Performance Indicators

Management of objectives and performance indicators

With our Sustainability Program and this data section, we detail the Group’s most important objectives and performance indicators in the 2006 reporting period. These indicators comprise data for environmental, social, and economic performance. Our self-commitment and increasing external requirements are, together, augmenting the meaningfulness of our performance indicators.

Dr. Wolfgang Grosse Entrup, Head of Environment & Sustainability at Bayer AG

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Dr. Wolfgang Grosse Entrup, Head of Environment & Sustainability at Bayer AG

“Our self-commitment and increasing external requirements are, together, augmenting the meaningfulness of our performance indicators. This year, we have become one of the first companies to include indirect greenhouse gas emissions in our reporting and are thereby presenting a comprehensive climate balance sheet for our Group.”

This year, we have become one of the first companies to include indirect greenhouse gas emissions in our reporting and are thereby presenting a comprehensive climate balance for our Group. We have also decided to newly include the social security coverage of our employees worldwide. Progress rather than stagnation is at the heart of our commitment. And the performance indicators are the yardstick against which we allow ourselves to be judged. The latter also entails the subjection of our data to an independent assurance process.

Bayer has captured data from all of the relevant organizational units and companies worldwide in which the Group held a participating interest of at least 51 percent in 2006. The performance data for these affiliated companies have been fully consolidated, regardless of the exact share held by Bayer in each company. We have based our selection and measurement of these indicators on the international recommendations and current guidelines of the Global Reporting Initiative (GRI), the World Business Council for Sustainable Development (WBCSD), and the European Chemical Industry Council (CEFIC).

As in previous years, HSE data were captured using an electronic questionnaire and consolidated in our Group-wide site information system, Baysis®. We have used various internal systems to compile employee-related data.

The auditing company Deloitte was commissioned by the Bayer Group to perform an audit of the data capture and reporting processes in order to confirm their quality and credibility (assurance process). The audit was performed between February and May 2007. The Assurance Statement issued by Deloitte has been included in this report

Key changes in 2006

The acquisition of Schering AG, Berlin, Germany, was completed in spring 2006. In addition, a decision was taken to sell off the companies Wolff Walsrode and H.C. Starck belonging to Bayer MaterialScience, as well as Bayer HealthCare’s Diagnostics Division. We have based our presentation of sustainability indicators on the requirements of financial reporting: Continuing operations are reported for 2006, meaning that Schering is included from June 23, 2006, while Wolff Walsrode, H.C. Starck and the Diagnostics Division are excluded. The values for the previous year 2005 have been similarly aligned.

To enable comparison with years prior to 2005 and to thereby increase the transparency of our reporting, we include for 2005 and 2006 an additional figure for the Group excluding Schering but including Wolff Walsrode, H.C. Starck and Diagnostics (“previous operations”).

The effect of the carve-out of Lanxess AG on the development of HSE performance was shown in past Reports by presenting Lanxess’s share separately for the reporting year 2004. In the following, we give figures for the Bayer Group for 2004 that exclude Lanxess but include Wolff Walsrode, H.C. Starck and Diagnostics.

Classifying performance indicators

When interpreting changes in the figures over time, it should be borne in mind that these changes depend on various influences. In addition to technical measures aimed at reducing emissions, waste levels and resource consumption, fluctuations in production volume and structural changes also play a part. The latter include the acquisition and sale of sites in full or in part, as well as the outsourcing of upstream production services.

Structural changes through adaptation of the portfolio are highlighted in the following diagrams through the separate indication of previous and continuing operations, as mentioned above. In addition, we place the performance indicators in the context of production volume: Since there is a causal relationship between emissions, waste levels and resource consumption on the one hand and production on the other, the development of production volume gives an indication of the reasons for the way performance indicators have changed over time. The production volume of Bayer AG’s continuing operations rose in 2006 compared to 2005. In some cases therefore, there was an increase in performance indicator values.

Production volume (in million t/a)

Management systems

Our objective is to address health, safety, environmental protection and quality (HSEQ) to an appropriate degree and to achieve a consistent level of hseq management throughout the Group. We have therefore continued to improve our established HSEQ management systems in 2006. These systems are subject to regular audits as set out in a Group-wide Audit Directive; this Report presents additional data for the first time to illustrate the percentage of sites with management systems that are subject to independent Bayer audits. This was the case for almost two thirds of the production sites in the Group’s continuing operations in 2006.

Where it makes sense in specific locations, the internal audits performed on our management systems are supplemented by external certification. For example, we will also in future arrange certification in accordance with the environmental management standard ISO 14001. We are in an increasing number of cases arranging for certification in accordance with the equivalent standard for health and safety management, OHSAS 18001 (Occupational Health and Safety Management System).

HSE audits (percentage of production sites)

	2004	2005	2005 cont.*	2006	2006 cont.*
Sites with a management system certified to ISO 14001 or EMAS standards	33	35	36	35	36
Sites with an environmental management system based on external standards**	38	39	40	43	43
Sites with a management system certified to OHSAS 18001	2	5	5	8	8
Sites with an HSE management system audited by Bayer personnel	-	-	-	56	62

continuing operations

“based on external standards” includes:
- management systems certified to ISO 14001 or EMAS
- systems and certifications in accordance with national standards, such as “Industria Limpia” in Mexico