Performance Report

Reporting principles

Capture and presentation of key data

We capture data from all of the relevant organizational units and companies worldwide which fall within the scope of the Bayer Group’s consolidated financial statements. Our health, safety and environment (HSE) data cover all companies in which we have a holding of at least 51 percent. The key performance data of these companies have been fully consolidated, regardless of Bayer’s precise share in the respective company. The years 2005 to 2008 reflect the continuing business operations without the divested Wolff Walsrode, H.C. Starck and Diagnostics sites. Schering sites have been included in the figures from the date of acquisition, June 23, 2006. We continue to report our data over a period of several years (2004 / 2005–2008) in order to identify trends. Our greenhouse gas emissions are reported from 2005, the baseline year for the climate targets set in the Bayer Climate Program up to the year 2020, portfolio-adjusted in line with the Greenhouse Gas Protocol.

Electronic data capture using Bayer information systems

The key HSE performance data of these companies were captured using an electronic questionnaire and consolidated in our Group-wide site information system, BaySIS®. BaySIS® is an intranet-based tool for Group-wide hse reporting developed by Bayer Business Services. BaySIS® makes efficient reporting possible thanks to its user-friendly and highly configurable design. Specially designated on-site reporting managers enter the relevant data based on predefined questionnaires into a central database. Plausibility checks and cross-checking of data ensure a high degree of data integrity. BaySIS® provides an important basis for external data verification by an auditor. Additional data have been provided through our information systems, e. g. BayInfo for human resources data.

Interpreting performance indicators

In our Performance Report, as well as providing figures, we also endeavor to give the reasons and background for the way performance indicators are changing. In order to classify the current performance indicators and interpret changes in figures over time, it is important in many cases to place these figures in the context of annual production volumes. The volume of products sold fell during the reporting year to 10.0 million metric tons compared with 10.6 million metric tons in 2007.

Volume of products sold

	2005	2006	2007	2008
Volume of products sold (million metric tons)	9.7	10.1	10.6	10.0
Change compared with previous year (percent)	6.6	4.1	5.0	- 5.7

External audit certification

Since 1997, we have had our reporting process audited by independent external organizations. For this report, the auditing company Ernst & Young examined the data capture process and the statements of the report’s Focus Issues and of the Performance Report as a whole for consistency, appropriateness and credibility.

HSEQ management systems

In order to ensure a consistently high standard in the areas of health, safety, environment and quality (HSEQ), Bayer has established the appropriate HSEQ management systems, which are based on recognized international standards.

Operational responsibility for HSEQ lies with the management boards of each of the subgroups and service companies and the corresponding line organizations. Through continuous updating and expansion of HSEQ directives and internal audits, each division ensures that its HSEQ management systems meet, or exceed, specific requirements based on international standards and statutory regulations.

Bayer CropScience is currently carrying out audits of relevant sites with regard to the key HSEQ requirements. These include sites of Industrial Operations, Environmental Science, BioScience and sites with research and development activities. By the end of 2008, 70 percent had already been inspected and auditing is due to be completed by the end of 2009, before a new five-year audit cycle begins. Process and plant safety will also be inspected at all Bayer CropScience production sites by the end of 2009.

Bayer HealthCare is also continuously updating, optimizing and auditing its HSEQ management systems on the basis of an annually defined, risk-based audit program. 19 sites were audited in 2008. The subgroup is additionally auditing process and plant safety at its sites by means of questionnaires and visits.

The Bayer MaterialScience (BMS) Integrated Management System is continually monitored within the framework of a global internal HSEQ audit program and is being externally certified to ISO 9001.

In addition to the audits by the individual subgroups, the Bayer Group carries out regular reviews (observer audits) of the subgroups and service companies.

In 2008, a total of 77 percent of our production sites had a Bayer-audited HSE management system.

Standards and certifications

Approximately one third of our production sites have been certified in accordance with the international environmental management standard ISO 14001 or validated according to the European environmental management regulation EMAS (Eco-Management and Audit Scheme). A further 21 percent of the sites have an hse management system complying with other external standards, such as the RCMS (Responsible Care Management System) in the United States or Industria Limpia (Clean Industry) in Mexico.

Additional certifications will be sought if this is deemed appropriate based on local factors. This also applies to the international occupational safety management system standard OHSAS 18001 (Occupational Health and Safety Assessment Series) and the SCC standard (Safety Certificate Contractors), for example for the safe management of construction sites and assembly activities by contractors. Bayer Technology Services, for example, has scc certification with Europe-wide validity.

All subgroups and service companies have quality management systems. Since quality standards and norms are often defined on a branch-by-branch basis, implementation is the responsibility of our subgroups and service companies.

Our drugs and medical devices are produced and monitored in accordance with the quality standards of GMP (Good Manufacturing Practice), while research and development activities take place in line with the principles of GLP (Good Laboratory Practice) and GCP (Good Clinical Practice). In the other subgroups and service companies, the international quality standard ISO 9001 plays an important role, with 47 percent of Bayer CropScience sites being certified to this standard. At Bayer MaterialScience, all main production sites have an ISO 9001 certificate.

Certifications and audits (as a percentage of the total number of Bayer production sites)

	2004	2005	2006	2007	2008
Sites with a management system certified to ISO 14001 or validated to EMAS standards	33	36	36	33	34
Sites with an HSE management system based on other external standards	5	4	7	10	21
Sites with a management system certified to OHSAS 18001	2	5	8	8	8
Sites with a Bayer-audited HSE management system	-	-	62	64	77