The global pharmaceutical sector has a fundamental role in society in relation to the creation of medicines and patient health and the industry continues to face a number of significant challenges. These include: the rising costs of research and development, increased competition from ‘generic’ drug manufacturers, expanding legislative and regulatory requirements as well as reputation and responsibility related challenges including research ethics, human rights issues, access to medicines in developing countries and compliance with sales and marketing codes.
AstraZeneca is responding to these issues in a number of ways. AstraZeneca’s business strategy continues to focus on increasing the strength of the R&D pipeline; new partnerships and acquisitions; and increasing opportunities for growth in emerging market economies. There has also been a further strengthening of the internal governance and compliance processes within the organisation underpinned by increased integration of reputation and responsibility accountability.
In 2007, AstraZeneca began a global restructuring in line with these challenges described above. This included reorganisation and planned reduction of the workforce in some areas of the business resulting in direct and indirect impact on employees.
This background has been used to inform the scope of the 2007 independent assurance process conducted by Bureau Veritas in order determine that AstraZeneca is responsive to the material corporate responsibility related needs of it’s stakeholders. The assurance process examined the new governance and compliance processes in detail; considered how AstraZeneca approached the issues associated with the planned reduction of the workforce as well as assuring material issues that form part of AstraZeneca’s “responsibility programme”.
Bureau Veritas has been engaged for the fourth year by AstraZeneca plc (AstraZeneca) to provide independent assurance over its Corporate Responsibility (CR) reporting. In 2007, AstraZeneca has further developed its approach to CR Reporting by inclusion of greater CR related information within its Annual Report and Form 20-F Information and provision of CR related content in this ‘Responsibility’ section of the AstraZeneca website. This integration process has meant that, unlike previous years, AstraZeneca has not produced a separate CR Summary Report. Bureau Veritas has therefore evolved its assurance process to support such development.
The preparation and content of the Annual Report, Form 20F and website is the sole responsibility of the management of AstraZeneca. Bureau Veritas’ responsibility is to provide assurance over the reliability of the information therein and to express an overall opinion as per the scope of assurance. Details of the scope, methodology, limitations and exclusions of our work are provided at the end of this statement. For the website, any web pages assured by Bureau Veritas include a reference at the bottom of the page providing the date of verification ( ‘The content if this page was externally assured by Bureau Veritas, February 2008). Pages may be updated and new content verified throughout 2008.
The assurance process considers the accuracy, completeness and relevance of CR content in line with the requirements of the AA1000 Assurance Standard (AS) and assesses whether AstraZeneca is responsive to the material needs of stakeholders.
Further, in 2007, AstraZeneca has formally revised its approach to key performance indicators and reported against the requirements of the G3 Global Reporting Initiative (GRI). Part of the assurance process was for Bureau Veritas to assess AstraZeneca’s alignment and with the GRI B+ application level.
In 2007 the assurance process concentrated on new governance and compliance processes that meet the needs of the corporate reorganisation and therefore its delivery of CR. This centred on corporate and Senior Executive Team (SET) area decision-making and activity and consequently, unlike previous years, no country visits were included in the assurance process.
Through the independent assurance process, Bureau Veritas aims to:
► Challenge the CR strategy and performance
► Focus on AstraZeneca’s understanding of and response to material issues
► Provide reassurance to stakeholders on management of priority issues
► Move from value protection to value creation using the assurance process to promote performance improvement
► Be strategic and forward-looking
In our opinion, based on the work carried out, AstraZeneca:
► Demonstrates increasing alignment to the principles of AA1000 Assurance Standard and addresses CR material issues considered to be a priority to the company’s stakeholders
► Meets the requirements of the G3 GRI application level B+
► Has streamlined governance processes resulting in clearer accountabilities and increased focus on global compliance
With regard to accuracy of reporting, as in previous years:
► AstraZeneca provides a fair summary of status and performance over the reporting period, in relation to the CR issues identified by the company to be of material interest to its stakeholders;
►The position statements made demonstrate alignment with corporate policies and objectives;
► The factual information provided can be considered to be accurate and reliable and reported in a clear and understandable manner; and
► The reported Key Performance Indicator (KPI) data is an accurate reflection of information at site level and collated by AstraZeneca at corporate level.
With reference to the AA1000 assurance standard, AstraZeneca has achieved a high level of completeness, with disclosure of performance in relation to its main CR impacts. Information is provided on CR issues deemed of material importance to the organisation and its stakeholders, although not always on the basis of formalised dialogue. The reported information can be used by stakeholders as a reasonable basis for their opinions and decision-making. Responsiveness is demonstrated via its Priority Action Plan and KPIs which have been reviewed during 2007 leading to an increase in material performance measures reported. However, there are still opportunities to further quantify progress against the Priority Action Plan (see recommendations).
Bureau Veritas has undertaken a formal review and gap analysis of AstraZeneca’s CR disclosures against the requirements of the G3 GRI application level B+. This requires specific disclosure on strategy, risks and opportunities, governance and management approach to economic, environment, human rights, labour, society and product responsibility issues. To gain the B+ application level an organisation must report upon 20 KPIs (with at least one from each issue listed above) and have this information assured. AstraZeneca exceeds these requirements. Please see the GRI Index for further details.
Bureau Veritas encourages the use of the GRI as one of the tools that can be used to consider which KPIs can help measure CR related performance in an organisation. Bureau Veritas also believes that the focus must be upon the development and monitoring of material KPIs that are meaningful to both AstraZeneca’s business and its stakeholders and help drive performance improvement. For example, for AstraZeneca, this is in relation to its key business areas of patient safety, access to medicines, sales and marketing, clinical trials and animal research. These are already recognised by AstraZeneca and are included in its Priority Action Plan.
Bureau Veritas was pleased to observe that AstraZeneca has, over the reporting period:
► Integrated its reporting of CR related issues to become an inherent part of its mainstream business reporting (eg inclusion of CR content within Annual Report and Form 20F)
► Revised the way it reports its performance and applicability of G3 KPIs leading to an increase in material performance measures reported
► Reviewed its Code of Conduct and continued to develop mechanisms to strengthen its internal compliance monitoring, control and reporting via the Global Compliance function
► Proactively considered how to apply AstraZeneca policies and operating standards globally to acquisitions, partnerships and external contractors
► Improved performance in relation to a number of KPI’s including greenhouse gas emissions, energy use, number of ozone depleting substances, number of confirmed sales and marketing breaches and the number of site audits which included corporate responsibility
► Continued to develop and implement its Climate Change Strategy, energy reduction initiatives, and monitoring processes to mitigate the impact of the propellant gases used to deliver its Symbicort asthma treatment product in the US
► Further formalised its community programmes and partnerships that contribute to improving health in the developing world
► Implemented internally an extensive range of health and wellbeing improvement programmes throughout the Company
► Further developed its Global Leadership Programme which promotes effective leadership, competencies and behaviour throughout the organisation in line with the reshaping of the Company
► Considered and progressed a number of the recommendations from Bureau Veritas’ assurance over the previous reporting cycle.
Governance & Compliance
There have been significant changes to the governance and processes at AstraZeneca during 2007. This includes the dissolution of groups such as the Risk Advisory Group and the Global CR Committee and changes to the Safety, Health and Environment (SHE) structure. A number of Committees have also been established, most significantly, the Global Compliance Committee whose remit is to drive the implementation of a global programmes that address regulatory compliance and related Policy risks including CR; the formation of the Group Public Affairs Department which incorporates CR, Government Affairs and Reputation Strategy; and the Issues Management Council whose objectives include horizon scanning for emerging issues and stakeholder engagement. Overall, this has resulted in a streamlined governance process promoting clearer CR accountabilities with responsibility for implementation throughout the business as opposed to responsibility sitting within a separate CR Department. However, it should be noted that these new structures and processes are in their early stages of development and should be reviewed to determine their effectiveness in terms of CR implementation and integration in the future.
Restructuring and Employee Dialogue
During 2007, AstraZeneca began a global restructuring process. This included changing manufacturing patterns across operations and a reduction in excess manufacturing capacity in some areas. As such, a reduction in the global workforce was announced in mid 2007, and restructuring will continue until 2009. The restructuring was coordinated centrally and delivered locally in accordance local labour laws. This included HR guidance and support to help individuals pursue their careers outside the organisation. Where appropriate, engagement was sought with trade unions and local stakeholders as well as representatives from the local communities affected. A review of the central procedures and local outcomes by Bureau Veritas indicate that overall this process has been handled with due care and consideration in 2007. Constructive dialogue on this issue should continue to be a focus throughout the continued implementation of the planned reductions.
Based on the work conducted in 2007 and previous assurance exercises, we recommend AstraZeneca to consider the following:
1.Governance - ensure that the Group’s CR strategy, management and governance arrangements continue to be clearly defined and communicated, that they are inter-connected and well supported and that monitoring processes are put in place to determine effectiveness in terms of identification of emerging issues and CR implementation across the business
2.Restructuring and Employee Dialogue – continue to ensure effective communication and constructive engagement with its workforce and implementation of global and local strategies for restructuring in order to manage the impacts associated with the reshaping of the business, demonstrate leadership and motivate employees
3.Outsourcing / Externalisation - build on existing processes to implement AstraZeneca policies and operating standards globally to new acquisitions (such as MedImmune) and also to partnerships and in relation to external contractors
4.Access to Medicines - review the information provided externally on access to medicines. This should include continued implementation of learnings from existing partnerships, and continued review of the applicability of different approaches in the future. For example, ongoing relevance to emerging markets or applicability of a changing product portfolio to diseases of the developing world 5.Stakeholders - improve the process for ensuring that formal and informal external stakeholder concerns are consistently captured and fed into the company’s risk identification process from a CR perspective
6.CR performance measures - where appropriate, improve the quantification of progress and robustness of data collection systems relating to Priority Actions. For example, this should include the continued development of materiality based performance measures, as well as best practice observations, setbacks experienced, and instances on non-compliance and resulting corrective actions
7.GRI Reporting – where improvements in global data collection allow, further develop GRI reporting to include information relating to labour issues and human rights
8.Assurance and integrated reporting - formally manage and report on AstraZeneca’s response to assurance recommendations and gain stakeholders’ feedback over its CR approach and performance. This should include consideration of whether integrated reporting has aided accessibility and meets the needs of stakeholders.
This opinion has been formed on the basis of, and is subject to, the inherent limitations. The assurance work was planned and carried out to provide reasonable, rather than absolute, assurance and we believe it provides a firm foundation for our conclusions.
The objectives were to:
1. Provide assurance over the CR content of the Annual Report and Accounts and CR information on this website for the reporting period 1January to 31 December 2007. Any web pages assured by Bureau Veritas include a reference at the bottom of the page providing the date of verification (‘Content on this page was externally assured by Bureau Veritas February, 2008’). Pages may be updated and new content verified throughout 2008. This mainly relates to information contained within the ‘Responsibility’ Section.
2. Evaluate the Report against the main principles of the AA1000 Assurance Standard
► Completeness
► Materiality
► Responsiveness
3. Review AstraZeneca’s reporting against the requirements of the G3 Global Reporting Initiative (GRI)and assess its alignment with the B+ application level
4. Undertake a specific review of governance and compliance structures at a corporate level. As a result of this there were no country visits in 2007.
Bureau Veritas recognises the need for a robust, transparent assurance process to ensure credibility and to act as a tool to drive performance improvement of AstraZeneca’s CR programme. This is achieved by providing an impartial commentary on the reporting process and, where appropriate, propose recommendations for further development that are elaborated in a separate Management Letter to the management of AstraZeneca.
The scope of our work was determined through discussions with AstraZeneca and included provision of assurance over:
►AstraZeneca’s CR management and governance structure, supporting policies, and related management and implementation systems;
►Factual information relating to CR issues, initiatives, systems and supporting data including key performance indicators;
►Progress over the reporting period
Factual statements and supporting data were verified through a series of interviews, document review, data sampling and interrogation of supporting databases and associated management and reporting systems. This involved challenging and substantiating the content of the material presented in the Report. This process was used to assess the quality of reporting and underlying systems that support CR performance. We have ensured, as a minimum, that the data has been accurately transposed into the report.
►We have interviewed more than 30 personnel at all levels throughout the organisation, including senior level, research and supervisory staff;
►We conducted site visits and interviews at AstraZeneca’s corporate offices in London and Alderley, UK and conducted telephone interviews with the national companies in the UK, US and Sweden, AstraZeneca’s three main business centres;
►Unlike previous years, no country visits took place in 2007 as the assurance process concentrated on new governance and compliance processes that meet the needs of the reorganisation and delivery of CR. This centred on UK decision-making and activity but which is implemented globally.
Our work should not be relied upon to detect all errors, omissions or misinterpretations.
Excluded from the scope of our work is information relating to:
►Activities outside the defined reporting period;
►Company position statements (including any expression of opinion, belief, aspiration, expectation, aim or future intention provided by AstraZeneca);
►The implementation of policies and performance of MedImmune;
►Financial data which is taken from AstraZeneca’s Annual Report and Form 20-F Information, audited by an external financial auditor.
Bureau Veritas is an independent professional services company that specialises in quality, environmental, health, safety and social accountability with over 170 years history in providing independent assurance services, and an annual turnover in 2006 of €1.8 billion.
Our assurance team does not have any involvement in any other Bureau Veritas projects with AstraZeneca (none of which are CR related) and there is no conflict between the other services provided by Bureau Veritas and that of our assurance team.
Bureau Veritas has implemented a Code of Ethics across its business which is intended to ensure that all our staff maintains high ethical standards in their day to day business activities.
Competence: Our assurance team has extensive experience in conducting assurance over environmental, social, ethical and health and safety information, systems and processes in accordance with best practice.
London, February 2008
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