2006 Environmental Financial Statement
Baxter's Environment, Health and Safety (EHS) function pioneered its Environmental Financial Statement (EFS) in 1993 to demonstrate the value of proactive environmental management to senior leadership and external stakeholders.
Results from 2006 demonstrate continued value of Baxter's program with savings and cost avoidance totaling $14.1 million, or 95 percent of the total cost of Baxter's basic environmental program, for initiatives completed in 2006. This amount decreased from $24.7 million in 2005 due to the following factors:
- Energy costs stabilized in 2006, which resulted in reduced cost-avoidance; and
- In 2006, Baxter EHS discontinued tracking packaging-reduction savings at the corporate level. The company's 2010 EHS goals do not cover packaging reduction.
BAXTER 2006 ENVIRONMENTAL FINANCIAL STATEMENT
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In compiling the EFS, Baxter uses the following terms and conventions:
Monetary Amounts
Stated in U.S. dollars.
Income
Money received in report year.
Savings
Reduction in actual costs between report year and prior year. An increase in actual cost is negative savings.
Packaging Cost Savings
Twelve-month cost savings resulting from packaging modifications made during the year. This is calculated by totaling the savings achieved from individual reduction projects completed in that year, assuming volumes at full production levels.
Cost Avoidance
Costs that would have been incurred had the reduction activity not taken place. Conservation initiatives produce cost avoidance in the year initiated, and in future years in which the material remains eliminated from processes.
Calculating Savings and Cost Avoidance
In calculating savings and cost avoidance for reduction activities, it is assumed that production and distribution grow at the same rate as Baxter's cost of goods sold, adjusted for inventory, inflation, and acquisitions and divestitures, and that waste/consumption quantities increase at that same rate in the absence of reduction initiatives. This percentage was determined by calculating the average annual increase in the company's published cost of goods sold over the past six years after adjusting for new acquisitions and changes in inventory, subtracting inflation, which is calculated as an average of three major, relevant U.S. producer-price indexes and rounding the resulting value down to the nearest whole number to conservatively report performance.
In calculations related to materials use, current average cost of materials and compounded growth in business activity are used.
Undetermined Costs and Savings
The following undetermined costs are not included in the EFS:
- Environmentally driven materials research and other research and development. These are typically offset by increased sales and other non-environmental benefits not reported in the EFS;
- Capital costs of modifying processes other than adding pollution controls. These are typically offset by increased production rates, efficiencies and other non-environmental benefits not reported in the EFS;
- Cost of substitutes for ozone-depleting substances and other hazardous materials. This cost is estimated to be relatively minor; and
- Time spent by non-environmental employees on environmental activities. Environmental training and responsibilities are part of every employee's job.
Baxter's proactive program produces savings and other benefits that are not easily measured. Examples include the following:
- Reduced liability exposure resulting from tank removals, waste site evaluations and other risk-management programs;
- Reduced recordkeeping and administrative costs;
- Avoided costs for environmental problems that did not occur due to Baxter's proactive efforts;
- Reduced work and increased employee efficiency due to the reduction of waste, spills and other environmental problems; and
- Increased good will and any increased sales, and improved employee morale.
