Strategy and Management Sustainability Management To us, sustainability means safeguarding our future social and economic viability. Understood in this context and as a part of our corporate strategy, sustainability is integrated into our day-to-day procedures. We underline our mission as a company that acts sustainably through our commitment to the U.N. Global Compact (UNGC schließen United Nations Global Compact (UNGC) The United Nations Global Compact is the most far-reaching and important responsible corporate governance initiative in the world. Based on ten universal principles in the areas of human rights, labor, environment and anticorruption, the UNGC pursues the vision of an inclusive and sustainable global economy that benefits people, communities and markets everywhere. By committing to the UNGC, companies agree to document each year their efforts to uphold the ten principles. ) and the Responsible Care™ initiative, as well as through our involvement in the World Business Council for Sustainable Development (WBCSD). In our sustainability reporting we have followed the guidelines of the Global Reporting Initiative schließen 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) for many years. Bayer is committed to the U.N. Sustainable Development Goals (SDGs) and has published a company position detailing this. Our innovations, products and services contribute to overcoming some of the biggest global challenges, including the goals of “Zero Hunger” (SDG 2) and “Good Health and Well-Being” (SDG 3) 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 Sustainable Development Committee (SDC) under the auspices of the Health, Safety & Sustainability function. The SDC sets targets and draws up initiatives, management systems and corporate policies, and is responsible for their implementation. 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 major areas of activity using a materiality analysis. Corporate policies ensure our sustainability principles are firmly established in business operations and are implemented through corresponding management systems, committees and processes. The review and revision of these regulations and internal audits ensure that our management systems are continuously improved and aligned to the respective requirements. Structure of Sustainability Management Materiality analysis and areas of activity We regularly analyze the expectations and requirements of our major stakeholders and compare these with our own assessment of their relevance for Bayer. 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. We document the identified topics in a materiality matrix that we use to derive the main areas of activity for Bayer. In view of the separation of Covestro and the planned acquisition of Monsanto, we will reexamine our areas of activity in 2018 using a comprehensive materiality analysis. The graphic below shows our current areas of activity and their assignment to the stages of the value chain. Online Annex: A 1.2.3-1 limited assurance Areas of Activity Across the Different Stages of the Value Chain On our sustainability website we include a table giving an overview of our areas of activity with definitions and the corresponding Group targets and GRI aspects. A detailed GRI content index with the corresponding UNGC principles can be found under “Further Information.” Stakeholder dialogue promotes acceptance and business success As a company, Bayer is a part of society and of public life. Through open dialogue with our stakeholders we aim to build trust in our actions, our products and the social value of our services, because the expectations and viewpoints of our stakeholders affect public acceptance of Bayer and thus our commercial success. Stakeholder dialogue helps us to recognize important trends and developments in society and our markets at an early stage and take this information into account when designing our business. The integration of various stakeholder groups is planned within the scope of our stakeholder engagement process. This process also includes monitoring the results of individual dialogue measures. In strategic decision-making processes such as investment projects and launches of new products, 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. This process is in line with our Stakeholder Engagement Directive and is supplemented by an internal information platform. We fundamentally distinguish four stakeholder groups with which we engage in various dialogue formats. Our Most Important Stakeholder Groups Online Annex: A 1.2.3-2 limited assurance Diverse stakeholders in focus Our stakeholder engagement process describes how the expectations of our stakeholders can be taken into account in a specific project, for example, and dialogue with them steered. The engagement process is regularly reviewed based on social trends. Stakeholder Engagement Process Collaboration formats aimed at specific target groups Our 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. Below and in the relevant chapters, we use examples to provide an insight into our engagement in 2017 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 Chapter “Marketing and Distribution”. Employees More information about internal communications can be found in Chapter “Employees”. Universities and schools Bayer’s research and development activities are enhanced supported by the international exchange with leading universities, public-sector research institutes and partner companies. More about this can be found in Chapter “Focus on Innovation”. You can find more information on our comprehensive activities in dialogue with school and university students in Online Annex A 22.214.171.124-1 of this Annual Report. Associations Bayer is an active member of, or holds leadership positions in, numerous associations and their committees. Examples include the Federation of German Industries (BDI; Presidential Board), the German Chemical Industry Association (VCI; Vice-Presidency), the German Equities Institute (DAI; Executive Committee and Board) and the European Chemical Industry Council (CEFIC; Executive Director Change Management). 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 U.S. (PhRMA) pharmaceutical industry 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). Representatives of the segment are also on the boards of regional self-medication associations. Crop Science is represented, for example, on the board of the international crop protection association CropLife International, the European Crop Protection Association (ECPA) and the presidium of the German agricultural industry association Industrieverband Agrar. Crop Science is represented on the Board of Administration and the Scientific Committee of the European Centre for Ecotoxicology and Toxicology of Chemicals (ECETOC). Crop Science is also a supporter of the International Food Information Council (IFIC) and a member of the Biotech Innovation Organization (BIO), the world’s largest biotech trade association. Furthermore, Crop Science holds memberships in the North American Council for Biotechnology Information (CBI), the European Seed Association (ESA), the biotech lobbying organization EuropaBio and the International Seed Federation (ISF), which represents the interests of the seed industry on a global level. Animal Health is represented on numerous boards of directors of national and international associations for animal health such as Health for Animals. 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 worldwide dialogue 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. See the chapter on compliance for more on our rules for political engagement. Lobbying The Group’s Public and Governmental Affairs Committee develops the principles for the alignment of Bayer’s political lobbying. This body establishes the company’s position with regard to relevant political and legislative decision-making processes, as well as advising the Board of Management on its position on important political issues. In 2017, Bayer’s global lobbying work focused on the issues of “innovation,” “access,” “reputation” and “freedom to operate.” In the area of “innovation,” Bayer advocates social discourse about good framework conditions for the development of innovative technologies, as well as strong protection of intellectual property. The issue of “access” deals with safe, fast and simple access by patients and consumers to our products. In the area of “reputation” we want to position Bayer as a leading life science company. In this context, we actively seek dialogue with various societal players, particularly nongovernmental organizations and politicians. The term “freedom to operate” summarizes all activities with which Bayer advocates strictly science-based regulation and an intensive and results-oriented debate about new technologies. The Communications & Public Affairs Function, in cooperation with the country companies, is responsible for the specific local implementation of lobbying work, compliance with ethical and legal criteria and the creation of transparency. Social interest groups Nongovernmental organizations (NGOs), the public, the local community and competitors Bayer is involved in a variety of projects, stakeholder dialogues, 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. This includes discourse and cooperation with a broad range of NGOs and supranational organizations on various topics, as well as in particular dialogue with the public. NGOs play a role in forming the opinions of the public. For this reason, we have internally systemized collaboration with this stakeholder group. To this end, we look to understand the interests of these groups, take their perspectives on board and enter into dialogue with the relevant experts. Exchange with the different NGOs is communicated to the Board of Management and its content is thereby incorporated into our considerations. Bayer is also 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 a Gold Community member of the Global Reporting Initiative schließen 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. All Bayer segments maintain open dialogue with the societal stakeholders of relevance to them and develop individual dialogue formats for this purpose. 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. In the case of investment projects for example, the involvement of the local community plays a decisive role in ensuring their success. In the communities near our production sites in particular, we maintain open dialogue between community members and local management, which is supported by the respective country organization. This dialogue includes personal discussions with citizens’ initiatives, representatives of church communities and the regional press. This community dialogue is anchored in a globally valid corporate policy on site management.