5. Sustainability Management and Governance

To us, sustainability basically means future viability and, as part of corporate strategy, is integrated into everyday procedures.

We underline our mission as a sustainably operating company through our commitment to the U.N. Global Compact with its internationally recognized 10 principles and to the Responsible Care™ initiative, and through our active global involvement in leading (industry) forums such as the World Business Council for Sustainable Development (WBCSD).

Bayer also expressly backs the comprehensive approach of the new Sustainable Development Goals (SDGs) agreed by the U.N. in September 2015 for the period to 2030. In our core business we support in particular the goals that focus on combating hunger and ensuring good health care provision across the globe. The other SDGs are also in line with our internal requirements relating to responsible business practices.

Responsibility for steering and aligning our Group-wide sustainability strategy lies with the Board of Management member responsible for Human Resources, Technology and Sustainability in his function as Chief Sustainability Officer, and with a Sustainability Council chaired by the Environment & Sustainability corporate function.

Structure of Sustainability Management

Structure of Sustainability Management (graph)Structure of Sustainability Management (graph)

The Sustainability Council sets targets, draws up initiatives, management systems and Group regulations, and is responsible for their implementation. In order to operationalize the Group strategy and make it measurable, we have set ambitious nonfinancial targets and indicators all along the value chain. Internal Group regulations ensure our sustainability principles are implemented in business operations, where they are realized through corresponding management systems, regulations and processes.

We regularly check that our areas of activity are up to date and relevant. To do so, we analyze and evaluate what the major stakeholders expect and require and match this against our own assessment. Thanks to this approach, we are quick to identify sustainability-related opportunities and risks and can incorporate these into our strategy. In 2014, we used a multi-stage process to identify issues of relevance to us and prioritized these in respect of sales, costs, risk and reputation. We summarized the 24 areas of activity that are relevant to Bayer in a materiality matrix.

In 2015, we once again discussed the results of the materiality analysis at internal workshops and reconciled these with current developments and the Group targets. We also analyzed the results’ relevance for the Bayer value chain (see graphic) and reporting in line with the new 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). G4 guidelines (see online annex 3-5-1). During this process, the original 24 areas of activity were condensed into 11, presented to the Board of Management and approved by it. The graphic below shows the assignment of our areas of activity 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 (graph)Areas of activity across the different stages of the value chain (graph)

In the augmented version of the Annual Report you will find a detailed GRI content index with the corresponding UNGC (United Nations Global Compact) The UN Global Compact is a strategic policy initiative for businesses that are committed to aligning their operations and strategies with ten universally accepted principles in the areas of human rights, labor, environment and anticorruption. By doing so, business – as a primary driver of globalization – can help ensure that markets, commerce, technology and finance advance in ways that benefit economies and societies everywhere. By committing to the UNGC, companies agree to document each year their efforts to uphold the ten principles. principles and the GRI aspects to which we have assigned our areas of activity. There we indicate whether our scope for exercising influence lies within or outside the company. An overview of our areas of activity, their definition, the corresponding Group targets and the assigned 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). aspects is also available online.

Stakeholder dialogue at Bayer

We consider the maintenance of constant contact and continuous dialogue with our stakeholders at a global and local level to be very important. Bayer is a part of society and of public life. Society’s acceptance and appreciation of our corporate activities are therefore essential to Bayer’s reputation and business success. Involving the different interest groups is a vital element of the company’s activities with the goal of creating better mutual understanding and trust in respect of our work and products.

Online annex: 3-5-1:

limited assurance

We believe that systematic dialogue with the stakeholders relevant to us offers a vital key to understanding their viewpoints and expectations and being able to incorporate them into our business decision-making processes as far as possible. This procedure helps us to identify social and market trends and developments early, avoid risks, assess our contribution and thereby set focus areas for our corporate activities.

We systematically involve our stakeholders in various ways, including the Stakeholder Engagement Process. This describes how, throughout the Group, stakeholder groups for a project can be identified, their expectations charted and dialogue with them steered. The engagement process requires regular review and needs to be reflected against social trends.

Stakeholder Engagement Process

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

To ensure the long-term acceptance and appreciation of our business, we seek to link the interests of our stakeholders even more closely to our corporate strategy. It is important to approach key social and political players right from the start of a new project and, early on, to canvass their support, identify risks and opportunities and seek open dialogue. The Group has developed a guide to engaging stakeholders in strategic decision-making processes such as investment projects and the launch of new products. The Virtual Resource Center platform that emerged from this provides online tools and a tutorial to help identify social and political trends at an early stage so that they can be successfully incorporated into project planning. The concept is currently being applied to various projects at Bayer, and the practical experience gathered is being channeled back into further refinements. In addition, senior managers are systematically undergoing specific training to improve interaction with critical stakeholders.

Bayer’s day-to-day stakeholder activities range from targeted dialogue at local, national and international level and active involvement in committees and specialist workshops, through to comprehensive information programs and participation in international initiatives and collaborations. Our stakeholder dialogue therefore includes both communication and active interaction with individual target groups and also issue-related multi-stakeholder events.

We basically divide the stakeholders with whom we mainly interact into four groups: partners, regulators, financial market players and social interest groups. In the following and in the relevant chapters, we use examples to provide an insight into the commitment Bayer has shown in 2015.

Our partners

Customers and suppliers

More on this topic can be found in Chapter 7 “Procurement, Production, Logistics, Distribution.”

Employees

More information about internal communications can be found in Chapter 6 “Employees.”

Universities and scientific institutions

Bayer’s research and development activities are supported by an international network of collaborations with leading universities, public-sector research institutes and partner companies. More about this can be found in Chapter 4 “Research, Development, Innovation.”

Schools and universities

You can find more information on Bayer’s comprehensive activities in dialogue with school and university students in Chapter 11 “Social Commitment.”

Associations

Alongside our business activities, Bayer is also an active member of, or holds leadership positions on, numerous national, European and international associations and their committees such as the Federation of German Industries (BDI, Vice-Presidency from 2015), the German Chemical Industry Association (VCI, Presidency), the German Equities Institute (DAI, Presidency), the European Chemical Industry Council (CEFIC, membership of the Board and Executive Committee), BusinessEurope and the International Council of Chemical Associations (ICCA). Bayer also currently chairs econsense, the Forum for Sustainable Development of German Business.

The subgroups are also active members of their respective industry associations. For example, HealthCare is on the boards of both the European (EFPIA) and the American (PhRMA) pharmaceutical trade associations, CropScience is represented on the boards of the international crop protection association CropLife International, the regional associations (CropLife America, Latin America, Africa & Middle East) and the European Crop Protection Association (ECPA), and the CEO of Covestro is the President of PlasticsEurope, the association of plastics manufacturers.

Financial market players

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

Regulators

Legislators, authorities and politicians

The framework for the company’s operations is determined by authorities, legislators and politicians through statutory regulations and licensing, for example. The dialogues Bayer is currently pursuing with authorities and ministries at local, national and international level include targeted discussions with political decision-makers and active involvement in specialist workshops and cooperation projects. Our active participation in political decision-making processes is also explicitly sought by the key players involved.

Lobbying

In its Bayer Group Regulation “Code of Conduct for Responsible Lobbying,” Bayer sets out clear and 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 is responsible for the strategic planning of Bayer’s political work. This especially includes developing the company’s political standpoints, as well as determining the position of the Bayer Board of Management on important political issues. In 2015, Bayer’s political lobbying again focused on the acceptance of products and technologies in society, on submitting proposals for creating sustainable health care systems, on dismantling obstacles to innovation, on chemicals and energy policy, on trade policy and on climate protection. Bayer actively promotes the protection of intellectual property in order to be able to continue developing innovative products. In addition, Bayer makes suggestions relating to the regulatory framework for crop protection products and seeds. More information on our political principles can be found on the internet.

Our liaison offices in Berlin, Brussels, Washington, Moscow, Brasilia and Beijing are key points of contact between the Group and the political arena. 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 way beyond the statutory requirements in doing so. For instance, the Group also publishes data for countries, e.g. in Germany, where there is no legal requirement to publish such information. In 2015, the costs incurred at the liaison offices for human resources, material and projects totaled approximately: €1.2 million in Berlin, Germany; €2 million in Brussels, Belgium; €6.9 million in Washington, United States; €0.14 million in Moscow, Russia; €1.1 million in Brasilia, Brazil; and €1 million in Beijing, China.

In keeping with our Group regulation, 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 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 directly. Consequently, such donations are not donations made by the company. 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, local community, 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 Global Compact networks. We have also acted as an organizational stakeholder in the Global Reporting Initiative since 2004.

HealthCare 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. The subgroup supports the International Dialogue on Population and Sustainable Development conference in close collaboration with various governmental and nongovernmental organizations. The concept of this political dialogue involves finding solutions for internationally relevant issues in reproductive health and sharing experiences of implementing the Millennium Development Goals.

Together with the DSW (Deutsche Stiftung Weltbevoelkerung – the German foundation for world population), HealthCare organizes a series of parliamentary evenings where experts in development cooperation and representatives from the political sphere, foreign agencies, medical research, international NGOs and think tanks discuss issues related to development policy and population growth.

CropScience wants to strengthen and expand societal dialogue about the need for and benefits of science and innovation in agriculture and inform the public of the potential and challenges in today’s agriculture. The Agricultural Education program is primarily aimed at encouraging young people to take a greater interest in agriculture and food production. The program includes practical exercises in student laboratories, agricultural science scholarships and sharing ideas about the future of agriculture at international youth conferences such as the Youth Ag-Summit.

In 2015, the second Youth Ag-Summit was held in Canberra, Australia, in partnership with the Australian agricultural youth organization FFN (Future Farmers Network). The focus was on nutrition for the growing global population. At the end of the year, delegates from the Youth Ag-Summit presented a declaration by the young people on specific campaigns and recommendations for safeguarding food supplies to the United Nations’ Committee of World Food Security in Rome, Italy.

The neighborhoods near Bayer’s sites are a key subject in our stakeholder dialogue. The Group is working at all sites on being recognized as a reliable partner and attractive employer that is aware of its social responsibility. For example, the involvement of the local community plays a decisive role in the success of any investment project.

CropScience regularly uses forums, print media and personal discussions with citizens’ initiatives, representatives of the church communities and the regional press to keep its neighbors continually informed, for instance at the Dormagen, Frankfurt-Hoechst and Knapsack sites in Germany. Stakeholder dialogue is also taking place with the communities around sites in other countries, such as Muskegon, United States, and Hangzhou, China.

Covestro engages in dialogue with neighbors, the public and non-governmental organizations (NGOs) on a case-by-case basis. The communities around the sites are proactively informed and involved when it comes to investment projects. One example is the intensive voluntary information policy adopted by Covestro and the German Chempark operator Currenta with respect to the relocation of a section of the existing carbon monoxide pipeline under the Rhine between Dormagen and Leverkusen. The permit documentation for the culvert can be openly viewed by interested parties in both cities affected and is additionally accessible on a specially dedicated website. For more detailed up-to-date information go to www.dueker.chempark.de (in German only). Both the media and local residents are kept informed about the planned carbon monoxide pipeline between the German sites of Dormagen and Krefeld-Uerdingen. The dialogue forum initiated by Covestro also plays an important role in the exchange of information with a critical public

In the United States, Covestro’s site dialogue takes place through local Community Advisory Panels (CAPs). These, for example, organize regular meetings with local government or the community, in order to provide information on current issues or news from the area of site safety. In Germany, dialogue with the community is conducted through the Chempark neighborhood offices run by Currenta at the Lower Rhine sites.

Among other things, Covestro is a member of the U.N. Global Compact and is active in econsense. It also maintains various partnerships with NGOs as part of a commitment to wider society, for instance with Habitat for Humanity, which seeks to build sustainable and affordable housing in India.