Baxter's Approach

How nations, companies and individuals respond to global sustainability challenges such as global climate change, scarcity of natural resources, corruption and unequal access to healthcare and educational opportunities will profoundly impact all life in the 21st century and beyond. Stakeholders will judge Baxter's performance increasingly by how the company contributes to addressing these global challenges, within its ability, in a responsible and timely manner. Baxter's actions demonstrate the company's leadership, values and commitment, and contribute to the company's legacy.

Baxter views sustainability as a long-term strategic approach to including social, economic and environmental considerations and opportunities to achieve both business objectives and contribute to a more sustainable world. Stakeholders expect such an approach and contribution from sustainability leaders. The company's sustainability programs and performance support Baxter's mission to apply innovative science in the development of medical products and specialty therapies that save and sustain patients' lives.

Sustainability is inherently broad. Baxter's efforts cover a wide range of areas, as reflected by the company's sustainability priorities and the structure and contents of this report:

• Sustainability at Baxter - Using financial resources wisely to benefit company stakeholders and address key sustainability issues;
• Governance, Ethics and Compliance - Operating in a sound and ethical manner and complying with the law wherever Baxter operates; promoting ethical sales and marketing practices globally;
• Employees - Providing a rewarding, diverse, and inclusive workplace for employees;
• Environment, Health and Safety - Continually improving the company's environmental performance, capitalizing on related financial benefits, and ensuring a safe and healthy workplace;
• Product Responsibility - Ensuring product quality and patient safety, and improving the sustainability performance of Baxter's products and packaging throughout the life cycle;
• Supply Chain - Working with suppliers to improve their social and environmental performance and working with vendors to reduce the environmental footprint of product delivery to Baxter customers;
• Community Support - Expanding access to healthcare, including for people at the "Base of the Pyramid"¹ and for those impacted by natural disasters; contributing to communities in need worldwide, with a focus on education and the environment; and supporting employee volunteerism and giving;
• Public Policy - Working with lawmakers, governments and policymakers worldwide to improve patient access to critical therapies and address other key issues.

Complementing these broad areas, Baxter also recognizes the importance of having clear priorities to focus its efforts and direct its initiatives. The company has nine sustainability priorities and corresponding goals for 2015, divided into three broad categories: Our People, Our Operations and Products, and Our World. See Baxter's Sustainability Priorities and Goals for detail.

Managing Sustainability

Baxter's executive-level Sustainability Steering Committee leads the company's efforts to accelerate and integrate sustainability into its current activities and long-term strategic planning process. The committee's role is to:

• Assess global challenges and opportunities associated with sustainability;
• Increase Baxter's knowledge of sustainability and benchmark other companies that demonstrate leadership and innovation in this area;
• Define, update and oversee Baxter's sustainability strategy;
• Track progress on the company’s sustainability priorities and specific goals, drive organizational accountability and recognize accomplishments;
• Establish performance objectives, evaluate and address resource needs and help implement sustainability initiatives;
• Engage with and provide sustainability progress updates to senior management;
• Identify and determine how to best address emerging issues;
• Guide and inform Baxter's sustainability reporting;
• Solicit stakeholder feedback and review stakeholder inquiries as appropriate; and
• Recommend actions to enhance Baxter's sustainability program.

The committee's executive sponsor is Baxter's vice president, Manufacturing. Baxter's vice president of Environment, Health, and Safety serves as committee chair. The committee includes senior representatives from the company's BioScience, Medical Products, Corporate Communications, Ethics and Compliance, Finance, Human Resources, Manufacturing, Research and Development, and Supply Chain organizations.

Members of the committee sponsor Baxter's sustainability priorities. Each sponsor is accountable for developing goals and achieving progress in their respective area, and leads a global and multi-functional team to implement related initiatives. The committee holds quarterly meetings to review progress against interim targets, and to discuss how to address performance gaps. These meetings often feature outside sustainability experts to contribute independent input and perspectives.

How Sustainability Strengthens Baxter's Business

In addition to demonstrating Baxter's values and commitment to corporate responsibility, the company's sustainability initiatives provide business value. This takes many forms, from attracting and retaining key talent, engaging employees, and reducing operating expense, to ensuring market access today and developing new markets, meeting stakeholder expectations, and enhancing Baxter's reputation.

In 2009, the company included a sustainability question on its employee engagement survey, and 78% of employees worldwide indicated that Baxter's sustainability programs were important to them. The Sustainability Steering Committee plans to use this data as a baseline to evaluate how sustainability engages employees and contributes to a satisfying work environment. Baxter is conducting its next employee engagement survey in 2011.

See more detail in Business Value.

History in Sustainability

Baxter’s commitment to corporate citizenship spans decades. The company established its first formal environmental program and policy in 1977. Since then, milestones have included:

• Establishing The Baxter International Foundation in 1986;
• Publishing the company’s first formal ethics manual in 1989;
• Introducing Baxter’s first work/life benefit program in 1991;
• Establishing the Corporate Responsibility Office to oversee the company’s ethics and compliance practices in 1993; and
• Taking steps to reduce use of packaging materials, decrease water consumption and waste generation, and conserve energy since 1988.

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The term "base of the pyramid" refers to the approximately 4 billion people who live on less than $1,500 annually and have limited access to the healthcare market. Companies developing and marketing products and services have typically overlooked this group, instead targeting people with more money to spend at the "top of the pyramid." In recent years, more companies have extended products to the "middle of the pyramid," often referred to as an "emerging economy" strategy.