Novartis in Society ESG Report 2020
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Novartis in Society ESG Report 2020
2 | Novartis in Society
Contents Novartis in Society | 3
Contents
2020 highlights 4
Our response to COVID-19 5
Who we are 6
How we create value 8
Message from the Chairman 10
Message from the CEO 11
Our journey to build trust with society 12
Valuing our impact 16
Strategic areas 18
Holding ourselves to high ethical standards 18
Being part of the solution on pricing and access 30
Addressing global health challenges 46
Being a responsible citizen 54
About this report 68
Performance indicators 2020 69
Selected training programs for associates 74
Task Force on Climate-related Financial Disclosures (TCFD) 75
Novartis GRI Content Index 78
Sustainability Accounting Standards Board (SASB) Index 82
Appendix: corporate responsibility material topic boundaries 84
Appendix: corporate responsibility materiality assessment issue cluster
and topic definitions 86
Appendix: external initiatives and membership of associations 88
Appendix: measuring and valuing our impact 89
Independent Assurance Report on the 2020 Novartis in Society ESG reporting 90
Inside cover photo Novartis employees at
a production facility in Torre Annunziata, Italy.
Cover photo Dr. Ngo Viet Quynh Tram (right)
watches as a student practices the correct
way to use a mask at the Hue University of
Medicine and Pharmacy in central Vietnam.
Dr. Tram participated in a nationwide effort to
train all final-year medical students how to
screen, diagnose and treat COVID-19 patients.
The program was supported by the Novartis
COVID-19 Response Fund.
4 | Novartis in Society
2020 highlights
ETHICAL STANDARDS
22
ETHICAL COMMITMENTS
98%
ASSOCIATES
8 400+
SUPPLIERS
included in our new Code of Ethics, completed global e-training on the new risk-assessed through our Third-Party
co-created with more than 3 000 Code of Ethics (rollout to be completed Risk Management program, with 120
Novartis associates by February 2021) engagements stopped due to assess-
ment outcomes
ACCESS TO HEALTHCARE
66m
PATIENTS
369 000
PATIENTS
8m
PEOPLE
reached with products through our reached with our emerging market reached with health education at
access activities brands in 2020 awareness events
GLOBAL HEALTH
980m
TREATMENT COURSES
3 400+
PATIENTS
7.3m
PATIENTS
of Coartem delivered in the past two treated for sickle cell disease with reached with free multidrug
decades in malaria-endemic countries hydroxyurea in 11 treatment centers in therapy for leprosy since 2000
Ghana
CORPORATE CITIZENSHIP
19%
REDUCTION
45%
WOMEN
60 000
HOURS
in greenhouse gas emissions vs. 2016 in management of learning on topics such as innovation,
baseline digital skills, and access to medicines
during Curiosity Month in September
16 | response
Our Novartis Annual Review
to COVID-19 2020 Novartis in Society | 5
Our responsetoto
Our response COVID-19
COVID-19
In the face of a global crisis, Novartis quickly mobilized research and
development capabilities, medicines, clinical trial expertise and
philanthropic aid to address the COVID-19 pandemic.
Supporting our associates
We took steps to support our associates and their families as they adapted to new conditions and
commitments such as working remotely, educating children at home, and caring for loved ones.
We provided additional paid leave and enhanced childcare support for associates in critical roles
who needed to be on site. We announced a new global policy to give office-based associates more
flexibility to choose how, where and when they work.
Clinical investigations
We played our part in the scientific effort to find treatments for COVID-19. We quickly designed and
launched three Phase III, placebo-controlled trials to determine if our products could help patients
with certain COVID-19-related symptoms. We provided these and other medicines to investiga-
tor-initiated trials and managed access programs upon request. We are also collaborating with
Molecular Partners to develop two potential antiviral treatments for COVID-19 based on a new
class of protein therapeutics known as DARPin®.
Access and pricing commitments
Novartis is making 15 drugs that treat key symptoms of COVID-19 available to low-income and
lower-middle-income countries at zero profit until a vaccine or curative treatment is available.
Our Sandoz Division is maintaining prices on a basket of essential medicines that may help in the
treatment of COVID-19.
Collaborating with partners
We are making efforts to leverage our capabilities in discovery, development and scale-up manufac-
turing. We are partnering with multi-stakeholder consortia, including the COVID-19 Therapeutics
Accelerator, coordinated by the Bill & Melinda Gates Foundation, the Wellcome Trust and Master-
card, as well as a partnership supported by the Innovative Medicines Initiative. We are participating
with the University of California, Berkeley, and other pharmaceutical companies to develop an
antiviral molecule to potentially treat all coronaviruses, including the virus that causes COVID-19.
Community funds
Novartis committed to donating up to USD 40 million to support communities around the world
impacted by the pandemic. This includes the Novartis COVID-19 Response Fund and a US COVID-
19 Community Response Fund, established by Novartis and the Novartis US Foundation, that will
provide cash and in-kind donations for immediate response and recovery efforts related to the
pandemic in the US.
6 | Novartis in
4 Society
Annual Review 2020
Who weare
Who we are
Our purpose
We reimagine medicine to improve and extend people’s lives. We use innovative
science and technology to address some of society’s most challenging healthcare
issues. We discover and develop breakthrough treatments and find new ways to
deliver them to as many people as possible. We also aim to reward those who invest
their money, time and ideas in our company.
Our company
INNOVATIVE MEDICINES NOVARTIS TECHNICAL
OPERATIONS (NTO)
The Innovative Medicines
Division has two business units: is responsible for making our
innovative medicines, devices
Novartis Oncology and Sandoz products, and
Novartis Oncology focuses on delivering them to our
patented treatments for a variety customers across the world.
of cancers and rare diseases.
icines/Pharma
e Med ceu NOVARTIS BUSINESS
v tic
Novartis Pharmaceuticals vati als SERVICES (NBS)
Novartis Pharmaceuticals no B
In u sin
focuses on patented treatments s es consolidates support
in multiple disease areas to on services across our organi-
i
s
ct
enhance health outcomes for zation, helping drive effi-
se
un
ciency, simplification, stan-
rvi
patients and offer solutions to
ef
dardization and quality.
ces
healthcare providers.
Corporat
(NBS)
CORPORATE FUNCTIONS
SANDOZ
support the enterprise in
The Sandoz Division offers
specific areas of expertise,
patients and healthcare
including finance, human
professionals high-quality,
gyy
resources, legal, communica-
ololog
affordable generics and
tions, and ethics, risk and
biosimilars.
ncco
Sa
compliance.
/On
nd
Ma
O
nuf )
oz
ess/
a c t u r i n g ( N TO ne
cini
eddici
Me
a veM
titvie
InIn o
n v
oav
RESEARCH AND DEVELOPMENT (R&D)
The Novartis Institutes The Global Drug
for BioMedical Research Development (GDD)
(NIBR) is the innovation organization oversees
engine of Novartis. NIBR the development of new
focuses on discovering medicines discovered
new drugs that can change by our researchers and
the practice of medicine. partners.
WhO we
Who WE are
aRE Novartis Annual Review
Novartis in Society 5
2020 | 7
Our values and behaviors
INSPIRED CURIOUS UNBOSSED INTEGRITY
ENGAGE OUR PEOPLE LEARN CREATE CLARITY BE HONEST
STRIVE FOR PATIENTS BE OPEN SERVE OTHERS HAVE COURAGE
LIVE OUR PURPOSE BE SELF-AWARE OWN YOUR ACTIONS DO WHAT’S RIGHT
Our people
The greatest strength of Novartis is our people, whose diversity, energy and
creativity are crucial to our success.
ANNUAL TRAINING WOMEN
HEADCOUNT NATIONALITIES HOURS PER EMPLOYEE IN MANAGEMENT
110 738 142 45.7 45 %
Our products
Our products address most major disease areas and are sold in approximately 155 countries around the world.
Our manufacturing facilities produced 72 billion treatments in 2020.
We develop and produce innovative medicines to We also offer about 1 000 generic and bio-
address patient needs in disease areas where our similar medicines covering a broad range of
experience and knowledge have the potential to therapeutic areas. They can bring substantial
produce transformative treatments. savings to patients and healthcare systems,
and help improve access to healthcare.
ONCOlOGY REsPIRatORY NEUROsCIENCE PIlls INJECtIONs INhalERs
CaRDIOVasCUlaR, IMMUNOlOGY, INFECtIOUs
RENal aND hEPatOlOGY aND DIsEasEs
MEtaBOlIsM DERMatOlOGY
OPhthalMOlOGY
8 | Novartis in
6 Society
Annual Review 2020
How wecreate
How we create value
value
In a rapidly changing business environment, our strategy
and business model help us deliver on our purpose and
create value for our company and society.
Our business Our strategic priorities
environment
aCCElERatING
UNlEash thE POWER
INNOVatION
OF OUR PEOPlE
46 We are transforming our culture to
The average yearly ensure people can fully apply their
number of new drugs talent and energy. We’re creating
approved by the US FDA’s an organization where people are
Center for Drug Evalu- inspired, curious and unbossed.
ation and Research from
2016-2020, an increase
of 25% compared with
2011-2015 DElIVER tRaNsFORMatIVE
INNOVatION
In our pursuit of transformative
sURGING UsE OF DIGItal treatments, we challenge medical
tEChNOlOGY IN hEalthCaRE paradigms and explore possibil-
ities to cure disease, intervene
235 bn earlier in chronic illnesses, and
The projected value of the global find ways to dramatically improve
digital health market by 2023 quality of life.
(USD), a 60% increase from 2019,
according to the Frost & Sullivan
Global Digital Health Outlook 2020 Our strategy is to
EMBRaCE OPERatIONal
build a leading, EXCEllENCE
aGING POPUlatIONs FUElING focused medicines We are rethinking how we work,
a RIsE IN ChRONIC DIsEasEs embracing agile teams and building
company powered better productivity into our company
77.1 years to free resources that we can
The projected average global life
by advanced invest in innovation and help boost
expectancy in 2050, compared
with 72.6 years in 2019, according
therapy platforms returns.
to the United Nations World and data science.
Population Prospects
GO BIG ON Data
aND DIGItal
RIsING hEalthCaRE sPENDING We aim to spark a digital revolution
at Novartis, embracing digital
5% technologies, advanced analytics
The expected annual average and artificial intelligence to help
growth in healthcare spending drive innovation and improve
between 2020 and 2023, efficiency.
according to the Economist
Intelligence Unit
BUIlD tRUst
WIth sOCIEtY
aCCEss tO hEalthCaRE We strive to build trust with
REMaINs a GlOBal IssUE society through finding new ways
to expand patients’ access to our
2 bn treatments and operating with
The number of people who lack integrity.
access to essential medicines,
according to the World Health Holding ourselves to
Organization high ethical standards
Being part of the solution
on pricing and access
Addressing global health
challenges
Being a responsible citizen
How WE
hOW we CREatE
create value
ValUE Novartis
Novartis Annual in Society
Review 2020 | 9
7
Our business model R&D R&D
RESOURCES WE USE n VALUE WE CREATE
io
n
tio
ut
rib
ibu
hUMaN CaPItal PatIENts
Dist
Distr
769 m
We depend on the skills and creativity of our employees
to discover, develop and produce new medicines, and
deliver them to patients.
110 738 Headcount Patients reached with Novartis
medicines
in g
45.7 Annual training hours per employee
Com
Co
26
tur
mm
in g
me
ac
FINaNCIal CaPItal ia ci
uf
er
ur
ct an
rc
l
iza our financial a li
We use cash, equity and debt to meettio n u fa za
ti o n M
Approvals granted to Novartis in 2020
commitments, make investments and pay dividends. M a n in the US, the EU, Japan and China for
214.3 bn Year-end market capitalization (USD) new treatments as well as new indica-
tions for existing treatments
1.85 bn The value of our sustainability-linked
bond issued in 2020 (EUR)
EMPlOYMENt
INtEllECtUal CaPItal
R&Dand market
We use expertise and data to develop
our products. We hold patents and trademarks
that protect thenlong-term investments required ib
ut
ion R&
974 000
Estimated
R&D
n jobs created by Novartis
io
(2019), including own employees,
io
r
for our business.
D
st
ut
ut
indirect and induced
Di
rib
rib
9.0 bn Investment in research and
Dist
80
Dist
development in 2020 (USD)
160+ Pipeline projects with ongoing
clinical trials in Phases I to III WHAT WE DO Engagement score (out of 100) in
Com
Q4 survey of Novartis associates, an
in g
in g
all-time high and 7 points ahead of the
Co
Co
NatURal CaPItal
tur
industry benchmark
tur
in g
me
mm
mm
We responsibly consume energy, water and
ac
ac
ur
rc
other resources
ci to manufacture our products liz ci
uf
er
an
uf
er
ct
ia
al business.
and operate our an at f a liz a
iz a M io n nu shaREhOlDERs
a ti o n M
11.15 Energy use, on tiosite
n and purchased Ma
(million gigajoules)
8.5 Water consumption (million m3) 8.1 bn
Net income in 2020 (USD)
MaNUFaCtURED CaPItal
We own or lease research laboratories, manufacturing
sites and offices around the world. We use artificial
intelligence, gene editing and other technologies.
7.0 bn
Total dividends paid (USD)
60 Novartis manufacturing facilities
72 bn Treatments produced by our manufacturing ENVIRONMENt
facilities in 2020
RElatIONshIP CaPItal
19%
Reduction in greenhouse gas
We build trusted relationships with stakeholders to emissions vs. 2016 baseline (Scope 1
bring treatments to patients, advance drug discovery and Scope 2)
and expand patient access.
24 432 Field force representatives in our Innovative
Medicines Division
98% Employees who completed e-training on new
35%
Reduction in water consumption
Code of Ethics (to be completed by February 2021) vs. 2016 baseline (million m3)
This infographic is informed by the framework of the International Integrated Reporting Council (IIRC).
10 | Novartis in Society
Message from the
Chairman
Dear reader,
The outbreak of the COVID-19 pande and middle-income countries by 2025. We are proud that our ESG efforts are
mic, which has caused millions of deaths Furthermore, we strengthened our recognized by leading nongovernmen-
worldwide, highlighted the need for environmental ambitions with a new tar- tal organizations and sustainability rat-
rapid and concerted global action to get to be carbon neutral across our ing agencies, such as the Access to
overcome an unprecedented crisis, and entire value chain by 2030. Medicine Foundation and Sustainalyt-
served as a litmus test for the ability of ics, and we are committed to making
the international community to tackle These measures demonstrate the further progress. We will also continue
emerging crises. growing importance of ESG for the our efforts to support nonprofit research,
Novartis Board of Directors and senior for example with the Friedrich Miescher
Novartis took fast and coordinated management. Ambitious targets are Institute in Basel, Switzerland, and the
action in response to the pandemic. We necessary to reduce pollution and recently founded Institute of Molecular
quickly took steps to protect the safety support healthcare equity on an inter- and Clinical Ophthalmology Basel.
and well-being of associates. We com- national scale. The measures are also
mitted to donating up to USD 40 million designed to help the international The COVID-19 pandemic continues to
to support communities around the community strengthen crisis prepar- disrupt everyday lives, jeopardizing
world impacted by the pandemic. We edness and support the United Nations businesses and putting healthcare
also introduced a portfolio of 15 generic in its efforts to meet its Sustainable systems under increased stress.
and over-the-counter medicines to Development Goals, which we strongly Novartis will remain a committed part-
treat patients in low-income and lower- endorse. ner to support private and public ven-
middle-income countries suffering from tures designed to help patients, protect
COVID-19 symptoms. And we collabo- Increasing safety and sustainability the environment, promote business
rated with academic researchers and also drove the transformation of our integrity, and support international
industry peers in the effort to find effec- Third-Party Risk Management pro- efforts to address future challenges.
tive treatments for COVID-19. gram, under which we are introducing
stricter control of our supplier network Sincerely,
In parallel, we continued to advance our to help protect the interests of patients,
environmental, social and governance stakeholders and shareholders. We
(ESG) agenda. In September, we issued also launched our Code of Ethics in
a bond linked to targets for global health 2020 to strengthen integrity in deci-
and access to medicine, including a tar- sion-making and help Novartis achieve
get to increase access to our strategic its ambition to be among the most Joerg Reinhardt
innovative therapies by 200% in low- trusted partners in healthcare. Chairman of the Board of Directors
Novartis will remain a committed partner
to support private and public ventures
designed to help patients, protect the
environment, promote business integrity,
and support international efforts to
address future challenges
Joerg ReinhardtMessage from the CEO Novartis in Society | 11
We aspire to create a culture in which our
ESG activities are deeply embedded in our
daily work, reflecting both the responsibility
we have to our patients around the world
today as well as those who will come after us
Vas Narasimhan
Message from the CEO
Dear reader,
As a leading global medicines company rate sustainability principles. The sum Our ambitions will remain high. Along
that reaches more than 750 million of these efforts has prepared us to take with the urgency of finding solutions to
patients every year, we know our work further action and pave the way to reach overcome the global pandemic, climate
to build trust with society extends far our goal to be a trusted ESG leader by change is one of the most pressing
beyond researching and developing integrating our global efforts, enhanc- challenges of our time given its deep
innovative therapies. It entails the total- ing executive accountability and meas- interconnection with human health. This
ity of human health and the promotion uring our performance against trans- increasingly urgent problem requires
of health equity, including environmental parent targets. fast and vigorous science-based action
protection, the delivery of medicines to and the collective strengthening of a
as many people as possible, and living An important step in our integrated sustainability mindset to ensure a
up to high ethical business standards. In approach was the initiation of our Trust healthier planet for rising generations.
2020, we continued taking important & Reputation Committee, which I have
steps to integrate our environmental, chaired since its inception in 2019. In its As we look ahead at the years to come,
social and governance (ESG) agenda first full year of existence, the commit- I remain optimistic about our ability to
into the core of our b usiness. tee, among others, reviewed potential meet our company’s ambitions to be an
gaps in our ESG performance and iden- ESG leader and the most trusted health-
With our perspective on our company’s tified new commitments. As part of care company in the world. We aspire
role in society in mind, I am proud of the these efforts, I signed the CEO Water to create a culture in which our ESG
ways Novartis has helped lead as part Mandate and the CEO Guide to Human activities are deeply embedded in our
of the global pandemic response. In Rights. daily work, reflecting both the respon-
addition to collaborating with govern- sibility we have to our patients around
ments, academia and other life s ciences In 2020, Novartis made measurable the world today as well as those who
companies, we focused our research progress in our existing ESG agenda will come after us.
and development (R&D) engine on find- while setting new targets. We were able
ing scientific solutions, set up emer- to resolve our long-standing legal
gency health programs, and were the issues and launched a new Code of Eth- Sincerely,
first company to commit to keeping rel- ics. We also worked to expand access
evant and essential generic medicines to innovative and generic therapies in
cost-stable. low- and middle-income countries, and
we set ambitious targets in this realm
More broadly, as a founding signatory going forward. In addition, we strength-
of the United Nations Global Compact, ened our environmental sustainability
Novartis has worked to build a strong targets and now aim to be fully carbon, Vas Narasimhan
legacy over the past two decades as plastic and water neutral over the next Chief Executive Officer
we’ve developed and refined our corpo decade.12 | Novartis in Society
Our journey to build trust
with society
As a global company, we have a great responsibility and an even greater opportunity to lead
the world in creating positive social change. We can help catalyze a global response to
complex challenges, such as the current pandemic or climate change, by embracing
societal impact as a core business objective. At Novartis, we work to build trust with society
and deliver long-term value to our stakeholders by embedding environmental, social and
governance (ESG) topics into the core of our business strategy and operations.
Building trust with our stakeholders is communicate about them clearly and formance, new ESG commitments, the
critical to our ability to deliver on our transparently. We are also determined environmental sustainability strategy,
purpose, as well as our long-term finan- to learn from and share our experience. and diversity and inclusion.
cial performance. Our purpose is inher-
ently a social one: We reimagine medi- Maintaining strong governance In 2020, we created the position of
cine to improve and extend people’s Chief Sustainability Officer, who reports
lives. We discover and develop break- In 2020, the Governance, Nomination to a member of the ECN, to lead the
through therapies and aim to deliver and Corporate Responsibilities Com- strategy and execution of environmen-
them to as many people as possible. mittee (GNCRC) of the Board of Direc- tal sustainability across Novartis.
tors met four times and continued to
We have a clear strategic path that we oversee the company’s strategy and We also created the ESG Management
believe will further accelerate our jour- governance on global health, corporate Office in our Corporate Strategy group
ney to build trust with key stakeholders responsibility and other ESG topics at to further institutionalize ESG efforts
and society, centered around four key the Board level. Our new ESG targets across the organization. The new office
focus areas: and the issuance of a sustainability- will work with experts in divisions, func-
linked bond were among the topics dis- tions and countries to develop a trust
• Holding ourselves to high ethical cussed by the GNCRC in 2020. and ESG strategy framework and lead
standards key ESG initiatives.
• Being part of the solution on pricing The Novartis Trust & Reputation Com-
and access to medicines mittee met six times in 2020. Chaired In addition, we are establishing an
• Addressing global health challenges by our CEO, this sub-committee of the external advisory board to provide guid-
• Being a responsible citizen Executive Committee of Novartis (ECN) ance to the Global Health & Corporate
oversees progress and aims to accel- Responsibility (GH&CR) organization
We are committed to taking real, meas- erate decision-making in key ESG on strategy and related plans, policies
urable and reportable action in these areas. Topics discussed in 2020 and indicators.
key areas, and making sure that we included potential gaps in our ESG per-
Our journey toward more sustainable social impact
2000 2001 2007 2014 2015 2017 2019 2020
Sole donor to Antimalarial Healthy Family1 Local Novartis Novartis New strategy Sustainability
the WHO of Coartem innovative Access 3 access for sub- bond linked to
multidrug (not-for-profit brands in principles Saharan Africa new access
therapy for strategy) LMICs2 targets
leprosy
1 Health education and access to medicines for rural populations at the bottom of the income pyramid
2 Low- and middle- income countries
3 Portfolio of 15 on- and off-patent medicines for noncommunicable diseasesOur journey to build trust with society Novartis in Society | 13
Materiality and reporting manner, helps us prioritize impacts on important: access to healthcare, patient
which to focus, and informs our strate- health and safety, ethical business
We strive to create long-term value gic thinking. practices and innovation. Novartis
along our entire value chain. Our mate- applied statistical analysis to the results
riality assessment helps us understand We conduct global materiality assess- to further prioritize the issues and focus
the issues that matter most to our inter- ments every four years, and are cur- areas, identifying 14 priority topics.
nal and external stakeholders; how our rently preparing for our fourth assess- These topics are reflected in the four
economic, social and environmental ment in 2021. In our third global key focus areas of building trust with
impacts are perceived along our value materiality assessment conducted in society and are covered in the follow-
chain; and how they translate today and 2017, internal and external stakeholders ing sections of this report. A list of the
in the future into associated risks and ranked issue clusters based upon their topics is on page 86. We have intro-
opportunities for our company. Our impact on the performance and busi- duced new management targets across
materiality assessment enables us to ness of Novartis overall. Four issue the four focus areas, as outlined below.
capture our impacts in a nonfinancial clusters were identified as being most
ESG management targets
HOLDING OURSELVES TO HIGH ETHICAL STANDARDS
Conduct risk Complete risk Fully integrate human Enhance external Post all clinical trial results
assessments for all new assessments of existing rights into third-party risk reporting on anti-bribery on clinicaltrials.gov or
eligible suppliers suppliers by 2022 assessments in scope by 2022 novartisclinicaltrials.com
within one year of
completion
BEING PART OF THE SOLUTION ON PRICING AND ACCESS TO MEDICINES
Implement an access Increase by 200% patients Achieve a twofold increase Implement tiered pricing for
strategy for all new reached with strategic in the number of patients launches in Pharmaceuticals and
products launched innovative therapies in reached in sub-Saharan Oncology based on national
low- and middle-income Africa by 2022, and a income levels and value-based
countries by 2025 fivefold increase by 2025 pricing
ADDRESSING GLOBAL HEALTH CHALLENGES
Increase by 50% Advance clinical Expand Africa sickle cell Advance clinical
patients reached by the development program disease program to development program in
global health flagship for our next-generation 10 countries by 2022 patients with Chagas-
programs by 2025 antimalarials related heart failure
BEING A RESPONSIBLE CITIZEN
Be carbon neutral in own Reduce water Be water neutral in all Reduce the amount of Achieve gender balance
operations (Scope 1 and consumption in our areas of our operations waste sent for disposal in management by 2023
2) by 2025 and across operations by half by by 2030 while by half by 2025 (vs. 2016)
Close the gender pay
the value chain (Scope 1, 2025 (vs. 2016), with no enhancing water quality
Be plastic neutral by gap by 2023
2 and 3) by 2030 water quality impacts wherever we operate
2030, with all new
from the manufacturing Invest USD 100 million
Include environmental Eliminate polyvinyl products meeting
of our products in learning over five
criteria in all supplier chloride in packaging by sustainable design
years from 2019
contracts by 2025 2025 principles14 | Novartis in Society Photo Dr. Juliet Akoth (left) walks with a patient
in Kitui, Kenya. Dr. Akoth enrolled in Echo for Life,
a Novartis-sponsored program in partnership
with the University of Nairobi to train healthcare
professionals in the diagnosis and treatment of
cardiovascular disease.
Engaging with stakeholders Massachusetts Institute of Technology
and the Harvard Global Health Institute
A cornerstone of our approach is con- hosted a series of 14 webinars to
sistent engagement with a wide range explore the role of artificial intelligence
of stakeholders, including patients and (AI) in responding to the pandemic in
caregivers, associates, healthcare pro- low-resource settings. The webinars
viders, governmental organizations, non gathered over 3 000 participants. In
governmental organizations (NGOs), 2021, the foundation plans to launch the
shareholders and other financial mar- HealthTech Dialogue Hub, an initiative
ket participants, local communities, and to connect policymakers, tech innova-
partners from the pharmaceutical and tors, NGOs and other key stakeholders
other industries. and drive the implementation of AI for
health in low- and middle-income coun-
Our CEO was invited to co-chair the Bill tries.
& Melinda Gates Foundation CEO Round
table, a group comprising 15 CEOs of The Novartis Foundation and Women in
the top pharmaceutical companies Global Health also co-hosted the
globally. The roundtable focused on #BuildBackBetter Digital Innovation
collective action related to the COVID- and AI Challenge to support gender
19 pandemic and established several equity in digital health while advancing
workstreams. Additionally, Novartis and health security. Over 100 startups from
the roundtable are working with various all continents participated in the chal-
governments and stakeholders on lenge. The winning startup, Clafiya,
future pandemic preparedness, and received USD 10 000 for its innovative
Novartis will continue to co-chair the digital platform that connects patients
CEO Roundtable in 2021. in semi-urban and rural parts of Nigeria
to community health workers to provide
Novartis is also active in multi-stake- home-based primary care services. As
holder initiatives on business ethics and the runner-up, Wheels for Life received
environmental issues. In October, Novartis USD 5 000 for its innovation in provid-
became a signatory to the Partnering ing prompt triage consultation and
Against Corruption Initiative, the princi- transferring pregnant mothers from
pal CEO-led platform in the global anti- homes to hospitals to prevent delays in
corruption arena, building on the pillars accessing maternal healthcare and
of public-private cooperation, responsible reduce maternal morbidity in Kenya.
leadership and technological advances.
In September, we joined PREMIER, a new Engaging the investor community
six-year project with the Innovative on ESG topics
Medicines Initiative (IMI), focused on Novartis has more than doubled the
evaluating and mitigating the risk of number of investor engagements on
medicines in the environment. ESG matters in recent years, and in
2020, our CEO led our ESG Investor
We believe we can help build a system- Day for the second time (marking our
atic and consistent approach to patient seventh dedicated ESG event for inves-
engagement across the healthcare sys- tors since 2014). In 2020, with ECN
tem. To this end, we continue to partic- members and the Group Head of Global
ipate in 41 IMI projects supporting the Health & Corporate Responsibility, we
progression of healthcare and science, held an ESG roadshow series in the
as well as other patient-focused initia- Netherlands, France, the US and Swit-
tives and collaborations. zerland. Further, as part of our compre-
hensive ESG engagement program, we
We regularly engage with our associ- increased the frequency of our commu-
ates globally through physical and vir- nication, issuing a quarterly ESG news-
tual events, which encourage open dia- letter to investors. Please see page 130
logue and communication. We run a of the Annual Report 2020 for key top-
global quarterly survey in which asso- ics discussed during our shareholder
ciate engagement is one of the main engagements.
parameters we measure.
We conducted five webinars in 2020 to
We also consistently engage with global share how Novartis is implementing the
health stakeholders on key topics. For outcomes of our previous materiality
example, the Novartis Foundation, the assessments. Webinar topics includedOur journey to build trust with society Novartis in Society | 15
access to healthcare, wealth and health, which create opportunities to raise goal 13 (climate action). We harness the
and measuring the social outcomes of industry standards and exchange best power of partnerships (goal 17) to dis-
access initiatives (see the appendix on practices. A list of our memberships can cover and develop breakthrough treat-
page 87). Each webinar featured inter- be found in the appendix on page 88. ments and deliver them to as many peo-
nal and external speakers and attracted ple as possible. We contribute to goal
approximately 80 participants from Novartis makes financial contributions 5 (gender equality), and our environ-
industry, NGOs, access-related and to support political dialogue on issues mental sustainability targets align with
sustainability groups, and investors. of relevance to the company or to cer- goal 6 (clean water and sanitation),
tain government projects (e.g., for goal 7 (affordable and clean energy),
We also organized and participated in capacity building). Such contributions and goal 12 (responsible consumption).
several events to promote the value of need to be fully compliant with applica-
measuring business impact beyond tra- ble regulations, and we only make polit- As a founding signatory of the UN
ditional financial metrics, an important ical contributions in countries where Global Compact (UNGC), we are com-
element in driving the ESG agenda with such contributions by corporations are mitted to sharing our progress in imple-
a broader stakeholder audience. For both legal and generally considered menting the 10 principles of the com-
instance, as part of our impact valuation appropriate. We publish the amounts of pact. We published a Communication
work, we participated in discussions at these contributions on our website on Progress in the first quarter of 2020
a Global Solutions Initiative summit and, for the US and Switzerland, in the and will do so again in 2021.
about the true value contribution of Novartis in Society US and Novartis in
business. We continue to drive impact Society Switzerland reports, respec- A mapping of our activities against the
valuation standardization through the tively. SDGs and the UNGC principles can be
Value Balancing Alliance, of which found in the GRI Content Index on
Novartis is a founding member. We are Contributing to the Sustainable page 78 of this report.
also a member of the Impact Valuation Development Goals
Roundtable, an informal group of more
than a dozen international companies We have a long-term commitment to
seeking to develop and operationalize support the UN in achieving its Sustain-
the field of impact valuation. able Development Goals (SDGs). As a
leading medicines company, ensuring
Engaging with policymakers good health and well-being (goal 3) is
Novartis also engages in dialogue with at the core of our business and is
policymakers and other external stake- aligned with our purpose of reimagining
holders. Providing policymakers with medicine to improve and extend peo-
data and insights enables informed ple’s lives. Through our business oper-
decision-making conducive to improv- ations and ongoing activities, we make
ing patient outcomes. Additionally, we essential contributions to goal 8 (decent
work closely with trade associations work and economic growth), goal 9
and participate in industry initiatives, (innovation and infrastructure), and16 | Novartis in Society
Valuing our impact
While the understanding of long-term value creation is still evolving, there is increasing
interest in the topic among key stakeholders. Part of our work entails engagement and
dialogue to foster a better understanding of the concept and contextualize impact
valuation within broader health economic considerations.
In December, we hosted our annual Co- cators meant to measure and disclose Overall, in 2019, our activities contrib-
Creating Impact Summit with external and the environmental, human, social and uted USD 90.4 billion to global gross
internal speakers. To make the experi- economic value companies provide to domestic product (GDP), as well as an
ence engaging and interactive, we also society. Overall, we found the indicators estimated 974 000 jobs, including
held a virtual exhibition to enable partici- consistent with our approach except for those held by our own employees. In
pants to explore the building blocks of our the environmental impact of land use addition, our human capital impact –
impact valuation roadmap and discover and of waste in the supply chain, which including employee development, occu-
and discuss inspiring best practices. we did not cover previously but have now pational safety and living wages – was
added. The social dimension of the indi- valued at USD 1.9 billion, with USD 2.2 bil-
We continue to work with partners to cators in the VBA model could be lion coming from the social impact of liv-
publish studies that, for example, help strengthened by including the social ing wages in our own operations and the
measure the social impact of a disease impact of our medicines and particularly entire supply chain, USD 1.5 billion com-
burden or preventive interventions in of living wages. ing from employee development, and a
averting negative health impacts and negative USD 1.8 billion coming from
environmental damage (see the appen- We continue to refine our approach, occupational safety. At the same time, we
dix on page 89). Our current research now called Novartis social, environmen- are taking steps to minimize our negative
covers an array of topics, including tal and economic (SEE) impact valua- environmental impact, as measured by
social risk in the supply chain, the social tion, to prioritize the social impact of our the carbon, other air emissions, water and
impact of pediatric formulations, and medicines. In 2020, more than 20 waste impacts of our own operations and
environmental footprints of products. Novartis country organizations – includ- supply chain, which were valued at USD
ing, for the first time, the UK and Spain 6.5 billion. The overall social impact of our
For impact valuation to be transforma- – drew on local impact valuation results portfolio, including Innovative Medicines
tional, standard setters and policies to derive insights and engage with and Sandoz products in 132 countries,
need to embrace it. To this end, we con- stakeholders. In total, data is now avail- amounted to USD 219 billion in 2019.
tinue to drive impact valuation stand- able for 189 countries, including our More information on our impacts in Swit-
ardization through the Value Balancing own operations and supply chain. We zerland is available in the Novartis in Soci-
Alliance (VBA), of which Novartis is a also conducted pilots using forecasted ety Switzerland report, which will be pub-
founding member. In 2020, we piloted impact valuation results for both Novartis lished in February 2021 on novartis.ch.
the alliance’s first impact valuation indi- operations and our supply chain.
Novartis social, environmental and economic impact 2019
Indicator Results 1, 2 Remarks
Social
Living wages USD 2.2 bn Own operations USD 1 bn, indirect USD 1.2 bn
Employee development USD 1.5 bn Own operations USD 80 m, indirect USD 697 m, induced USD 775 m
Occupational safety -USD 1.8 bn Own operations USD 461 m, indirect USD 767 m, induced USD 561 m
Other human capital impacts Employee well-being, voluntary turnover, human rights beyond living wages not valued in 2019
Products USD 219 bn Based on 54 Innovative Medicines brands and 40 Sandoz products in 132 countries
Environmental
Climate, energy and air pollution -USD 3.80 bn Own operations USD 164 m, indirect USD 1.4 bn, induced USD 2.2 bn
Water and waste -USD 1.03 bn Own operations USD 15 m, indirect USD 322 m, induced USD 542 m, downstream USD 152 m
Land use -USD 1.71 bn Own operations USD 43 000, indirect USD 266 m, induced USD 1.441 m
Other environmental impacts Biodiversity not valued in 2019
Economic
GDP contribution USD 90.4 bn Own operations USD 52.1 bn, indirect impacts USD 17.7 bn, induced impacts USD 20.6 bn
Employment 974 000 FTEs Own operations 104 000 FTEs, indirect 351 000 FTEs, induced 519 000 FTEs
Economic inefficiencies Not valued in 2019 – no methodology available
Total taxes Not valued globally in 2019
1
Our methodology is based on leading approaches including WifOR (social impact of medicines, direct GDP contribution, indirect and induced environmental and economic impacts), Valuing
Nature (social impact of wages and salaries), VBA (employee development, occupational safety, waste, land use) and Impact Valuation Roundtable (general approach).
2
Data represent continuing operations.Valuing our impact Novartis in Society | 17
Photo Leo Vieira exercises in São Paulo, Brazil, after recovering from
COVID-19. Mr. Vieira was treated at the Hospital das Clinicas of the
University of São Paulo, where doctors used an artificial intelligence
platform – developed with the support of the Novartis Foundation as well as
government and civil society partners – to assess damage to his lungs.18 | Novartis in Society
Photo Novartis employees at
a production facility in Torre
Annunziata, Italy.
STRATEGIC AREAS
Holding ourselves to high
ethical standards
Why is it important?
Building trust with customers, patients, associates and society is the
foundation of our long-term success. Our stakeholders not only expect us to
do what is legally required, but also to act with high ethical standards wherever
we operate and to be accountable for the way our business impacts people
and the environment. We recognize these expectations of our company and
strive to do what’s right both for Novartis and for society at large.
In this section
Read about our journey to strengthen ethics, risk, compliance and assurance at Novartis:
Code of Ethics Risk management Third-party risk Human rights
Launched a new Code of Ethics, Defined the Novartis risk management Signed the CEO Guide to
encouraging associates to be portfolio, which comprises 21 Revised our Novartis Third Party Human Rights, calling on
bold, open-minded, honest and risks categorized as strategic, Code, outlining requirements for businesses to contribute to the
accountable when making operational or emerging, as third parties on environmental realization of universal human
decisions well as awareness topics sustainability, human rights, and rights
diversity and inclusion
! p. 19 ! p. 20 ! p. 26
! p. 25Holding ourselves to high ethical standards Novartis in Society | 19
Our targets
Conduct risk assessments for all new eligible suppliers
Complete risk assessments of existing suppliers by 2022
Fully integrate human rights into third-party risk assessments in scope
Enhance external reporting on anti-bribery by 2022
Post all clinical trial results on clinicaltrials.gov or novartisclinicaltrials.com within one year of completion
“The experiences of the past 12 Our approach and performance associates understand what it means
to behave and act ethically.
months have shown just how We work to build trust – with associates
important it is to coordinate risk and partners, doctors and patients, and Our new Code of Ethics, launched in
with society more broadly – by embed- September, is a natural step on this jour-
management locally, regionally ding environmental, social and govern- ney. It is rooted in behavioral science,
and internationally – based ance (ESG) topics into the core of our which is about what we do, why we do
business. We are governed by strong it, and how it is influenced. If we want to
on our ethical commitment and consistent values and continue to change behaviors, we need to change
to do what’s right” implement policies and practices to the context and environment in which
hold our company, our associates, our we work and live.
Klaus Moosmayer, suppliers, and stakeholders we work
Chief Ethics, Risk & Compliance Officer and interact with to high ethical stand- Our new Code of Ethics elevates prin-
ards. We endeavor to identify potential ciple-based decision-making and rein-
problems, prevent issues from occur- forces our commitment to ethics across
ring, promote personal accountability, all business interactions, encouraging
and generate lessons that we can apply associates to be bold, open-minded,
OUR ETHICAL PRINCIPLES across the company. honest and accountable when making
decisions. Co-created with more than
Be open-minded This continues to be a journey, and we 3 000 Novartis associates sharing
are making progress. We are embed- feedback, ideas and insights into the
Am I actively listening to ideas or concerns? ding principle-based decision-making areas that matter most, our Code of
Am I questioning the impact of my decisions? in our business interactions to help Ethics is a collection of 22 ethical com-
Am I valuing the perspective of others? ensure our leaders and associates act mitments we make as an organization,
appropriately when faced with ethical reflecting the diverse voices of our
dilemmas. We are expanding our efforts associates. The code is accompanied
Be honest
to protect human rights within our oper- by an online decision-making frame-
ations and throughout our supply chain. work based on behavioral science that
Am I acting with clear intent? This extends from creating a more helps associates challenge their intui-
Am I avoiding harm? inclusive company culture to protecting tion and encourages reflection on the
Am I speaking up? people and communities with uncom- potential impacts of their decisions. In
promising standards for ethical sourc- 2020, more than 45 750 associates
Be bold
ing and practices. As a diverse com- used the interactive tool and resources.
pany operating globally, we know this is
a challenging endeavor and there will To mark the launch of the code, we held
Am I standing up for what I believe?
always be more we can do. a companywide Ethics Week, which
Am I putting patients first? included a series of global events
Am I making a positive difference? Creating a Code of Ethics hosted by internal and external experts,
Over the past two years, we have been with almost 20 000 associates tuning
Be accountable on a journey to strengthen principle- into the live virtual sessions. Addition-
based decision-making by introducing ally, 160 local events were held across
Am I taking responsibility for my decisions? P3, our Professional Practices Policy. 78 countries, and more than 1 200
We have learned about the importance associates participated in virtual train-
Am I treating others as I would like to be treated?
of providing room for open dialogue and ings on understanding why, and how,
Am I putting the team before myself? discussion, especially in grey areas, so we make decisions. Global e-training on20 | Novartis in Society
the new Code of Ethics is being rolled shops with business and organizational While our purpose – reimagining medi-
out from September 2020 to February units. Additionally, we looked at reports cine to improve and extend people’s
2021, with a preliminary completion rate by Novartis functions such as Internal lives – drives our values and defines our
of 98% by December 31, 2020. Audit, as well as external data on indus- culture, our ethical principles guide us
try and macro-economic trends, to help in everyday decision-making and en
Safeguarding our company from risks identify high-risk areas. sure we act with integrity. Our new
In a rapidly changing business environ- Code of Ethics sets the ethical frame-
ment, effective risk management is crit- The Chief Ethics, Risk & Compliance work for risk management at Novartis.
ical to our ability to build resilience and Officer is responsible for the overall risk In addition, within the Novartis Risk &
provide sustained, long-term value to management process at Novartis. The Resilience organization, Business Con-
patients, shareholders and other stake- Ethics, Risk & Compliance (ERC) func- tinuity Management (BCM) and
holders. We strive to minimize or pre- tion oversees the company’s risk man- Novartis Emergency Management
vent negative issues from occurring agement and compliance functions, (NEM) are important elements of our
while helping ensure we capture busi- including risk-based companywide pol- risk management strategy. During the
ness opportunities as they arise. icy and internal control management, as COVID-19 pandemic, more than 100
well as crisis and business continuity NEM teams worldwide supported the
The Enterprise Risk Management (ERM) management. business to help ensure the safety and
process at Novartis is a series of coor- well-being of associates as well as the
dinated activities designed to identify The Executive Committee of Novartis uninterrupted supply of medicines to
risks, promote accountability and sup- (ECN), led by the CEO, reviews and patients.
port balanced decision-making for sus- endorses the risk portfolio. The Board
tainable long-term growth. The process of Directors provides the highest layer THE NOVARTIS RISK COMPASS
begins with leadership discussions of oversight. It focuses on the most We use the outcomes of the ERM pro-
about risk at the global level and in significant risks, while the Board-level cess to update the Novartis Risk Com-
country organizations as part of annual Risk Committee reviews the entire risk pass, which provides a single holistic
strategic planning. In 2020, we held portfolio and actions implemented by view of risk across the company. We
mostly virtual cross-divisional work- management. For further details on the group risks into four categories and
shops in our top 11 markets and a num- Risk Committee and its activities, assign a risk rating based on likelihood,
ber of additional countries in Africa, please see page 146 of the Novartis potential impact and other factors
Asia, Europe and South America. At Annual Report 2020. within a time horizon of up to five years.
the global level, we also held risk work- This approach helps senior manage-
Enterprise Risk Management process (ERM)
• Previous risk assessment results
Scope, context, criteria
• Risk leadership roundtable discussion
Risk workshops:
• At selected country level
Risk assessment • By business unit/division/organizational unit
• By selected corporate function
• Consolidation at annual risk workshop. Finalization of the Novartis Risk Compass
• Accept
• Avoid
Risk treatment • Pursue
• Reduce
• Share
• Monitor risk mitigation progress
Monitoring & review
• Review of risk status by ERM team
• Recording of risks and mitigation activities via the Novartis ERM tool
Recording & reporting
• Risk reporting to the Executive Committee of Novartis
• Promote risk awareness
Communication & consultation
• Support decision-makingHolding ourselves to high ethical standards Novartis in Society | 21
Novartis Risk Compass
STRATEGIC RISKS EMERGING RISKS
are the most consequential to our ability require close monitoring and have
to execute our strategy or achieve our the potential to become strategic or
business objectives. operational risks.
OPERATIONAL RISKS AWARENESS TOPICS
relate to internal processes or systems, are longer-term trending topics that have
employee errors or external events. the potential to become new risks
ment and the Board of Directors align For ERM purposes, we assessed Novartis has for some time actively
the company strategy and our risk expo- whether the COVID-19 pandemic ampli- managed a range of ESG matters. These
sure. Once a risk is identified, we decide fied or accelerated known risks in our are now included within the risk portfo-
how to treat it based on our risk appe- portfolio, rather than labeling it as a lio as a strategic risk, taking into account
tite. We regularly monitor and reassess standalone risk. For example, we esca- their expected impact on the sustaina-
risks in case there are changes in the lated “geo-political and socio-eco- bility of our business over time, and the
risk situation. nomic threats” from an awareness topic potential impact of our activities on
to an emerging risk in 2020, due in part society and the environment.
RISKS IN 2020 to the widespread societal and eco-
The Novartis risk portfolio comprises nomic impact of the COVID-19 pan- The below categories show the degree
21 risks, of which seven are categorized demic. We also identified “new ways of of risk exposure for Novartis, based on
as strategic, 10 are categorized as working” as an emerging risk, partly due a combination of the risk’s likelihood
operational, and four are categorized to the potential impact of a widespread and potential impact on our business.
as emerging. In addition, we identified shift to remote working amid the pan-
three awareness topics. demic. T Very high M High T Medium T Low
STRATEGIC RISKS OPERATIONAL RISKS EMERGING RISKS
T Key products and commercial priorities T Cybersecurity and IT systems M Geo-political and socio-economic
threats
T Pricing, reimbursement and access M Third-party management
M Research and development M Manufacturing and product quality T New ways of working
M Alliances, acquisitions and divestments M Fragmented core processes and IT T Global enterprise resource planning
(ERP) implementation
landscape
M Environmental, social and governance T Social media and digital engagement
matters M Talent management
T Organizational, structural and cultural M Facility and workplace safety
transformations AWARENESS TOPICS
M Legal and compliance
T Digitalization and emerging business M Inadequate oversight of medical
Climate change
models
programs Antimicrobial resistance and changes in
disease patterns, including pandemics
T Data privacy
Deterioration of human rights protection
T Supply chain22 | Novartis in Society
Risks in focus
The following provides further details on key risks for Novartis, including the top risks in each category as well as those
that have been significantly upgraded in 2020.
Risk Context Actions
STRATEGIC RISKS
Key products and Our ability to grow our business depends on the commercial • We are pursuing a “launch excellence” strategy in
commercial priorities success of key products. Their success could be impacted by a commercial execution, including investing in earlier
Failure to deliver key number of factors, including pressure from new or existing prelaunch preparations and using data science to
commercial priorities and competitive products; changes in the prescribing habits of test and learn from new commercial models.
successfully launch new healthcare professionals; unexpected side effects or safety
products • We are accelerating the planned implementation of
signals; supply chain issues or other product shortages; pricing a new customer engagement model, which
pressures; regulatory proceedings; changes in labeling; loss of combines traditional face-to-face visits with digital
intellectual property protection; and global pandemics. methods of engaging healthcare professionals.
We are similarly changing our approach to engaging
healthcare systems, payers and other healthcare
providers.
• We enter into business development agreements
with other companies and with academic and other
institutions to develop new products and access
new markets.
Pricing, We experience significant pressures on the pricing of our • We have dedicated teams that actively seek to
reimbursement and products and on our ability to obtain and maintain satisfactory optimize patient access, including formulary
access
rates of reimbursement from governments, insurers and other positions, for our products.
Pricing and reimbursement payers. These pressures have many sources, including rising • We are increasing our efforts to enable patient
pressure, including access healthcare costs (exacerbated in 2020 by the COVID-19
to healthcare access through innovative pricing and access
pandemic); funding restrictions and policy changes; and public initiatives in the US, Europe and other markets.
controversies, debate, investigations and legal proceedings These include contract structures such as pay-
around pharmaceutical pricing. Such pressures may impact over-time and outcome-based agreements.
product pricing and market access. We also face price controls
and other measures imposed by governments and other payers. • We announced new access-to-medicine and
In addition, our Sandoz Division has faced and may in the future global health targets in 2020. We also launched a
face continued price erosion in the generics and biosimilars sustainability-linked bond, embedding the targets
segment. into the core of Novartis business operations.
Research and We engage in costly, lengthy and uncertain R&D activities, both • We enter into agreements with other pharmaceutical
development (R&D) independently and in collaboration with third parties, to identify and biotechnology companies and with academic
Failure or delay in the and develop new products and new indications for existing and other institutions to develop new products.
research and development products. Failure can occur at any point, including after • We are accelerating the use of data science and
of new products or new substantial investment. New products must undergo intensive
indications for existing digital technology to make the drug discovery and
preclinical and clinical testing. Further, regulatory authorities development process more efficient and effective.
products
continue to establish new and increasingly rigorous requirements
for approval and reimbursement. The post‑approval regulatory
burden has also increased.You can also read
