Life Unlimited Sustainability Report 2019 Introduction and sustainability strategy Putting people first Products with a reduced footprint How we manage sustainability

Contents Our purpose

Introduction and sustainability strategy 2 Life Unlimited captures the essence of our Our purpose 2 A message from our 3 purpose to improve the health issues that hinder Chief Executive Officer At a glance 4 people from living their lives to the fullest. Our business model 5 A message from our Chair 6 Why sustainability 7 is important Access to healthcare 8 Our sustainability strategy 9 Putting people first 14 Empowering our employees 15 Injury-free workplace 20 Our purpose Our culture pillars Our strategic imperatives Achieve the full potential Responsible global citizen 23 Life Unlimited. Our culture pillars guide Five strategic imperatives 1 of our portfolio Smith+Nephew our behaviours and build form our value creation plan Launching new products 27 Transform the business through exists to restore a winning spirit. for the medium term. in 2019 enabling technologies people’s bodies 2 Safe use of our products 29 Care – A culture of and their self-belief. Expand in high-growth empathy and understanding Products with 3 segments a reduced footprint 30 for each other, our customers Strengthen talent Product development 31 and patients. and capabilities Minimising waste 32 Collaboration – A culture of 4 A focus on water 34 teamwork based on mutual Become the Reducing emissions 35 trust and respect. 5 best owner How we manage Courage – A culture of sustainability 38 continuous learning, innovation Corporate governance 39 and accountability. Our approach to 40 risk management Acting with integrity 42 Working with responsible 44 third parties Data and references 45

Smith+Nephew Sustainability Report 2019 2 Introduction and sustainability strategy Putting people first Products with a reduced footprint How we manage sustainability

A message from our Chief Executive Officer A spotlight on sustainability

Since joining Smith+Nephew as CEO in November 2019, I have been impressed by the Company’s increasing spotlight on sustainability.

Our sustainability strategy is integrated We have created a Sustainability Council with our Group business strategy, our comprising members of our Executive purpose of Life Unlimited, our culture pillars, Committee to provide further visibility and our strategic imperatives, to ensure to the Board through regular updates to that sustainability guides what we do. our Compliance & Culture Committee. Our Sustainability Council was established to We are very proud that this is our 19th annual set and ensure delivery of our sustainability sustainability report. The report outlines our strategy, so that sustainability truly becomes new sustainability strategy and provides an part of the fabric of Smith+Nephew. update on our 2020 targets, against which we have made good progress. It also introduces We continue to apply our culture pillars of our new strategy focused on delivering our Care, Collaboration and Courage and strive purpose of Life Unlimited. Our commitment to deliver sustained competitive advantage goes beyond just environmental concerns and through focusing holistically on people, patient safety, to also include meaningfully planet and products. “Our commitment goes addressing the health issues that hinder people from living their lives to the fullest. We are beyond just environmental accelerating our sustainability programme concerns and patient safety, and setting more ambitious goals with hard to also include meaningfully metrics to measure our success and ensuring addressing the health issues accountability across the whole business. Roland Diggelmann that hinder people from living Chief Executive Officer their lives to the fullest.” Roland Diggelmann Chief Executive Officer

Smith+Nephew Sustainability Report 2019 3 Introduction and sustainability strategy Putting people first Products with a reduced footprint How we manage sustainability

At a glance We are a leading portfolio medical technology company We serve our customers through the global franchises

Group revenue Orthopaedics Sports Medicine & ENT Advanced Wound Orthopaedics includes an Our Sports Medicine & ENT Management innovative range of Hip and (Ear, Nose and Throat) businesses Our Advanced Wound 17, 5 0 0 + $5,138m Knee Implants used to replace offer advanced products and Management portfolio provides diseased, damaged or worn instruments used to repair or a comprehensive set of products employees supporting joints, robotics-assisted enabling remove soft tissue. They operate to meet broad and complex customers in over technologies that empower in growing markets where clinical needs, to help healthcare surgeons, and Trauma products unmet clinical needs provide Revenue by franchise Revenue by geography professionals get CLOSER TO used to stabilise severe fractures opportunities for procedural ZERO human and economic We operate through three We serve customers in established and correct bone deformities. and technological innovation. consequences of wounds. 100 global franchises. and emerging markets. countries, supporting healthcare professionals for more than Advanced Wound Orthopaedics Emerging United States Management $2,222m markets $2,551m 160 $1,380m $957m years

Innovation Manufacturing & quality Smith+Nephew delivers Smith+Nephew takes great pride innovation that aims to improve in its manufacturing expertise 19% Sports Medicine Other established quality of life. New products and maintains focus on delivering more invested & ENT $1,536m markets $1,630m and business models empower products that are safe and in R&D in 2019 healthcare professionals with effective for patients. options to improve patient outcomes. We develop technology through our global R&D programme, and additionally acquire exciting products where we can add value through technical or commercial acumen.

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Our business model Value creation is driven by our purpose, culture pillars and strategic imperatives

Our resources >> Creating value through >> Value delivered in 2019

Our people & culture Operating Trading Efficiency Attracting, developing and retaining Revenue profit profit1 savings the best employees is important. We strive to build a purpose- $5,138m $815m $1,169m $80m driven culture based on strong Purpose-driven culture Strong product portfolio and authentic values. Having a clear purpose gives employees We have market-leading technology Practitioner training Philanthropic a sense of belief and determination. across our broad range of products. Ethics & compliance Dividend Jobs instances donations This supports a strong culture which We deploy our capital to drive continued Committed to doing business the $318m 17,637 110,000+ $13m right way, compliance is embedded improves performance across the innovation from our R&D programmes in the way we work. business both in terms of financial and invest in product and technology and non-financial value. acquisitions which improve outcomes Sales & marketing and widen access to life-changing care. Shareholders Customers Supporting customers through highly In 2019 we were pleased We continue to bring new, specialised sales teams with in-depth to deliver a 4% increase innovative products to technical product knowledge that in dividend, in line with customers, and support these surgeons and nurses value greatly. our progressive policy. with clinical evidence, as well Shareholders also benefited as delivering professional Manufacturing & quality from a 28.3% increase in development training to Operating global manufacturing Life share price over the year. healthcare professionals efficiently and to high standards around the world. to ensure quality and competitiveness. Patients Our products are used in Employees Medical education more than 100 countries In 2019 we improved our Supporting the safe and effective use of Unlimited to improve the quality of employee engagement our products through medical education. life of patients. We strive and promoted diversity to widen access to such and inclusion. Research & development technology, with 19%of Innovation is part of our culture and revenue now coming from Communities we are increasing the amount we invest the Emerging Markets. We aim to work in a sustainable, in new products. ethical and responsible manner, supporting local Sustainability Strategic imperatives Customer centricity charities, and reducing our We focus on three aspects environmental footprint. of sustainability; economic Our five strategic imperatives are Serving our customers is at the heart prosperity, social responsibility fundamental to how we focus the resources of our business model. We have a global and environmental stewardship. of the business to maximise commercial franchise model led by management For more information, impact in our markets. They form the basis of who are specialists in their areas. This keeps click here for our our value creation plan for the medium term. us close to our customers, ensuring we can 2019 Annual Report anticipate and meet their needs. 1 This non-IFRS financial measure is explained and reconciled to the most directly comparable financial measure prepared in accordance with IFRS on pages 200-204 of our 2019 Annual Report.

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A message from our Chair Elevating our sustainability agenda across the business

Welcome to our 2019 Sustainability Report. Since our previous report, we have increased the visibility of sustainability for the Board. “We strive to deliver Life Unlimited through sustainable leadership We have updated our strategy to align We are identifying and characterising the in our industry.” with our purpose of Life Unlimited, sustainable attributes of our products and Roberto Quarta included sustainability in the remit of our services as we believe this differentiates Chair Board Compliance & Culture Committee, us from our competitors. We were one and created our Sustainability Council. of the first in our industry to produce a This greater emphasis on sustainability sustainability report, we continue to be listed is critical to achieving our strategic on the Dow Jones Sustainability Index (DJSI) imperatives, which aim to deliver long- and FTSE4Good, and we strive to deliver Life term shareholder value not only through Unlimited through sustainable leadership profits, but also by engaging our employees in our industry. and positively impacting society in the Smith+Nephew has a history dating back communities in which we operate. more than 160 years, and we want our We have taken a broad view of sustainability legacy to extend to the next 160 years and in the medical devices industry looking beyond, continuing to create long-term beyond product safety, quality and efficacy shareholder value. In 2020, I am excited to to the entire product life cycle. The Board see how much we can achieve with our new fully supports this approach. Our new sustainability strategy and I look forward sustainability strategy incorporates not only to updating you on our progress in next the manufacturing, distribution, and use year’s report. of our products, but also labour standards throughout the supply chain, a focus on raw materials, packaging materials and design, and end-of-life disposal of both packaging and products. Roberto Quarta Chair

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Why sustainability is important A look at our world

People today are living longer. But we don’t just want to live for longer, we want quality of life – to live life to the full. To put Smith+Nephew’s purpose, Life Unlimited, into practice, we need to be mindful of what’s happening in our world.

Three key trends are particularly significant in shaping our ability to deliver Life Unlimited. Affordability Rising concern about The use of chemicals and materials Smith+Nephew’s response 1 of healthcare 2 healthcare inequality 3 within healthcare solutions Through our franchise structure, we Governments, insurers and individuals Non-governmental organisations Some customers are expressing growing work together to quickly take advantage need healthcare to be affordable to ensure (NGOs) and the media are increasingly concern about certain chemicals and of new technologies that we have both people continue to have opportunities reporting on healthcare solutions that are materials that are used in healthcare developed and acquired. For example, in life. Technology is developing rapidly, available in the developed world, but not devices. No longer satisfied that following a total knee arthroplasty, our but not everybody can be treated in developing countries. We anticipate something is safe or sustainable because single use negative pressure wound with all these solutions given resource growing calls for multinationals to take it is government-approved, they are asking therapy device may be used post- constraints. Healthcare companies need action to level the playing field, improving more questions about the processes used operatively to enable better outcomes. to take note and respond accordingly. access to healthcare for everyone. to manufacture and deploy healthcare solutions. Medical device companies are under pressure to find alternative materials and technologies that provide the same outcomes.

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Access to healthcare For us, sustainability means We want people to be able to benefit from In developing markets, there are large Improving access to that patients have access the best cost-effective solutions to meet populations who don’t have access to their needs, no matter where they live in healthcare. We are bringing our innovations to the healthcare solutions the world. to patients who otherwise would have medical technologies that are necessary to provide no access to technology. For example, In developed markets, Smith+Nephew is our collaboration with ‘Operation Walk’ + TEAMFund improved outcomes and allow supporting the improvement of efficiency has brought healthcare solutions to them to achieve their goals and effectiveness of healthcare systems, In November 2019, we announced that underserved populations in Latin America. in life. making it easier for surgeries to be we have invested in the inaugural fund of performed in a more streamlined and We price our solutions competitively TEAMFund (‘Transforming Equity and Access integrated environment. This means that in the markets in which we sell, and run for MedTech’). The fund’s purpose is to invest procedures can be carried out more quickly an active product donation programme. in medical technology companies that give and accurately, so throughput and efficiency patients living in low-resource settings Smith+Nephew is uniquely placed to be are higher. Our innovations also mean that improved access to affordable, appropriate, able to improve access to healthcare patient outcomes are improving, with and sustainable medical technologies. because of our end-to-end model, shorter rehabilitation times. Supporting TEAMFund’s venture helps get including involvement in both surgical medical technologies to some of the world’s devices and wound care. most economically challenged populations. The investment strongly aligns with our purpose, Life Unlimited, to remove physical and mental barriers to living life to the full. TEAMFund’s initial geographic focus is India and Sub-Saharan Africa. TEAMFund expects to invest in between eight and ten portfolio companies.

TEAMFund has made investments in ophthalmology, diagnostics and cardiovascular companies

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Our sustainability strategy Our aspirational goals and targets

Back in 2016, we launched our sustainability strategy, setting out our aspirational goals and targets for 2020. This year, we report on our progress and renew our “Sustainability is part commitment to sustainability, with the introduction of our new strategy. of who we are at Smith+Nephew. It is Where purpose and sustainability meet Our sustainability vision and mission an integral part of Life We envision a world in which healthcare Our sustainability strategy reflects our professionals and patients have access to three culture pillars of Care, Collaboration Unlimited, and informs the solutions they need to restore health, and Courage. We care about contributing the decisions we take. engage in society, enhance the environment to positive change – it is about caring Our success as a business and improve their wellbeing. for customers, patients and each other. depends on it.” We need to collaborate with partners and Our sustainability strategy aims to achieve Elga Lohler work together to achieve our sustainability this vision. It outlines the steps we take with Chief Human Resources Officer, targets. This will happen if we display a view to leading our industry in developing Chair of the Sustainability Council courage in our decision making and actions. and using products and services that: ––Satisfy unmet health needs and promote greater access to treatment; ––Offer easier, better, faster and more effective treatment, enabling productive engagement in society; ––Prioritise materials that are re-used, re-manufactured, or recycled; ––Are manufactured using raw materials sourced from an environmentally and socially-sound supply chain; ––Use natural resources efficiently; ––Are manufactured by processes that are not Smith+Nephew has been and remains committed to working in a sustainable, ethical and responsible hazardous to people or the environment; and manner everywhere we do business. We are ––Implement the most sustainable proud of our achievements over many years, including our recurring inclusion in leading indices, product options. such as FTSE4Good, ISS and the Dow Jones Sustainability Index. Smith+Nephew Sustainability Report 2019 9 Introduction and sustainability strategy Putting people first Products with a reduced footprint How we manage sustainability

Our sustainability strategy Looking back: our progress We have made strong progress against our 2020 sustainability targets, which related to the United Nation’s Sustainable Development Goals (SDGs) that are most relevant to our business. We report below our progress against these targets, which were originally scheduled to close at the end of 2020. Our new sustainability strategy reflects our updated business strategy with enhanced targets to further advance our sustainability goals, as described on page 13. We will continue to measure and report on key sustainability metrics.

Most relevant Specific Our material issues Our 10 long-term aspirational goals Our 2020 targets Progress since 2016 baseline Status SDGs SDG target* Care (putting people first) Prevent illness and injury Zero work-related injuries and –– 10% reduction in Total Injury Rate –– A reduction of 6% since 2016 (in 2016 the TIR was 0.52, AT RISK 8.8 Ensure the health, safety and illnesses across the value chain (TIR) from 2016 baseline in 2019 the TIR was 0.49) wellbeing of all Smith+Nephew’s employees and contractors Operate ethically Ethical Business Practices: –– Labour practices throughout –– Products accounting for 75% of revenue identified. ON TRACK 8.7 Enhance trust and promote All activities are conducted the supply chain associated Assessment to applicable ILO conventions completed 8.8 equal opportunity in compliance with applicable with products accounting for for internal operations. Engagement with upstream International Labor Organization 75% of revenue compliant with suppliers and downstream distributors and agents (ILO) conventions, involve no applicable ILO conventions under way environmental degradation, and are free from corruption Ensure product and service quality Zero product-related and service- –– Robust system in place to detect, –– Systems are in place to detect, record and investigate ON TRACK 3.8 Improve efficiency, enhance trust related patient injuries record, investigate and eliminate patient injury incidents. Patterns in the data are being and reliability root cause of product-related and used to craft models which will allow identification of service-related patient injuries at-risk attributes. The root cause investigation and mitigation protocols are in place and operational Engage communities Robust social responsibility –– Social responsibility strategy –– Social responsibility strategy in place but requires ON TRACK 10.2 Promote trust and extend access programmes which contribute which aligns philanthropy, employee updating to align with the Group business strategy to care. Enhance our potential pool to the attraction and retention volunteering and wellness to the and the new sustainability strategy of talented employees of top talent business strategy in place Enterprise risk management Strategic risks and opportunities are –– Enterprise risk management –– Enterprise risk management processes and supporting ON TRACK Comprehensively assess and understood and business activities arrangements are embedded manual redeveloped mitigate risks across the entirety are aligned to risk appetite in the routine business decision- –– Senior business risk champions appointed and trained of Smith+Nephew, to ensure making process in risk management sustained profitability –– Risk registers refreshed and mitigating actions regularly monitored and updated –– Principal risks aligned to new organisation structure and strategic imperatives » *See page 45 for data references Smith+Nephew Sustainability Report 2019 10 Introduction and sustainability strategy Putting people first Products with a reduced footprint How we manage sustainability

Looking back: our progress

Most relevant Specific Our material issues Our 10 long-term aspirational goals Our 2020 targets Progress since 2016 baseline Status SDGs SDG target* Collaboration and Courage (delivering products with a reduced footprint) Use water responsibly Water: Total water impacts of our products –– Water footprint (1) available for products –– Products accounting for 75% of ON TRACK 6.4 Enhance availability of water for and solutions are balanced with local human accounting for 75% of revenue and revenue identified. Water footprint alternative uses, reduce conflict and ecosystem needs (2) considerations embedded in new tools identified and reduce environmental impact product development process –– Life Cycle Assessment (LCA) –– Total potable water consumption at not completed S+N sites no higher than 2016 actual –– Water reduction of 5% since 2016 Reduce waste Waste: All materials are either shipped as –– Total material efficiency estimated for –– Products accounting for 75% of ON TRACK 12.2 Improve resource efficiency and part of product or returned for beneficial use products accounting for 75% of revenue revenue identified. Material efficiency 12.4 reduce environmental impact –– 80% or more of waste generated reused, tools identified 12.5 recycled or recovered –– LCA not completed –– We currently reuse, recycle or recover energy from 76% of our total waste, up from 74% in 2016 Reduce carbon emissions Carbon: 80% absolute reduction in total life –– Estimate total life cycle greenhouse gas –– Products accounting for 75% of revenue ON TRACK Improve resource efficiency and cycle greenhouse gas emissions by 2050 emissions of products accounting for 75% identified. Total life cycle greenhouse reduce conflict, while enhancing of revenue gas emissions tools identified biodiversity and mitigating –– Total Scope 1 & 2 greenhouse gas emissions –– LCA not completed climate change reduced by 10% from 2016 actual –– Greenhouse gas emissions reduction of 16% since 2016 Develop products with Products and services are aligned to market –– Sustainability attributes described for –– Products accounting for 75% of ON TRACK 3.8 sustainable attributes economic, social and environmental expectations products accounting for 75% of revenue revenue identified. Product/service 10.2 Increase access to care, improve and anticipate future market conditions: –– Robust emphasis on sustainability attributes sustainability attributes agreed 12.2 our environmental impact and All products have identified and clearly-described of new products/services in place –– NPD sustainability focus planning 12.4 reduce costs sustainability attributes under way 12.5 R&D and New Product Development (NPD) processes deliver environmental-, social-, and healthcare economically-advantaged innovations Consistent focus Environmental, social, and economic impacts of –– Formal programmes in place to measure/ –– Conducted a number of ‘deep AT RISK Ensure that all aspects of the (1) potential acquisitions, (2) technologies to be assess the economic, social and environmental dives’ into several key risks. business remain aligned to the extended to Emerging Markets, (3) innovative impacts of (1) potential acquisitions, Tools and standards to address new sustainability imperative and business models, (4) cost-of-quality reduction (2) technologies to be extended to Emerging technologies are being developed move us steadily towards the initiatives, and (5) manufacturing siting, functional Markets, (3) innovative business models, to support our NPD work above achievement of our targets optimisation and site utilisation alternatives are (4) cost-of-quality reduction initiatives, –– LCA outputs not available fully understood and appropriately balanced and (5) manufacturing siting, functional optimisation and site utilisation alternatives » *See page 45 for data references

Smith+Nephew Sustainability Report 2019 11 Introduction and sustainability strategy Putting people first Products with a reduced footprint How we manage sustainability

Looking forward: our new sustainability strategy

We believe that our new sustainability We have created a Sustainability Council strategy is more responsive to the challenges comprising members of our Executive Sustained competitive advantage = facing society in the areas where we can Committee and it maintains visibility to make a meaningful difference. It is also more the Board through regular updates to deeply embedded into our Group business our Compliance & Culture Committee. strategy, ensuring that sustainability is fully The Council drives sustainability and the People Planet Products connected to our business success. new sustainability strategy ties directly to our purpose, culture pillars, and strategic Creating a lasting Having the most Innovating To realise the goals in our strategy, we must imperatives. The Sustainability Council is made work towards achieving our medium-term positive impact on positive impact in sustainably up of executives from Human Resources, sustainability targets. Delivery against our communities the MedTech sector Global Operations, Quality and Regulatory these will be key to the continued success Affairs, Research & Development, Commercial of our Company. and Procurement. This diversity of thought, In 2019, we established our Sustainability experience and knowledge of our company Council to set and ensure delivery of our vision, strategic imperatives, culture, product sustainability strategy, so that sustainability portfolio and innovation makes this an becomes embedded throughout excellent team to drive sustainability. Smith+Nephew. Delivering this is critical to We will apply our culture pillars to deliver achieving our strategic business imperatives, sustained competitive advantage through which deliver long-term shareholder value not a focus on people, planet and products. only through profits, but also by engaging our We are committed to deliver this strategy employees and positively impacting society in through a set of targets with accountability the communities in which we operate. across the business.

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Enhanced sustainability targets

People Planet Products Creating a lasting positive impact on our communities Having the most positive impact in the MedTech sector Innovating sustainably

Targets Targets Targets

–– Between 2020 and 2030, contribute 1 million volunteer –– Achieve an 80% absolute reduction in total life cycle greenhouse –– By 2022, include sustainability review in New Product Development hours to the communities in which we live and work gas emissions by 2050 beginning by implementing 100% renewable phase reviews for all new products and product acquisitions –– Between 2020 and 2030, donate $125 million in cash and electricity (e.g. solar or wind) plans at our facilities in Memphis (US) –– By 2025, incorporate at least 30% post-consumer products to underserved communities. and Malaysia by 2022 and at all of our strategic manufacturing recycled content into all packaging materials facilities by 2025 –– By 2025, complete supply chain assessment of all suppliers –– Achieve zero waste to landfill at our facilities in Memphis (US) and and subsequent tier levels to assure compliance with our Malaysia by 2025 and at all of our strategic manufacturing facilities sustainability requirements. by 2030.

Additional Actions Additional Actions Additional Actions

–– Revise social responsibility strategy and implement –– Develop and implement a greenhouse gases (GHG) –– Apply identified international labour standards to our downstream globally, including guidance to all locations reduction programme partners using current compliance scheme on philanthropy and volunteering –– Determine local human and ecosystem water needs –– Extend current compliance scheme relative to identified –– Continue to measure and report on all current health at each significant location international labour standard to upstream vendors and safety metrics (i.e. incident rates) –– Develop and implement a water reduction programme –– Identify and catalogue the sustainability attributes in existing –– Implement targeted training and performance elements targeted to high risk locations products and services in Commercial areas –– Develop and implement a waste reduction programme –– Identify attributes of value to customers, investors and regulators –– Continue to share best practices across operations sites –– All current metrics (i.e. water usage, recycling percentages, and embed them into R&D/NPD targets and processes –– Continue and extend robust HSE audit programme etc.) will continue to be measured and reported. –– Develop and implement a programme to communicate and embed –– Become fully compliant with identified applicable product and service sustainability attributes into Medical Education, international labour standards within Smith+Nephew. Market Development, Sales Training, R&D/NPD and product launch, Evidence generation, and Manufacturing processes –– Implement processes to ensure current and ongoing compliance with the customer and regulatory requirements (i.e. chemicals of concern, Modern Slavery, conflict minerals, Waste Electrical and Electronic Equipment Regulations (WEEE), Restriction of Hazardous Substances Directive (RoHS), Registration, Evaluation, Authorisation and Restriction of Chemicals Regulations (REACH), Safe Drinking Water and Toxic Enforcement Act of 1986 (California Proposition 65/Prop65), etc.).

Smith+Nephew Sustainability Report 2019 13 Introduction and sustainability strategy Products with a reduced footprint How we manage sustainability

Putting people first

People come first at Smith+Nephew For example, we have also strengthened our – our patients, employees, healthcare wellness programmes for employees, with professionals, partners and shareholders. a focus on enabling healthy lifestyle choices. Why is this important? We engage meaningfully with the communities where we operate through our This principle is the essence of Life Unlimited. site leadership teams and local camaraderie Putting people first will help us achieve “Putting people first councils. In addition, we encourage our is the essence of not only our vision of a world in which healthcare people to volunteer in local communities, professionals and patients can access our Company, but also our offering paid volunteering time and matching purpose. It is what drives solutions to help restore health, wherever employee charitable donations. they may be. our business decisions We believe that these initiatives will be the and, we believe, our While our employees, partners and foundation for our future business success, business success.” contractors work to help improve other and ability to have an ever greater impact Elga Lohler people’s health and wellbeing, we take on people’s lives. steps to protect theirs, by ensuring a Chief Human Resources Officer, Chair of the Sustainability Council healthy and safe working environment.

What’s in this section?

Empowering our employees 15

Injury-free workplace 20

Responsible global citizen 23

Launching new products in 2019 27

Safe use of our products 29

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Empowering our employees

Why is this important? Key areas of focus and to determine where we need to focus Smith+Nephew’s success comes from our A culture of Care, Collaboration and improve the employee experience. employees. It is through their hard work and Courage This decision to prioritise and measure and dedication that we are able to improve engagement, rather than satisfaction, Smith+Nephew has a proud history of was driven by our new culture pillars. patients’ lives every day across the world. more than 160 years of improving health We want to be an employer of choice, and around the world. While we have grown More than 14,300 – or 84% – of our to attract and retain talented employees. significantly from our beginnings as a small employees gave feedback about the current To achieve this, we are empowering family pharmacy in Hull, England, our caring state of engagement at Smith+Nephew. our leaders and managers, building a spirit has remained the same. Our scores were highest where we have sustainable talent pipeline, and operating focused our efforts: sense of purpose, more effectively and inclusively. Our culture of Care, Collaboration and pride, and commitment to quality work, Courage defines who we are as a Company with more to do in the areas of recognition How it links to our goals and as employees, and creates an and development. Every manager received Empowering our employees will help us environment that sets us up for collective a results report for his or her team, and achieve our goal of having ‘robust social success. A strong and consistent culture worked with them to set action plans responsibility programmes which contribute engages and motivates employees, creates for improvement. to the attraction and retention of top talent’. a community where they understand our strategy and purpose, and makes them feel The Gallup results are reviewed by the valued for their contributions to it. It also Compliance & Culture Committee of the drives behaviours that help us realise our Board, who monitor how the culture pillars business ambitions. are being embedded, and consider the Gallup Survey as an additional method for employees 2019 was the first year that we used the to provide feedback on what is working well Gallup Global Engagement Survey to measure and where improvements are required. how well our employees are engaged,

Caring for our customers Congratulations to Puri Diaz (Sales Representative, Spain) for being the first colleague to be recognised as part of our culture pillars campaign. Puri worked hard to develop a unique manual tracking system to manage use of RENASYS◊ negative pressure wound therapy devices at a large hospital. Puri also provided bags to store and move the devices, ensuring they were well looked after. Thank you Puri for demonstrating Care toward our customers and patients.

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Empowering our employees

Winning Behaviours “Our new Winning learning platform, which offers self-paced Courage in action + We launched Winning Behaviours in early Behaviours and leadership micro-learning (e-learning modules, 2019 to underpin our new purpose and strategy will ensure videos and leadership summaries) on a supporting mental health culture pillars. They define the winning Smith+Nephew is a leader range of topics. Our corporate leadership development approach has been evolving mindset we want to drive at Smith+Nephew in our industry.” Employee groups across our UK sites including our to accommodate individual learning and the behaviours we expect to deliver Nikki West Inclusion & Diversity Committee are collectively styles. Our digital training resources and our strategic imperatives. Senior Vice President, driving a new initiative to create a work environment Continuous Leadership Journeys (CLJs) Global Talent that supports mental health, and to break down We now have one set of expectations enable employees to tailor their training the stigmas that are attached to the subject. for how all Smith+Nephew employees and learn at their own pace. The CLJs Launched in 2019, the programme offers mental should behave, tailored to different levels topics were different for each month health first aid training to volunteer employees. – Individual Contributor, People Leader in 2019 and have included effective and Senior Leader. communication, influencing and skills of Chris Defraine, our UK HSE Director, explains: Winning Behaviours have been embedded persuasion, relationship management and “We have had 87 volunteers to date who come into all of our talent and HR processes, how to develop a strong customer focus. from each of our key UK locations. We selected the one-day Mental Health England (accredited) from how we recruit and manage We have also redefined our leadership course. Our goal is to have people in place who performance, to how we develop our programme strategy, targeting our can recognise the symptoms of people struggling employees. We measure success by different employee and manager with mental health, initiate a conversation and the integration of Winning Behaviours populations with dedicated learning, signpost the individual towards the resources into all our talent and people processes. tailored to their level and needs. All our we have available to us, such as the Employee This includes our recruitment process, learning solutions are now designed Assistance Programme.” performance management processes, around Winning Behaviours to enable leadership development programmes, our purpose and culture pillars. Our two 360° feedback, talent review process successful leadership programmes, and development planning. Leadership Edge and Pioneer, are available for people managers. Frontier is a front Leadership development line supervisor programme, specifically We have defined the leadership expectation designed for supervisors at our for every employee via our Winning manufacturing sites. We also encourage Behaviours, which is supported via individual our front line manufacturing operators 70/20/10 development plans. Every employee to propose improvements to their work also has access to MyLearning, our online environment to promote efficiency.

Smith+Nephew Sustainability Report 2019 16 Introduction and sustainability strategy Products with a reduced footprint How we manage sustainability

Empowering our employees

Collaboration in Valuing difference Elevate is our women’s leadership We want to ensure that we select talent We are committed to employment development programme. It is digital with a strong fit, and that the team actively action + enhancing practices based on equal opportunities, and interactive, providing continuous communicates the importance of our regardless of colour, creed, race, national momentum for professional development culture pillars throughout the entire talent origin, sex, age, marital status, sexual for our female employees. Up to 200 acquisition process. the culture of people participate each month and the orientation, or disability. A person’s ability In 2019, we invited 2,600 candidates to programme is generating very positive to perform essential functions of a job complete remote, video interviews to drive teamwork feedback. It is helping to build engagement is the only relevant criteria. more efficiency in the screening process and retention of our female pipeline, as well Another one of our culture pillars is for our hiring managers across the US, EMEA Inclusion and diversity is a key part of as accelerating women’s professional and Collaboration. In 2019, we recognised and APAC, and to provide a more consistent our strategy and how we do business. career development. It is also preparing them Philip Langton, a Senior Microbiology candidate experience. This has led to faster It embodies our purpose, culture, Winning for more senior roles within our organisation. Analyst in Hull (UK), for enhancing hiring decisions, with 30% of interviewees Behaviours and strategic imperatives. In fact, 45% of participants achieved a our culture of teamwork, based on choosing to participate via a mobile device. It is reflective not just of what we want to promotion or new role during the year. mutual trust and respect. Philip spotted achieve, but also how we want to achieve it, an opportunity to bring our Quality and how we want to operate day-to-day. One course attendee commented: Assurance and Research & Development “Elevate has allowed me to think about Future focus departments together to conduct We work to build awareness and manager- my career and approach from a different capability to improve the diversity of our In 2020, we will continue to build on in-house testing. Thank you Philip for perspective. Most impactful have been our initiatives to reinforce the culture improving our expertise, saving money recruitment pipeline. We have invested topics which remind me to consciously in this across our organisation. We have of Care, Collaboration and Courage, and promoting collaborative teamwork. consider how I approach a situation which we know will be key to our future delivered Inclusion training to our top 100 or opportunity.” leaders and a group of our top talent, as success. Our approach will continue well as training our Talent Acquisition and Talent management to be holistic and ensure everything we do is integrated and aligned with HR teams involved in recruiting. Groups such Investing in our talent and developing our people and business processes. as the Society of Women in Engineering at employees is fundamental to Smith+Nephew’s For example, we will redesign some Smith+Nephew drive greater inclusion by long-term success. Our culture is personified key HR policies and further simplify supporting, enabling and celebrating the by the people in our organisation and the key processes to underpin our culture diversity of our people. same holds true for the new talent we hire. pillars. We will also increase our focus We have aligned our interview guides to our on manager development to support winning behaviours, reinforcing our culture line leaders and their teams, to embed pillars of Care, Collaboration and Courage. our winning culture.

Smith+Nephew Sustainability Report 2019 17 Introduction and sustainability strategy Products with a reduced footprint How we manage sustainability

Empowering our employees (case studies) US interns putting our culture International pillars into action Women’s Day 2019

Care – This summer, as part of our global Collaboration – Our interns have also International Women’s Day (IWD) is 108 Our team in China, for example, held a intern programme, we hosted interns across benefited from a weekly lunchtime lecture years old, with the first IWD gathering taking women’s forum, led by three inspirational our US sites including Andover, Austin, series. Based in Andover, interns from other place back in 1911, supported by over a leaders – Ginger Lu, Vice President APAC Mansfield and Memphis. Alongside their work sites tune in via Skype. Senior leaders take million people in Austria, Denmark, Germany Compliance and Greater China Legal; experience, they readily immersed themselves the time to speak about their role and and Switzerland. Today, it is a global event, Jennifer Sun, Greater China Commercial in the community spirit at Smith+Nephew. background, and answer questions ranging celebrating the social, economic, cultural Excellence Director; and Jerry Li, Greater Alison Keefe, our Graduate Recruitment from how to achieve a healthy work- and political achievements of women. China IT Senior Director. The event was Programme Manager, was with 57 employees life balance to the challenges facing our broadcast online to all employees, including In May 2019, teams across many of our and interns who took part in a 5k run organisation. Speakers so far have included home-based employees, with 122 attendees sites organised events and activities that sponsored by our Minuteman Office Park in Will Danzinger, our Senior Vice President across different locations. supported our efforts to create an inclusive Andover. The run benefited the Boys and Girls Operations, Al Torabi, Vice President Quality, workplace where every individual can fulfil of Greater Lawrence and raised $5,700. and Melissa Guerdan, Chief Quality and their potential and be proud ambassadors Regulatory Affairs Officer. Sophia Poirier, a Regulatory Affairs Intern, said: for Smith+Nephew, our customers and “We met other people who we don’t normally Courage – Our global intern programme their patients. work with and everyone was welcoming. is a great way for Smith+Nephew to They made an effort to include us in their attract new talent to prepare them for “The forum was such a conversations and it was fun to connect jobs in their chosen fields, since it offers success and it was really with co-workers.” real insight into the workings of a global interesting to hear from our medical device company. Taylor Barbagallo, leaders. Ginger shared her Marketing Intern, explains: “My perspective opinions on the challenges on what marketing entails has changed. of being a woman in the Now I realise just how much work goes workplace, and invited all into creating one brochure, or one post female employees to be on a social media channel.” a part of our WISE club, which stands for ‘Women in Search of Excellence.” Lisa Gong Senior Medical Education Manager Charity 5k run in Andover (US) International Women’s Day in China Smith+Nephew Sustainability Report 2019 18 Introduction and sustainability strategy Products with a reduced footprint How we manage sustainability

Empowering our employees (case studies) Developing STEM leaders of the future in the UK

We want to raise the level of scientific “Hannah and Sam are “Ron Dearing UTC has prepared me and technological understanding, and work evidence that the unique really well for this,” explains Hannah, on a number of initiatives to achieve this. partnership between who achieved a Distinction in Engineering. In the UK, for example, Science, Technology, employers and educators at “By working for Smith+Nephew, I can join Engineering and Mathematics (STEM) Ron Dearing UTC really does a team which will make a huge difference Ambassadors at our Hull and Watford sites give students the edge in in the world because of the products they speak at local schools and colleges about terms of their employability make. To have the opportunity to be part their careers. They offer their time and and specialist skills.” of that is breathtaking.” enthusiasm to help bring STEM subjects Sam, who achieved two Merits in to life by giving presentations, mentoring Gary Carr Engineering and a further Merit in Digital and career talks. Production Manager, Advanced Wound Management, Technology, said the approach to learning We are a founding partner at Ron Dearing Hull (UK) at the college had pushed him to aim high. University Technical College, Hull, which “I know I have made the right decision to provides students with a unique, employer- go down the apprenticeship route. I’m so led education. We provide opportunities excited and it’s a privilege to work for a for their students, like Hannah Crossley and big company such as Smith+Nephew.” Sam Graham, both aged 18, who have begun their careers as Apprentice Manufacturing Technicians at Smith+Nephew.

Sam and Hannah, two apprentices from Ron Dearing University Technical College, Hull Smith+Nephew Sustainability Report 2019 19 Introduction and sustainability strategy Products with a reduced footprint How we manage sustainability

Injury-free workplace

Why is this important? Key areas of focus As a result of this wider focus, we have Every day, we must ensure that the safety We continue to focus our safety efforts seen an increase in the number of injuries Total recordable incident of our employees and those who work with on our manufacturing operations, reducing reported by people working for us, including rate, TIR those arising from driving on company us is given the highest priority. This is the risk from the use of machinery and through 2019 0.49 business and receiving cuts while handling case in all of our offices and manufacturing lean initiatives. Our field sales operations 2018 0.45 sites around the world, and also when we have seen increased focus globally, ensuring or assembling products. This has been 2017 0.35 visit customers. A healthy and safe working measures are in place to protect employees reflected in increased incident rates 2016 0.52 who are working in country offices and reported across the Company in 2019. environment is fundamental to the way Lost time incident warehouses, travelling on company business, Our total incident rate did improve when we work at Smith+Nephew. frequency rate, LTIFR as well as those who need to work in the compared to 2016, but we did not maintain How it links to our goals operating theatre during surgery. We are the 10% improvement. There were no 2019 0.28 Our injury-free workplace activities working diligently to address these risks fatalities during 2019. This wider focus is 2018 0.19 will help us achieve our goal of having providing us with an opportunity to more 2017 0.11 through the implementation of policies 2016 0.23 ‘zero work-related injuries and illnesses and education. accurately address the root causes of these across the value chain’. issues bringing us a step closer to realising Our performance our injury reduction goals. Smith+Nephew’s approach In 2019, we continued to develop the We have achieved improvements in culture of shared responsibility for employee Safety and occupational health workplace safety and incident reporting health and safety. We did this by extending Our headline safety performance by continually applying our holistic and behaviour-based safety programmes, includes all employees and supervised integrated sustainability management improving the reach of safety training, the contractors, and excludes unsupervised system, our active health and safety breadth of our on-site safety audits and by contractors. We adopt the industry programme, a number of behaviour-based identifying and investigating all incidents standard US Occupational Safety and safety campaigns, and robust incident and their associated root causes. Health Administration (OSHA) system reporting and investigation systems to record incidents of occupational across the Company. injury and ill-health. Lost time incidents are defined as those which result in a person not being able to report for work on the day or shift following the incident. Performance is expressed as a rate of the number of incidents per 200,000 hours worked.

Smith+Nephew Sustainability Report 2019 20 Introduction and sustainability strategy Products with a reduced footprint How we manage sustainability

Injury-free workplace (case studies) Costa Rica: Improving Raising safety awareness Occupational through ‘CAMPEON’ Health

Our team in Costa Rica wanted to develop Anyone who reports five safe behaviours We have relaunched our UK Occupational a strong safety culture, embedded in the 6x wins the CAMPEON challenge, in which Health services to provide better, risk- £30,000 increase reduction in organisation. They analysed the root causes of near winners receive a CAMPEON sustainably- based services to staff exposed to costs by getting of workplace injuries and discovered that misses and sourced t-shirt and participate in the hazards in the workplace. This includes an people back into 84% of incidents were related to unsafe improvement monthly prize raffles. effective referral process to get support work sooner, ideas raised with improved behaviours. In response, they created a to employees, managers and HR when As a result of this programme, in the case management Behaviour Based Safety (BBS) programme. they need it, and assessments conducted services past year our site in Costa Rica raised Rather than waiting for an accident, the for staff experiencing health issues over 2,400 near misses and improvement Health, Safety and Environment (HSE) affecting their performance at work. ideas, an increase of nearly six times over department is switching its focus to the previous year. The programme is ongoing, As well as ensuring legal compliance preventative action by reinforcing positive involves everyone from our senior leaders and risk management, this has led to and safe behaviours. to new recruits, and is part of our culture reducing downtime following the removal Our people are encouraged to follow the of continuous improvement. of ‘blanket’ requirements and ‘inferred ‘CAMPEON’ safety behaviours: Corrijo, Actuo, liability’ (providing health surveillance Mejoro, Prevengo, Evito y Observo para No for non-existent risk), and improved case tener accidentes (I Behave, I Do, I Improve, management services. By treating issues I Prevent, I Choose and I Observe to Not early, which either prevents absence have accidents). The team raises awareness or gets people back into work sooner, of CAMPEON through the BBS mascot, we have reduced costs by over £30,000. Sam the Chameleon. People who demonstrate safe behaviours are rewarded and publicly recognised with a CAMPEON badge.

The Costa Rica team with Sam the Chameleon

Smith+Nephew Sustainability Report 2019 21 Introduction and sustainability strategy Products with a reduced footprint How we manage sustainability

Injury-free workplace (case studies) Stretching exercises Safety and and ‘e-bike training’ wellbeing initiatives to reduce injuries

Our team in Suzhou (China) introduced 339 Just some of our other safety and stretching exercises to help combat wellbeing initiatives Future focus employees musculoskeletal injuries. In 2019, 650 received an e-bike ––Employees in Beijing (China) were asked We are extending our Sustainability Management Clean Room employees participated in these safety helmet to attach a leaf to a ‘Safety Tree’ to raise System standards and procedures, and our established exercises twice during each shift, and a safety awareness; Health, Safety and Environment (HSE) audit programme further 160 office employees participated ––Our ‘Mommy Cottage’ in Suzhou (China) to a larger number of commercial sites. We are also in daily stretches. Additionally, we have supports working mums to continue increasing our focus on audit, training and safety delivered e-bike safety awareness training breastfeeding their baby; awareness at our commercial locations, including our to all employees and 339 employees employees who are working in sales. ––All our UK sites have introduced a received an e-bike safety helmet. new ‘Mindful’ menu to our restaurants Having a safe work environment means that we not to promote healthy eating; and only look for immediate and obvious risks, but are ––250 colleagues joined in our ‘Wellness also aware of the risk to our employees’ health and Challenge’ in Costa Rica to improve wellness. We strive to identify injuries and illness their eating habits. before they become life-altering, and we are working to continuously improve our processes so that the impacts to the body are minimised and eliminated where possible. We also recognise that a healthy A commuter in Suzhou (China) on their e-bike person is a happier person. Promoting wellness by offering mental health support, healthy eating options and competitions, flu vaccinations, assistance with stopping smoking, and blood pressure checks are just a few ways in which we will continue to assist employees in monitoring their health.

Smith+Nephew Sustainability Report 2019 22 Introduction and sustainability strategy Products with a reduced footprint How we manage sustainability

Responsible global citizen

Why is this important? Smith+Nephew’s approach “Our people work hard to We believe that selecting charitable and Today’s world faces many challenges Our wider social responsibility strategy bring healthcare solutions not-for-profit organisations and activities and everyone needs to play their part engages employees around our philanthropic to patients every single day. is best accomplished at the local level, to help tackle them. More and more activities. These include: However, as responsible guided by our social responsibility strategy. citizens, we want to go people want to work for purposeful We provide grants Each location’s site leadership team or Product donations: even further, helping companies that act in a responsible way. and donations to charitable or not-for- camaraderie council designs, constructs, communities to access At Smith+Nephew, we are proud that our profit organisations, medical institutions, and operates a local programme that healthcare and enhancing products and services enable our people accredited educational programme vendors, best engages their employees and meets to make a difference to improve health medical foundations or professional societies lives all around the globe.” local needs. and quality of life around the world. as governed by our Global Policy and Simon Fraser We let people know about our progress, Procedure on Grants and Donations. President, Advanced reinforcing that Smith+Nephew is a great How it links to our goals Wound Management Our responsible global citizen activities Matching gifts: Our programme is designed and Member of the place to work. will help us achieve our goal of having to encourage charitable contributions; we Sustainability Council We apply strict criteria to ensure that ‘robust social responsibility programmes match our employees’ eligible donations up we support only charities and other which contribute to the attraction and to $500 per employee on an annual basis. non-profit organisations adhering to retention of top talent’. Employee volunteering: We encourage appropriate ethical standards. our people to volunteer as a way to build teamwork and develop them further, as well as to give back to our local communities. Our programme allows every employee up to eight hours of paid volunteer time per year. Wellness activities: Our wellness programme is designed to empower our employees to actively participate in their overall health, and promote healthy behaviours in the communities in which we live and work.

PICO◊ 7Y Single Use Negative Pressure Wound Therapy

Smith+Nephew Sustainability Report 2019 23 Introduction and sustainability strategy Products with a reduced footprint How we manage sustainability

Responsible global citizen

Key areas of focus Our performance 67% Future focus Health & human services Annual increase During 2019, our philanthropic activities In 2020, we will revise our social As a leading medical device company, in cash and totalled $13.41m. This consisted of product donations responsibility strategy to ensure we give preference to health and $13.30m in cash and product donations continued alignment with our new human services-related programmes. (67% increase over the $7.98m from 2018), sustainability strategy, and will adjust Our contributions are used to increase and $108,000 from matching employee our programmes as appropriate. access globally to healthcare and human gifts to qualified charities. services, in places where they will benefit This reflects the initial success of our social those in greatest need. responsibility strategy, which aims to build Education employee enthusiasm for charitable giving and demonstrate a connection between Education is essential for economic and charitable endeavours and our success social development, increasing people’s as a company. ability to access high quality healthcare solutions. We fully support educational In addition, in 2019 we provided $7.13m programmes, particularly those focused in educational grants and sponsorships on Science, Technology, Engineering and across the world. These aimed to support Mathematics (STEM). and improve the skills of surgeons in the application of our products and Environmental stewardship technologies, thereby expanding access We encourage participation in programmes to world-class healthcare solutions. that protect and provide wider access to local natural resources and those that promote sustainable initiatives.

$7.13m of educational grants and sponsorships across the world

Smith+Nephew Sustainability Report 2019 24 Introduction and sustainability strategy Products with a reduced footprint How we manage sustainability

Responsible global citizen (case studies) Volunteering in local communities

‘Wings for Life’ Cycling from the UK to In 2019, colleagues from our site in Baar France to combat liver disease (Switzerland) supported the ‘Wings for A team of 34 employees completed the Life’ charity running event. The motto was Croxley, UK to Paris three-day bike ride, ‘we run for those who can’t’ and the team raising over £15,000 for Primary Sclerosing raised €1,158 for research into spinal cord Cholangitis (PSC) support. The route took injuries. We salute our eight brave runners them through the UK South Downs and who together covered almost 100km for Northern France, ending 235 miles later this important cause, despite the cold with the team riding through the cobbled and wet weather. Parisian streets to the finish at the base of the Eiffel Tower. Year-round support for Barnardo’s We are proud to be a charity partner of Orange Spots sighted in Costa Rica child protection charity, Barnardo’s in During the summer of 2019, a group of Australia. In August, 20 of our Sydney staff our employees in Costa Rica volunteered ran, jogged and walked their way from the to collect waste at one of the most Sydney Central Business District to Bondi contaminated beaches in the country. Beach as part of the world’s largest fun run We called the project ‘an orange spot – City2Surf – raising over AUS$1,900 for arrived at Guacalillo beach’ because the charity. We followed this up during the the orange spot represents our crew winter, with an Australia-wide collection as of Smith+Nephew volunteers sporting part of Barnardo’s Winter Warmers appeal. orange tops. They spent the day using Thanks to our generous staff and their their ingenuity, initiative, strength and huge outpouring of support, this resulted team work to fill a truck with waste, in 30 boxes of warm clothes, food, toiletries, weighing approximately 1,000kg. vouchers and treats sent to three different Barnardo’s centres.

Smith+Nephew Sustainability Report 2019 25 Introduction and sustainability strategy Products with a reduced footprint How we manage sustainability

Responsible global citizen (case studies) The first ever Smith+Nephew Plastic surgery Sustainability Challenge in South Africa

Smith+Nephew Young Professionals (SNYP) A team in Oklahoma City (US) nicknamed A hospital in South Africa requested a “Improving the quality of patients’ lives is launched the first ever Smith+Nephew ‘the cabbage patch kids’, created a donation from Smith+Nephew of our PICO◊ what we do every day at Smith+Nephew,” Sustainability Challenge in 2019. Teams all vegetable garden made from reclaimed Single Use Negative Pressure Wound explains Sabashini Naicker, Senior Director, over the world developed and implemented materials and providing a community Therapy system (sNPWT) in order to reduce Advanced Wound Management. “Our projects that have changed the way our gathering space. There, employees are the risk of wound healing complications team helps to provide advanced wound sites operate and have helped us towards encouraged to participate by collecting and help improve post-surgical outcomes care solutions to patients suffering our sustainability goals. coffee grounds to use as fertilizer. for their patients. Our team was happy to from burns, and chronic and traumatic assist as part of our approach to supporting wounds. We were extremely pleased With direction from local HSE managers, And a team at our Orthopaedics healthcare professionals in improving the when Albert Luthuli approached us each site was assigned a sustainability manufacturing site in Tuttlingen (Germany) lives of patients, enabling better outcomes to assist, giving Smith+Nephew the topic, ranging from waste management is testing saving emissions by transporting through the pioneering design of our opportunity to demonstrate the health to carbon emissions and community less cutting fluid and oil, consuming less fluid products, and securing wider access to and economic benefits that PICO can engagement. The result was 40 Challenge and water, and reducing the bacterial load our technologies. offer. Reducing healing time, dressing entries representing five countries, 15 for the site by using filtration techniques changes and complications such as winning teams and three ‘Most Innovative and new machinery. Inkosi Albert Luthuli Central Hospital is wound infection helps patients as Project’ awards. Our sustainability leadership a public/private partnership situated in SNYP aims to continue the Sustainability well as the healthcare provider.” team thoroughly reviewed all projects and Durban, with a large catchment population. Challenge and build on this year’s success, selected the winners from each site. As a tertiary institution, the hospital provides moving our entire organisation towards specialised care, including plastic surgery. A team in Hull (UK), for example, organised greater sustainability. The multi-disciplinary surgical team at the a clean-up at the nearby Withernsea beach. “Seeing so many people from different hospital wanted to operate on 20 patients They improved community engagement countries, cultures and backgrounds working suffering from macromastia (abnormally by collaborating with the local community together to find sustainable solutions for our large breasts). This causes extreme neck and council. sites was inspiring,” says Camila de Conto, and back pain, chronic breast pain, and Manufacturing Engineer, Curaçao, whose in most cases, difficulty performing daily idea it was for the Challenge. “I hope we will functions and a poor quality of life. keep innovating together and reducing our carbon footprint for many more challenges to come.”

The team at the hospital in Durban, South Africa Smith+Nephew Sustainability Report 2019 26 Introduction and sustainability strategy Products with a reduced footprint How we manage sustainability

Launching new products in 2019

Advanced Wound Management In 2018, a large randomised controlled trial 2 LEAF◊ Patient Monitoring System (RCT) was published on the LEAF technology. The study demonstrated that it reduces The current standard of care for pressure pressure injury rates by 73% relative to the injury prevention is to reposition all patients standard of care. at risk of pressure injuries on a regular basis. However, given the busy nature of hospitals, LEAF demonstrates our three culture pillars: it’s often difficult to keep track of which Care – We care deeply about preventing patients need to be turned. Compliance with pressure injuries. turning protocols is typically suboptimal and Reducing the human as a result, pressure injury rates remain high. Collaboration – Our product was developed in collaboration with and economic burden Our LEAF System has been clinically engineers, nurses and physicians. proven to increase frequency and quality of wounds of turning in an acute setting, which has Courage – Patient turning protocols have been demonstrated to reduce hospital- been co-ordinated in the same way for the Smith+Nephew’s extensive Advanced Wound Management portfolio is designed to meet broad acquired pressure injuries, a common and past 150+ years. We have to be courageous and complex clinical needs, helping healthcare costly hospital complication.1 It involves a to improve this fundamental nursing practice. professionals get ‘CLOSER TO ZERO’ human small, wireless patient sensor that attaches By infusing technology into this traditional and economic consequences of wounds. to the patient’s upper chest, continuously practice, we are introducing a cultural change monitors all patient movement, and helps that we believe will improve patient outcomes caregivers know when a patient needs to and supports our purpose of Life Unlimited. be repositioned to prevent pressure injury. A life without pressure injuries is a Life LEAF◊ Patient Monitoring System LEAF continuously monitors patient position Unlimited – we are deeply committed to for the purposes of co-ordinating and helping caregivers prevent pressure injuries. optimising patient turning protocols. It was first launched in 2014 and is FDA cleared for use in the United States.

Smith+Nephew Sustainability Report 2019 27 Introduction and sustainability strategy Products with a reduced footprint How we manage sustainability

Launching new products in 2019

1 AHRQ National Scorecard on Hospital-Acquired Conditions Sports Medicine & ENT Orthopaedics (June 2018) and Effect of a wearable patient sensor on care delivery for preventing pressure injuries in acutely ill adults: A pragmatic Smith+Nephew’s Sports Medicine & ENT Smith+Nephew’s Orthopaedics franchise randomized clinical trial (LS-HAPI study), International Journal franchise operates in growing markets where includes an innovative range of Hip and Knee of Nursing Studies (December 2018). 2 Effect of a wearable patient sensor on care delivery for preventing unmet clinical needs provide opportunities Implants used to replace diseased, damaged pressure injuries in acutely ill adults: A pragmatic randomized for procedural and technological innovation. or worn joints, robotics-assisted enabling clinical trial (LS-HAPI study), International Journal of Nursing Studies (December 2018). technologies that empower surgeons, and 3 Ref. 2018 SmartTRAK US Meniscal Repair Fixation market report. Trauma products used to stabilise fractures and correct bone deformities.

Innovative technology Enhancing for minimally quality of life invasive surgery In 2019, we announced the launch of There are currently more than 1.2 million OR30◊, our new Advanced Dual Mobility meniscal tears treated surgically in the US system incorporating our proprietary each year with only 15–20% of the cases VERILAST◊ technology. The diversity of receiving a meniscal repair, rather than our portfolio exemplifies our commitment removal.3 With products like NOVOSTITCH◊ to providing surgeons with implant and PRO and FAST-FIX 360◊, we see the instrumentation options that meet the opportunity to double this proportion specific demands of their patients and in the medium term. preferred surgical approach.

NOVOSTITCH PRO Meniscal OR3O Dual Mobility System Repair System

Smith+Nephew Sustainability Report 2019 28 Introduction and sustainability strategy Products with a reduced footprint How we manage sustainability

Safe use of our products

Why is this important? Smith+Nephew’s approach “At Smith+Nephew, we transition period until the date of application Manufacturing and supplying safe and Product safety is at the heart of our believe product quality is a in May 2020. The regulation includes new effective products is at the heart of business. Regulatory authorities across critical priority, ultimately requirements for the manufacture, supply our business. the world enforce a complex series of laws allowing healthcare providers and sale of all CE marked products sold in and regulations that govern the design, to improve the lives of their Europe and requires the re-registration of Our strategic imperative to ‘Become the development, approval, manufacture, patients. We have made medical devices with CE marking, regardless best owner’ includes our commitment to labelling, marketing and sale of healthcare great progress executing of where the devices are manufactured. uphold the highest standards of quality and products. Our internal processes and our Global Quality strategy compliance. We endeavour to effectively Our performance procedures are established to ensure product in 2019. The important and efficiently deliver products that provide Throughout 2019, our Quality and Regulatory safety and efficacy across the full life cycle work of the Sustainability safe and effective solutions to our customers Affairs function continued to focus on of our products and services. We actively and patients. Council enhances our improving overall Company compliance encourage reporting of any observation focus on quality across the while supporting our growth objectives by How it links to our goals indicating a potential concern with product full product life cycle, by delivering multiple new product approvals Our people, processes and technology are performance. We listen to feedback – from establishing aspirational as well as registering hundreds of existing structured to support progress toward the customers, patients, sales representatives, goals for our employees products in new markets. The function aspirational goal of having ‘zero product- employees and regulatory authorities. across multiple functions.” also improved key quality metrics through related and service-related patient injuries’. Key areas of focus Melissa Guerdan implementation of improved processes Our global Quality and Regulatory Affairs Chief Quality and Regulatory and management oversight. function supports the full product life Affairs Officer and Member of the Sustainability Council cycle management of Smith+Nephew’s global product portfolio from design and development through manufacturing and Future focus post-market surveillance. This function In 2020, we will continue to improve establishes appropriate processes and key metrics associated with our procedures to facilitate compliance to external and internal quality measures. applicable global laws and regulations. We are simplifying our processes and implementing supporting technologies in The team is currently leading a major our journey of continuous improvement. Group-wide programme to prepare for We take pride in our work, and take implementation of the European Union (EU) seriously our commitment to provide Medical Devices Regulation (MDR), which safe and effective products for patients. came into force in May 2017, with a three-year

Smith+Nephew Sustainability Report 2019 29 Introduction and sustainability strategy Putting people first How we manage sustainability

Products with a reduced footprint Why is this important? We are also working to deliver products “2019 has seen a marked Along with our customers and stakeholders, and services with improved overall increase in the number of we are continuing to show interest in the environmental impact. people becoming aware environmental footprint of our products and We are taking steps to better understand of the need to protect our services. We have focused on our internal the extended footprints of our top products. planet. We are playing our environmental footprint for a number of years, This is important to ensure that we focus our part by managing resources improving our performance in the areas of resources where they will produce the most efficiently, saving energy, waste recycling, water and GHG emissions. positive impact. cutting emissions, and our use of water and plastic.” Our revised strategy extends upstream We are mindful that impacts can be to our suppliers and downstream to our complex and inter-related. So throughout Mark Gladwell customers. This means that we want to our business, we take a holistic approach to President, Operations and Global work with partners who are making efforts Business Services and Member sustainable decision-making, ensuring that of the Sustainability Council to reduce their environmental impact. all impacts are taken into account.

What’s in this section?

Product development 31

Minimising waste 32

A focus on water 34 The ANTHEM◊ Total Knee System provides a simplified surgical Reducing emissions 35 technique that allows knee surgeons to benefit from the anatomical fit provided by ANTHEM Smith+Nephew Sustainability Report 2019 30 Introduction and sustainability strategy Putting people first How we manage sustainability

Product development

We have made progress in 2019 The innovation teams have taken improved “I’m excited to be a This will allow us to set clear objectives at incorporating sustainability manufacturing capabilities as key goals. member of our new the initiation of programmes and provide We continue to extend the application Sustainability Council. the required governance to insure the initiatives into our new product of methods such as Six Sigma and Our new sustainability teams are successful in meeting those development processes. lean manufacturing to enable process strategy addresses all objectives. In addition, we will continue to flexibility early in the development cycle. increase post-consumer recycled content Why is this important? areas of our business. Lean manufacturing tools have specifically Incorporating sustainability in packaging materials and we have several We want to develop products with been used to target reductions in several into our Innovation ongoing enterprise-wide projects to sustainable attributes, increase access waste streams; namely overproduction, processes ensures that transition product support materials such to care, improve our environmental inventory, transportation and scrap. we address customer as Instructions For Use (IFU) and marketing impact and reduce costs. While tools like these were originally collateral from paper-based content to needs by optimising the utilised to improve efficiency and reduce electronic on-demand product information. environmental footprint How it links to our goals cost, they have also been beneficial for us of our products and Our product development programme to achieve our sustainable goals in design will help us achieve our goal of having and production. packaging, and improving ‘products and services that are the patient experience aligned to market economic, social As we continue to expand our sustainability through sustainable and environmental expectations and efforts for future new product development, product attributes.” anticipate future market conditions’. we are implementing sustainability reviews for all new innovation programmes. Vasant Padmanabhan President, Research and Development and Member of the Sustainability Council

Smith+Nephew Sustainability Report 2019 31 Introduction and sustainability strategy Putting people first How we manage sustainability

Minimising waste

Why is this important? Smith+Nephew’s approach ––We work with our waste contractors to identify and introduce more recycling We are seeing more and more Our aim is to minimise all of our waste Landfill waste (t) customers demanding medical devices streams at all our sites around the world, opportunities. This helps us recycle where 2019 1,996 that are produced – and perform – especially at our manufacturing locations, it was previously impractical to do so, supporting our long-term ambition to send 2018 1,940 in an environmentally-friendly way. achieving best practices in waste 2017 2,196 Waste is an opportunity to improve management. We place specific emphasis no waste to landfill. Some sites are already 2016 2,281 resource efficiency and costs. on the waste we generate in-house and nearing this goal where opportunities for downstream, throughout the life cycle recycling exist; 1,996 -12% How it links to our goals of our products – from the raw materials ––Some of our waste streams are incinerated Our waste activities will help us we purchase, the waste generated in our at waste facilities – these facilities reuse achieve our goal that ‘all materials manufacturing facilities, and ultimately the the heat generated to supply energy in Total waste (t) are either shipped as part of product final destination of the materials we use. place of burning fossil fuels; and 2019 11,837 or returned for beneficial use’. ––We are constantly talking to our suppliers 2018 11,034 Wherever possible, our employees help 2017 10,496 and manufacturers about ways to reduce to spread the message about waste 2016 10,122 waste by redesigning transit packaging, reduction and encourage waste elimination and we continue to encourage them and recycling. 11,837 +17% to increase their recycling efforts using Key areas of focus some of the lessons we have learnt. % waste to recycling incl. We focus on a number of areas to minimise Our performance waste to energy our waste. Here are just some examples: While the Company experienced growth, 2019 76% ––We encourage recycling at all of our both through the existing business and 2018 79% manufacturing, distribution and office acquisitions, the effect did not have a 2017 77% locations – this includes paper, cardboard, 2016 74% material impact on our environmental plastic, glass bottles, metals, chemicals footprint; our total waste generated was and much more; 76% slightly more than in the previous year. ––At our warehouses, where possible, We continue to identify and implement we minimise unnecessary packaging source reduction, reuse and recycling for shipping; opportunities and ways to divert waste ––We collect, sort and recycle nearly 9,000 away from landfill. In 2019, we recycled tonnes of materials each year, including 76% of our total waste, including waste some waste sent for energy recovery – now diverted to energy recovery, towards representing 76% of all our waste produced; our target of 80% by 2020. Smith+Nephew Sustainability Report 2019 32 Introduction and sustainability strategy Putting people first How we manage sustainability

Minimising waste

Solving the conundrum 1% The importance of packaging “Our improvements to Going forwards, we will introduce a number packaging take Courage of measures to improve the environmental Our Orthopaedics manufacturing Exceeding The most critical requirement for packaging location in Memphis (US) is one of the expectations in healthcare applications is patient safety to challenge current footprint of our packaging. For example, largest generators of solid waste across in Costa Rica and ensuring product integrity. In addition to manufacturing models. we are working on a strategic collaboration sending only with one of our suppliers to use materials Smith+Nephew. As a result, this location 1% of its waste safety and economic considerations, we are It takes Collaboration to has a particular responsibility to mitigate to landfill also taking steps to improve the design of find the most sustainable that are easier to recycle (mono-materials). its environmental impact. With increasing our packaging and ensure accurate tracking solutions, and it takes We are also exploring biodegradable plastic production demands, overall waste of packaging waste, to improve recovery Care to develop and packaging alternatives in all packaging levels. reduction has not been feasible, so the and recycling rates. train employees so that site decided to divert waste away from they have the capability Our focus is on waste reduction and landfill and focus on recycling. The HSE Future focus packaging rationalisation. We invest in to find and analyse the team in Memphis has adopted the goal A key challenge of waste reduction technology to shorten the supply chain best alternatives.” of recycling or reusing more of its waste. is that the majority of our products with on-site packaging conversion, promote Laurie Jordan We communicate waste progress to all and services’ environmental footprint projects to digitise paper (electronic Senior Director, Global production groups to raise awareness of the is locked in during the design phase. Instructions For Use (eIFU) and production Packaging Technology impacts of waste generation, as well as the This makes it difficult to make paperwork), and support testing for new benefits of reusing, recycling and converting significant headway during the distribution routes that require less fossil waste to energy initiatives. As a result, in product’s life. We are addressing this by fuels for shipping packages. Smith+Nephew 2019, the sites in Memphis recycled, or sent applying agreed product sustainability offices also continue to reduce unnecessary for incineration and energy recovery, 52% attributes to both our products and packaging and to discuss waste reduction of their total waste with an aim to improve their packaging through our New issues with suppliers. over the coming year. Product Development and Operations processes. These attributes include Exceeding expectations in Costa Rica One key project redefined packaging for our flagship product (PICO) and its IFU format. decreasing energy use and packaging We are delighted that our team This alone saved 600,000 plastic trays waste for customers, reduced material in Costa Rica achieved its target from being sent to landfill. Changes to pallet handling risk, and the use of robotics to of sending only 1% of its waste configuration also improved space usage in cut procedural complexity. They remain to landfill. transit and storage. a priority going forward. The new PICO 7 sNPWT packaging which saved 600,000 plastic trays from being sent to landfill Smith+Nephew Sustainability Report 2019 33 Introduction and sustainability strategy Putting people first How we manage sustainability

A focus on water

Why is this important? Smith+Nephew’s approach Our performance People and businesses are using up our We take a holistic approach to water Water is necessary to ensure that our Future focus planet’s fresh water faster than it can be consumption, aiming to cut the amount products are safe for consumer use, and Our Orthopaedics manufacturing replenished. The availability of fresh water of water used when we manufacture we continue to see the positive impacts sites in Memphis (US), are the in the areas where we operate varies. and distribute our products. We strive of our 2018 water-saving initiatives. largest consumers of water across At Smith+Nephew, we challenge ourselves to optimise water use during upstream Whilst there was a significant leak at one Smith+Nephew globally. As a result, to save water at all of our locations. manufacture and distribution of raw facility in Memphis (US), resulting in a loss we have a particular responsibility materials and components. We also aim of approximately 24,000m3 of water, to mitigate our environmental impact How it links to our goals to ensure that our new and modified we have used this as an opportunity to at this location, ensuring we consume Our activities to reduce and conserve products minimise our customers’ water identify leak detection deficiencies and natural resources responsibly as part water will help us achieve our goal that consumption when they use our products. improve our overall leak detection and of our manufacturing processes. ‘total water impacts of our products response programmes. Learnings from our successes to date and solutions are balanced with local Focus on water have been compiled and opportunities We also saw an increase in water usage human and ecosystem needs’. We apply the following criteria: for water use reduction are being at our facility in Costa Rica (approximately evaluated at several locations – these 3 ––Quantify the water use at each location, 14,000m ). The cause of this was three- include converting chiller units to air- prioritising sites by quantity used; fold. First, an energy saving initiative to cooled systems and elimination of ––Question whether the water use was utilise HVAC cooling towers which, while cooling towers. necessary, eliminating unnecessary use; successfully reducing energy use, led Next steps are to identify areas where ––Optimise remaining water use; and to an increase in water consumption. Second, there was an increase in manufacturing our operations impact water stressed ––Balance waste with incoming clean areas, and focus our efforts on water water (cradle to cradle approach). operations on site, raising the demand for chilled water for the condensate system. reduction programmes accordingly. Third, there were approximately 25% more Water (1,000m³) employees on site in 2019 compared to 2018, leading to an increase in demand for 2019 650 water in our dining room and bathrooms. 2018 538 2017 614 Elsewhere, preparation for production at 2016 683 our site in Fort Worth (US), has also resulted in a large increase in water consumption 650 -5% of approximately 16,000m3.

Smith+Nephew Sustainability Report 2019 34 Introduction and sustainability strategy Putting people first How we manage sustainability

Reducing emissions

Why is this important? Smith+Nephew’s approach 77,212 These include: Every day, we read about the devastating We understand the urgent need for a low- metric tonnes ––LED lighting installations in offices effects of climate change around the world. carbon economy, and are constantly open of CO2e and manufacturing areas; From droughts to floods and other unusual to learning new ideas and bringing about ––Solar panels in India and China; weather events, climate change is already change. Our approach to cutting emissions ––Combined Heat and Power (CHP) impacting people’s lives – and no country is twofold – tackling energy efficiency and (natural gas fired) units in Germany; is immune. To tackle this global challenge, sourcing lower-carbon energy. To achieve ––Variable frequency drives on motors, everyone, including businesses, needs both of these, we invest in technological e.g. climate control, heating and lighting to take action to use energy responsibly solutions, like low energy LED lighting automation system occupancy settings; and reduce emissions. systems and solar power. These can help us use energy resources more efficiently. ––Conducting compressed air leak How it links to our goals We also want every employee and partner assessments and remediating leaks; Our activities to reduce emissions will to take responsibility for minimising their ––Building energy management systems help us achieve our goal to achieve an energy use. We make efforts to motivate (BEMS), control of equipment for ‘80% absolute reduction in total life cycle staff to actively care about the environment, maximum efficiency and the use greenhouse gas emissions by 2050’. giving them guidance and information of time zones and setbacks; to help them make a real difference. ––Analysis of usage data to identify anomalies and opportunities; and Key areas of focus ––Replacing old inefficient equipment We have been measuring greenhouse with highly efficient equipment, such as gas emissions throughout our value chain compressors, chillers, pumps and motors. to ensure that we apply resources most effectively, in our quest to reduce our 16% Our performance total CO2e emissions footprint. We have reduction in CO2e In 2019, the location-based carbon footprint also implemented, or benefited from, since 2016 of business operations was 77,212 metric numerous energy efficiency and low- tonnes of CO2e, a 16% reduction since 2016. carbon energy measures. Some of this reduction was achieved as a result of lower grid factors being published for some countries or regions. This exceeds our 2020 goal of a 10% reduction.

Smith+Nephew Sustainability Report 2019 35 Introduction and sustainability strategy Putting people first How we manage sustainability

Reducing emissions

CO2e reporting methodology, Where current market-based factors Smith+Nephew holds this certification at five materiality and scope were not available, we have used key manufacturing locations (Suzhou and Future focus We report the carbon footprint of our Scope ‘Residual Mix’ data for the EU locations Beijing in China, Hull in the UK, Memphis in the Our employees are increasingly mindful 1 and 2 greenhouse gas (GHG) emissions in from RE-DISS Phase 2 (Reliable Disclosures US) and most recently in 2019, Costa Rica. of greenhouse gas impacts when System for Europe) and IEA data for all carrying out projects and are taking tonnes of CO2 equivalent from our business Compliance with this standard other countries, except the remaining operations for the calendar year ended promotes awareness of environmental more and more ownership of reducing US locations where the eGRID factors 31 December 2019. Our focus is on the areas performance and impacts across all levels GHG emissions. Instead of a centralised were applied. Additionally, some market- of largest environmental impact including of the organisation, identifies savings programme from the top down, based data was no longer current and manufacturing sites, warehouses, R&D sites opportunities for the business, helps us enlightened middle-level managers are so we reverted to IEA data for location- and offices. Smaller locations representing meet our sustainability goals, improves taking personal responsibility for factoring based emissions, for example in China less than 2% of our overall emissions are regulatory compliance and ensures that in GHG emissions. This is illustrated by for 2019 and this has resulted in a further not included. Acquisitions completed before our environmental legal responsibilities the Smith+Nephew Young Professionals annual reduction in reported emissions. 1 January 2019 are included in the data, are managed on a day-to-day basis. (SNYP) Challenge (see page 26), which has with more recent ones being excluded and led to projects aimed at GHG reduction. Our Scope 2 emissions this is in line with our established policy for ISO 45001 is replacing the Occupational This is really a key development and we are Health & Safety (OH&S) management integration of acquired assets. Scope 2 emissions CO2e (t) excited to encourage it moving forward. system OHSAS 18001. ISO 45001 is the Our GHG emissions reporting represents our Location-based Market-based international standard focused on identifying core business operations and facilities which 2016 82,415 – and controlling workplace risks and it also fall within the scope of our consolidated requires organisations to consider how 2017 76,107 67,685 financial statements. Primary data from energy suppliers and contractors are managing suppliers has been used wherever possible. 2018 67,886 66,475 their risks. The system will help thousands 2019 67,324 57,152 Market-based carbon emissions of organisations to provide a safe and healthy workplace for their workers and Where available, we have applied the » See page 45 for data references other people, prevent deaths, work-related market-based emission factors available Accreditations injury and ill-health, and to continually for some manufacturing locations. improve their OH&S performance. These are in accordance with the ISO 14001 is the international standard ‘GHG Protocol Scope 2 Guidance, an that specifies requirements for an In 2019, our sites in Costa Rica and Beijing amendment to the Corporate Standard’. effective environmental management (China) became the first two manufacturing system (EMS). facilities to gain both the ISO 14001 and ISO 45001 certifications.

Celebrating ISO 14001 and ISO 45001 in Beijing Smith+Nephew Sustainability Report 2019 36 Introduction and sustainability strategy Putting people first How we manage sustainability

Reducing emissions (case studies) Investing in energy efficiency

Major energy saving investment “District cooling offers UK efficiency measures lighting Energy efficiency in Costa Rica in Switzerland significant advantages the way at Smith+Nephew During 2019, our site in Costa Rica has Our main production facility in Aarau in cost, environmental Our UK team has undertaken significant taken many steps to reduce its energy is currently being air conditioned by protection, comfort, and work to reduce our impact on the consumption. We’ve successfully completed decentralised devices and ventilated by operational efficiency over environment, with improved systems and the move to new LED lighting by replacing a centralised system. This setup results other cooling technologies. energy efficient methods, processes and an additional 330 lamps across the site. in high maintenance and operating costs, It makes sense in areas of equipment. We carried out an extensive Other initiatives include HVAC Set Back for which are not energy efficient. The majority high cooling density such as programme of LED lighting replacement controlled and not controlled production of the operating units need to be replaced. an industrial building.” across Hull, Godmanchester and Warwick, areas, compressed air leaks repair and improving the standard of lighting, compressed Air Dryer Set Back. It is Our team’s proposal, with work under Ramona Wawrzynek working environments and reducing estimated that these combined savings way, is to connect the main building to a Senior Director, Manufacturing, energy consumption. will total more than 200,000kWh per year. district cooling system (DCS), which cools Aarau (Switzerland) through the use of chilled water. This will Systems have been optimised using the be distributed from a central source by a Building Energy Management Systems semi-public company. The implementation (BEMS) to cut back, and in some cases of ventilation control reflecting hours of switch off, heating, ventilation, air occupancy will result in a large, one-off cost conditioning (HVAC) systems and chilled for technical installations. However, it will water during no or low occupancy also lead to a substantial decrease in energy periods. Heating systems are switched use and maintenance costs over time. off during summer months and the BEMS has been extended to include switching off kitchen fans at Croxley Park outside of cooking times.

Smith+Nephew Sustainability Report 2019 37 Introduction and sustainability strategy Putting people first Products with a reduced footprint

How we manage sustainability

The true value of an organisation This is particularly necessary in three areas: cannot be reflected simply in its financial general management, risk management reports. True value to society rests in and integrity. the organisation’s long-term impact Clear lines of authority and accountability on quality of life. regarding target setting and achievement Why is this important? are important. There must be a rational, informed, and empowered process by Sustainability is embedded in the fabric which organisational leadership identifies, of Smith+Nephew. As an organisation evaluates and addresses sustainability committed to realising our full potential, risks and opportunities. And there must be we must optimise the economic, social strong arrangements to ensure the universal and environmental impacts of our activities. application of fair and open business practices. Robust overall governance is essential Consistent progress towards the goal of to maintaining direction and pace. sustainable operation can only be made when all three are present.

What’s in this section?

Corporate governance 39

Our approach to risk management 40

Acting with integrity 42

Working with responsible third parties 44

Smith+Nephew Sustainability Report 2019 38 Introduction and sustainability strategy Putting people first Products with a reduced footprint

Corporate governance

The Board The Chief Executive Officer The Council is intentionally sponsored at The Board is responsible to shareholders The Board delegates the day-to-day an executive level to guarantee visibility for approving the strategy of our Group, running of the Company to the Chief to the Board through regular updates to overseeing performance, evaluating and Executive Officer, Roland Diggelmann, our Compliance & Culture Committee. monitoring the management of risks. who is supported and advised by the Chaired by our Chief Human Resources Oversight of our sustainability strategy is Executive Committee which meets Officer, Elga Lohler, the Council considers one of the Matters Reserved to the Board. regularly and makes decisions collectively. issues such as social responsibility, corporate The Board reviews the Sustainability It recommends and implements strategy, governance, environmental stewardship, Framework on a regular basis and recommends budget and three-year plan labour and workplace conditions, supply annually approves the Sustainability to the Board for approval, ensures liaison chain impacts, community involvement, Report prior to publication. between commercial and corporate and philanthropy. The Council’s members functions, receives regular reports represent a cross section of our business, The Compliance & Culture from sub-committees, reviews major bringing diverse thinking and experience Committee investments, divestment and capital to the team. The Board delegates some of its work expenditure proposals and approves to Board Committees comprised entirely business development projects. Further details of the Company’s of Independent Non-Executive Directors. The Sustainability Council governance framework may be found The Compliance & Culture Committee is in the Annual Report on pages 62-63. chaired by Marc Owen. The Compliance & During 2019, the Executive Committee Culture Committee reviews and monitors established a new Sustainability

Governance Council to develop and implement Division of Responsibilities ethics and compliance, quality and Roles and composition Corporate governance framework Whilst we all share collective responsibility for the activities of the Board, some of our roles have been defined in greater detail below. The Board is responsible to shareholders and stakeholders for approving the strategy of the Group, for overseeing the performance of the Group and evaluating and monitoring the management of risk. Each member of the Board has access, collectively and individually, Chair Senior Independent Director to the Company Secretary and is also entitled to obtain independent professional advice at the Company’s expense, should they our sustainability strategy. This aligns decide it is necessary in order to fulfil their responsibilities as Directors. The Board delegates certain matters, as follows, to Board Committees, consisting of members of the Board: regulatory matters across the Group and – Building a well-balanced Board. – Chairing meetings in the absence of the Chair. – Chairing Board meetings and setting Board agendas. – Acting as a sounding board for the Chair on Our Board – Ensuring effectiveness of the Board and enabling the Board-related matters. annual review of effectiveness. – Acting as an intermediary for the other Directors Audit Committee Remuneration Nomination & Compliance & Ad hoc – Encouraging constructive challenge and facilitating where necessary. effective communication between Board members. – Available to shareholders and stakeholders Provides independent Committee Governance Culture Committee committees with our business strategy and will on matters which cannot otherwise be resolved. assessment of the Determines Committee Reviews and monitors Ad hoc committees – Promoting effective Board relationships. financial affairs of the – Holding meetings with Non-Executive Directors in the – Leading the annual evaluation into the Remuneration Policy Reviews size, skills, ethics and compliance, may be established during 2019, the Committee’s remit was Company, reviews and packages for quality and regulatory to review and Board’s effectiveness. experience, knowledge absence of Executive Directors. financial statements – Leading the search for a new Chair, if necessary. Executive Directors and composition of and related legal matters approve specific – Ensuring one to one discussions with each Board Member. and controls oversight and Executive Officers, the Board, succession across the Group. matters or projects. – Ensuring appropriate induction and development programmes. of the risk management having regard to pay planning, diversity and Role was expanded – Ensuring effective two-way communication and debate process and key risks, across our workforce. governance matters. in 2019 to include with shareholders and stakeholders. such as cybersecurity. create long-term shareholder value. Ensures alignment with oversight of culture, – Promoting high standards of corporate governance. Manages use of internal our purpose, values and sustainability – Maintaining appropriate balance between stakeholders. and external auditors. expanded to include oversight of culture, long-term strategy. and stakeholder relationships.

See page 72 See page 86 See page 69 See page 80 It is also tied to our purpose, culture Chief Executive Officer Chief Financial Officer Company Secretary sustainability, and stakeholder relationships. – Developing and implementing – Supporting the Chief Executive – Advising the Board on matters The Board delegates certain matters, as follows, to Board Committees, consisting of Executive Board Members: Group strategy. Officer in developing and of corporate governance. – Recommending the annual implementing the Group strategy. – Supporting the Chair and budget and long-term strategic – Leading the global finance function, Non-Executive Directors. Finance & Banking Committee Disclosures Committee and financial plan. developing key finance talent – Point of contact for investors on Approves banking and treasury matters, guarantees, Group structure Approves release of communications to investors and Stock Exchanges. – Ensuring coherent leadership and planning for succession. matters of corporate governance. changes relating to mergers, acquisitions and disposals. Reviews whether communications are inside information. pillars, and strategic imperatives. of the Group. – Ensuring effective financial – Ensuring good governance – Managing the Group’s risk reporting, processes and controls practices at Board level and The Board delegates the day-to-day running of the business to Roland Diggelmann, Chief Executive Officer, who is assisted in his role profile and establishing effective are in place. throughout the Group. by the Executive Committee comprising the Executive team shown on pages 58–61. The governance framework below outlines internal controls. – Recommending the annual the Executive Committee arrangements as follows: – Regularly reviewing organisational budget and long-term strategic structure, developing executive and financial plan. Executive Committee team and planning for succession. – Maintaining relationships with shareholders. Recommends and implements strategy, recommends budget and three-year plan to the Board for approval, ensures liaison between commercial – Ensuring the Chair and Board and corporate functions, receives regular reports from sub-committees, monitors succession planning and talent pipeline below Board level, are kept advised and updated regarding key matters. reviews major investments, divestment and capital expenditure proposals and approves business development projects. – Maintaining relationships with Monthly Operating Review Franchise, Functional and Portfolio Innovation Board shareholders and advising the Board accordingly. Wider group of senior commercial Regional Leadership Meetings Defines portfolio allocation principles, – Setting the tone at the top with and financial leaders reviews monthly Senior management meetings to drive reviewing and challenging current regard to culture, compliance commercial and marketing and operating performance across each franchise, shape of portfolio, identifying gaps and sustainability matters. results against budget, identifying function and region. and opportunities and re-prioritising gaps and agreeing remedial actions. segments and geographies. – Day-to-day running of the business. Health, Safety & Diversity & Inclusion Council Global Benefits Committee Environment Committee Implements strategies to promote Oversees all policies and processes Non-Financial Reporting Regulations Oversees health, safety and diversity and inclusion. relating to pensions and employee In accordance with The Companies, Partnerships and Groups (Accounts and Non-Financial Reporting) Regulations 2016 information environmental matters. benefit plans. can be found on the following pages of this 2019 Annual Report relating to the environment (pages 32–35 of this report and the 2019 Sustainability Report), Social (24–27 of this report and the 2019 Sustainability Report), anticorruption and anti-bribery matters (34–35), employees (24–25 and 84–85) and human rights (26). Group Ethics & Mergers & Acquisitions Sustainability Council Compliance Committee Investment Committee Monitor Sustainability strategy Reviews compliance matters and Oversees Corporate Development Strategy, and deliver agreed plan. country business unit or function monitors status of transactions and approves compliance reports. various stages in merger, acquisition and disposal process.

62 Smith+Nephew Annual Report 2019 Smith+Nephew Annual Report 2019 63

Smith+Nephew Sustainability Report 2019 39 Introduction and sustainability strategy Putting people first Products with a reduced footprint

Our approach to risk management

Like all businesses, we face a number Providing guidance and rigour across this Principal risk Oversight of risks and uncertainties. process is our Executive Committee and Business continuity and business change Board the Group Risk Team. Successful management of existing Supply Board and emerging risks is critical to the At the third line of defence is our Internal Cybersecurity Audit Committee achievement of our strategic objectives Audit Function, providing an annual opinion Quality and regulatory Compliance & Culture Committee and to the long-term success of our on the effectiveness of our Risk Management New product innovation, design & development Board business. Risk management is therefore process to the Executive Committee, chaired including intellectual property an integral component of the Company’s by the Chief Executive Officer, and then to Talent management Board corporate governance. the Board and its Committees. Pricing and reimbursement Board Mergers and acquisitions Board As in previous years, our Enterprise Risk This process has led us to identify the Legal and compliance Compliance & Culture Committee Principal Risks in the table to the right. Management process is based on a holistic Commercial execution Board approach to risk management. Our belief Each Principal Risk is linked into our Political and economic Board is that the strategic and operational Strategic Priorities, and their management Finance Audit Committee benefits of managing risk are achieved is overseen by our Board or one of its when Enterprise Risk Management is committees. This work includes defining aligned with the strategic and operational the level of tolerance for each risk and goals of the organisation, and our process reviewing management reports into and governance structure achieves this. the risk. The Board cascades our risk appetite throughout our organisation via the Executive Committee, risk owner community and our management group. A formal ‘bottom up’ exercise ensures that risks are escalated back through the process to our Board and form our Principal Risks as appropriate.

Smith+Nephew Sustainability Report 2019 40 Introduction and sustainability strategy Putting people first Products with a reduced footprint

Our approach to risk management

The impact of climate change For several years we have rigorously Our refreshed sustainability strategy takes One of the United Nations’ Sustainable measured our GHG emissions using full account of the risks and opportunities Future focus Development Goals (SDGs), is to ‘take internationally recognised standards. presented by climate change, focusing We will enhance how we adhere to the urgent action to combat climate change We have also set and consistently achieved investment on de-carbonising our operations principles set out by the Task Force on and its impacts’. our GHG reduction targets. Going forward, and those of our suppliers and customers. Climate-related Financial Disclosures we have taken a science-based goal Our sustainability strategy is owned by (TCFD). The TCFD structured its It is widely recognised that continued aligned with the recommendations of the Sustainability Council, comprised of recommendations around four areas emission of greenhouse gases (GHG) will the Intergovernmental Panel on Climate members of the Smith+Nephew Executive that represent core elements of how cause further warming of the planet and Change to reduce total life cycle GHG Committee, which ensures that the organisations operate: governance, this warming could lead to damaging social emissions by 80% by 2050. Climate change strategy adequately addresses climate strategy, risk management, and metrics and economic consequences. During 2019, risk is a component of our re-invigorated impacts. We understand how important and targets. These overarching themes we have continued to consider, and mitigate business resilience and crisis management it is to balance environmental initiatives will guide our assessment of climate- against, the potential impact of climate programme and we have taken several with business activities, and strive to related risks and opportunities. change on our business operations. measures to reduce vulnerability to climate reduce emissions through new technology Our physical assets and supply chain are change-exacerbated incidents, such as the development, renewable energy use and vulnerable to weather and climate change improvement of flood defences in Hull (UK). other measures. (e.g. sea level rise, increased frequency and severity of extreme weather events, stress on water resources). In our orthopaedics TCFD theme Our focus areas business, mineral-based raw materials are Governance Consider short, medium and long-term climate-related issues dependent upon energy-intensive processes Strategy Ensure that the new sustainability strategy addresses the risks (smelting). Patient populations are vulnerable and opportunities of climate change to a potential rise in infectious disease Risk management Full consideration given to climate-based impacts on business propagation. Governments and corporations continuity and recovery Metrics & targets Commitment to implement 100% renewable electricity at our alike are under increasing pressure to strategic manufacturing sites by 2025 mitigate the expected effects of climate change, potentially resulting in infrastructure projects which would require large capital outlays, further increasing the pressure on healthcare payments.

Smith+Nephew Sustainability Report 2019 41 Introduction and sustainability strategy Putting people first Products with a reduced footprint

Acting with integrity

Why is this important? We believe that trust is the most “We continue to embed We earn people’s trust by working in an At Smith+Nephew we are committed important driver for long-term our culture of compliance ethical way, and complying with strict through collaboration standards. Our Code of Conduct and to integrity, honesty and professionalism. business success. These principles are reflected in our across the Group and Business Principles (Code) define our values culture pillars: Care, Collaboration and Bribery and corruption in the healthcare simplified compliance as a Company. We revised the structure of Courage. These culture pillars guide the sector is a cause for concern for governments processes designed to this document in 2019 to reflect our new behaviour of everyone at Smith+Nephew. across the world. When healthcare make it easier for our brand, strategy and culture pillars of Care, professionals’ clinical decision making is employees and third Collaboration and Courage. Our Code is We believe that it’s a privilege to provide improperly influenced, impacts can be seen parties to understand our supported by global policies that specifically products and services for patients on healthcare budgets and patient access to expectations and do the define behaviours, ensuring that our actions and healthcare professionals. And we quality healthcare. More and more countries strengthen our reputation, and that we right thing.” believe that it’s up to everyone who are enacting anti-bribery legislation, and follow relevant anti-bribery and anti- works for us – or on our behalf – to our industry remains an area of focus for Catheryn O’Rourke corruption laws. share that responsibility by upholding investigation and enforcement action. Chief Legal and Compliance Officer our reputation for integrity and ethical Ethics oversight conduct, because the sustainability of Our business requires interactions with In 2019, we restructured our Compliance our business depends on doing things Government Officials and Healthcare organisation to establish a global team with the right way. Professionals (HCPs) to enable us to deliver responsibility for managing all Compliance new products and services to benefit operational and oversight activities, including patients, and to ensure the safe and training, investigations, monitoring, data effective use of our products. We must analytics and validation. By centralising engage with Government Officials to obtain these activities within a single group, led the necessary licences to manufacture, by an experienced senior leader, we have sell and distribute our products. In addition, improved our visibility of developing trends our partnerships with HCP customers are across the business. This enables us to focus essential to support the design, development our efforts on understanding the root cause and testing of new products, and to support of an issue and developing corrective and peer-to-peer training in the appropriate use preventive actions to drive required change. of our products. All these interactions need This group is also responsible for measuring to be carefully managed to ensure they are and reporting on the effectiveness of done in the right way, and to avoid even the our Compliance programme and key perception of impropriety in our relationships improvement initiatives. with these key partners.

Smith+Nephew Sustainability Report 2019 42 Introduction and sustainability strategy Putting people first Products with a reduced footprint

Acting with integrity

Our Board maintains oversight through The global Compliance team collaborates Our Regional Compliance Officers also Sourcing minerals responsibly our Compliance & Culture Committee closely with our Medical Education conduct on-site assessments of third parties. We are committed to sourcing minerals and leadership through our Group Ethics team, who are key in managing our HCP These assessments provide opportunities for only from responsible suppliers. In May 2019, and Compliance Committee. The latter is interactions. In 2019, we developed and the Compliance team to help third parties we reported our status on conflict minerals made up of our Chief Executive Officer and launched an extensive, mandatory, online understand our expectations and give the in accordance with the 2010 US Dodd business and corporate function heads. training programme for Medical Education. Regional Compliance teams an insight into Frank Act and US Securities and Exchange Our compliance programme is led by our This provides detailed guidance on risks the operations of key partners. Commission rules. In 2018, we were one Chief Legal & Compliance Officer, and and appropriate management of all their As appropriate, Corrective and Preventive of few in our industry group to confirm our supported by a global Office of Ethics and interactions with HCPs. We have also Actions (CAPAs) are created to address conflict-free status. We will continue to Compliance. Accountability is also crucial extended our Compliance Ambassador findings arising from any Compliance monitor developments and be prepared and our top leaders certify to our CEO every programme with 53 new Ambassadors, oversight activities, including investigations to respond appropriately. Full details are year that required policies in their businesses taking our global total to 153 across 24 and CVAs. CAPAs are tracked to closure and available at www.smith-nephew.com/ have been implemented. Managers and countries, with India, Malaysia, Thailand, metrics reported to the Board Compliance sustainability/policies. employees complete an annual compliance Poland and Puerto Rico joining the & Culture Committee. During 2019, we certification, and we support compliance programme in 2019. Against modern slavery introduced monitoring checks for CAPA through communication tools like articles We work with suppliers who share our We conduct regular reviews to monitor quality. With the creation of the global team on our Company intranet, in our regular opposition to modern slavery. In compliance compliance with our Code, policies and responsible for managing all Compliance communications, and during face-to- with the UK Modern Slavery Act 2015, procedures, and to identify opportunities operational and oversight activities, we are face training. we have published our statement on this for improvement. We group these activities focusing on identifying common trends in issue online. Increasing understanding of compliance under our Compliance Verification findings and conducting root cause analysis Training on our Code of Conduct is issued to Programme (CVP), which includes to enhance the scope and effectiveness all new hires when they join Smith+Nephew, Compliance Validation Assignments (CVA) of our CAPAs. Plans are in place to develop Read more online at of our internal business units and functions, more role-based training aimed at helping www.smith-nephew.com/ and refresher training is given to all sustainability/policies employees on an annual basis. With the centralised and local monitoring, reviews our global teams understand how to apply introduction of our new Code of Conduct of higher risk third parties, and data Compliance in their daily lives. analytics to identify potential compliance in 2019, we introduced a new training We are making significant enhancements risks. In addition to risk-based reviews of module that gives employees a guided tour to our use of data analytics and business direct markets and third parties, we have through the new Code. The new module intelligence to provide early warning of introduced reviews of global processes. reinforces our culture pillars and provides potential violations and to improve our a series of real-life scenarios to reinforce ability to identify emerging trends. key requirements of the Code.

Smith+Nephew Sustainability Report 2019 43 Introduction and sustainability strategy Putting people first Products with a reduced footprint

Working with responsible third parties

Third party compliance “Our new sustainability In 2019, we updated our Global Third Party As a global company in more than 100 strategy incorporates a Seller Management procedure to reflect countries, Smith+Nephew relies on a worldwide focus on people, planet the revisions to our Code of Conduct. network of third party suppliers who enable and products and we Additionally, we transitioned management us to manufacture and sell our products. expect vendors who of US Third Party Seller due diligence We work with third party vendors, distributors share our vision to be activities to our Global Business Support and agents to uphold our vision to deliver integral partners in our team based in Costa Rica allowing for Life Unlimited. new products, current streamlined practices globally. In order to requirements and simplify processes and minimise errors, Our new sustainability strategy incorporates ongoing services.” we also integrated a high-risk supplier a focus on people, planet and products. compliance assessment for our direct While our third party suppliers contribute to Brandy Maranian vendors into our procurement system. all of these focus areas, we expect vendors Senior Vice President, who share our vision to be integral partners Supply Chain and Smith+Nephew’s third party suppliers Global Procurement in our new products, current requirements enable us to deliver the best products and ongoing services. We conduct risk- and services to our customers. based due diligence and training to ensure We strive to ensure the supply chain vendors are aware of and comply with the we manage adheres to these standards. standards we expect of them. Additionally, To this end, we are targeting by 2025 we have established a Supplier Relationship completing a supply chain assessment Management team who in co-ordination with of all suppliers and subsequent tier our quality and regulatory organisation are levels to assure compliance with dedicated to managing supplier alignment our sustainability requirements. with corporate social responsibility and environmental standards.

Smith+Nephew Sustainability Report 2019 44 Introduction and sustainability strategy Putting people first Products with a reduced footprint

Data and references

Pages 10 and 11 – Specific SDG targets We report our emissions in two ‘scopes’. Product names 3.8 Achieve universal health coverage, including financial Scope 1 figures include: Direct sources of emissions conversion factors published by the Department for The product names referred to in this document are risk protection, access to quality essential healthcare mainly comprise the fuels we use on-site, such as gas Business, Energy and Industrial Strategy (BEIS) and the identified by use of capital letters and the ◊ symbol services and access to safe, effective, quality and and heating oil and fugitive emissions arising mainly Department for Environment, Food and Rural Affairs (on the first occurrence) and are trademarks owned affordable essential medicines and vaccines for all. from the losses of refrigerant gases. (DEFRA) for 2019. We have applied the emission factors by or licensed to members of the Group. 6.4 By 2030, substantially increase water-use Scope 2 figures include: Indirect sources of emissions most relevant to the source data, including DEFRA efficiency across all sectors and ensure sustainable such as purchased electricity and steam we use at 2018 (for UK locations), International Energy Agency Contact us withdrawals and supply of fresh water to address our sites. (IEA) 2017 (for overseas locations) and for the US we We would welcome your feedback have used the US Environmental Protection Agency on this Sustainability Report. water scarcity and substantially reduce the number Location-based emissions are calculated in compliance of people suffering from water scarcity. (US EPA) ‘Emissions and Generation Resource Integrated Chief Human Resources Officer with the World Resources Institute (WRI)/World Database’ (eGRID) for the regions in which we operate. 8.7 Take immediate and effective measures to Business Council for Sustainable Development (WBCSD) All other emission factors for gas, oil, steam and Smith & Nephew plc eradicate forced labour, end modern slavery and GHG Protocol Corporate Accounting and Reporting fugitive emissions are taken from DEFRA 2019. Building 5, Croxley Park human trafficking and secure the prohibition Standard and have been calculated using carbon Hatters Lane, Watford and elimination of the worst forms of child labour, Hertfordshire WD18 8YE including recruitment and use of child soldiers, Waste 2016 2017 2018 2019 United Kingdom and by 2025 end child labour in all its forms. Non-hazardous waste (tonnes) 2,281 2,196 1,940 1,996 [email protected] 8.8 Protect labour rights and promote safe and secure Hazardous waste (tonnes) 327 259 335 857 www.smith-nephew.com working environments for all workers, including migrant workers, in particular women migrants, Waste recycled for energy recovery (tonnes) 2,152 2,406 2,481 2,521 and those in precarious employment. Waste recycled (tonnes) 5,362 5,635 6,278 6,463 Read more online at www.smith-nephew.com 10.2 By 2030, empower and promote the social, Total waste (tonnes) 10,122 10,496 11,034 11,837 economic and political inclusion of all, irrespective of age, sex, disability, race, ethnicity, origin, religion or economic or other status. Energy, emissions and water 12.2 By 2030, achieve the sustainable management Total energy (GWh) 207 209 209 213

and efficient use of natural resources. Emissions to air (tonnes CO2e) 12.4 By 2020, achieve the environmentally sound Combustion of fuel and operation of facilities 9,822 9,451 9,956 9,888 management of chemicals and all wastes (process and fugitive) throughout their life cycle, in accordance with Purchased electricity (location-based) and steam agreed international frameworks, and significantly 82,415 76,107 67,886 67,324 reduce their release to air, water and soil in order Total (location-based) 92,237 85,558 77,842 77,212 to minimise their adverse impacts on human Purchased electricity (market-based) and steam – 67,685 66,475 57,152 health and the environment. Water usage (1,000m3) 683 614 538 650 12.5 By 2030, substantially reduce waste generation through prevention, reduction, recycling and reuse. All emissions have been calculated using the most up-to-date emission factors available for each location according to the GHG Protocol Guidance.

Smith+Nephew Sustainability Report 2019 45