Environmental, Social and Governance (ESG) Index

Product/service safety and quality policy, strategy and governance

Product/service safety and quality policy and program

Policy commitment to help ensure product/service safety & quality:

• Novartis quality commitment
• Code of Conduct
• Novartis in Society 2020

Details of managerial responsibility for product/service safety & quality:

• The Novartis Quality Manual describes the Novartis Quality Organization and Quality Management System including management responsibilities. Each Function/Local Quality Unit Head is responsible for ensuring compliance with the requirements listed in the Quality Manual. The Novartis Quality Organization (led by the Head of Global Quality who reports functionally to the CEO and operationally to the Global Head of Novartis Technical Operations, a member of the Novartis Executive Committee of Novartis) is an independent function that is responsible for the development, implementation and maintenance of the Novartis Quality Management System. It consists of a formal organization, as well as advisory and decision-making bodies and is responsible for both Quality Assurance and Quality Control throughout Novartis.

Product/service safety risk management procedures:

• Risk management
• Responsible Supply Chain Management
• Throughout the lifecycle of our medicines, we work to help ensure the best balance of benefit and risk by having a variety of systems and processes in place for a continuous and systematic review of the data collected for all products in our portfolio, including those on the market and those that are still in development. The Novartis safety risk management process begins early in the development of new products. Safety management teams develop safety monitoring and risk management plans for each product when it enters development. These plans are regularly updated as new safety information for a product becomes available. High-impact safety- and product-related risks are addressed for recommendation and advice to the Portfolio Stewardship Board (PSB). The PSB is a standing, cross-functional senior executive board that is chaired by the Head Chief Medical Office and Patient Safety Organization supported by the Head Portfolio Stewardship. Its decisions and recommendations are made independently of any business/financial considerations, with the intent to put patient safety first.

Regularly tested emergency response procedures to help ensure product/service quality/safety: Business continuity

• Novartis operates in a highly regulated industry: Throughout the product lifecycle, all our operations require a cGxP certificate issued by the relevant health authorities, with a robust Quality Management System in place.
• Novartis Emergency Management (NEM) procedures are established to ensure a quick, safe and coordinated response to emergencies across the Novartis Group. This compulsory, uniform system sets internal reporting and decision-making structures and procedures.
• NEM is an integral element of Business Continuity Management (BCM). Trainings, including simulation trainings, are performed to develop and maintain emergency management skills, and an understanding of tools and processes.
• Performance on NEM and BCM is reported quarterly and trainings are performed on a regular basis.

Incident investigation and corrective action procedures:

• Responsible Supply Chain Management
• Reporting side effects
• Novartis in Society 2020

Monitoring of product/service safety performance:

• Code of Conduct
• Novartis in Society 2020

Product/service objectives or targets

• Each product is tested with approved and validated analytical testing procedures before being released on the market and has registered specification limits approved by health authorities.
• We have established the following indicators to measure our product quality and safety: Novartis in Society Report 2020
  • Number of ICSR (Individual Case Safety Report) reporting
  • Number of HA (Health Authority) inspections without critical findings
  • Audit performance
  • Number of initiated recalls
  • Number of regulatory warnings:
    • Warning letters
    • FDA inspections with Form 483

Regular external product/service safety audits (see below): Risk management

• We maintain a robust quality system with harmonized processes and procedures. These include providing integrated medical safety evaluations and benefit-risk assessments as well as monitoring the quality and safety of in-market and investigational products. This quality system is compliant with regulatory requirements and standards. Further, we are regularly subject to health authority inspections, which additionally ensure regulatory compliance and the highest product quality at our manufacturing sites.
• 126 inspections were completed in 2020, all but one was found acceptable (99.2%). The one inspection that may require further improvement was due to increased inspection focus on our clinical activities. The final classification of this inspection is still to be determined.
• Novartis also performs internal audits. The Novartis Quality Audit program normally conducts over 1 500 audits per year covering internal and external functions and sites. Travel restrictions due to the COVID-19 pandemic had an impact on our ability to complete all the audits in our 2020 quality audit program. Audit reports are reviewed and approved independently and distributed to the auditee (internal function, manufacturing site or external supplier) who is responsible for submitting a corrective and preventative action plan which, upon agreement, is implemented. The audit is closed when all actions in the plan have been completed.

Public reporting on product/service safety issues:

• Novartis in Society 2020

Safety and quality in manufacturing and handling

Extent and scope of product quality and safety testing and monitoring

Details on whether testing is done in-house (in-house is best practice):

• Global Drug Development
• Novartis Clinical Trials
• Investigator-Initiated Trials
• Animals & Research
• Novartis in Society Report 2020

Extent and scope of product quality and safety audits

Scope and frequency of audit program, and further details of internal and external audits

• To maintain compliance with our quality and safety standards and to support the continuous improvement of our QMS, Novartis has a robust and independent audit program that covers the product lifecycle.

• The audit program is governed by global procedures and covers Novartis internal sites and functions as well as suppliers. The scope of each audit depends on the type of operations conducted. The frequency of audits is based on activities performed and applicable risk assessments. The Novartis quality audit program normally conducts more than 1 500 audits per year covering internal functions, sites and external suppliers in areas including Good Manufacturing Practice (GMP), Good Clinical Practice (GCP), Good Laboratory Practice (GLP) and pharmacovigilance. Travel restrictions due to the COVID-19 pandemic had an impact on our ability to complete all the audits in our 2020 quality audit program.

• An annual audit plan is established to take into account audit frequency and assessed risks. Audits are performed by certified auditors. The subsequent audit report is reviewed and approved independently and distributed to the auditee (internal function, manufacturing site or external supplier) who is responsible for submitting a corrective and preventative action plan which, upon agreement, is implemented. The audit is closed when all actions in the plan have been completed.
   

Extent and scope of product quality and safety training for employees

Proportion of employees trained: Learning and development  

• All internal and third-party personnel are required to take mandatory Safety and Quality (cGxP) trainings before executing a GxP relevant task.
• Throughout the product lifecycle, all our operations require a cGxP certificate issued by the relevant health authorities, with a robust Quality Management System in place that incorporates all the relevant legal requirements and associated standards, including ISO. Against this background, regulators require we are able to prove that our employees are qualified, through education, training or experience, to perform any assigned task which has an impact on product quality or patient safety.
• We have a very robust quality and safety training process (initial and continuous training) for our associates and we are regularly audited on our training procedures. Examples of topics covered in initial training for all employees include: Product Quality Reporting (adverse events), Information Management and Responsible Record Keeping, Novartis Group Quality Management Escalation, GxP on-boarding and HSE.
• All associates in Novartis Technical Operations complete their initial role-specific training to ensure they can safely and compliantly perform their tasks, prior to performing them independently. All Novartis employees (includind contractors) in Manufacturing and Quality Assurance are continuously trained to maintain the skills and knowledge needed to manufacture medicine safely, compliantly and effectively. These trainings include: Aseptic Operator, Enhanced Third-party Oversight, Investigation Certification Program and Quality Management Systems.

Proportion of company facilities that have received external QMS or product safety/quality certification (e.g. ISO 9001, HACCP, or equivalent)

Proportion of own sites that are certified to relevant standard: Our commitment to quality

• For the manufacture of medical devices, we hold the relevant certifications from ISO and other notified bodies. For all manufacturing, supply and distribution of Novartis pharmaceutical products, we hold the relevant manufacturing licenses and GMP/GxP certificates issued by the appropriate health authorities (FDA, EMEA, WHO, SwissMedic), that confirm after inspection that our duties, including our quality management systems, comply with their regulatory requirements.

Responsible sales, promotion and marketing of products

Policy for responsible sales, promotion and marketing

Novartis Professional Practices Policy

Scope and depth of employee training on responsible marketing, promotion and interactions with healthcare professionals

Scope of training:

• Novartis trains all new employees and new contractors on relevant policy topics ensuring compliance with ethical standards. E-trainings target associates with an email address. All remaining associates are required to be trained face-to-face or through shared kiosks. The Professional Practices Policy (P3) global mandatory compliance e-training course was launched in 2018. The P3 training (held every two years) had a 2018 completion rate of 99% (target was 95%).
• In addition, in-depth training is available on a variety of topics related to responsible marketing, promotion and interactions with healthcare professionals, including promotional and non-promotional materials; events and professional meetings; external funding; engagement with healthcare professionals and healthcare organizations; interactions with patients and patient organizations; and market research.

Depth of training:

• In-depth interactive scenario-based e-trainings are assigned to associates involved in sales, promotion and marketing activities based on functional/local needs and requirements. These trainings are also available face-to-face in classroom settings.
• The objectives of the trainings are to:
  • Understand the purpose, content and specific global requirements of the P3 guidelines
  • Learn how to apply the underlying P3 principles for principles-based thinking
  • Overall duration: 1-2 hours

Audit and control procedures on responsible marketing

• Scope and depth of control procedures and frequency of audits: Novartis in Society 2020
• Novartis has established a comprehensive compliance framework (P3), which addresses promotional and non-promotional materials; events; professional meetings; medical utility and cultural acknowledgements; external funding; HCP and HCO engagements; interactions with patients and patient organizations; and market research.
• To ensure processes are implemented, Novartis has established a comprehensive monitoring and audit framework, which comprises three types of activities:
  • Local commercial country organizations make a compliance self-risk assessment vs. the established P3 compliance framework using the Risk Assessment & Monitoring tool, which highlights risk areas requiring further attention.
  • A central independent worldwide compliance monitoring team has been established in January 2020 and will conduct 70+ country monitoring reviews (Ethics, Risk & Compliance audits) in selected units in 2020. This team partners with local businesses to assess how effectively the Novartis compliance framework guides our associates. Each review is concluded with a report and agreed remediation actions. Remediation actions are defined to address identified gaps, and a dedicated Remediation Team has been established in February 2020 to strengthen follow-up.
  • Novartis has also established a comprehensive third-party risk management program, which among other risk areas, addresses anti-bribery risks. Once a third party is on-boarded, it can be subject to anti-bribery audits conducted by Novartis or an external audit company.
• Further, Internal Audit, which is part of the Novartis Business Advisory & Audit function, performs 70+ audits spread over 6 blocks per year, including in-market audits and functional audits. In 2020, out of the 70+ audits, Internal Audit will complete 30+ in-market audits specifically on Sales, Marketing and Distribution, including ethical marketing. In 2019, 24 in-market audits on Sales, Marketing and Distribution, including ethical marketing, were completed.
• Final audit reports are shared with members of the Executive Committee of Novartis (ECN) and other Novartis stakeholders. All high and medium observations from audits are reported, and they are rated based on their impact on the local, cross-divisional or group level.
• The Audit and Compliance Committee (ACC) from the Board of Directors receives a summary of these reports every quarter. “Needs Major Improvement” (i.e. serious breaches or major deviations from regulations or policies putting the organization at risk) and “Leading” (i.e. effective and efficient controls, showing a continuous improvement cycle) reports are submitted to the ECN and the ACC.

Alignment with external guidelines on responsible marketing

The Novartis P3 policy reflects several industry codes such as the Code of Practice of the International Federation of Pharmaceutical Manufacturers & Associations and the Ethical Criteria for Medicinal Drug Promotion established by the World Health Organization.

Supply chain and sourcing

Scope of supplier qualification and training

• In accordance with health authority requirements and expectations, all third parties with whom Novartis does business, and who provide goods or services that fall within scope of GxP, including Good Manufacturing Practice (GMP) or Good Distribution Practice (GDP), undergo a formal and rigorous assessment, qualification and monitoring process. This includes initial and periodic audits of facilities and quality management processes, with over 1 000 audits of GMP third parties, both direct and indirect, performed each year. The clear definitions, specific expectations, requirements, obligations and responsibilities are established through the Novartis Third Party Code and quality agreements specific to the type of product or service provided.
• All third parties providing materials or products manufactured to GMP are required by regulation to have their own Quality Assurance department and a formal training process. Novartis routinely assesses the capability and effectiveness of third-party training programs during audit, to confirm suitability for the provided service or product. Where transfer of product or technology occurs from Novartis to a third party, full knowledge transfer and associated technical skills training (e.g., quality-critical parameters, process steps) are provided by Novartis. The extent of training provided varies according to the complexity and risk of the associated product and process technology. For highly complex technologies, for example involving personalized medicine, Novartis uses a robust multi-step process with specialized training.

Membership of external bodies

Name of membership organization(s) and formality of involvement: Novartis in Society 2020

Trial data transparency

Please refer to the business ethics section

Product quality and safety performance

Product recalls

Class I (severe), Class II (moderate) & Class III (minor) and details:

• Novartis statements
• Novartis in Society Report 2020

Regulatory warnings

Number and details: Novartis in Society Report 2020 (data table p.57)

FDA Form 483s: Novartis statements

Employee training and development

Employee development policy

Learning and development

Initiatives for talent development, recruitment and retention

Formal talent pipeline development strategy (forecasts hiring needs, actively develops new pools of talent): Annual Review 2020

• Our talent strategy aims to anticipate future business priorities, and we have adopted comprehensive succession planning and development programs at various levels to help ensure we have the right capabilities to execute on our business strategy. For our succession planning process, we include all Executive Leadership and senior management roles and include successors at various levels of readiness, typically down through middle management. There is a full-review with the CEO/ Chief People & Organization Officer annually. Summary succession plans, and talent metrics are captured/reported to the Board of Directors annually.
• The Executive Committee (ECN) has a standing “Talking Talent” topic on their monthly meeting during which all key open positions and key talents are being reviewed and discussed.
• In partnership with the business, finance, strategy and People & Organization (P&O), we have identified more than 50 key roles across the Enterprise and more than 150 in our respective business areas, which will unlock significant future value for Novartis. We have built our capacity to design the roles and support talent to help ensure that we realize this value. Circa 30 associates were trained on the methodology with plans to increase to 90 in 2020. We aspire to have 0-days vacancy time in these roles. Therefore, the target is for 90% of these value roles to have at least 1 internal successor fully ready to take on the role and for 70% of these value roles to have 2 internal successors fully ready. Finally, we encourage continuous talent scouting externally, as well as targeted development for potential internal successors, to help ensure a healthy pipeline for these roles. At the end of 2019, 98% of these value roles were occupied, 65% of them had strong succession plans and 59% low retention risk.
• Our talent and leadership development approach is grounded in our beliefs on 21st century leadership principles and is informed by external evidence into what factors influence performance for knowledge workers. Leaders are critical for driving culture change, and this means developing strong and self-aware managers who act in an inspired, curious, and unbossed way. In other words, they set clear priorities, empower their teams, and encourage employees to speak their mind and take smart risks.

At Novartis, we have three leadership development journeys to help enable leadership excellence at different stages and two talent development programs to develop the succession pipeline with early and emerging talent. In total more than 3900 leaders took part in one of our leadership and talent development journeys in 2019 to be prepared to transition to a new career stage and build sustainable performance in role.

Partnering with educational institutions to develop or deliver joint training programs for staff:

• Learning and development
• Novartis in Society 2020
• Novartis Annual Review 2020 

• Job-specific development training programs: Novartis Annual Review 2020
• Dedicated divisional and functional training teams offer job-specific programs to all permanent employees and part-time employees. Engagement-specific trainings are also offered to contractors.
• Global Oncology launched the OUTSMART program to strengthen the skills of marketing teams. Marketers have access to knowledge and best practices from more than 1 200 employees in 68 countries, enabling them to be at the forefront of marketing innovation.
• Following a guideline issued by the International Council for Harmonisation (November 2019) describing the estimand framework national regulatory agencies should adopt, Novartis launched a face-to-face training program in 2020. The program fosters cross-functional dialogue among clinicians, statisticians and regulatory affairs specialists to translate clinical trial objectives into scientific questions in order to improve the quality of clinical trial submissions.
• Global Drug Development launched a three-level training program focused on the implementation of Patient Reported Outcomes (PROs) in our clinical development programs. PROs enable us to collect information directly from patients, hence measuring the impact of therapies on symptoms, health status and quality of life. To date, 436 associates are enrolled in fundamental level training and 60 associates have completed the intermediate level training.
• Global Drug Development also launched a program on designing effective clinical study protocols with more than 77% of clinical development scientists describing it as highly beneficial to their roles, teaching them “Lean” principles they can apply to trial design and clinical protocols.
• Sandoz, our generics division, launched the Medical Office Knowledge Academy to provide scientific updates to all new medical employees. To date, more than 1 000 employees have been trained virtually.
• Sandoz also launched the Accelerate Biopharma Capabilities program to build understanding of biologics and biosimilars, underlying diseases and treatment options, and support clinical decision making. To date more than 280 medical employees and 650 sales representatives and key account managers in 90 countries have taken this first ever cross-functional biopharma training.
• Novartis Business Services launched the Coach2Blue program to develop coaching skills and instill Unbossed leadership. To date, approximately 1 000 managers completed the program with over 90% improvement across skills, coaching, adaptability and performance on the job.
• Onboarding is a key element of employee retention. Each year, Novartis on-boards approximately 17 000 associates. In order to make the onboarding process efficient, streamlined across global locations and seamless between the Novartis functions that deliver it, we are currently building a technology enabled end-to-end Hire-to-Onboard service, which is launching in 2020.

Scope and extent of performance reviews

Regular performance appraisals and feedback processes for all permanent employees aligned with career development: Novartis Annual Review 2020

• Novartis has employed a global approach to performance management which encompasses objective setting, a mid-year check-in and an end-year review with a formal rating of each individual employee’s performance.
• In 2019, to help ensure our people are inspired and unbossed, we made significant evolutionary changes to our Performance Management: Our crowdsourcing initiative Generate.Action conducted in early 2019 with participation of 30 000 employees showed that our associates see our current system is not enabling empowerment and inspired teams. In 2019, we moved toward real-time feedback and peer-to-peer appreciation and recognition. Employees are now encouraged to proactively schedule conversations with their managers to discuss strengths, receive feedback, focus on priority skills and secure support.
• In pilot programs involving more than 16 000 employees in eight countries, we eliminated individual performance ratings, stressing instead the importance of teamwork and collaboration. Employees received regular feedback from peers as well as managers, and we increased the focus on coaching to improve performance. The experience we gained will inform how we extend the process across the company in the next two years.

Scope and support for employee and contractor degree programs and certifications and traineeship / apprenticeship program

Programs covering all Novartis employees. We also make these available to part-time workers and contractors:

• Learning and development
• Career programs
• Students & scholars
• Novartis Quantitative Sciences Hackathon
• AI innovation lab
• Novartis in Society ESG Report 2020
  • Building skills across the organization
  • Training community health workers
• Novartis Annual Review 2020 

Disclosure of performance of employee training and development programs

Novartis in Society ESG Report 2020

Employee training and development metrics

Quantitative targets related to human capital development:

• Novartis in Society ESG Report 2020 
• Training and development targets

• Reporting on human capital development metrics: Novartis in Society 2020
• Our aspiration is for all employees to spend 100 hours a year on learning and personal development. Supporting an increase in learning hours in 2020 vs. 2019 to create time and space for employees to learn and grow is part of the annual objectives of each member of the Executive Committee of Novartis. This supports our employees in building skills to help them perform in their jobs today and to further develop their careers. In 2019, there was a 58% increase in learning hours to 35.8 hours per employee. During the COVID-19 pandemic, we extended our learning offerings to the families and friends of our employees (two additional Coursera licenses per employee) to foster a learning environment for the entire family.

External recognition as employer of choice

• Awards and Recognition
• Novartis in Society ESG Report 2020

Scope and extent of managerial development training

Evidence of trainings:

• Novartis in Society ESG Report 2020

In 2019, we continued our focus on building leadership capabilities:

• More than 1 400 employees completed their Association for Talent Development award-winning Ready to Grow learning journey, which supports an associate’s preparation or transition from an individual contributor to an associate who leads in some capacity. Building on the 2019 success, we will offer an additional 1 500 seats globally in 2020.
• In 2019, more than 1 700 leaders in 25 countries completed M1 Lead the Way, a 9-month multiphase leadership journey that develops greater self-awareness and understanding of their impact on others while demonstrating and fostering Novartis values and leadership practice. The program will extend its reach to more than 1 600 leaders in 20 countries in 2020.
• In 2019, 330 Novartis leaders completed IMPACT, a 17-week first-line leadership development program, which will be further scaled up to offer an additional 375 seats in 10 countries in 2020.

Formal mechanisms to promote an open feedback and development culture

• Our culture and values
• People and culture
• Novartis in Society ESG Report 2020

Reporting on human capital risk assessment

• Novartis Annual Report 2020 (p.16)

Employee engagement and satisfaction

Scope and frequency of employee survey

• Annual engagement surveys to monitor employee satisfaction: Novartis in Society ESG Report 2020
• Our employee engagement surveys are conducted quarterly and reviewed extensively by the ECN, the Risk Committee of the Board of Directors and by managers with their teams to define actions. Our current engagement score is at 80 points, which is 6 points above the global benchmark and 10 points above the pharma industry benchmark.

Procedures for grievance and escalation

Formal grievance escalation/reporting (confidential):

• Novartis in Society ESG Report 2020
• Handling complaints

Employee benefits

Employee stock ownership plan (ESOP) or employee stock purchase plan (ESPP): Novartis Annual Report 2020 (p.F-63)

Non-salary benefits and work-life balance: Novartis in Society ESG Report 2020

• All Novartis associates (and or their families) are covered by a wide variety of benefits and flexible working arrangements. Benefits are locally competitive compared to benefits offered by other companies and in line with or exceeding statutory requirements. For example, around 85% of Novartis employees receive pension/ retirement scheme benefits in excess of statutory requirements; the corresponding figure for healthcare plans is 77%
• Novartis is constantly reevaluating its benefit offerings adapting it to the diverse and changing needs of its employees, e.g.:
  • The Novartis healthcare plan in the US which includes cover for egg freezing and gender reassignment
  • The Chinese healthcare plan which allows employees to include their parents in the coverage
• In 2019, we launched a number of key benefit initiatives:
  • A minimum of 14 weeks of paid parental leave regardless of gender. All associates are entitled to a minimum of 14 weeks of paid parental leave when they become a parent: Global Parental Leave Guideline
  • Global Financial Wellbeing: Global Financial Wellbeing (GFW) initiative supports our associates in confidently managing financial life today, while preparing for the future and anything unexpected along the way. Currently roughly 90% of our employees from ca. 40% of our countries have access to this offering with plans to expand access by the end of the year.
  • For mental wellbeing, we launched a mindfulness awareness campaign this year, offer facilitator guided meditation and train our own people to become trainers in the space. We also piloted an emotional well-being campaign in 2019 and trained 500 mental first aiders to teach them skills to respond to the signs of mental illness among their colleagues.
• Benefits during global public health crisis: COVID-19

Employee Turnover Rate

% of total employee turnover rate: Novartis in Society ESG Report 2020

• Retention of associates is a key focus area for Novartis. We benchmark turnover locally (2019 data source is Workforce Turnover Around the World). Voluntary Turnover (2019*) in key markets like US, Germany, India and Japan is significantly lower than the Industry and country turnover benchmark.

% of voluntary turnover: Novartis in Society ESG Report 2020

Diversity and inclusion

Managerial or board level responsibility for diversity initiatives

• Diversity & Inclusion strategy
• Diversity & Inclusion Governance and Community
• Novartis in Society ESG Report 2020
• Meet Elena Rodriguez, Global Head of Diversity & Inclusion at Novartis
• Executive Committee members have diversity aspirations as part of their individual strategic objectives. Diverse candidate slates and interview panels are required for senior positions and monitored as part of the monthly talent reviews at the executive level.

Promoting diversity learning within the workforce

Training and guidance regarding diversity:

• Unconscious bias training for recruiters currently in development with estimated launch and completion in Q4 2020.
• Annual, Novartis-wide mandatory Diversity & Inclusion training approved for development with planned global rollout in H1 2021.
• We offer inclusive leadership training to all associates through facilitated modules and self-paced learning materials.
• We train all new employees on the Diversity & Inclusion policy in our Novartis Code of Conduct as part of new-hire onboarding.
• Fostering inclusive behavior
• Novartis in Society ESG Report 2020

Employee affinity groups, diversity councils, or networking groups:

• Building internal communities
• Novartis in Society ESG Report 2020

Mentorship programs: Attracting and retaining diverse talent

Diversity and inclusion initiatives beyond legal compliance

Targeted recruitment:

• Nudging bias out of the organization
• Novartis in Society ESG Report 2020

Initiatives that support a diverse workforce:

• Diversity & Inclusion
• Pride @ Novartis 2020
• Global parental leave guideline
• Novartis in Society ESG Report 2020
• Novartis Equal Pay International Coalition (EPIC) pledge

Diversity monitoring and audits

Novartis in Society ESG Report 2020

Commitment to inclusion

List of the types of discrimination the company is committed to eliminate: Human rights guideline (p.4)

Commitment to help ensure equal opportunity:

• Novartis Equal Pay International Coalition (EPIC) pledge
• Pay equity and transparency
• Women’s Empowerment Principles launched by the UNGC and the UN Development Fund for Women (UNIFEM)
• United Nations’ workplace standards protecting the rights of lesbian, gay, bisexual, transgender and intersex people

Reference to the ILO conventions: Novartis in Society ESG Report 2020

Employee representation

Freedom of Association Policy

Code of conduct and referral to the applicable conventions of the International Labor Association (ILO):

• Code of Conduct
• Human rights guideline (p.4)
• Novartis Modern Slavery Statement (p.5)

Collective Bargaining Agreements

• % of Novartis employees represented by a trade union or covered by collective bargaining agreements (rating in bands of 25%): Novartis in Society ESG Report 2020
  • At Novartis, more than 45% of our total non-management headcount are formally covered by a collective bargaining agreement and approx. 75% of employees are covered by formal employee consultation procedures and duties.
  • All employees are protected by written employment or similar contracts
  • All employees are covered by independent internal employee relations, counselors and resolutions.
  • Intensified social dialogue opportunities between senior (top) management and the Novartis European Works Council (NEF) – more than tripled in the year 2019 (11 face-to-face meetings) compared to (3) in 2015.
  • Awareness of associates towards their right to associate with trade unions or employee representatives reached 70% in 2019
• We engage in constructive dialogue with employees and employees’ representatives. In general, minimum notice periods regarding operational changes are defined by law, by collective bargaining agreements or by individual labor contracts in all countries. Where relevant, local legislation and collective bargaining agreement specifications on notice periods vary, ranging from 30 to 180 days and more. In general, Novartis Group company associates and their representatives are informed at the earliest possible time (usually between 30 and 180 days). In addition to regulations in collective bargaining agreements, social plans and balance of interests negotiated with employee representatives may allow longer pre-notice and notice periods, as well as severance pay, redeployment to other Novartis companies, outplacement services or transition assistance in compliance with the regulatory or bargaining agreement requirements.
• More than 60% of Novartis Group company associates have access to an employee assistance program, i.e. Job Center support, which can include coaching, application training and social counselling. We also offer outplacement support to assist associates in their transition post-exit – the support we offer goes beyond the legally required minimum for more than a third of our workforce.
• Novartis has paused globally any new restructuring-related notifications between March 20 and April 30, 2020 due to COVID-19, and has communicated to employee representatives accordingly.

Board structure

Board/management quality & integrity

• Board Experience:
  • Board of Directors
  • Novartis Annual Report 2020 (p.133)
• Director Track Record: Board of Directors
• Board Capture: Novartis Annual Report 2020 (p.148)

Votes Against Board:

• Novartis shareholders approve all resolutions proposed by the Board of Directors at the Annual General Meeting
• Novartis Annual Report 2020 (p.131)
• 2020 AGM voting results

Responsiveness to Shareholders:

• Novartis shareholders approve all resolutions proposed by the Board of Directors at the Annual General Meeting
• Novartis Annual Report 2020 (p.130, 160)
• Annual General Meeting of Shareholders

Related Party Transactions: Novartis Annual Report 2020 (p.F-72)

Director Ownership & Remuneration: Novartis Annual Report 2020 (p.A9;93; 119-122)

Executive/Board Misconduct: Novartis Annual Report 2020 (p.96)

Overboarded Directors:

• Novartis Annual Report 2020 (p.148)
• Board of Directors

Board effectiveness

Board Leadership:

• Board of Directors
• Novartis Annual Report 2020 (p.148)

Board Tenure: Novartis Annual Report 2020 (p.133)

Board and Chair independence: Novartis Annual Report 2020 (p.132)

Nominating Committee Effectiveness: Novartis Annual Report 2020 (p.145)

Voting Structures: Novartis Annual Report 2020 (p.130-131)

Directors not Elected by Shareholders:

• Novartis shareholders approve all resolutions proposed by the Board of Directors at the Annual General Meeting
• 2020 AGM voting results

Risk Oversight: Novartis Annual Report 2020 (p.146; 156)

Risk Management Expertise on Board: Board of Directors

Female directors (no. and total):

• Board of Directors
• Novartis Annual Report 2020 (p.133)
• Novartis in Society ESG Report 2020

Number of Board Members over 70:

• Board of Directors
• Novartis Annual Report 2020 (p.133)

Board and executive remuneration

Structure of remuneration

STI Performance Metrics: Novartis Annual Report 2020 (p.98-117;119-124)

LTI Performance Metrics: Novartis Annual Report 2020 (p.98-117;119-124)

Pay Magnitude: Novartis Annual Report 2020 (p.98-117;119-124)

Pay for Performance: Novartis Annual Report 2020 (p.98-117;119-124)

Pay for Failure: Novartis Annual Report 2020 (p.98-117;119-124)

Pay linked to sustainability: Novartis Annual Report 2020 (p.98-117;119-124)

Clawback & Malus Policy or Provision: Novartis Annual Report 2020 (p.96)

Remuneration Committee

Remuneration Committee Effectiveness: Novartis Annual Report 2020 (p.144)

Remuneration Committee Independence: Novartis Annual Report 2020 (p.123; 132)

Overboarded remuneration committee members

- Board of Directors

- Novartis Annual Report 2020 (p.148)

Disclosure

Remuneration Disclosure: Novartis Annual Report 2020 (p.98-117;119-124)

Disclosure on linking pay and performance: Novartis Annual Report 2020 (p.98-117;119-124)

Participation

Say on Pay:

• Novartis shareholders approve all resolutions proposed by Board of Directors at the Annual General Meeting
• Annual General Meeting of Shareholders

Internal Pay Equity: Novartis Annual Report 2020 (p.110;120)

Ownership and shareholder rights

Shareholder rights & involvement

Proportionality - One Share/One Vote / Voting Rights Limits Shares Held: Novartis Annual Report 2020 (p.130-131)

Restrictions on legal action by shareholders: Novartis Annual Report 2020 (p.131)

- Subject to Swiss law, mainly Art. 758 of the Swiss Code of Obligations

Shareholder Action: Novartis Annual Report 2020 (p.130-131)

Accounting indicators

Auditor Committee Structure

Audit Committee Structure: Novartis Annual Report 2020 (p.143)

Audit Committee Effectiveness

Audit Committee Effectiveness: Novartis Annual Report 2020 (p.143)

Audit-related fees

Auditor Fees: Novartis Annual Report 2020 (p.158)

Stakeholder Governance

Stakeholder Governance

• ESG Governance
• Novartis in Society ESG Report 2020

ESG Reporting Standards: Novartis in Society ESG Report 2020

Verification of ESG Reporting: Novartis in Society ESG Report 2020

Global Compact Signatory:

• Novartis in Society ESG Report 2020
• Novartis UNGC Communication on Progress 2019

ESG Performance Targets: Targets and results

Political Involvement Policy: Political engagement

Lobbying and Political Expenses: Political contributions

Anti-bribery & anti-corruption Policy:

• Anti-bribery policy
• Code of conduct
• Novartis Professional Practices Policy
• Conflicts of Interest Policy

Environmental Policy: Health, Safety and Environment Policy

Whistleblower Programs:

• Handling complaints
• Novartis in Society ESG Report 2020

Tax Disclosure: Novartis Tax Policy Statement

Non-discrimination Policy: Human rights guideline (p.4)

Scope of Social Supplier Standards: Novartis Third Party Code

CDP Participation:

• CDP Climate 2020
• CDP Water 2020

GHG Reduction Program:

• Climate
• Novartis carbon-sink forestry projects
• Novartis in Society ESG Report 2020

Green Procurement Policy: Novartis Third Party Code

Policy & Commitments

Responsibility for managing bribery and corruption issues

Responsibility of a board-level committee: Novartis Annual Report 2020 (p.143;146)

The Board of Directors has established an Audit and Compliance Committee (ACC), which assists the Board of Directors in overseeing audit and compliance. The ACC reviews at least annually the processes and procedures used by management to execute an effective compliance program.

Bribery and anti-corruption policy

Detailed formal policy against bribery and corruption:

• Code of conduct
• Anti-bribery policy
• Conflicts of Interest Policy

Prohibition of bribery: Anti-bribery policy

Definition of bribery or corruption: Anti-bribery policy (p.3)

Prohibition and definition of facilitation payments and conflict of interest:

• Anti-bribery policy (p.6)
• Conflicts of Interest Policy

Guidelines of what is considered acceptable behavior:

• Code of conduct
• Novartis Professional Practices Policy (p.4)
• Holding ourselves to the highest ethical standards
• Our values

Require all suppliers to have anti-corruption policies and programs to verify compliance: Novartis Third Party Code (p.8-9)

Scope of business ethics policy

Policy prohibits facilitation payments:

• Anti-bribery policy (p.5). Novartis prohibits facilitation payments, irrespective of whether local law permits facilitation payments. Therefore, total value equals 0.
• Novartis Third Party Code (p.8-9)

Policy covers all subsidiaries: Anti-bribery policy

External standards & anti-corruption initiatives

Leading industry-specific anticorruption standards: Novartis in Society ESG Report 2020

Membership in other external anti-corruption Initiatives: Novartis in Society ESG Report 2020

As a signatory to the UN Global Compact, Novartis supports […] the UN Convention Against Corruption and the OECD Convention on Combating Bribery of Foreign Public Officials

Signatory to the CEO Letter on the UN Convention Against Corruption

World Economic Forum’s Partnering Against Corruption Initiative (PACI): Novartis used PACI principles to design and implement our anti-bribery compliance system including our Anti-bribery Policy. Novartis is currently in the process of evaluating a membership.

Transparency International's Business Principles for Countering Bribery: Novartis used Transparency International’s principles to design and implement our anti-bribery compliance system including our Anti-bribery Policy.

Programs

Scope and extent of employee and contractor training

Regular training programs covering all employee (incl. part-time) and contractors:

• Novartis Modern Slavery Statement (p.6)
• Anti-bribery and anti-corruption
• Anti-bribery policy

Compliance training scope covers all company-wide policies with regular e-trainings and refreshers

Employee engagement

Mechanisms for employees to consult on ethical issues: Novartis in Society ESG Report 2020

• Creating a Code of Ethics
• Encouraging associates to speak up

Associates are required to take the annual Code of Conduct training, which includes certification on the Anti-Bribery Policy. In addition, specific e-trainings target associates, including on Anti-Bribery. Launched in 2018, training on anti-bribery had a completion rate of 97% (period: October 2018-May 2019).

Compliance assurance/Regular bribery and corruption risk assessments

Internal and external assurance of compliance with ethical standards:

• Anti-bribery and anti-corruption

Novartis has implemented a formal and robust end-to-end due diligence process, from information gathering to monitoring, to establish the risk profile of third parties. Formal processes for screening, due diligence and monitoring of third-party intermediaries/agents with respect to corruption include:

• Responsible Supply Chain Management
• Novartis in Society ESG Report 2020
  • Safeguarding our company from risks
  • Expanding the third-party risk management process

Internal monitoring system to detect corruption:

• Novartis in Society ESG Report 2020
• Ethics, Risk & Compliance

Operating guidelines

Operating guidelines addressing record keeping, approval procedures and appropriate behavior

• Novartis Third Party Codeaddresses record keeping for suppliers

Each risk function (i.e. ERC, HSE, Labor Rights) has guidelines, working instructions, SOPs, etc. (for instance the Anti-Bribery Third Party Guideline) that clearly define requirements and processes for assessing third parties before their engagement.

General record keeping requirements are defined by IT, Data Privacy and other functions but not necessarily by the risk function. The Third Party Code does not define record keeping but determines Novartis expectations with regards to third party behavior.

Whistleblower protection
Please refer to the business ethics section

• Handling complaints
• Novartis in Society ESG Report 2020
• Human rights guideline (p.6)

Total value of facilitation payments

Novartis prohibits facilitation payments, irrespective of whether local law permits facilitation payments. Total value equals 0.

Human Rights

Company’s policy indicating support for human rights

Policy aligned with UN Declaration of Human Rights or equivalent: Human rights guideline

Commitment to external mandates & standards to protect human rights

List of commitments to external mandates to protect human rights, e.g. Declaration of Helsinki, Good Clinical Practice:

• Human rights guideline (p.3)
• Novartis in Society ESG Report 2020

Commitment to external standards to protect human rights:

• Human rights guideline (p.3)
• Novartis in Society ESG Report 2020