Baxter's Environment, Health and Safety (EHS) function pioneered its Environmental Financial Statement (EFS) in 1994 (covering 1993 data). The EFS demonstrates the value of the company’s proactive global environmental management program to EHS team members, senior leadership and other stakeholders. The company has typically demonstrated a return of approximately three dollars per year for every dollar invested in a proactive global environmental program/ initiatives.
For the first time since Baxter began producing the EFS, the company did not realize a net positive environmental income, savings and cost avoidance in 2011. Costs related to unexpected waste management activities were the main contributing factor for this situation. The EFS analysis helps Baxter determine where to focus additional resources for greatest impact, and in the past year, Baxter has increased its focus on waste generation and related performance. The company expects to benefit from those efforts in future years. Environmental income, savings and cost avoidance equaled a net loss of $3.3 million for initiatives completed in 2011. This amount decreased from a net gain of $11.8 million in 2010.
Factors that significantly influenced 2011 performance include the following:
Total estimated environmental income, savings and cost avoidance realized in 2011 from environmental initiatives implemented during the prior six years, including 2011, totaled $36.3 million.
When initiating the EFS, Baxter developed specific methodologies to estimate savings and cost avoidance. The company uses this approach consistently each year, to enhance the reliability and comparability of the results.
In compiling the EFS, Baxter uses the following terms and conventions:
Stated in U.S. dollars.
Money received in each of the reported years.
Reduction in actual costs between the report year and the prior year. An increase in actual costs equals negative savings.
Costs that the company would have incurred had the reduction activity not taken place. Conservation initiatives produce cost avoidance in the year commenced, and in future years in which the resource (such as energy, water or materials) remains eliminated from processes. To be conservative, Baxter stops accumulating cost avoidance from conservation activities after seven years (including the year implemented). This reflects the typical duration of many conservation projects, after which additional improvements or changes may be made.
In calculating savings and cost avoidance for resource reduction activities, Baxter assumes that production and distribution grow at the same rate as the company's cost of goods sold, and that resource use and waste generation increase at that same rate in the absence of reduction initiatives. Baxter determines this rate by calculating the average annual increase in the company's published cost of goods sold over the past six years. It then adjusts this number for new acquisitions and changes in inventory, and subtracts inflation, which is calculated as an average of three major, relevant U.S. producer-price indexes. The company then rounds the resulting growth rate down to the nearest whole number to conservatively report performance.
In calculations related to materials use, Baxter uses the current average cost of materials and the compounded growth in business activity.
The following undetermined costs are not included in the EFS:
Baxter's global environmental program also produces undetermined savings and other benefits that are not easily measured and are not included in the EFS. Examples include the following:
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