CORPORATE RESPONSIBILITY Report 2018 Merck Corporate Responsibility Report 2018 Content 5 STRATEGY & MANAGEMENT 84 EMPLOYEES 6 Company profile 85 Attractive employer 9 CR strategy 90 Diversity 11 Stakeholder dialogue 94 Health and safety 14 Materiality analysis 97 Employee engagement 99 Good leadership 20 BUSINESS ETHICS 21 Corporate Governance 101 ENVIRONMENT 21 Governance 102 Environmental stewardship 22 Compliance 105 Climate action 27 Responsible marketing 108 Waste and recycling 29 Interactions with health systems 110 Water management 31 Suppliers 113 Plant and process safety 31 Supply chain standards 115 Biodiversity 34 Mica supply chain 36 Human rights 38 Bioethics 116 COMMUNITY 41 Clinical studies 117 Community involvement 45 Animal welfare 119 Global Health 121 Broad Minds 48 PRODUCTS 49 Innovation and digitalization 124 FACTS & FIGURES 53 Sustainable products 125 Report profile 53 Sustainable product design 127 Indicators 56 Packaging and recycling 127 Economics 58 Health for all 128 Business ethics 58 Global strategy 131 Employees 61 Focus programs 144 Environment 64 Open innovation sharing 150 Community 66 Pharmaceutical supply chain 152 Goals 68 Prices of medicines 164 Recognition and rankings 70 Health awareness 167 Sustainable Development Goals 73 Product safety and quality 172 Non-financial report 73 Chemical product safety 179 GRI content index 76 Patient safety 179 General disclosures 79 Product-related crime 184 Economic Standards 82 Transport and warehouse safety 187 Environmental Standards 190 Social Standards 197 Global Compact CoP 201 Assurance report 2 Merck Corporate Responsibility Report 2018 Letter from the CEO Ladies and gentlemen, friends of Merck, In 2018 we ran an employee campaign called “350 We aspire to be a leading science and technology company, Good Deeds”. The name says it all – to commemorate our which also means developing technological advances that 350th anniversary, we rolled up our sleeves to support good benefit all humankind. This ranges from treatments for causes across 60 countries. We made donations to chari- serious diseases, to products and services that make table initiatives, launched new projects and volunteered our research and biomanufacturing faster and more reliable, time. Our employees poured great effort into helping people through to materials for the technologies of tomorrow. We with disabilities; they renovated hospitals and cooked meals are leveraging the great potential presented by genome with disadvantaged children. Starting this year, our work- editing, big data and artificial intelligence while living up force across the globe will be permitted to take up to two to the massive responsibility that arises from utilizing such days of paid leave per year to volunteer for charitable activ- technologies. To keep our moral compass aligned, we ities spearheaded or supported by Merck. discuss complex ethical issues in our Bioethics Advisory While I am proud to be part of a company that is so Panel, consisting of internal and external experts from a deeply dedicated to community outreach, corporate respon- variety of fields and cultures, and comply with the clear-cut sibility means so much more to us. Indeed, our entire recommendations they make. business model is founded on this sense of responsibility. 3 Merck Corporate Responsibility Report 2018 Last but not least, responsible conduct involves respecting Sustainable Solutions covers everything that we at the interests of our employees, customers and investors. In the company do to ensure that our processes, products and line with this ethos, we are deeply committed to the United services contribute to sustainability, specifically in terms of Nations Global Compact and its principles on human rights, climate and environment. Thanks to our liquid crystals, for labor standards, environmental protection, and anti-corrup- instance, energy-efficient smart windows can block sunlight tion. and help reduce the energy needed for air conditioning by In 2018 we realigned our corporate responsibility up to 40%. Another example is Design for Sustainability, a strategy to reflect a shared value approach that centers system our Life Science team uses to analyze and enhance more heavily on creating long-lasting added value for both products at the development stage in a bid to conserve our company and society. We also narrowed the focus of our resources from cradle to grave. three strategic spheres of activity. Broad Minds embodies our tradition of promoting STEM Under Global Health, we partner with other actors education, scientific research and culture. We are on a quest to support a variety of initiatives that improve access to to spark enthusiasm for science among the next genera- health services particularly for people in low- and middle- tion. In 2018, we were therefore thrilled to host the German income countries. Our non-profit Merck Foundation is like- national “Jugend forscht” young researchers competition wise focused on achieving this goal. For me personally, the for the third time. As someone who lives and breathes greatest proof that we are on the right track is our fourth- research, I thoroughly enjoyed interacting with so many place ranking in the Access to Medicine Index, where we curious, talented up-and-coming scientists and discussing beat out some of the giants in the pharmaceutical industry. their ideas and projects. It is also reflected in our advances in malaria and antimi- We at Merck absolutely believe that progress thrives on crobial research, our continued fight against the tropical the nourishment of creative minds. The wide-ranging exam- disease schistosomiasis, and our many awareness ples contained in this report illustrate that we do more than campaigns such as “Embracing Carers”. pay mere lip service to responsibility – we live it every day. For us, scientific research and responsible entrepreneur- ship go hand in hand, a principle that will guide us today, tomorrow and beyond. Yours, Stefan Oschmann Chairman of the Executive Board and CEO 4 Merck Corporate Responsibility Report 2018 Strategy & Management Strategy & Management Within this chapter: 6 Company profile 11 Stakeholder dialogue 9 CR strategy 14 Materiality analysis 5 Merck Corporate Responsibility Report 2018 Strategy & Management Company profile Part of the non-financial report We are Merck, a vibrant science and technology company. Science is at the heart of everything we do. It drives the discoveries we make and the technologies we create. Our work makes a positive difference in millions of people’s lives every day. In line with our strategic direction, in Healthcare, we discover unique ways to treat the most challenging diseases such as multiple sclerosis and cancer. Our Life Science experts empower scientists by developing tools and solutions that help deliver breakthroughs more quickly. And in Performance Materials, we develop science that sits inside technologies and changes the way we access and display information. Everything we do is fueled by a belief in science and tech- and as EMD Performance Materials in the high-tech mate- nology as a force for good. A belief that has driven our work rials business. since 1668 and will continue to inspire us to find more joyful Apart from our three business sectors, our financial and sustainable ways to live. We are curious minds dedi- reporting presents the five regions Europe, North America, cated to human progress. Asia-Pacific (APAC), Latin America as well as Middle East and Africa (MEA). As of December 31, 2018, we had 51,749 We are Merck employees worldwide, which compares with 52,941 on We hold the global rights to the Merck name and brand. The December 31, 2017. only exceptions are Canada and the United States. In these In 2018, our 207 subsidiaries with employees in 66 countries, we operate as EMD Serono in the biopharmaceu- countries generated sales of € 14.8 billion. Our 90 produc- tical business, as MilliporeSigma in the life science business tion sites are located across 21 countries. Employees and sales by region – 2018 Group structure infertility, growth disorders as well as certain cardiovascular Merck comprises three business sectors: Healthcare, Life and metabolic diseases. Biopharma is the larger of our Science, and Performance Materials. Our Healthcare busi- Healthcare businesses and operates in four franchises: ness sector – the biggest among our three business sectors Oncology, Neurology & Immunology, Fertility and General – comprises the two businesses Biopharma and Aller- Medicine & Endocrinology. Our R&D pipeline positions us gopharma. On December 1, our Consumer Health business with a clear focus on becoming a global specialty innovator transferred to Procter & Gamble (P&G). in oncology, immuno-oncology and immunology including Our Biopharma business discovers, develops, manufac- MS. Our allergy business Allergopharma is one of the tures and markets innovative pharmaceutical and biological leading companies in the field of allergy immunotherapy prescription drugs to treat cancer, multiple sclerosis (MS), (AIT) in Europe. For high-precision, effective allergy 6 Merck Corporate Responsibility Report 2018 Strategy & Management therapy, we offer comprehensive diagnosis solutions as a BrightLab™, our digital ecosystem for complete lab basis for individual treatment concepts. Our AIT products management. concentrate on causal treatment of type 1 allergies such as Our Performance Materials business sector comprises allergic rhinitis (for example, hay fever) and allergic