Strategy and Management

Sustainability Management

To us, sustainability means safeguarding our future viability and, as part of corporate strategy, is integrated into everyday procedures. We underline our mission as a company that acts sustainably through our commitment to the U.N. Global Compact and the Responsible Care™ initiative, and through our active global involvement in leading initiatives such as the World Business Council for Sustainable Development (WBCSD). Bayer is committed to the U.N. Sustainable Development Goals (SDGs) and released a position outlining the company’s stance on these in 2016. Our innovations, products and services make a contribution to overcoming some of the biggest global challenges, including the SDGs of zero hunger and good global health care in particular.

Clear responsibilities and structures defined

As part of Bayer’s corporate strategy, sustainability is firmly established at Board level. Responsibility for the Group’s sustainable orientation lies with the Board of Management member responsible for Human Resources, Technology and Sustainability in his role as Chief Sustainability Officer, and with the Corporate Health, Safety and Sustainability function introduced in 2016. Operational implementation is effected with the help of nonfinancial targets and performance indicators throughout the value chain, based on a clear definition of responsibilities in the corporate structure and the identification of key areas of activity using a materiality analysis. Corporate policies ensure our sustainability principles are firmly established in business operations and are implemented through management systems, committees and processes. The ongoing review and revision of directives and regular internal audits ensure that our management systems are continuously improved and aligned to the specific respective requirements.

Covestro has established its own sustainability organization that functions according to a similar system and comparable processes to those at Bayer. The following information in this chapter does not include Covestro, unless otherwise indicated.

Structure of Sustainability Management

Structure of Sustainability Management (chart)Structure of Sustainability Management (chart)

Materiality analysis and areas of activity updated

We regularly analyze what the major stakeholders expect and require and match this against our own assessment. This enables us to identify at an early stage the latest developments along with sustainability-related opportunities and risks, which we can then incorporate into our strategy. After Covestro became independent and Bayer realigned itself as a Life Sciences This term describes Bayer’s activities in health care and agriculture and comprises the Bayer Group excluding its legally independent subsidiary Covestro. It refers to the businesses of the Pharmaceuticals, Consumer Health and Crop Science divisions and the Animal Health business unit. company, we examined our areas of activity in 2016. This involved reviewing the issues in our last materiality analysis and assessing their relevance in view of the reorganization. Selected internal and external stakeholders evaluated the relevance to Bayer of the issues identified in respect of sales, costs, risk and reputation. The results were entered into a materiality matrix in line with the internal and external perspectives. The next step was to condense the issues relevant to Bayer, leading to 11 areas of activity. The Board of Management approved the entire process. The following graphic shows our areas of activity and their assignment to the stages of the value chain.

Areas of Activity Across the Different Stages of the Value Chain

Areas of Activity Across the Different Stages of the Value Chain (chart)Areas of Activity Across the Different Stages of the Value Chain (chart)

The content index of the GRI (Global Reporting Initiative) is a nonprofit organization that works to promote the dissemination and optimization of sustainability reporting. The GRI guidelines are considered the most frequently used and internationally most recognized standard for sustainability reporting. These guidelines are evolved in a multi-stakeholder process. GRI was established in 1997 by Ceres (Coalition for Environmentally Responsible Economies) and UNEP (United Nations Environment Programme). (GRI) with the corresponding U.N. Global Compact principles and the key GRI aspects assigned to our areas of activity can be found in the augmented version of the Annual Report. There we indicate whether we are able to exert influence within or outside the company. An overview of our areas of activity, their definitions, the corresponding Group targets and the assigned GRI aspects is available on our sustainability website.

Stakeholder dialogue promotes acceptance and business success

As a company, Bayer is a part of society and of public life. Ongoing and systematic dialogue with our stakeholders is therefore particularly important to us. Their expectations and viewpoints affect public acceptance of Bayer and thus our commercial success. They enable us to recognize trends and developments in society and our markets at an early stage and provide input for the continuing development of our business activities, risk management and reporting. We take the wide-ranging requirements of our stakeholders seriously and consider them in our business operations. The open dialogue with them also enables us to build trust in our products and the social value of our services. We distinguish four main stakeholder groups with which we interact.

Stakeholder Dialogue: Our Most Important Interest Groups

takeholder Dialogue: Our Most Important Interest Groups (chart)takeholder Dialogue: Our Most Important Interest Groups (chart)

Online Annex: A 1.2.3-1

limited assurance

Diverse stakeholders in focus

We involve our interest groups, among other means, on the basis of our Stakeholder Engagement Process. This describes how their expectations, regarding a particular project for example, can be charted and dialogue with them steered. The engagement process is regularly reviewed based on social trends.

Stakeholder Engagement Process

Stakeholder Engagement Process (chart)Stakeholder Engagement Process (chart)

Early and open dialogue for new projects

To ensure the long-term acceptance and appreciation of our business, we seek to link the interests of our stakeholders to our corporate strategy. Bayer approaches key social and political players right from the start of a new project to canvass their support. The open dialogue makes it possible to identify opportunities and risks early on. We use a manual to guide our stakeholder engagement in strategic decision-making processes such as investment projects and launching new products. The associated internal platform, the Virtual Resource Center, provides corresponding online tools. The concept is currently being applied to various projects at Bayer and undergoing continuous further development based on the practical experience obtained. In addition, senior managers are receiving systematic training to improve interaction with critical stakeholders.

Collaboration formats aimed at specific target groups

Bayer’s regular stakeholder activities range from dialogue at local, national and international level and active involvement in committees and specialist workshops all the way through to comprehensive information programs, issue-related multi-stakeholder events and participation in international initiatives and collaborations. Our stakeholder dialogue also involves systematic monitoring.

Below and in the relevant chapters, we use examples to provide an insight into our engagement in 2016 with respect to our four most important stakeholder groups.

Our partners

Customers and suppliers

More on this topic can be found in Chapter “Procurement and Supplier Management” and in Chapter “Marketing and Distribution”.

Employees

More information about internal communications can be found in Chapter “Commitment to Employees and Society”.

Universities and scientific institutions

Bayer’s research and development activities are supported by international collaborations with leading universities, public-sector research institutes and partner companies. More about this can be found in Chapter “Focus on Innovation”.

Schools and universities

You can find more information on Bayer’s comprehensive activities in dialogue with school and university students in Online Annex “A 1.4.1-15” of this Annual Report.

Associations

Bayer is an active member of, or holds leadership positions in, numerous associations and their committees. Examples include the German Chemical Industry Association (VCI; Vice-Presidency), the German Equities Institute (DAI; Presidency) and the European Chemical Industry Council (CEFIC; Executive Director Sustainability). Bayer also currently provides the Chairman of the Executive Board of econsense, the Forum for Sustainable Development of German Business.

Our segments are active members of their respective industry associations and committees. For example, Pharmaceuticals is on the boards of both the European (EFPIA) and the American (PhRMA) pharmaceutical trade associations. Consumer Health has leadership functions in relevant industrial and trade associations. The member of the Bayer Board of Management responsible for Consumer Health is on the Board of Directors of the WSMI (World Self-Medication Industry) federation. Representatives of the segment are on the boards of regional self-medication associations in the United States, Latin America and Europe, where Bayer currently holds the vice-presidency.

Crop Science is represented on the boards of the international crop protection association CropLife International, its regional associations CropLife America, Asia, Latin America and Africa & Middle East, the European Crop Protection Association (ECPA) and the presidium of the German agricultural association Industrieverband Agrar.

Animal Health is represented on the Board of Directors of the international association Health for Animals and the International Federation of Animal Health (IFAH-Europe) among other organizations.

Covestro holds the Presidency of PlasticsEurope, the association of European plastics manufacturers, and is represented on the Executive Committee of the World Plastics Council. It is also represented on the Executive Committee of CEFIC and the Board of VCI.

Financial market players

Investors, banks and rating agencies

More information on our dialogue with the capital market – stockholders, capital investment companies, institutional investors, banks and rating agencies – can be found in the “Investor Information” chapter of this Annual Report.

Regulators

Legislators, authorities and politicians

The framework for the company’s operations is essentially determined by authorities, legislators and politicians. The dialogue with authorities and ministries worldwide includes discussions with political decision-makers and active involvement in specialist committees and cooperation projects. Our active participation in political decision-making processes is explicitly sought by the key players involved.

Lobbying

In its Corporate Policy “Code of Conduct for Responsible Lobbying,” Bayer sets out binding rules for its involvement in political matters, aiming to ensure transparency in any collaboration with the representatives of political institutions. The Group’s Public and Governmental Affairs Committee established the principles for the alignment of Bayer’s political work. This especially includes developing the company’s political positions as well as determining the position of the Board of Management on important political issues. In 2016, Bayer’s political lobbying focused among other things on social debate regarding good framework conditions for developing innovative Life Science technologies and products, evidence-based regulation and the necessary reforms for the regulatory approval of crop protection products and in the area of seeds. A further focal point was submitting proposals for creating sustainable health care systems and strengthening self-care as a key factor in this process. Bayer also promotes the prevention of additional burdens for innovation and is involved in various policy areas: from energy, chemicals and trade policy to climate protection and sustainability. In addition, the company actively supports the protection of intellectual property – a key prerequisite for continuing to invest significantly in the development of innovative products. More information on our political principles and positions can be found on the internet.

Our liaison offices in Berlin, Brussels, Washington, Moscow, Brasília and Beijing are key touchpoints between the company and political stakeholders. Bayer actively participates in existing transparency initiatives. It publishes details of costs, employee numbers and any of the other statistics required in each country, e.g. in the transparency registers of the European institutions and the U.S. Congress. Bayer goes far beyond the statutory requirements in doing so. For instance, the Group also publishes data for countries such as Germany where there is no legal requirement to publish such information. In 2016, the costs incurred at the liaison offices for human resources, material and projects totaled approximately: €1.4 million in Berlin, Germany; €1.9 million in Brussels, Belgium; €7.3 million in Washington, United States; €0.2 million in Moscow, Russia; €1.3 million in Brasília, Brazil; and €1.1 million in Beijing, China.

According to our corporate policy, we have committed not to make any direct donations to political parties, politicians or candidates for political office. However, some associations to which the Group belongs make donations on their own initiative, in compliance with statutory regulations.

In the United States, a number of our employees use the Bayer Corporation Political Action Committee (BayPac) to make private donations supporting candidates for parliamentary office. Political action committees in the United States are state-regulated, legally independent employee groups. In the United States, companies are legally prohibited from donating to political candidates in Federal elections directly. In many cases, such direct donations by companies are legally prohibited for elections at state and local level too, but irrespective of the legislation Bayer’s internal regulations do not permit them anyway. Donations through BayPac are therefore not corporate donations. The BayPac contributions are regularly reported to the U.S. Federal Election Commission and can be viewed on its website.

Social interest groups

Nongovernmental organizations, the public, the local community and competitors

Bayer is involved in a variety of projects, thematic initiatives and specialist conferences at a national and international level in order to play an active role in the common task of shaping sustainable development. Alongside exchange and cooperation with nongovernmental organizations (NGOs) and supranational organizations, this primarily involves dialogue with the public.

Among other involvement, Bayer is actively engaged in the U.N. Global Compact and its initiatives, the CEO Water Mandate and Caring for Climate, as well as the Global Compact LEAD network and local networks. We have also acted as an organizational stakeholder in the GRI (Global Reporting Initiative) is a nonprofit organization that works to promote the dissemination and optimization of sustainability reporting. The GRI guidelines are considered the most frequently used and internationally most recognized standard for sustainability reporting. These guidelines are evolved in a multi-stakeholder process. GRI was established in 1997 by Ceres (Coalition for Environmentally Responsible Economies) and UNEP (United Nations Environment Programme). since 2004.

As a co-initiator of the “Zukunft der Industrie” (Future of Industry) group, Bayer was involved in several events in Germany during the Week of Industry initiative that took place for the first time in 2016. This demonstrated the impressive performance and innovative spirit of industry as well as its vital contribution to the prosperity of German society.

Segments develop specific dialogue formats

Pharmaceuticals is an active participant in the social dialogue addressing sustainability issues and creates forums to encourage exchange and develop viable problem-solving approaches together with partners. Pharmaceuticals supports the International Dialogue on Population and Sustainable Development conference in close collaboration with various governmental and nongovernmental organizations. Here, approaches for tackling internationally relevant issues in reproductive health are worked on and experiences of implementing the U.N. Millennium Development Goals are shared.

As part of their partnership, Consumer Health and the U.S. NGO, the White Ribbon Alliance (WRA), make a joint contribution to the U.N.’s “Every Woman Every Child” campaign. Its goal is to work at local level to reduce the mortality rate of mothers, infants and children. Consumer Health also supports the United Nations Population Fund’s (UNFPA) “Safe Birth” campaign.

Crop Science has initiated various dialogue formats to improve knowledge transfer in agriculture, highlight the improvements in sustainable agriculture and increase communication with stakeholders such as farmers, public-sector decision-makers and society as a whole. For instance, Bayer has joined forces with industry business partners to organize numerous visits to Hof ten Bosch, a farm near Brussels, Belgium, with the goal of providing E.U. representatives, journalists and other stakeholders with a practical example of how digital farming works and can be further expanded. Crop Science sees great potential in digitizing agriculture and is therefore working with partners, for example, to develop digital farming applications for farmers that support them in decision-making processes and help them to optimize their work routines.

Crop Science pursues an intensive societal dialogue about the benefits of science and innovation in agriculture today. The Agricultural Education program is primarily aimed at encouraging young people to take a greater interest in agriculture and food production. In addition to practical exercises in student laboratories, the program also includes scholarships for agricultural science students and the sharing of ideas about the future of agriculture at international youth conferences such as the Youth Ag-Summit. And AgLearn, a new online offering, offers a practical approach to learning with online experiments relating to plant growth.

Dialogue with the local community builds trust

An important part of our stakeholder dialogue takes place in the direct vicinity of our sites. We are working on being recognized everywhere as a reliable partner and attractive employer that is aware of its social responsibility. The involvement of the local community plays a decisive role, for example, in the success of any investment project.

Dialogue with neighbors in the communities surrounding our production sites is anchored in a corporate policy on site management. Community dialogue is jointly maintained by the sites and the relevant country organization. In Germany, dialogue with the local community is handled via the Chempark neighborhood offices among other means.

For Pharmaceuticals and Consumer Health, exchange with neighbors at the production sites is a particularly high priority as it helps make the operation of the facilities in question transparent. It involves organizing guided tours and dialogue events and providing informational material for various stakeholder and age groups. Regular exchange is also maintained in networks with representatives of local governments and other resident companies. Crop Science regularly uses forums, print media and personal discussions with citizens’ initiatives, representatives of church communities and the regional press to keep its neighbors continually informed, for instance at the Dormagen, Frankfurt-Hoechst and Knapsack sites in Germany. Close dialogue with stakeholders is also taking place in the communities around sites in other countries, such as in the United States.

Covestro initiates dialogue with neighbors, the public and nongovernmental organizations (NGOs) on a case-by-case basis. In the United States, for example, dialogue takes place through the Community Advisory Panels (CAPs). These organize regular meetings, for example with local government or the community, in order to provide information on current issues. Covestro enters into direct dialogue with social interest groups in particular when commissioning new facilities.