Novartis in Society ESG Report 2019
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Novartis in Society
ESG Report 2019
2 | Novartis in Society
Contents
Photo A worker at Zipline’s distribution
center in Omenako, Ghana, prepares a
medical order for drone delivery. Novartis
has partnered with Zipline, a US-based
automated logistics company, to help deliver
vital medicines to remote areas.
2019 highlights 3
Cover photo Patients at Kumasi General
Who we are 4 Hospital in Ghana, where newborns are
screened for sickle cell disease. Only about
What we do 6 4% of babies in Ghana are tested for this
debilitating genetic blood disorder.
Message from the CEO 8
Global Health & Corporate Responsibility at Novartis 9
Strategic areas 13
Holding ourselves to the highest ethical standards 13
Being part of the solution on pricing and access 20
Addressing global health challenges 32
Being a responsible citizen 39
About this report 50
Performance indicators 2019 51
Novartis GRI Content Index 55
Appendix: corporate responsibility material topic boundaries 59
Appendix: corporate responsibility materiality assessment issue cluster
and topic definitions 61
Appendix: external initiatives and membership of associations 63
Appendix: supplier spend 2019 64
Appendix: the responsible procurement (RP) risk indicator tool 64
Appendix: measuring and valuing our impact 65
Independent Assurance Report on the 2019 Novartis in Society
ESG reporting66
2019 highlights Novartis in Society | 3
2019 highlights
ETHICAL STANDARDS
99/100
SCORE
500+
ASSOCIATES
135
HIGH-LEVEL AUDITS
achieved by Novartis for clinical trial volunteered to be part of the performed on 100% of suppliers
transparency in a recent analysis networkthat will create the with active follow-up
published by BMJ NovartisCode of Ethics
ACCESS TO HEALTHCARE
16 m
PATIENTS
10 m+
PEOPLE
300 000+
PATIENTS
reached through access programs reached through training reached with over 90 local brands
and health education programs for some of our most advanced
medicines
GLOBAL HEALTH
900 m+
TREATMENT COURSES
20 000+
TREATMENTS
7 m+
PATIENTS
of Coartem delivered of hydroxyurea delivered to reached with free multidrug
to date in malaria-endemic Ghana for the treatment of therapy for leprosy since 2000
countries people withsickle cell disease
CORPORATE CITIZENSHIP
80 000
TONNES REDUCTION
44 %
WOMEN
100 000
HOURS
of carbon emissions in management devoted to learning during
(Scope 1 and 2) vs. 2016 Novartis Learning Month
4 | Novartis Annual
in Society
Review 2019
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 treat- s es consolidates support
ments in multiple disease areas on services across our organi-
i
s
ct
to 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
Sandoz offers patients
specific areas of expertise,
and healthcare professionals
including finance, human
high-quality, affordable
gyy
resources, legal and commu-
ololog
generics and biosimilars.
nications.
ncco
Sa
/On
nd
Ma
O
nuf )
oz
ess/
a c t u r i n g ( N TO ne
cini
eddici
Me
veM
atitvie
I
In n 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 by
new drugs that can change our researchers and
the practice of medicine. partners.
WhO we
Who WE are
aRE Novartis Annual Review
Novartis 2019 | 5
in Society
Our culture Our values
Curious Innovation Performance
Inspired Quality Courage
Unbossed Collaboration Integrity
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
108 775 149 35.8 44 %
6 | Novartis Annual
in Society
Review 2019
What wedo
What we do R&D
n
R&D
io
n
tio
ut
rib
ibu
Dist
Our business model Distr
RESOURCES WE USE
in g
Com
talENtED FINaNCIal INtEllECtUal NatURal INFRastRUCtURE
Co
tur
PEOPlE CaPItal CaPItal CaPItal tEChNOlOGY aND FaCIlItIEs RElatIONshIPs
mm
in g
me
ac
We depend on the We use cash, equity
ia We use expertise We consume energy,
c We use artificial We own or lease We work with doctors
uf
er
ur
ct water and other ializ intelligence, gene an
rc
skills and creativity and debt to meet liz and data to devel- research laborato- to get effective treat-
ati u fa a t M
of our employees our financial com- o nop and market M a n our resources to manu- iediting
on and other ries, manufacturing ments to patients. We
to discover, develop mitments, make products. We hold facture our products cutting-edge tech- sites, offices and partner with external
and produce new investments and patents and trade- and operate our nologies to spur distribution facilities organizations to ac-
medicines, and pay dividends. marks that protect business. innovation and around the world. celerate drug discov-
deliver them to the long-term invest- increase efficiency. ery, develop business
patients. ments required for opportunities and ex-
our business. pand patient access.
R&D R&D
ion
ut R& n
n ib
io
io
r
D
st
ut
ut
Di
rib
rib
Dist
Dist
WHAT WE DO
Com
in g
in g
Co
Co
tur
tur
in g
me
mm
mm
ac
ac
ur
rc
ci liz ci
uf
THE VALUE WE CREATE
er
an
uf
er
ct
ia
a liz an at
io n u fa a li
za M
ati o M an ti o n
n M
IMPROVED hEalth aND aCCEss tO MEDICINE
JOBs shaREhOlDER REtURNs taXEs PaID WEll-BEING aND hEalthCaRE
1.3 m
Indirect, induced (2018)
22.3 %
2019 total shareholder return
1.9 bn 67 bn
(USD) Social impact (USD, 2018),
799 m
Patients reached with
(USD), including Alcon spin-off based on estimated value of Novartis medicines
health benefits to patients
108 775 6.6 bn
Own operations Total dividends paid (USD)
10 m
People reached through
training and health
education programs
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 2019.
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
we DO
What WE do Novartis
Novartis Annual in Society
Review 2019 | 7
Our environment
We live in an era of amazing medical innovation, driven by better understanding of the genetic and biological roots of
disease, and surging use of data analytics and digital technology in science and healthcare. At the same time, the world’s
population continues to grow and people are living longer, fueling a rise in chronic diseases. Together, these factors are
increasing demand for high-quality care worldwide and pressuring healthcare systems to restrain spending growth.
aCCElERatING INNOVatION aGING POPUlatION hEalthCaRE sPENDING
39 % 235 bn 997 m 5%
The rise in the average yearly The projected value of the The projected number of The expected annual average
number of new drugs approved global digital health market by people in the world aged 65 or growth in healthcare spending
by the US FDA’s Center for Drug 2023 (USD), a 60% increase older by 2030, a 64% increase between 2019 and 2023,
Evaluation and Research from from 2019, according to the from 2015, according to the according to the Economist
2015-2019, compared to Frost & Sullivan Global Digital United Nations World Popula- Intelligence Unit
2010-2014 Health Outlook 2020 tion Prospects
Our strategy
Our strategy is to build a leading, focused medicines company
powered by advanced therapy platforms and data science.
As we implement our strategy, we have five priorities to shape our future and help us continue to
create value for our company, our shareholders and society.
STRATEGIC PRIORITIES
Unleash the Deliver Embrace Go big on Build
power of our transformative operational data and trust with
people innovation excellence digital society
We are transforming In our pursuit of trans- We are rethinking how We aim to spark a digital We strive to build trust
our culture to ensure formative treatments, we work, embracing revolution at Novartis, with society through our
people can fully apply we challenge medical agile teams and building embracing digital tech- efforts to operate with
their talent and energy. paradigms and explore better productivity into nologies, advanced integrity, and to find new
We’re creating an possibilities to cure our company to free analytics and artificial ways to expand patients’
organization where disease, intervene earlier resources that we can intelligence to help drive access to our treatments.
people are inspired, in chronic illnesses, and invest in innovation and innovation and improve
curious and unbossed. find ways to dramatically help boost returns. efficiency. p. 36
improve quality of life.
p. 18 p. 30 p. 32
p. 22
Holding ourselves to the highest ethical standards
Being part of the solution on pricing and access
Addressing global health challenges
Being a responsible citizen
8 | Novartis in Society
We aspire to be a leader on
environmental, social and
governance topics and to build
trust with society. In the long run,
that’s what will enable us to
continue reimagining medicine
Vas Narasimhan
Message
from the CEO
Dear reader, Within that framework, I wanted to share Related to responsible citizenship,
some of our ESG highlights from 2019: we made significant progress toward
Thank you for taking the time to learn making good on the promises we made
more about how Novartis continues to To widen access to medicines, we con- in signing the UN Equal Pay Interna-
make meaningful progress on environ- tinued to implement our pioneering tional Coalition (EPIC) pledge for pay
mental, social and governance (ESG) Access Principles to enable populations equity. Our teams also took important
topics. We’ve long been on this journey, around the world to access the latest steps to help ensure we meet our com-
including as a founding signatory of the medical innovations, and we continued mitment to become carbon neutral in
United Nations (UN) Global Compact, to ensure responsible, value-based our own operations by 2025.
and as our world changes and grows pricing, including global tiered pricing
increasingly complex, we continue to based on national income. We also There’s much more to share, and our
evolve and advance our perspective and announced plans to shift from maximiz- 2019 report provides an update on our
approach to building trust with society. ing profit to maximizing access in sub- commitments but more importantly on
Saharan Africa, which has the world’s our actions. We understand our contri-
Our ESG-related commitments are not most underserved patient population. butions must be part of a larger social
add-ons to our business – they perme- movement, as the challenges society
ate Novartis to the core – and we are We made significant progress in global faces are too great for any group or
owning this journey at the most senior health, including on our efforts to elim- government to solve alone. I hope the
levels of the company. In 2019, we inate leprosy and malaria. Additionally, following pages will inspire you to join
established a Trust & Reputation Com- with the Ghanaian government and the us on our journey to forge a healthier,
mittee, which I personally chair, to Sickle Cell Foundation of Ghana, we more sustainable future.
review our ESG performance. Building launched a first-of-its-kind partnership
trust with society has been elevated as to improve care for people with sickle Sincerely,
one of our top strategic priorities, and cell disease.
within that priority we are focused on
four key areas, which I believe are criti- Focusing on ethical behavior, we rolled
cal for our strategy and our contribu- out an integrated approach to enter-
tions to the world: access to medicines, prise risk management (known as the
global health, ethical standards and Novartis Risk Compass) and further
responsible citizenship. embedded principles-based decision- Vas Narasimhan
making frameworks throughout our Chief Executive Officer
business, including through country-
specific workshops.
Global Health & Corporate Responsibility at Novartis Novartis in Society | 9
Global Health & Corporate
Responsibility at Novartis
Our Global Health & Corporate cience, we’re confident that our new
s
Responsibility journey GH&CR strategy will accelerate our
Our organization
journey to build trust and maximize our
The Novartis purpose is inherently a positive social impact everywhere
social one: We reimagine medicine to Novartis does business. NOVARTIS SOCIAL
BUSINESS
improve and extend people’s lives. We
develop breakthrough therapies and Our annual progress and aspirations for
aim to deliver them to as many people the future are reflected in this report, brings together our flagship global health
as possible. Over the past 20 years, our which is organized around our four key priorities, our work in noncommunicable
company has evolved its approach to GH&CR focus areas: diseases and our social business
corporate responsibility, moving beyond commercial operations
philanthropic initiatives to strategically • Holding ourselves to the highest
integrate access in our core business ethical standards
operations. In 2018, we changed the • Being part of the solution on pricing NOVARTIS
name of the function to Global Health & and access to medicines FOUNDATION
Corporate Responsibility (GH&CR), and • Helping tackle global health
in 2019, we took important steps to cre- challenges focuses on how data, digital and artificial
ate a new GH&CR organization and • Being a responsible citizen intelligence can transform global health
launched a three-year strategy.
We are committed to taking real, meas-
Our strategy rests on five pillars and is urable and reportable action in these SUB-SAHARAN
rooted in one of the five corporate pri- key areas, and making sure that we AFRICA UNIT
orities: building trust with society. communicate about them clearly and
transparently. We are also determined a ims to maximize patient reach across
1 Guide the implementation of the to learn from and share our experience. income levels by focusing on affordability
Novartis Access Principles in the In 2019, we introduced new manage- strategies and social business models
areas of research and development ment targets covering environmental,
(R&D), affordability and pricing, and social and governance (ESG) topics
health system strengthening such as the environment, access to HEALTH SYSTEM
medicines, global health, human rights STRENGTHENING
2 Drive end-to-end strategies for the
and third-party risk. AND INNOVATION
elimination or control of four
diseases where there has been serves as a center of excellence for
Identifying our key issues
market failure and little investment in capacity-building, partnerships, digital
R&D: malaria, leprosy, sickle cell solutions and innovation in global health
As a global innovator, we strive to
disease and Chagas disease
expand our focus beyond financial
3 Implement a new strategy for results to create long-term value along
our entire value chain. One way we CORPORATE
sub-Saharan Africa focused on RESPONSIBILITY
reaching more patients and approach this is through our corporate
INITIATIVES
expanding the availability of our responsibility materiality assessment to
full portfolio of medicines understand what matters to our stake- encompass employee engagement and
holders and how they perceive our volunteering, as well as measurement and
4 Deepen our company’s role as a impact. It allows us to capture non- evaluation efforts, including impact valuation
responsible citizen with a greater financial issues, such as social and envi-
focus on social impact valuation, ronmental impacts, and prioritize issues
CR materiality assessment, to focus on. We conducted our third
corporate volunteering and global materiality assessment in 2017.
environmental stewardship The results identified four material CR
issue clusters: access to healthcare,
5 Expand our engagement with key innovation, patient health and safety,
stakeholders, with robust reporting and ethical business practices. Within
to support transparency and these clusters, priority topics were
accountability identified. These topics are at the core
of the four GH&CR focus areas outlined
As we strive to build a leading, focused above, and are covered in the following
medicines company powered by ad sections of this report.
vanced therapy platforms and data
10 | Novartis in Society
Streamlining our governance NGOs, government agencies, private Novartis makes financial contributions
sector firms, patient organizations, the to support political dialogue on issues of
In March, Novartis established an inter- media and health technology compa- relevance to the company or to certain
nal Trust & Reputation Committee as a nies to discuss strategies to achieve government projects (e.g., for capacity
sub-committee of the Executive Commit- universal health coverage in Africa. building). Such contributions need to be
tee of Novartis. Chaired by our CEO, it fully compliant with applicable reg
oversees progress and aims to accel- In May, our CEO addressed the annual ulations, and we only make political
erate decision-making in key GH&CR Shared Value Leadership Summit in contributions in countries where such
areas. This was followed in May by the Boston, Massachusetts, in the US. He contributions by corporations are both
launch of our new GH&CR organization, presented the company’s approach to legal and generally considered appro
which is now responsible for end-to- embracing shared value as a driver of priate. We publish the amounts of these
end execution of the company’s global both business strategy and cultural contributions on our website and, for the
health priorities, from discovery through transformation. US and Switzerland, in the Novartis in
development to implementation. The Society US and Novartis in Society Swit-
new setup will help achieve a stronger In September, we held our sixth ESG zerland reports, respectively.
focus on the areas where Novartis can investor event, including a physical
have the greatest impact. event for the first time, in addition to a Measuring and valuing our total
webcast. The event was hosted by our impact
Novartis Social Business and the CEO and included our Chief Ethics,
Novartis Foundation were integrated Risk & Compliance Officer, as well as We work with partners to establish
into the GH&CR organization, and a new the Group Head of Global Health & methodologies to measure the total
team was created to focus on health Corporate Responsibility and the Chief impact of our business activities. For
system strengthening and innovation. Operating Officer for Global Health. example, we are currently working on
Most recently, we announced a new Senior management attendance high- valuing the social return on investments
unit in sub-Saharan Africa, bringing lighted our company’s commitment to at the intersection of community health
together the expertise and portfolio trust and reputation priorities. and the local environment. We are also
across d ivisions and business units. exploring ways to better assess social
Also in September, Novartis and the risks in our supply chain beyond those
The Governance, Nomination and Cor- Novartis Foundation were headline associated with living wages.
porate Responsibilities Committee sponsors of Intelligent Health’s AI in
(GNCRC) of the Board of Directors con- Medicine Summit in Basel, Switzerland, In February, Boston University (BU)
tinues to oversee the company’s strat- which was attended by 2 000 clinicians, published the midline measurement
egy and governance on GH&CR topics. technologists, business executives and and evaluation results on Novartis
Our approach to patient access in sub- entrepreneurs. Delegates discussed the Access, our program that offers a port-
Saharan Africa and ESG targets were future of artificial intelligence (AI) and its folio of medicines for noncommunica-
among the topics discussed by the potential to revolutionize healthcare. ble diseases at the price of USD 1 per
GNCRC in 2019 (see page 180 of the treatment, per month, in low- and mid-
Annual Report 2019). In addition, we conducted three mate- dle-income countries. BU evaluated the
riality assessment webinars on evaluat- program in Kenya, the first country to
The Group Head of Global Health & ing social materiality by measuring out- receive the program. More details on
Corporate Responsibility continues to comes, capturing intangible risks of the results and how we are adjusting
report to the CEO of Novartis. The global trends, and focusing on the our business model based on the learn-
GH&CR leadership team includes rep- United Nations (UN) Sustainable Devel- ings can be found on page 25.
resentatives from the business divi- opment Goals. Approximately 60 par-
sions and relevant functions. ticipants, including representatives We are a founding member of the Value
from industry, NGOs, and access- Balancing Alliance, an association devel-
Engaging with stakeholders related and sustainability groups, as oping a standard model for measuring
well as investors, dialed into each webi- and disclosing the environmental, human,
Novartis continues to engage with a nar, which featured both internal and social and financial value companies pro-
wide range of stakeholders, including external speakers. vide to society. We are also a member of
patients and caregivers, associates, the Impact Valuation Roundtable, an
healthcare providers, governmental Novartis also engages in dialogue with informal group of more than a dozen
organizations, nongovernmental organ- policymakers and other external stake- international companies that wish to
izations (NGOs), shareholders and holders. Providing policymakers with develop and operationalize the emerging
other financial market participants, data and insights enables informed field of impact valuation. In December,
local communities, and partners from decision-making conducive to improv- we hosted an event on co-creating social
the pharmaceutical and other industries. ing patient outcomes. We also work impact, held on the Novartis campus in
closely with trade associations and par- Basel. It featured Robert Eccles, from
In March, Novartis Social Business con- ticipate in industry initiatives, which cre- Saïd Business School at the University
vened its first pan-African stakeholder ate opportunities to raise industry of Oxford, and was moderated by John
dialogue in Kampala, Uganda. The standards and exchange best prac- Elkington, from Volans, who chairs our
event brought together more than 160 tices. A list of our memberships can be Impact Valuation Advisory Council.
attendees from 12 African countries found in the appendix on page 63.
spanning faith-based organizations,Global Health & Corporate Responsibility at Novartis Novartis in Society | 11
Novartis financial, environmental and social impact 2018
Indicator Results 1 Remarks
Financial
GDP contribution USD 102 bn Own operations USD 58 bn, indirect impacts USD 20 bn, induced impacts USD 24 bn
Employment 2 1.3 m Own operations 125 000, indirect 360 000, induced 940 000
Economic inefficiencies Not valued in 2018 – no methodology available
Total taxes Not valued globally in 2018
Environmental
Climate, energy and air pollution (USD 4.4 bn) Own operations USD 210 m, indirect USD 1.5 bn, induced USD 2.7 bn
Water and waste (USD 1.0 bn) Own operations USD 32 m, indirect USD 282 m, induced USD 530 m, downstream USD 150 m
Other environmental impacts Land use, biodiversity not valued in 2018
Social
Living wages USD 4.5 bn Own operations USD 600 m, indirect USD 3.9 bn
Employee development USD 375 m Own operations
Occupational safety (USD 3.7 m) Own operations, including third-party personnel
Other human capital impacts Employee well-being, voluntary turnover, human rights beyond living wages not valued in 2018
Products USD 67 bn Large part of the Innovative Medicines portfolio in 117 countries
1
Data represent continuing and discontinued operations.
2
Total excludes own operations.
In parallel, we further developed the Indirect impacts in Switzerland mate action). We harness the power of
Novartis financial, environmental and In Switzerland (Basel), where we are partnerships (goal 17) to discover and
social (FES) impact valuation approach. headquartered, Novartis offers jobs not develop breakthrough treatments and
We now have FES impact data available only directly but also indirectly as a buyer deliver them to as many p eople as pos-
for all countries where Novartis oper- of goods and services from suppliers, sible. In 2019, we made further progress
ates. In addition to gaining insights on including many small- and medium-sized to help increase our contributions to
the impact they create, several coun- enterprises. In 2019, the company goal 5 (gender equality), and our ambi-
tries are using impact valuation to placed orders worth about CHF 2.7 bil- tious environmental sustainability strat-
engage with stakeholders and commu- lion with companies in the 26 Swiss can- egy and targets align with goal 6 (clean
nicate results through different chan- tons. Major areas of procurement water and sanitation), goal 7 (affordable
nels, including brochures, fact sheets include laboratory equipment, informa- and clean energy), and goal 12 (respon-
and stakeholder events. tion technology products and services, sible consumption).
raw materials, building costs, fixtures
In 2018, this approach showed that our and fittings, and chemical products. As an original signatory of the UN Global
activities contributed USD 102 billion to More information on our impacts is avail- Compact (UNGC), we are committed to
the global gross domestic product able in the Novartis in Society Switzer- sharing our progress in implementing
(GDP), as well as an estimated 1.3 mil- land report to be published in February the 10 principles of the compact. This
lion jobs beyond those held by our own 2020. report serves as our UNGC Communi-
employees. In addition, our human cap- cation on Progress. We published a
ital impact – including employee devel- Contributing to the UN goals Communication on Progress in the first
opment, occupational safety and living quarter of 2019, and will do so again in
wages – was valued at USD 4.8 billion, We have a long-term commitment to 2020.
with USD 4.5 billion coming from the support the UN in achieving its devel-
social impact of living wages in our own opment goals, starting with the Millen- A mapping of our activities against the
operations and the entire supply chain, nium Development Goals and, since SDGs and the UNGC principles can be
and USD 0.3 billion coming from their adoption in 2015, the Sustainable found in the GRI Content Index on page
employee development and occupa- Development Goals (SDGs). As a lead- 55 of this report.
tional safety. At the same time, we are ing healthcare company, ensuring good
taking steps to minimize our negative health and well-being (goal 3) is at the
environmental impact, as measured by core of our business and is aligned with
the carbon, other air emissions, water our purpose of reimagining medicine to
and waste impacts of our own opera- improve and extend people’s lives.
tions and supply chain, which were val- Through our business operations and
ued at USD 5.3 billion. We also calcu- ongoing activities, we make essential
lated the social impact of a large part contributions to goal 8 (decent work
of our Innovative Medicines portfolio in and economic growth), goal 9 (innova-
117 countries, amounting to USD 67 bil- tion and infrastructure), and goal 13 (cli-
lion in 2018.12 | Novartis in Society
Expanding access to as many people as possible
Patrice Matchaba, M.D., heads Global Health & Corporate
Responsibility (GH&CR) at Novartis. He is driving the imple
mentation of the new GH&CR strategy, including embedding
the Novartis Access Principles in the way we operate.
Why did Novartis transform its What is Novartis doing to bring Social inequalities are growing
GH&CR organization? innovative drugs faster to patients around the world. How is Novartis
in the developing world? helping to close equality gaps?
The new GH&CR organization is now
responsible for end-to-end execution We are working hard to ensure that Simply put, healthier lives offer more
of our global health priorities, from the drugs we launch in Europe and equal opportunity. Social inequalities
discovery through development to the US reach developing markets and health inequalities go hand in
implementation. I believe the new faster. In the past, on average, it hand. Every child who is relieved of
setup will help achieve a stronger took around 10 years before a drug the burden of leprosy, malaria or
focus on the areas where Novartis approved in these regions reached sickle cell disease has the chance to
can have the greatest impact. the developing world. We are aiming go to school and get an education.
to bring this down to 12 months or Every successfully treated child
less. In some instances, we have relieves families and communities
Why did Novartis launch a sub- even been able to reduce this time- from the burden that disproportion-
Saharan Africa unit in 2019? frame to five months. We clearly ately hits underprivileged populations.
Traditionally, the pharmaceutical need to include the developing world
industry has targeted patients and in the innovation cycle.
How does impact valuation
healthcare systems that could incur contribute to value creation?
the costs associated with innovation. How can Novartis expand access to
Donations took care of the poorest. In The central question we need to ask
healthcare in areas of market
the past two years, through Novartis ourselves is which metrics can best
failures?
Social Business, we tested a new valuate what matters to all stakehold-
business approach in certain African One important part of our access ers beyond shareholders – from
countries to reach patients across the strategy is to focus on so-called areas customers to vendors through to
full income pyramid in a way that was of market failure, when economic and employees and society. The scope
financially sustainable for our com- social framework conditions are too for impact valuation is broad, so we
pany. We have seen this approach weak for companies to set up sustain- need a standardized approach that
works and have decided to scale it able business strategies. Two fields in will enable us to compare results.
up massively through a dedicated which Novartis has been working for With this in mind, Novartis became
sub-Saharan Africa unit that will help years are malaria and leprosy. In the a founding member of the Value
broaden patient reach and availability case of malaria, we are not only Balancing Alliance in 2019. For any
of our entire portfolio of medicines in providing access to our therapies, but company that cares about long-term
the region. Importantly, moving we are also actively discovering and value creation, it is meaningful to be
forward, we will prioritize driving developing new treatments to support part of this journey.
access to medicines, in addition to the global effort to eliminate malaria.
pure financial metrics. Likewise, in leprosy, we are working to
eliminate this disease together with
our partners, including Microsoft,
which will support us with best-in-
class digital technologies. In addition,
we launched two new projects to
tackle sickle cell disease and Chagas
disease, where there has been little
innovation for the past 100 years.13
Photo Matteo Almeida, 4,
with his mother, Nicole. Matteo
was born with spinal muscular
atrophy, a rare genetic disease
that leads to progressive
muscle weakness.
STRATEGIC AREAS
Holding ourselves to the
highest ethical standards
Why is it important?
Research consistently shows that public trust in the pharmaceutical industry remains
low. As society’s expectations continue to grow, building trust with patients, physicians
and other stakeholders is critical to delivering on our purpose, as well as long-term
financial performance. Addressing allegations with respect to legacy conduct related
to business practices and relationships to healthcare professionals is an important part
of this journey. At the same time, Novartis engages with an extensive network of
suppliers worldwide. It is of paramount importance that our goods and services are
ethically sourced, and that we help ensure that companies we do business with also
meet the standards for ethics and business integrity that are expected.
In this section
Read about our journey to strengthen ethics, risk, compliance and assurance at Novartis:
Risk management Human rights SpeakUp Code of Ethics
Completed the global rollout of Introduced a five-year human Transformed our SpeakUp Office Announced the co-creation by
the Third-Party Risk Management rights strategy while integrating the to decentralize the way we associates of a Code of Ethics
program and introduced the function with Third-Party Risk manage whistleblowing and to be launched in 2020
Novartis Risk Compass, providing Management enable further focus on higher-
p. 18
a holistic view of risk across the risk cases
p. 16
company
p. 17
p. 1514 | Novartis in Society
Klaus Moosmayer Chief Ethics, Risk & Compliance Officer
When it comes to ethics in society, we win together or we lose together. Whether
we are a private company, the public sector or an NGO, we all are society and have
to overcome silo thinking and work together for the same goals. If we talk and listen
to each other, understand and respect each other`s perspective, and form integrity
alliances, we can make a difference in the fight against unethical behavior – for the
benefit of all of us and especially the ones who need it most, our patients.
Our approach and performance action if they are substantiated, and be
transparent in our disclosures.
P3 PRINCIPLES We aspire to be a trusted leader in
Novartis has adopted a single set of ethical changing the practice of medicine. We Our efforts are also recognized exter-
principles that should be applied in daily are committed to meeting the highest nally. Our Chief Ethics, Risk & Compli-
decision-making by all Novartis associates ethical standards in what we do, and we ance Officer continues to chair the Anti-
are taking steps to earn and maintain Corruption Committee of the Business
the trust of patients, associates, part- and Industry Advisory Committee to the
ners, shareholders and society. As part Organization for Economic Co-opera-
of the company’s cultural transforma- tion and Development (OECD), and was
Put patients
first tion, we continue to strengthen the tone nominated in 2019 as co-chair of the B20
from leaders, support constructive prin- Integrity & Compliance Task Force.
Research ciples-based discussions, and guide the
for the right Fund decision-making of our associates. Our Strengthening our governance
reason responsibly
aim is to prevent issues from occurring, In 2018, we combined our risk manage-
drive personal accountability for behav- ment and compliance functions into a
iors, and generate learnings that can be single organization called Ethics, Risk &
applied across the organization. In addi- Compliance (ERC) to help enable more
Engage Act with tion, we maintain a strong commitment effective risk management and mitiga-
appropriately clear intent to upholding human rights and manag- tion efforts. We continue to increase the
ing risk in our supply chain. We began number of country and monitoring visits
this journey some years ago, and we as part of our risk and compliance man-
continue to make progress. agement efforts, reaching about 250 in
2019 compared to 220 in 2018.
We believe that our efforts, detailed in
the following section of this report, con- In addition, we continued strengthening
tinue to show positive results. In 2016, the function by integrating human rights
we adjusted the ratio of fixed to varia- and Third-Party Risk Management
ble total compensation for our sales (TPRM). With this move, the collabora-
force to help ensure that the target var- tion between the TPRM team and the
iable component is a maximum of 35% ERC function helps provide greater
of total compensation, on average transparency around one of our key
across all countries. In addition, 20% of risks: third parties. The ERC function is
target variable pay for the sales force responsible for the governance of the
is based on demonstration of our Val- TPRM program, while Novartis Busi-
ues and Behaviors. These standards ness Services has operational respon-
have now been implemented across sibility. Because of the elevated human
countries and divisions. rights risks when dealing with third par-
ties, we merged our human rights and
Although even the best system may not TPRM program into one function named
be able to entirely prevent individual Human Rights & Third-Party Risk Man-
misconduct, we have seen an 11% agement. This will help ensure more
reduction, across divisions, in the num- effective human rights due diligence in
ber of reported complaints of fraud our supply chain and ingrain human
(fraud/asset misappropriation; expense rights further into our core business
fraud; books and records, accounting practices and strategies across our
irregularities) and improper profes- markets. Our human rights manage-
sional practices in the sales force in ment team now includes a Head of
2019 compared to 2018. We will con- Human Rights and a Manager of Exter-
tinue to rigorously investigate all plau- nal Assessments and Engagement.
sible complaints, take appropriateHolding ourselves to the highest ethical standards Novartis in Society | 15
We also created a new function for risk Improving risk management Managing risk in our supply chain
and resilience that brings together the The Risk & Resilience team introduced One of our key risk areas is within our
former Risk Office, Risk Assessment an innovative, integrated enterprise risk supply chain and our interactions with
and Monitoring, Business Continuity management (ERM) approach. The pro- third parties. Our approach has evolved
Management and Novartis Emergency cess is a series of coordinated activities over time, and a few years ago, we iden-
Management, in order to establish a designed to detect and control risks. It tified the need for an integrated model,
comprehensive and integrated risk is based on risk discussions conducted applicable across Novartis divisions
management framework that is coordi- by the leadership teams of business and geographies. This realization led to
nated among risk functions and busi- units at the global level in alignment with the launch of the TPRM program in 2016.
ness units. The Risk Committee of the their own strategic planning processes,
Board of Directors is responsible for and in close collaboration with all risk TPRM assesses whether companies
overseeing the risk management sys- functions within units and countries. we do business with meet the stand-
tem and processes (see page 182 of the ards for ethics, business integrity and
Annual Report 2019). In 2019, we held a focused cross-divi- environmental sustainability that we
sional risk workshop linked to the stra- expect. It uses one end-to-end assess-
In January 2019, we created Novartis tegic planning process. We also launched ment process, one technology solution
Business Assurance & Advisory (NBAA). risk workshop pilots with our local busi- and a centralized operating model to
This independent corporate function nesses and the relevant risk functions in deliver consistency and rigor, embed
brings together Global Security, the 10 countries across Africa, Asia, Europe compliance and increase transparency.
SpeakUp Office and Internal Audit, ena- and the Americas. Ultimately, business It covers seven risk areas: anti-bribery;
bling us to leverage our resources and leaders and function representatives animal welfare; health, safety and envi-
data, providing insights and protection, came together to discuss and consoli- ronment (HSE); labor rights; information
and acting as cultural change agents. date the Novartis business risk portfo- security; data privacy; and quality for
NBAA offers insight, assurance and lios; insights and advice from NBAA, good manufacturing practices.
advice to the business, senior manage- including Internal Audit; and insights
ment and the Board of Directors. from the external business environment. TPRM was introduced in the first coun-
try, Mexico, in late 2018. A key learning
By sharing insights from speak-up This process resulted in a single holistic for the subsequent global rollout was
cases, audits and advisory engage- view of risks across the company, known the importance of local language mate-
ments more broadly across the com- as the Novartis Risk Compass, which rials and support. Since launch, we have
pany, NBAA plays a key role in helping summarizes the key risks across four conducted more than 100 training ses-
Novartis identify both best practices important dimensions: strategic, opera- sions for our people in the US, Latin
and important lessons learned that can tional, emerging and awareness risks. America and Canada. In April 2019, the
be applied to every market in which we The compass will help enable senior program went live in those regions, fol-
operate. Additionally, with continued management and the Novartis Board of lowed by 32 countries in Asia-Pacific,
learning and certification activities, we Directors to focus discussions on key the Middle East and Africa. In July, we
are further developing the professional strategic risks and more closely align the implemented the final wave in Europe,
standards of our teams. We plan to company strategy, our risk exposure and including Turkey and Russia. The com-
expand these efforts in 2020. our ways of working. pletion of the global program rollout
The Novartis Risk Compass
STRATEGIC RISKS EMERGING RISKS
Risks that are most consequential to the Identified risks with the potential to
company’s ability to execute its strategy or become operational or strategic risks.
achieve its business objectives Require close monitoring
OPERATIONAL RISKS AWARENESS TOPICS
Risks resulting from inadequate or failed Trending topics that are not yet accounted for
internal processes and/or systems, employee by Novartis risk management but that have
errors or external events the potential to become new risks16 | Novartis in Society
Supply chain performance indicators 1, 2
2019 2018 2017
Suppliers posing an elevated risk under responsible procurement (RP)/Third-Party Risk Management (TPRM) 3 734 347 436
Suppliers with active follow-up 3, 4 122 89 265
Suppliers audited 3, 5 135 48 49
1
Data represent continuing operations. 3
Includes new suppliers and new products, services or sites from existing suppliers. Figures
2
Data reflect responsible procurement (RP) and Third-Party Risk Management (TPRM) include data on labor rights; health, safety and environment; and animal welfare.
programs from January to July 2019, and the TPRM program only from August to December 4
Follow-up includes more information requested, audits or on-site assessments.
2019. As of August 2019, after completion of the global TPRM program rollout, the RP 5
High-level audits
program was officially retired.
marked the official retirement of our for- ers were conducted in 2019; these rep- • Development of business and
mer responsible procurement (RP) pro- resented 100% of those identified as human rights training at Group-wide
gram, as of August 2019. requiring follow-up actions, as well as and function-specific levels
some additional audits related to animal
Under this new operating model, we welfare. These data reflect both the RP • Ongoing stakeholder engagement
believe we will be able to continuously and TPRM programs from January to for the continuous improvement of
scan for new risks, proactively take cor- July 2019, and the TPRM program only human rights strategy development
rective measures where needed, and from August to December 2019. and implementation
deliver continuous improvement in our
supply chain. We expect to incorporate The Novartis Third-Party Code (for- We have already taken concrete steps
our entire supplier base into the program merly the Supplier Code) sets out our to address the risk areas identified in
in the next three years. In addition, by expectations for our third parties. It is our 2017 and 2018 human rights assess-
integrating human rights into our daily aligned with the Novartis Code of ments. Overall, we have expanded our
procurement activities, we will be in a Conduct and is based on the UN Global focus on human rights risks and impacts
better position to assess human rights Compact, the UN Guiding Principles in our supply chain and in the commu-
risks and the impact of breaches where on Business and Human Rights, and nities where we work. In some of the
third parties operate. We believe this will other international standards and markets piloted in 2017 and 2018, we
enable us to improve human rights man- accepted good practices, such as found a need to address risks associ-
agement in the supply chain overall. those of the International Labor Organ- ated with our outsourced workforce,
ization. Novartis is also a member of the which again demonstrates the impor-
In parallel, we already kicked off the next Pharmaceutical Supply Chain Initiative tance of combining our human rights
level of improvement for TPRM. We are (PSCI) and supports its principles for efforts with Third-Party Risk Manage-
working to further strengthen compli- responsible supply chain management ment.
ance and facilitate integration with busi- for ethics, labor, health and safety, envi-
ness operations. In particular, we held ronment and related management sys- Similarly, we found in our 2018 human
workshops to analyze the new system tems. Since 2018, we have played a rights assessment that more regular
and identify opportunities to shorten leading role on the board, and we and broader consultation with external
turnaround time, and improve risk tar- chaired the PSCI in 2019. stakeholders was needed at the local
geting and risk triggering to further opti- level (from patient groups, local com-
mize supplier prioritization. Based on Further integrating human rights munities and health authorities to
these recommendations, we aim to into our business supply chain partners). Therefore, in
expand the program’s scope in 2020 to We are implementing a five-year human 2019, we redesigned our human rights
include distributors and wholesalers, as rights strategy, which is based on the assessment program to include direct
well as additional new risk areas cover- following elements: engagement with suppliers, communi-
ing third-party business continuity man- ties and civil society actors. For instance,
agement and financial risk. • Ongoing due diligence by our assessments in India, Singapore,
integrating human rights into Brazil and China included supplier site
In 2019, through the TPRM rollout, we existing processes, or creating visits as well as interviews with commu-
expanded the scope and enhanced the customized risk and impact nities surrounding our or our suppliers’
assessment of certain risk areas, such management processes operations, and relevant nongovernmen-
as labor rights and environment. As a tal organizations.
• Site-level impact assessments in
result, we were better able to identify
high-risk markets
risk in our supply chain: 734 suppliers Our 2018 assessment also revealed
were identified as posing an elevated • Promotion of rights relevant to the need to help put formal grievance
risk, compared to 347 in 2018. Of these, Novartis business objectives and mechanisms and processes in place for
122 have active follow-up actions, leadership ambitions (aligned with communities living close to our manu-
including more information requested, our corporate responsibility facturing operations. With this in mind,
audits or on-site assessments. Addi- materiality priorities) we started a gap analysis of our Group-
tionally, 135 high-level audits of suppli- wide grievance system against the
effectiveness criteria of the UN GuidingHolding ourselves to the highest ethical standards Novartis in Society | 17
Principles on Business and Human management, and the Audit and Com- cines Division on the implementation of
Rights. In particular, we are working pliance Committee of the Novartis the Novartis Access Principles (see
with our SpeakUp Office to develop a Board of Directors on risks and oppor- page 21 of this report).
mechanism for communities surround- tunities related to key initiatives and
ing our operations and those of our sup- activities. The team helps Novartis Encouraging a speak-up culture
pliers to raise concerns about risks or reach its objectives through audits and Our SpeakUp Office (formerly the
impacts linked to our or our suppliers’ advisory engagements that focus on Business Practices Office) underwent
operations. strengthening governance, risk man- a transformation in 2019. The new name
agement, processes and our culture. was chosen to better reflect the pur-
To demonstrate our commitment to pose of the program and the culture
addressing broader issues that affect In 2019, audit scopes were broadened change at Novartis. It provides a safe
people’s rights and livelihoods, we con- to look at processes and activities from place for everyone to raise concerns
tinue to take steps to prevent modern an end-to-end perspective rather than about potential misconduct. Com-
slavery – as defined in the UK and Aus- to focus on individual themes, espe- plaints can be made directly to the
tralia modern slavery acts – in our oper- cially in audits of commercial units but SpeakUp Office through an externally
ations and supply chains. We publish a also across research and development hosted web-based platform, which
statement explaining how we address (R&D) and other functions. All engage- offers the possibility to report anony-
modern slavery risks or impacts each ments were linked to the strategic mously. Complaints can also be raised
year on our website, and have devel- objectives of the respective units to through local channels, such as the
oped an e-learning module on modern focus on what matters and support the ERC, People & Organization (P&O), and
slavery that will be released globally in organization in achieving its objectives. legal functions or senior management.
2020.
In 2019, the Internal Audit team com- A revised process decentralizes the
As we expand our resources and pleted 44 audits, 20 advisory engage- way we manage whistleblowing, ena-
strengthen our efforts to protect human ments and 14 site visits. Complement- bling the SpeakUp Office to concen-
rights, we plan to conduct broader and ing our assurance provision with trate on central matters (higher-risk
more frequent consultations with advisory engagements enables us to cases), and empowering local organiza-
patient groups, local communities, bring our expertise around governance, tions to efficiently manage local matters
health authorities and supply chain risk management and processes to new (lower-risk cases). A central matter
partners throughout our operations. areas and help units increase their applies to a senior leader or manager,
This will help us benchmark our efforts, chances of success. While also provid- potentially disruptive reputational
measure our progress, and fulfill our ing assurance on the activities under impact, sexual harassment, discrimina-
ambition to become a leader in the review, advisories are used to support tion, retaliation and financial signifi-
healthcare sector for respecting and units developing new approaches or cance. The aim is to reduce bureaucracy
protecting the rights of people affected deal with known challenges by strength- in local investigations and resolution pro-
by our or our suppliers’ operations. ening their processes to manage poten- cesses, leading to faster handling of
tial risks. Advisories in 2019 included cases. A new web-based case manage-
Providing independent insights and reviews in the following areas: newly ment system was launched, giving more
advice on risks and opportunities acquired entities, Novartis Social Busi- than 600 associates from the ERC and
The Internal Audit team is an independ- ness, Group Patient Advocacy and P&O functions the ability to enter, man-
ent sounding board that provides assur- Launch Excellence. In addition, we con- age and track local speak-up cases on
ance and advice to the business, senior ducted an audit of the Innovative Medi- their own.
Our SpeakUp process
REPORT REVIEW INVESTIGATE DECISION UPDATE ACTION CLOSE
Report concern Concern Local or global Business Employee will If required, SpeakUp
using one of the reviewed to function decides on be updated actions case closed
SpeakUp decide investigates appropriate on the case will be put into
platforms* next steps action practice
* Externally hosted web-based platform (web form or hotline) or
via local channels, such as the ERC, People & Organization, and
legal functions or senior management18 | Novartis in Society
Ethical business practices performance indicators 1
2019 2018 2017
Novartis associates trained and certified on the Code of Conduct (%) 2 98 98 98
Misconduct cases (central matters) reported / allegations substantiated 3, 4 205 / 113 289 / 356 525 / 519
SpeakUp Office allegations per category (% of all central matters) 5
Fraud/asset misappropriation 12 57 32
Expense fraud 9 11 10
Books and records, accounting irregularities 2 1 2
Improper professional practices 29 58 42
Gifts, bribery, kickbacks 4 6 10
Discrimination and sexual harassment 16 11 11
Retaliation 13 6 4
Other employee relation issues 38 21 23
Conflict of interest 20 13 11
IT security breach 8 5 6
Quality assurance/data integrity 13 8 12
Data privacy 4 1 2
Antitrust, fair competition 0 1 0
Other 22 13 18
Dismissals and resignations related to misconduct (central matters) 3, 6 45 124 192
1
Data represent continuing operations. 5
One case can fall under several categories, so the total is greater than 100% and category
2
Active Novartis associates with email addresses, trained via e-learning or via One Deck for figures total more than the stated number of cases. Investigation reports are received on an
Novartis Technical Operations ongoing basis, which potentially leads to a reassessment of the allegation category and
3
Decrease in number of misconduct cases reported is due to change in methodology: As of related figures.
January 1, 2019, we only report on central matters (higher-risk cases). A central matter 6
The number of dismissals and resignations related to misconduct may change due to the
applies to a senior leader or manager, potentially disruptive reputational impact, sexual fact that investigation reports are received and then reviewed for remedial actions on an
harassment, discrimination, retaliation and financial significance. ongoing basis, which potentially leads to a difference in numbers at a later stage.
4
The number of misconduct cases reported may change as matters may be reassessed in
the course of the case lifecycle. The number of substantiated allegations may change due
to the fact that investigation reports with assessments are received on an ongoing basis,
which potentially leads to a difference in numbers at a later stage. A case can have more
than one allegation and therefore the number of allegations is higher than the actual number
of cases.
The revised process, which includes a • Retaliation in EthicsLive, a global engagement event
SpeakUp mobile app available to all • Other employee relations issue to encourage open conversations around
Novartis associates, will drive faster res- • Conflict of interest ethical dilemmas at Novartis. Most
olution by enabling leadership to respond • IT security breach recently, more than 500 associates vol-
to day-to-day concerns at the local level. • Quality assurance/data integrity unteered to be part of the Voice of the
Cases determined to be of higher risk are • Data privacy Associate network that will create the
referred to the SpeakUp Office for fur- • Antitrust, fair competition code.
ther investigation at Group level. These • Other
changes aim to continue to drive fair, Addressing the Zolgensma data
timely and thorough investigations of Overall, the investigated central matter integrity issue
both local and higher-risk cases to pro- allegations resulted in 45 dismissals Novartis recognizes society’s increas-
tect Novartis associates, patients, cus- (for serious matters) or resignations, ing expectations of our industry and our
tomers, assets, brands and r eputation. and in 51 written warnings. Other reme- company. We are constantly learning
dial actions such as training, coaching and remain committed to not only meet-
In 2019, 2 309 complaints of alleged and implementing new controls are also ing but exceeding these expectations
misconduct, with a total of 2 820 allega widely used when deemed appropriate. as we endeavor to increase our positive
tions, were made. 26% were self-identi- impact everywhere we work. It is with
fied (monitoring) and 74% came from Creating a Code of Ethics this mindset that we approached the
SpeakUp. These fall under 14 categories: To further reinforce principles-based situation when, in August, the US Food
thinking and ethical decision-making in and Drug Administration (FDA) released
• Fraud/asset misappropriation our organization and interactions with a statement addressing data integrity
• Expense fraud external stakeholders, we are develop- issues with the regulatory submission
• Books and records, accounting ing a Novartis Code of Ethics. It is being for Zolgensma, our gene therapy for spi-
irregularities co-created by Novartis associates and nal muscular atrophy. The statement fol-
• Improper professional practices is planned for launch in 2020. More lowed the voluntary disclosure by AveXis,
• Gifts, bribery, kickbacks than 2 500 associates shared ideas a Novartis company, to the FDA and to
• Discrimination and sexual and insights during early-stage crowd- other health authorities that some data
harassment sourcing. A further 1 500 participated previously submitted to the agency asYou can also read
