Sustainability Reporting: How Merck Does It

Elaine Cohen, Exclusive to the Sustainable Business Forum as part of the Reporting: How They Do It series

Merck is a global healthcare company that delivers innovative health solutions through its prescription medicines, vaccines, biologic therapies, animal health, and consumer care products, which it markets directly and through its joint ventures, Merck has a sales revenue of $45 billion, employing about 94,000 people.

Reporting Period: 2010 calendar year

Format:

• Online report
• CR Overview PDF (40 pages)

Framework: GRI A level , GRI checked; ATM Index; Global Compact ; UN MDG

Assurance: None

Material issues: The process for defining material issues is described but the issues themselves are not disclosed and there is no Materiality Matrix.

Special features: Access to Medicine Index

Interesting practices:

• Summary of stakeholder feedback on reporting scope and detail, with Merck responses.
• Disclosure of approach on regenerative medicine and genetic research
• Sponsorship of the Diversity Alliance for Science (DA4S)
• US Diversity report (for US employees only) 
• Good practices relating to employee wellness
• Good disclosure of employee engagement (51% of employees are "fully engaged" or "engaged")
• Road Safety is reported as Accidents Per Million Miles (APMM) (10.4 APMM plus two fatalities) – one of the few companies reporting on road safety

Merck has topped many prestigious rankings for sustainability and responsible practices over the years, so this report, coming after the company has undergone major restructuring following the $41 billion Schering Plough acquisition in late 2009, was of particular interest, especially following massive post-merger layoffs. Indeed, Merck claims to have completely revised their corporate responsibility strategy and now focuses on four strategic priorities:

• Access to Health
• Environmental Sustainability
• Employees
• Ethics and Transparency  

The report largely describes Merck's management approach in all of these areas with isolated examples of practice.  Access to Health covers a range of issues from R&D investment and nature of R&D activities, registration, manufacturing and commercialization/pricing of drugs, HIV/AIDS, vaccines and women's health. This is of course a very complex subject which is crucially important and as Merck points out, barriers to healthcare access are numerous and go beyond the capability of a single company to resolve, particularly in low-income countries. Merck does a good job in defining its overall policies in these areas but somehow, the actual impact of Merck's activities gets lost in multiple webpages. It is clear that Merck is making Access to Health a core corporate mission but specifically what Merck has achieved in this respect is hard to discover. There is a nice story about a positive step by Merck to lower the price of a contraceptive implant for millions of women in low-income countries, for example, but trying to get a true sense of how to assess Merck's most vital, focused contribution to improving Access to Health as part of Merck's core business, and not only in terms of Merck's extensive and impressive (philanthropic) Public Private Partnerships, is difficult.

In 2010, Merck completed most of its post-merger restructuring after shedding many jobs in recent years. The section on restructuring in the Merck report (which follows closely the company line in Merck's Form 10k submission) refers to a 17% overall downsizing. Merck's commitment is: "We will implement our restructuring plans with the utmost care and respect for the hard-working and talented employees of Merck. To assist those affected by the restructuring, eligible employees receive benefits and other services, including severance pay, continuance of health care benefits and outplacement services." However, I feel that Merck could have been much more open about the way employees were released, how employees were selected and which employee populations (and communities) were most affected and what practical support employees were given to find alternative employment or at least, maintain a decent standard of living. I believe Merck has missed a real opportunity in this corporate responsibility report to demonstrate how Merck has behaved responsibly in such a major reshaping of its organization.  

Diversity is a key priority for Merck and the company maintains an Office of Global Diversity and Inclusion and Merck annually sponsors the Chairman's Global One Merck Diversity and Inclusion Award in recognition of the outstanding commitment of employees to achieving diversity excellence. However, diversity data in Merck's report is recorded only for Merck's USA operations. While the numbers are positive (39% of women on the senior management team and 47% in management roles), this data represents about a third of Merck's total global workforce. It would be nice to see Merck reporting globally on these figures in future reports.

Merck's online report is a bit of a navigation nightmare, full of short pages with many links. The data is hidden away behind a multitude of policy declarations and in some cases, impossible to find. After clicking vigorously for quite some time, I was still not able to find a total number of Merck's employee headcount, of particular interest since the layoff issue.  Despite this report being GRI Checked at "A" level, requiring disclosure of total headcount against core Indicator LA1, I couldn’t find the number in the online report. Similarly, interested in how restructuring affected employee groups by age, gender and region (core indicator LA2) I could not find the data. Clicking on the Performance Data tab on the online report in many cases brings you to more pages of narrative. I found this quite frustrating.

Merck's 40 page Corporate Responsibility Overview, accompanying the online report, is a storybook, and not a summary of the online report. It's clearly targeted at the non-professional reader who may not want to delve into policies and technical references, and has absolutely never heard of the GRI. It is built around some overly copywritten personal stories from employees – such as Monica Chaudhari , the daughter of physicians, who faints at the sight of blood, who has developed a marketing career at Merck, proving, apparently,  that diversity works. Or Mike Tune, a global group packaging leader at Merck Consumer Care, who "sounds like a guy with a calling, who’s in the right place at the right time." For the uninitiated, the Overview does a good job getting the four-pronged Merck message across. For the professional reader, however, the Overview is largely irrelevant. It contains no data except for four good news numbers – total turnover, 277 million gallons of water recycled, 22% reduction in lost-tome injuries and $1.2 billion total giving – none of which are pivotal in Merck's overall corporate responsibility strategy.  
 
Merck is planning to report again in two years' time, in 2012. Perhaps we can expect that the coming two years will more stable for the Merck global organization and that this will be reflected in the next report with more comprehensive disclosures and greater clarity.