservancy plan to plant 10 million saplings on 3 900 hectares by 2015.
• Novartis Energy Excellence Awards recognize projects that help reduce our carbon footprint. Of 124 projects submitted in 2011, 57 have already achieved annual savings of more than USD 11 million, or 3% of Novartis total annual energy costs.

Social Achievements

• Be Healthy, a Group-wide initiative providing opportunities for affi liate associates to take control of their personal health, launches at 76 sites globally.
• Novartis conducts second Group-wide Global Employee Survey; strong, 88% response rate demonstrates a shared commitment to making Novartis an even better place to work.
• Novartis Institutes for BioMedical Research hold inaugural Health Equity Symposium that explores biological foundations of health disparity and steps to refocus healthcare research to address these disparities.
• Access-to-medicine programs reach more than 89 million patients in 2011 and, together with our R&D institutes for diseases of the developing world, are valued at USD 1.7 billion, or 3% of net sales.

Governance Achievements

• Novartis revises its Code of Conduct to address evolving business landscape.
• Updated Code is principle-based, focusing on standards for ethical conduct beyond narrow legal defi nitions.
• Business Practices Offi ce (BPO) provides formal system for dealing with complaints of actual or suspected cases of misconduct.
• Novartis again achieves top ratings in corporate responsibility and industry rankings, including number one pharmaceutical com-pany in Fortune ’s list of “World’s Most Admired Companies,” MedAdNews ’ “Most Admired Pharmaceutical Company,” and Scrip ’s “Pharma Company of the Year.”
• Novartis also receives SAM Gold Class Award, and is included in STOXX Global ESG Leaders indices, FTSE4Good Index and Ethibel Excellence Investment Register.

Climate Goals & Targets

Environmental Challenges

• The healthcare industry is currently facing anumber of critical challenges, such as the uncertainties surroundingthe global debt crisis, recent substantial regulatory changes and pricecuts.
• Global competition in the healthcare industryand the pressure for realizing efficiencies are increasing even further.
• upcoming patent expirations will slow growth of our Pharmaceuticals Division during 2012 and 2013.
• government-imposed price cuts and patent expiries
• quality management in production
• Sandoz received a warning letter from the US Food and Drug Administration

Mitigation Strategies

• productivity initiatives continue to gain importance
• quality-oriented investments at our manufacturing sites
• site closures and related product transfers
• outsourcing of some cyclical activities in development, as well as the reorganization of research activities in neuroscience
• restructuring of our US operations
• increasing our investments in growth regions, such as Asia and South America
• implementing a program to reduce our cost base – including consolidation and transfer of some manufacturing and research and development activities

Supply Chain Management

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: GRI, UNGC

Third-party Assurance: PricewaterhouseCoopers AG

Awards & Recognition

• number one pharmaceutical com-pany in Fortune ’s list of “World’s Most Admired Companies”, MedAdNews ’ “Most Admired Pharmaceutical Company”, and Scrip ’s “Pharma Company of the Year”, SAM Gold Class Award

Environmental Metrics

ESG Focus Areas

• Expanding Access to Healthcare
• Doing Business Responsibly

Environmental Achievements

• Achieved 2012 Kyoto target by reducing on-site CO2 emissions from the 1990 level by 5%
• Novartis Environment and Energy Awards recognized projects that improved environmental footprint, achieving cost savings of USD 21 million and reducing waste, water use and CO2 emissions.

Social Achievements

• Access to healthcare programs reached more than 100 million patients in 2012, and 7.2 million people with health education, infrastructure development and other sustainable programs.
• Novartis social Business Group launched social business models in Kenya and Vietnam, aiming to expand access to healthcare for people living at the bottom of the economic pyramid.
• Novartis Be Healthy initiative expanded to include more than 95% of Novartis Group company associates worldwide, promoting healthy behaviors and providing access to key personal health metrics.

Governance Achievements

• High scores in industry rankings, outperforming all other pharmaceutical companies in Fortune’s “World’s most Admired companies” and Barron’s “World’s most Respected companies” surveys.
• Received SAM Gold Class award, and was included in Dow Jones Sustainability World and FTSE4Good indices.
• Implemented a leadership framework designed to ensure that Novartis leaders have the right skills to manage in an increasingly complex market environment.

Climate Goals & Targets

Environmental Challenges

• Increased price pressure
• Patent expiration for Diovan
• Financial and currency market turbulence
• Quality problems at Sandoz and Consumer Health leading to production downtime
• Quality issues at a US production site affected the performance of OTC and Animal Health.

Mitigation Strategies

• Strong new product launches rejuvenated the portfolio
• Expansion in fast-growing markets
• Productivity efforts saving around USD 2.8 billion
• Investments in quality improvements
• Progress on quality remediation at Sandoz and Consumer Health sites.

Supply Chain Management

Supplier Audits: 214754 suppliers in 2012

Responsible Procurement

• Novartis Third-Party Guidelines

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: GRI, UNGC

Third-party Assurance: PricewaterhouseCoopers AG

Awards & Recognition

• SAM Gold Class award

Environmental Metrics

ESG Focus Areas

• Access to healthcare
• Environmental protection
• Ethical business practices
• Research and development

Environmental Achievements

• Achieved a 20.5% reduction in total GHG emissions (Scope 1 and 2) compared to 2008, exceeding the 17% target.

Social Achievements

• Launched Novartis Access, providing 15 medicines for chronic diseases at USD 1 per treatment per month in low- and lower-middle-income countries.
• Delivered more than 750 million antimalarial treatments (including over 300 million for children) without profit since 2001.
• Increased percentage of women in management to 41%.

Governance Achievements

• Launched a Group-wide ethics program to embed corporate values into business practices.
• Established a Governance, Nomination and Corporate Responsibilities Committee of the Board of Directors in 2014.

Climate Goals & Targets

Environmental Challenges

• Ongoing effects of past unethical behavior.
• Addressing ethical issues and improving compliance in Japan.

Mitigation Strategies

• Launched initiatives to strengthen culture, compliance, reporting, and commercial relationships.
• Implemented corrective actions in Japan to address failures in promptly reporting adverse effects.

Supply Chain Management

Supplier Audits: 100 audits

Responsible Procurement

• Novartis Supplier Code covering labor rights, HSE, animal welfare, anti-bribery, and data privacy.

Climate-Related Risks & Opportunities

Physical Risks

• Extreme weather events, changes in weather patterns, rising temperatures, sea levels, water scarcity, biodiversity loss

Transition Risks

• Regulatory changes (e.g., cap-and-trade schemes), increased operational costs

Opportunities

• Energy efficiency projects, renewable energy sources

Reporting Standards

Frameworks Used: GRI G4 (Comprehensive)

Certifications: ISO 14001, EMAS, OHSAS 18001

Third-party Assurance: PricewaterhouseCoopers AG (limited assurance)

UN Sustainable Development Goals

• Not disclosed

Not disclosed

Sustainable Products & Innovation

• Not disclosed

Awards & Recognition

• DiversityInc magazine named NPC the best company in the US for diversity (two consecutive years).

Environmental Metrics

ESG Focus Areas

• Expanding access to healthcare
• Doing business responsibly
• Environmental Sustainability
• Governance and ethical business practices
• Research and development

Environmental Achievements

• Reduced net GHG emissions by 18.7% versus 2010
• Reduced total water use from 91.5 million m³ in 2015 to 82.5 million m³ in 2016
• Improved efficiency of non-recycled total operational waste per unit of production by 18.7% versus 2010 baseline

Social Achievements

• Reached approximately 52 million patients globally through access-to-healthcare initiatives
• Improved ranking in the Access to Medicine Index to third place
• Reduced overall LTIR to 0.08 per 200,000 hours, a 27% reduction
• Reduced overall TRCR to 0.29, down from 0.40 in 2015
• Achieved initial aspiration of 25% female representation among Novartis Top Leaders and 42% female representation in management

Governance Achievements

• Strengthened Integrity & Compliance (I&C) function with approximately 375 FTEs
• Publicly disclosed payments and other transfers of value to health professionals and healthcare organizations
• Updated and re-launched Anti-Bribery Policy
• Launched a global online tool to handle conflicts of interest

Climate Goals & Targets

Environmental Challenges

• Underestimated paradigm shift required in how countries procure medicines for Novartis Access
• National essential medicines lists not regularly updated, hindering countries from purchasing Novartis Access medicines
• Supply chain disruptions due to climate events (potential)
• Political or regulatory action on drug prices (potential)

Mitigation Strategies

• Independent evaluation of Novartis Access by Boston University
• Adjustments to Healthy Family program parameters to improve quality and impact
• Programs in place to ensure business continuity, including risks of supply interruptions
• Reinforcement of site infrastructure to account for changes in precipitation extremes and droughts
• Programs to manage and minimize dependence on water at water-scarce sites

Supply Chain Management

Supplier Audits: 76 audits in 2016

Responsible Procurement

• Novartis Supplier Code
• Risk-based approach
• Modular approach
• Integrated approach
• Collaborative approach

Climate-Related Risks & Opportunities

Physical Risks

• Extreme weather events
• Changes in weather patterns
• Rising temperatures
• Rising sea levels
• Water scarcity
• Reductions in biodiversity

Transition Risks

• Cap-and-trade schemes
• International agreements
• Increased operational costs

Opportunities

• Development of energy-efficient products
• Renewable energy sources

Reporting Standards

Frameworks Used: GRI G4 guidelines (comprehensive level), UNGC Communication on Progress

Certifications: ISO 14001, OHSAS 18001

Third-party Assurance: PricewaterhouseCoopers AG

UN Sustainable Development Goals

• Goal 3 (Good Health and Well-being)
• Goal 8 (Decent Work and Economic Growth)
• Goal 9 (Industry, Innovation and Infrastructure)
• Goal 13 (Climate Action)
• Goal 17 (Partnerships for the Goals)

Contributions to SDGs detailed throughout the report

Environmental Metrics

ESG Focus Areas

• Expanding access to healthcare
• Doing business responsibly

Environmental Achievements

• Reduced GHG emissions (Scope 1 and Scope 2) per sales by 4.1% compared to 2016.
• Increased non-hazardous waste recycled to 78.5%.

Social Achievements

• Reached 46 million patients through access-to-healthcare programs.
• Trained almost 115,000 employees on the Code of Conduct.
• Launched Better Hearts Better Cities initiative to address hypertension in low-income urban communities.
• Novartis Access delivered more than 685,000 treatments to patients in lower-income countries.

Governance Achievements

• Developed a new harmonized, companywide Professional Practices Policy.
• Further strengthened anti-bribery due diligence.
• Increased country compliance and monitoring visits by approximately 40% from 2016.

Climate Goals & Targets

Environmental Challenges

• Procurement processes not supporting a portfolio approach, outdated national essential medicines lists, and skepticism toward private companies presented barriers to Novartis Access uptake in the public sector.
• Rising generic competition in malaria treatment drove a decline in patient reach with Coartem.
• Most healthcare systems in lower-income countries were geared toward acute care and ill-equipped to address chronic patient needs.
• Lack of basic healthcare infrastructure, equipment, clinics, hospitals, efficient distribution networks, medical staff, and trained healthcare providers presented challenges for healthcare access.
• Stigma associated with certain diseases (e.g., cancer) prevented patients from promptly seeking diagnosis.
• Isolated cases of noncompliant behavior overshadowed otherwise improved performance.
• Complexity of multinational organization presented a challenge in swiftly and fully embedding a common understanding around a culture of compliance.
• Shift from a rules-based to a more principles-based compliance approach required a change in mindset needing time, training, and communication.
• One end-to-end process to effectively manage third-party risks was complex to operationalize.

Mitigation Strategies

• Established a set of Access Principles to integrate patient access strategies into all new medicine launches.
• Expanded into the private sector with Novartis Access to drive sales volume and sustainability.
• Strengthened anti-bribery compliance program by updating guidelines and training employees.
• Increased country compliance and monitoring visits.
• Developed a new principles-based, Group-wide Professional Practices Policy.
• Launched a new Third-Party Risk Management program.

Supply Chain Management

Supplier Audits: 49 suppliers audited (18% of those identified as requiring follow-up actions)

Responsible Procurement

• Novartis Supplier Code
• Responsible Procurement (RP) program
• RP risk indicator tool

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: GRI Standards: Core option

Third-party Assurance: PricewaterhouseCoopers AG

UN Sustainable Development Goals

• Goal 3 (Good Health and Well-being)
• Goal 8 (Decent Work and Economic Growth)
• Goal 9 (Industry, Innovation and Infrastructure)
• Goal 13 (Climate Action)
• Goal 17 (Partnerships for the Goals)

Novartis's activities contribute to these goals through expanding access to healthcare, responsible business practices, innovation, and partnerships.

Awards & Recognition

• No. 4 on Fortune magazine’s “Change the World” list
• Fourth in the 2017 Dow Jones Sustainability Index (DJSI) World
• Re-entered the DJSI Europe Index
• No. 68 on Corporate Knights’ list of the world’s most sustainable companies
• CDP’s Water A List
• No. 2 on Fortune’s 2017 “World’s Most Admired Companies” list for the pharmaceutical industry
• FTSE4Good Index

Environmental Metrics

ESG Focus Areas

• carbon neutrality
• plastic neutrality
• water neutrality
• supply chain carbon footprint minimization
• Access Principles implementation
• integrity standards enhancement
• business ethics principles improvement

Environmental Achievements

• Aim to become carbon neutral by 2025, and plastic and water neutral by 2030
• Processes put in place to minimize the carbon footprint of our supply chain

Social Achievements

• Implementation of Access Principles is gaining pace with the approval of innovative medicines in low- and middle-income countries
• Work to tackle sickle cell disease is one example. Adakveo, our new treatment for this life-threatening, inherited blood disorder, was approved for use in the US

Governance Achievements

• Strengthened governance framework, Ethics, Risk & Compliance (ERC) function is developing a principles-based Code of Ethics

Climate Goals & Targets

Environmental Challenges

• Pressures on pricing and reimbursement for our products
• Significant breaches of information security or disruptions of our information technology systems
• Commercial success of key products
• Losses of intellectual property protection
• Research and development efforts may not succeed
• New laws and regulations; failures to comply with laws; legal proceedings; and government investigations
• Outsourcing key business functions to third parties
• Compliance with data privacy laws and regulations
• Complex and highly regulated manufacturing processes
• Failure to develop or take advantage of transformational technologies and business models
• Goals in transactions or reorganizations may not be achieved
• Environmental, social and governance matters
• Falsified products
• Political and economic instability
• Indebtedness
• Intangible assets and goodwill impairment
• Competition in Sandoz Division
• Changes in tax laws
• Foreign exchange fluctuations
• Consolidation among distributors and retailers
• Inability to attract and retain qualified personnel
• Environmental liabilities
• Climate change, extreme weather events
• Inaccuracy in pension plan calculations

Mitigation Strategies

• Significant resources and management attention to cybersecurity, information management and business continuity efforts
• Significant attention and focus from members of our key management
• Global ethics and compliance program
• Global manufacturing strategy to maximize business continuity
• Digital transformation strategy
• Contingency plans for Brexit
• Measures to reduce or hedge against foreign currency exchange risks
• Regular review for impairment of long-lived intangible and tangible assets
• Steps to be in compliance with evolving OECD and EU tax initiatives
• Efforts to manage ESG matters
• Outcome-based agreements for Zolgensma and Kymriah

Supply Chain Management

Climate-Related Risks & Opportunities

Physical Risks

• Flooding
• Water scarcity

Transition Risks

• Regulatory changes
• Increased operating costs

Reporting Standards

Frameworks Used: IFRS

Environmental Metrics

ESG Focus Areas

• Ethical Standards
• Access to Healthcare
• Global Health Challenges
• Corporate Citizenship

Environmental Achievements

• 19% reduction in greenhouse gas emissions vs. 2016 baseline (Scope 1 and Scope 2)
• 35% Reduction in water consumption vs. 2016 baseline (million m3)

Social Achievements

• Launched a new Code of Ethics, encouraging associates to be bold, open-minded, honest and accountable when making decisions
• 98% of associates completed global e-training on the new Code of Ethics
• Expanded access to innovative and generic therapies in low- and middle-income countries
• Expanded the Novartis Africa Sickle Cell Disease program to Kenya, Tanzania and Uganda
• Reached 66 million patients with products through access activities
• Reached 8 million people with health education at awareness events
• 45% women in management

Governance Achievements

• Resolved several legacy litigation matters in 2020
• Established an ESG Management Office under Corporate Strategy to track performance and drive strategic initiatives
• Issued a EUR 1.85 billion sustainability-linked bond

Climate Goals & Targets

Environmental Challenges

• COVID-19 pandemic impacting operations and supply chains
• Pricing pressures and access to healthcare
• Climate change and increased risk of major natural disasters
• Cybersecurity breaches and catastrophic loss of IT systems
• Failure to maintain adequate governance and oversight over third-party relationships
• Inability to ensure proper controls in product development and product manufacturing

Mitigation Strategies

• Implemented remote working and enhanced childcare support
• Introduced outcome-based agreements and tiered pricing
• Strengthened environmental targets, aiming for full carbon neutrality by 2030
• Established Security Operations Center and Cyber Security Center teams
• Revised Novartis Third Party Code
• Aligned Novartis Quality organization to the business

Supply Chain Management

Supplier Audits: 382 comprehensive HSE assessments in 2020

Responsible Procurement

• Novartis Third Party Code
• Environmental sustainability objectives embedded in supplier contracts
• Supplier sustainability surveys

Climate-Related Risks & Opportunities

Physical Risks

• Extreme weather events
• Flooding
• Water scarcity

Transition Risks

• Regulatory changes
• Carbon pricing
• Increased requirements to invest in technology to reduce emissions

Opportunities

• Development of energy-efficient products
• Investment in renewable energy

Reporting Standards

Frameworks Used: GRI Standards: Core option, SASB, TCFD

Certifications: ISO 9001 (Pharmacovigilance)

Third-party Assurance: PricewaterhouseCoopers AG

UN Sustainable Development Goals

• Goal 3 (Good Health and Well-being)
• Goal 5 (Gender Equality)
• Goal 6 (Clean Water and Sanitation)
• Goal 7 (Affordable and Clean Energy)
• Goal 8 (Decent Work and Economic Growth)
• Goal 9 (Industry, Innovation and Infrastructure)
• Goal 12 (Responsible Consumption and Production)
• Goal 13 (Climate Action)
• Goal 17 (Partnerships for the Goals)

Novartis's activities contribute to these goals through various initiatives, including access to medicines, health system strengthening, environmental sustainability, and employee well-being programs.

Sustainable Products & Innovation

• Breezhaler inhaled products

Awards & Recognition

• CDP Water A-List
• CDP Climate A rating

Environmental Metrics

ESG Focus Areas

• Environment
• Social
• Governance

Environmental Achievements

• Further reduced environmental footprint in 2021 in climate, waste, and water.
• Achieved a 98% solvent recycling rate in 2021.
• Reduced water consumption by approximately 8% in Kundl and 14% in Schaftenau compared to 2020.
• Reduced total energy consumption by 6,500 MWh (CO2 saving of 974 tons).

Social Achievements

• Recognized as an “Employer of Choice” for more than 5,000 associates.
• Offered paid parental part-time leave since 2021.
• Invested around €15 million in employee benefits in 2021.
• Established Employee Resource Groups (ERGs).

Governance Achievements

• Published payments to healthcare partners since 2015.
• Implemented a Code of Conduct outlining ethical principles.

Climate Goals & Targets

Environmental Challenges

• Fierce international competition requiring cost efficiency.
• Resource-intensive manufacturing in Kundl and Schaftenau.
• Attracting and retaining well-qualified personnel.
• Maintaining HSE resilience.

Mitigation Strategies

• Implemented sophisticated management systems (GMP, HSE).
• Offered flexible work arrangements.
• Provided comprehensive employee benefits.
• Regular audits, reviews, and self-inspections to ensure compliance.

Supply Chain Management

Supplier Audits: Risk-based audits conducted.

Responsible Procurement

• Environmentally responsible suppliers, goods, and services prioritized.
• Sustainability considered in supplier selection criteria.

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: EMAS, Responsible Care

Certifications: ISO 14001, ISO 45001, ISO 50001

Third-party Assurance: TÜV Austria CERT GmbH

Sustainable Products & Innovation

• Biosol® and Biosol Forte® fertilizers

Awards & Recognition

• Novartis Energy Excellence Award (2010)
• TRIGOS Award for Sustainable Companies (2011)
• Klima:aktiv award (2012)
• Novartis HSE & BC Award (2015)
• ÖBB Green Events Award (2017)
• Top Employer Austria (3 years)
• Top Employer Europe 2021
• Top Employer Global 2021

Environmental Metrics

ESG Focus Areas

• Patient health and safety
• Access to healthcare
• Innovation
• Ethical business practices
• People and culture
• Good governance
• Sustainable financial performance
• Environmental sustainability

Environmental Achievements

• 49% reduction in greenhouse gas emissions in own operations (vs. 2016 baseline)

Social Achievements

• Reached 54.6 million patients through access programs
• Increased patients reached with strategic innovative therapies in LMICs by 119% since 2019
• Increased patients reached through global health programs in LMICs by 107% since 2019
• 47% women in management

Governance Achievements

• 98% of employees trained and certified in the Novartis Code of Ethics

Climate Goals & Targets

Environmental Challenges

• Volatile macroeconomic environment
• Unstable geopolitical environment
• Supply chain disruptions
• Pricing pressures
• Access barriers in healthcare systems
• Climate change impacts
• Antimicrobial resistance

Mitigation Strategies

• Cost discipline and operational streamlining
• New organizational structure to improve innovation and agility
• Multiple supply sources
• Innovative access and pricing models
• Partnerships to strengthen healthcare systems
• Environmental sustainability initiatives
• Investments in new antibiotics and antimicrobial resistance research

Supply Chain Management

Supplier Audits: 11,097 suppliers risk assessed

Responsible Procurement

• Third-party risk management framework
• Third Party Code
• Environmental sustainability criteria in supplier contracts

Climate-Related Risks & Opportunities

Physical Risks

• Carbon price
• Net-zero healthcare systems
• Circular economy
• Energy source
• Tropical cyclones
• Flooding
• Extreme heat
• Water stress and drought

Transition Risks

• Carbon price
• Net-zero healthcare systems
• Circular economy
• Energy source

Opportunities

• Circular economy
• Energy source

Reporting Standards

Frameworks Used: Integrated Reporting Framework, TCFD, SASB, GRI

Certifications: ISO 14001, ISO 45001

Third-party Assurance: KPMG (limited assurance)

UN Sustainable Development Goals

• SDG 3 (Good Health and Well-being)
• SDG 8 (Decent Work and Economic Growth)
• SDG 13 (Climate Action)

Novartis's medicines improve health; operations create jobs and economic value; sustainability initiatives reduce environmental impact.

Sustainable Products & Innovation

• Not disclosed

Awards & Recognition

• Stonewall Top Global Employer Silver Award
• Inclusion in Bloomberg Gender Equality Index

Environmental Metrics

ESG Focus Areas

• Environmental
• Social
• Governance

Climate Goals & Targets

Supply Chain Management

Responsible Procurement

• ES Criteria Annex
• Third-Party Code (TPC version 3)

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: Integrated Reporting Framework, TCFD, SASB, GRI, Greenhouse Gas Protocol, Art 964 of the Swiss Code of Obligations

Third-party Assurance: KPMG AG

Environmental Metrics

ESG Focus Areas

• Access to medicines
• People
• Environmental sustainability
• Ethics
• Animal welfare
• Supply chain
• Product quality and patient health and safety
• Political engagement
• Business model

Climate Goals & Targets

Supply Chain Management

Responsible Procurement

• ES Criteria Annex
• Third-Party Code (TPC)

Climate-Related Risks & Opportunities

Physical Risks

• flooding
• drought
• cyclones

Reporting Standards

Frameworks Used: TCFD, Integrated Reporting Framework, GRI

Third-party Assurance: KPMG AG