Novartis

Governance structure

Our primary governance bodies are the Annual General Meeting of shareholders (AGM), our Board of Directors, and the Executive Committee of Novartis (ECN). Each has different roles and responsibilities within our overall governance system:

At the AGM, shareholders approve dividend payments, maximum aggregate compensation for members of the Board and ECN, as well as financial statements, the nonfinancial report and other disclosures. They also elect the Board Chair, members of the Board of Directors, members of the Board's Compensation Committee, the Independent Proxy, and the external auditor.

Our Board of Directors has ultimate decision-making authority (for those decisions not reserved for shareholders). The Board operates through five permanent committees: Audit and Compliance (ACC); Compensation; Governance, Sustainability and Nomination (GSNC); Risk (RC); and Science & Technology (STC). The Board represents the interests of all stakeholders and oversees the work of the ECN.

Led by our CEO, the ECN is responsible for operational management, including financial performance, as well as fulfillment of the company's purpose, strategic priorities and targets. The ECN has 11 members, including the CEO and Chief Financial Officer, the leaders of our organizational units — Biomedical Research, Development, Operations, US and International — as well as those of other functions.

Composition of the Board

All Board members are independent and nonexecutive (as defined under the Board regulations). Members are elected at the AGM for one year only; they may serve a maximum of 12 years.

When choosing new members to propose to the AGM, the Board aims for a balance of skills, expertise and experience. Twelve of 13 current Board members have experience in leadership and management. In addition, seven have experience in medicine, healthcare or R&D, and four in environmental, social and governance (ESG) topics. The Board considers gender, age, nationality, ethnicity, viewpoints, professional background and expertise in its selection process.

ESG governance

Board: Ultimate responsibility for our ESG strategy lies with the Board of Directors. The Board has delegated certain duties and responsibilities related to ESG to some of its committees.

The primary responsibility for the oversight of the ESG strategy and governance is held by the Governance, Sustainability and Nomination Committee (GSNC). The GSNC oversees the company's strategy, governance and progress on sustainability, including access to products and services, environmental sustainability (including matters related to climate and nature), people management, and other ESG matters.

The Audit and Compliance Committee is responsible for internal controls over financial and nonfinancial information, and reviews all performance indicators included in this report. The Risk Committee oversees the company's risk management, including risks related to ESG.

The Science & Technology Committee is responsible for the oversight and evaluation of the company's scientific, technological and R&D activities, which are relevant to our material topic of innovation.

Management: The ECN is responsible for operational management of ESG matters. The ECN-level ESG Committee, chaired by the CEO, meets every two months to review the company's ESG performance and strategy.

Board members receive regular briefings and trainings on ethics, risks and compliance, ESG and other relevant topics. In 2024, topics covered included the US healthcare ecosystem, our updated Code of Ethics, and data ethics and information management.

The Board of Directors is subject to an annual self-assessment; every third year, this assessment is carried out by an external consultant.

Board highlights for 2024

During 2024, the Board of Directors discussed strategic, operational and financial issues:

• Oversaw the company's strategy to deliver high-value medicines that alleviate society's greatest disease burdens through technology leadership in R&D and novel access approaches

• Reviewed the development of the talent pipeline in the context of strengthening the Company's foundations

• Discussed longer-term Board succession planning and required profiles, including the nomination of a new Board Chair and a new Board member for election at the 2025 AGM

• Reviewed strategic considerations around mergers and acquisitions (including the acquisition of Mariana Oncology and MorphoSys), and the Company's larger strategic moves to drive sustainable growth

• Discussed updates from the US, International and Operations units

• Reviewed the Research Development Commercial Continuum Execution and the focuses and priorities of the different therapeutic areas

• Discussed the Company's ESG strategy, plans and developments, including updates on nonfinancial disclosure regulations and the nonfinancial reporting governance of the Company

• Discussed and reviewed the annual Board self-evaluation including the 2023 in-depth exercise performed by the external firm Egon Zehnder

• Discussed and assessed the geopolitical situation, with a special focus on the impact of the US election

• Received an update on the Southern Europe, Russia & Central Europe Cluster Business and the Company's strategic ambitions and technology platforms in Slovenia

The Compensation Committee determines performance measures (including those related to ESG) for executive compensation and, together with the Risk Committee, reviews Novartis compensation systems to ensure they encourage behaviors that support sustainable value creation.

For more information on compensation, see our Annual Report 2024.

Human rights due diligence

We manage our program through three pillars, aligned with the UNGPs: due diligence, internal empowerment, and stakeholder engagement.

Due diligence: We conduct ongoing human rights due diligence across our business and ensure that we have policies and management systems in place to support our commitments. External partners are regularly assessed and monitored against the labor and human rights provisions set out in our Third Party Code.

We have a monitoring system in place that tracks remediation actions regarding human and labor rights at external partner sites, and their successful resolution through time-bound corrective action plans. We collaborate with industry partners such as the Pharmaceutical Supply Chain Initiative (PSCI) on topic-specific supply-chain projects.

Supply chain due diligence

Our external partner risk management (EPRM) framework enables risk management in a single, mandatory process and system as part of our integrated assurance system. The framework comprises governance, processes and internal controls, and applies a risk-based approach.

The due diligence efforts are applied in proportion to the level of identified risk, which is determined by the probability and severity of potential adverse impacts. We carry out risk assessments and selected audits among external partners in various risk areas including human rights; health, safety and environment; labor rights; information security; anti-bribery and corruption, and; business continuity management.

All suppliers are subject to risk assessments when we engage with them and at a regular frequency thereafter. Suppliers flagged for high risk are subject to an onsite audit by our integrated assurance team.

Main activities in 2024

In early 2024, we completed our company-wide annual human rights risk saliency assessment. This reaffirmed our focus on four previously identified priority areas.

In alignment with the evolving regulatory landscape on value chain due diligence, we also enhanced our external partner labor rights due diligence and risk assessment framework.

We concluded a pilot project aimed at engaging directly with workers in our supply chain. This involved a comprehensive survey on working conditions. To address the survey's findings, we are actively providing ongoing capability-building support to strengthen our external partners' ability to implement effective solutions.

In 2024, we continued to develop human rights due diligence tools and processes to further support our operations in high risk and conflict-affected markets. These markets present unique challenges that require businesses to adapt their strategies to navigate and operate effectively.

We published a report on our efforts to address modern slavery under UK and Australian legislation, as well as reports on child labor and conflict minerals in our supply chain under Swiss and US legislation, respectively. We also published our second human rights report under the Norwegian Transparency Act.

Integrated assurance model

We have an integrated assurance model, which involves a comprehensive and consistent approach across the company to governance, risk management, compliance and internal controls. The integration is supported by an efficient operating model, processes and consistent methods, enabled by collaboration and data insights.

The integrated assurance model is driven by members of the Ethics, Risk and Compliance (ERC) function as business stewards, in collaboration with Internal Audit.

As the basis of our integrated assurance system, we follow a model for managing our risks developed by the Institute of Internal Auditors that describes three lines of assurance.

Employees addressing potential risks that might arise through their business activities represent the first line. Second-line roles provide expertise, support, monitoring and challenge on risk-related matters. In the third line, our Internal Audit function provides assurance that other lines are operating effectively.

Corporate ERC Assurance Team

The Corporate ERC Assurance Team serves as the backbone of our second line of assurance, ensuring one functional standard for how we approach assurance, including internal review, external partner audit activities, and remediation.

Its scope comprises internal reviews of compliance with our Doing Business Ethically, Health, Safety and Environment (HSE), and Ethical Use of Data and Technology policies, guidelines and handbooks. Corporate ERC Assurance also initiates audits with external partners on anti-bribery, labor rights, and HSE.

Through our Enterprise Monitoring Coordination process, we avoid overlaps of activities carried out by different assurance functions, including Internal Audit.

Internal Audit

As a third-line assurance function, Internal Audit assists the Board of Directors and the Executive Committee of Novartis (ECN) by providing assurance and advice on the effectiveness, efficiency and adequacy of processes and controls that support Novartis in achieving its strategy, managing major risks, and ensuring compliance with applicable policies, laws and regulations.

Internal Audit works according to an audit plan approved by the Board's Audit and Compliance Committee. During 2024, Internal Audit carried out 52 audits. These include the review of ethical standards.

Strategy and business model

Novartis is a focused medicines company. We use science-based innovation to address some of society's most challenging healthcare issues. Our mission is to improve and extend people's lives through innovative medicines, and we strive to be the most valued and trusted medicines company in the world.

Our strategy

Our strategy is to build a focused medicines company with leading positions in selected areas of high unmet medical need. We are organized into a single operating unit with an integrated research, development and commercial model designed to efficiently and effectively bring innovative medicines to patients who need them.

Our business model

We discover, develop, manufacture and market innovative medicines. Our business model is built around four strategic priorities:

1. Build leading positions in select areas of high unmet medical need: We focus our efforts on therapeutic areas where we can make the biggest difference for patients and where we have or can build competitive advantages.

2. Accelerate innovation with novel technologies and enhanced speed and quality: We leverage breakthrough technologies and reinvent R&D to deliver innovative medicines faster and more efficiently.

3. Grow and expand to new patient populations through innovative commercial approaches: We maximize the value of our medicines by reaching more patients through innovative commercial models and access strategies.

4. Leverage capabilities, scale and efficiency through a focused business model: We operate as one integrated medicines company to maximize efficiency and effectiveness across all our operations.

Value chain

Our value chain encompasses research and development, manufacturing and supply, distribution, and commercial activities. We work with suppliers, healthcare professionals, payers, and other stakeholders to ensure our medicines reach patients who need them.

In 2024, our medicines reached 296 million patients around the world. Our medicines are sold in approximately 120 countries worldwide.

Stakeholder engagement

As a global healthcare company, we engage with diverse stakeholders including patients, healthcare professionals, governments, payers, investors, employees, communities, and suppliers. We recognize that meaningful progress on healthcare challenges requires collaboration across the entire healthcare ecosystem.

We assess political, legislative and regulatory decisions that have a potential impact on patients and our industry. Furthermore, we participate in policy discussions with partners through various stakeholder dialogues and industry platforms.

Employee engagement

We measure employee engagement every quarter through a voluntary and anonymous survey. It is sent to all employees and carried out by an external vendor to ensure independence. Aggregated results are used to identify potential risks and make improvements to working conditions, training and development, access to support programs and other areas where necessary.

Human rights stakeholder engagement

Stakeholder engagement: We engage across industries, listen to stakeholder concerns, and take individual or collective action. We also engage in collaborative efforts with stakeholders from civil society, investor communities and international institutions (e.g., PSCI and Business for Social Responsibility's Human Rights Working Group) on our approach to human rights.

Supply chain engagement

We engage with key suppliers on their carbon footprint that contribute significantly to our Scope 3 emissions. We have so far onboarded and engaged with suppliers covering more than two-thirds of Scope 3 emissions.

We have introduced an Environmental Sustainability Supplier Playbook, which is designed to provide comprehensive guidance to our suppliers on transitioning to sustainable business models. The playbook has been shared with more than 1,000 suppliers and integrated into the Pharmaceutical Supply Chain Initiative's (PSCI) standard supplier learning plans.

Material impacts, risks and opportunities

The material impacts, risks and opportunities identified through our materiality assessment include:

Environmental

• Climate change: Transition risks including carbon pricing, physical risks from climate events, and opportunities from climate-related health conditions
• Water and marine resources: Water stress impacts on operations and supply chain
• Biodiversity and ecosystems: Nature-related impacts and dependencies
• Resource use and circular economy: Waste reduction and circular business models

Social

• Own workforce: Talent attraction, development and retention, diversity and inclusion
• Workers in value chain: Labor rights and working conditions in supply chain
• Affected communities: Community impacts from operations
• Consumers and end-users: Patient safety, product quality, access to medicines

Governance

• Business conduct: Ethical business practices, anti-corruption, human rights

Integration with strategy and business model

These material topics are integrated into our business strategy through:

• ESG governance structures with Board-level oversight
• Integration into enterprise risk management processes
• Inclusion in performance management and compensation
• Embedding in operational policies and procedures
• Regular monitoring and reporting on progress

Our strategy to build a focused medicines company addresses many of these material impacts by focusing on areas of high unmet medical need, accelerating innovation, and expanding access to new patient populations.

Materiality assessment process

We conduct regular materiality assessments to identify and evaluate the sustainability topics that are most relevant to our business and stakeholders. Our materiality assessment follows a structured approach aligned with ESRS requirements and other relevant standards.

Double materiality approach

Our assessment considers both:

• Impact materiality: How our business activities affect the environment, society and governance
• Financial materiality: How sustainability matters affect our financial performance and enterprise value

Stakeholder engagement in materiality assessment

We engage with key stakeholders including investors, employees, patients, healthcare professionals, regulators, and civil society organizations to understand their perspectives on material sustainability topics.

Regular review and updates

We regularly review and update our materiality assessment to ensure it remains current and reflects evolving stakeholder expectations, regulatory requirements, and business context. The assessment informs our ESG strategy, reporting, and risk management processes.

Integration with enterprise risk management

ESG issues are integrated into our Enterprise Risk Management (ERM) approach. We have internal policies and controls to minimize risks in areas such as human rights, health and safety, anti-bribery/corruption and environmental sustainability.

Based on our materiality assessment, Novartis has identified the following ESRS topics as material:

• ESRS 2: General disclosures
• E1: Climate change
• E3: Water and marine resources
• E4: Biodiversity and ecosystems
• E5: Resource use and circular economy
• S1: Own workforce
• S2: Workers in the value chain
• S3: Affected communities
• S4: Consumers and end-users
• G1: Business conduct

The following environmental topics were assessed as not material for Novartis:

• E2: Pollution - While we have environmental controls and monitor air and water quality, this was not identified as a material topic in our assessment

This sustainability statement covers all material ESRS disclosure requirements based on our materiality assessment. Where topics are deemed not material, this is disclosed in accordance with ESRS requirements.

Climate transition plan

We are committed to reaching net-zero greenhouse gas emissions by 2040 across our full value chain (Scopes 1, 2 and 3). This includes an interim target to reduce absolute Scope 1 and 2 emissions by 45% by 2030 compared with 2019, and Scope 3 emissions by 25% by 2030 compared with 2022.

Our transition plan includes:

Energy transition

• Transitioning to renewable electricity across our operations
• We have already achieved over 75% renewable electricity procurement globally
• Optimizing heating, ventilation and air conditioning systems
• Upgrading to energy-efficient equipment and improved building insulation

Supply chain decarbonization

• Engaging with suppliers covering more than two-thirds of Scope 3 emissions on their carbon footprint
• Implementing environmental sustainability criteria in supplier contracts (now covering 76% of Scope 3 emissions)
• Participating in WBCSD's Partnership for Carbon Transparency Pathfinder Framework for primary data exchange

Technology and innovation

• Investing in low-carbon technologies and processes
• Implementing sustainable sourcing programs
• Developing circular economy approaches to reduce emissions

Governance and monitoring

• Board-level oversight through Governance, Sustainability and Nomination Committee
• Regular monitoring and reporting of progress against targets
• Integration into enterprise risk management and compensation systems

Our transition plan is aligned with the Science Based Targets initiative (SBTi) and contributes to limiting global warming to 1.5°C.

Climate change mitigation policies

We have comprehensive policies and governance structures in place to address climate change:

Environmental Sustainability Strategy

Our Environmental Sustainability Strategy sets our commitment to reach net-zero greenhouse gas emissions by 2040 across our full value chain. The strategy is overseen by the Board's Governance, Sustainability and Nomination Committee.

Governance

We have established governance processes with the Executive Committee-level ESG Committee, chaired by the CEO, meeting every two months to review ESG performance including climate-related matters.

Supply chain policies

Contracts that include environmental sustainability criteria now cover 76% of Scope 3 emissions, which represents an increase of 19 ppts versus the previous year.

Our sourcing practices have evolved to reflect environmental sustainability criteria consistently, and we have introduced an Environmental Sustainability Supplier Playbook to provide comprehensive guidance to suppliers on transitioning to sustainable business models.

Climate change adaptation policies

Our approach to climate change adaptation involves assessing the evolving challenges posed by climate-related shifts in disease patterns and their potential implications for our portfolio and sales. Additionally, we evaluate the potential financial impacts of physical climate risks on our assets, inventories, operations and supply chain, including risks of potential supply disruption that may result in lost revenue.

We have established policies and processes to support the quality and resilience of our supply chain and manufacturing processes. For instance, we have mitigated physical risks to our sites by putting in place infrastructure (e.g., shelters, flood defenses), supported by administrative procedures (e.g., business continuity plans).

Actions and resources for climate change

Energy management

We have an active energy management system to optimize energy consumption based on site-specific requirements. We are implementing initiatives across our operations such as optimizing heating, ventilation and air conditioning, and upgrading to energy-efficient equipment and improved building insulation.

Renewable energy transition

We are transitioning to renewable electricity across our operations in partnership with Schneider Electric. We have achieved over 75% renewable electricity procurement globally.

Supply chain engagement

We engage with key suppliers on their carbon footprint that contribute significantly to our Scope 3 emissions. We have so far onboarded and engaged with suppliers covering more than two-thirds of Scope 3 emissions.

We have introduced an Environmental Sustainability Supplier Playbook, which has been shared with more than 1,000 suppliers and integrated into the Pharmaceutical Supply Chain Initiative's (PSCI) standard supplier learning plans.

Climate risk assessment

To further assess the resilience of our operations and supply chain to changes in physical climate events, we conduct annual climate-related scenario analyses. In 2024, we assessed all Novartis operating sites and warehouse inventories for vulnerability to 18 physical climate-related hazards across three time horizons.

Investment and resources

We continue to invest in low-carbon technologies, energy efficiency measures, and sustainable supply chain initiatives as part of our commitment to reach net-zero emissions by 2040.

Climate targets

Net-zero commitment

We are committed to reaching net-zero greenhouse gas emissions by 2040 across our full value chain (Scopes 1, 2 and 3).

Science-based targets

• Scope 1 and 2: Reduce absolute Scope 1 and 2 emissions by 45% by 2030 compared with 2019
• Scope 3: Reduce Scope 3 emissions by 25% by 2030 compared with 2022

Progress against targets

Our 2030 targets are validated by the Science Based Targets initiative (SBTi) and aligned with limiting global warming to 1.5°C.

Additional targets

• Over 75% renewable electricity procurement achieved globally
• Environmental sustainability criteria now cover 76% of Scope 3 emissions through supplier contracts

Energy consumption and mix

While specific detailed energy consumption data is not provided in the available sections, the report indicates:

Renewable energy

• We have achieved over 75% renewable electricity procurement globally
• We are transitioning to renewable electricity across our operations in partnership with Schneider Electric

Energy efficiency initiatives

• We have an active energy management system to optimize energy consumption based on site-specific requirements
• We are implementing initiatives across our operations such as optimizing heating, ventilation and air conditioning
• Upgrading to energy-efficient equipment and improved building insulation

Energy management

We continuously work to optimize our energy consumption through various efficiency measures and the transition to renewable energy sources as part of our commitment to reach net-zero emissions by 2040.

Greenhouse gas emissions

All figures in kt CO2e

Key notes:

1. Environmental data for the current year is based on actual performance data from January to September, with estimates for October to December, unless indicated otherwise. Any significant deviations from actuals data against these estimates will be restated for 2024 in our sustainability report the following year. 2022 and 2023 reflect full year actuals data. Data from the Novartis entity Abadia Retuerta is included in the 2024 environmental data.

2. Novartis follows the GHG Protocol for calculating the greenhouse gas emissions unless adjustments are required to comply with local regulations.

3. Scope 3 emissions are calculated based on actual performance data and estimates as outlined in the environmental performance table.

Progress

In 2024, our total Scope 3 emissions decreased by 5% from the prior year (13% compared with the 2022 baseline). The calculation of the purchased goods and services and capital goods categories, which account for 85% of total Scope 3 emissions, is still largely based on proxy data (spend) and statistical modelling through the Environmentally Extended Input Output model. The share of emission factors sourced from suppliers has increased to 33%.

Anticipated financial effects from climate-related impacts

Physical risks financial impact assessment

We conducted financial impact analysis focusing on two chronic (water and heat stress) and three acute (cyclones, flooding, and drought) physical risks.

Acute physical risk effects

Chronic physical risk effects

Climate-related opportunities

Shifts in temperature and air pollution affect disease patterns. This is likely to influence the prevalence and severity of certain health conditions, in particular cardiovascular diseases, respiratory conditions, kidney diseases, lung cancer, and communicable diseases such as malaria and dengue.

To understand the potential financial impact of these trends on our business, we have modelled the change in the disease burden of health conditions due to climate change as a proxy for changes in demand and hence in sales across three time horizons — 2030, 2040 and 2050.

Across all time horizons, on average we see a potential sales decrease for medicines used to treat ischemic heart disease and asthma due to expected declines in pollution levels. For lung cancer, results vary by region, with a potential decrease in sales driven by particulate matter levels in the US and Europe, and an increase in the regions Asia, Africa and Australasia, and Canada and Latin America.

Meanwhile, across all regions, a potential increase in sales driven by climate-related factors could occur for renal diseases. This effect is expected to be most pronounced in Asia, Africa and Australasia, with a potential increase in sales of 2.7% to 2.8% per USD million in sales by 2050.

Supply chain risk assessment

The analysis of our upstream value chain focused on assessing the current economic exposure levels to physical risk events. We found that 427 first-tier suppliers, representing 9% of our total third-party spend, are exposed to significant climate risk, including 12 with very high risk. In total, we found suppliers representing USD 119 million of revenue to be at risk.

Water and marine resources policies

We set minimum, mandatory requirements for the management of water, waste, wastewater and pharmaceuticals in the environment. Each part of the organization is required to protect the environment by reducing risk; to ensure individuals are appropriately skilled, competent and fit for performing their tasks properly; and to comply with environmental regulation.

We seek to minimize discharge of active pharmaceutical ingredients (APIs) into water systems, and do not dispose of waste containing APIs in landfill.

We regularly measure water and air quality to make sure we remain within limits permitted by applicable local regulation. Sites with established regulatory limits, conditions or specific limitations on discharges are responsible for collecting data on a periodic basis.

Sites also perform an annual self-assessment of their controls, and the assessments of a representative sample of sites are tested by an independent governance team each year. Conformance reviews and legal compliance audits are conducted at least every five years.

Water management actions and resources

Water consumption reduction

In 2024, we reduced our water consumption by 9% from the prior year, bringing the reduction to 57% since 2016. With this we have met, and seek to maintain, our 2025 target. In 2024, we continued to reduce consumption by using more recycled water (where local regulations allow) and adopting less water-intensive production techniques.

Water quality management

As of the end of 2024, 97% of Novartis manufacturing sites can demonstrate that they meet internal water quality standards.

Further, we increased engagement with our manufacturing suppliers around their maturity in managing their impact on aquatic environments, particularly concerning effluents containing active pharmaceutical ingredients (APIs). As a result, 100% of our high-risk suppliers met our water quality standards in 2024, compared with 88% in 2023. These assessments are conducted in alignment with the framework to tackle antimicrobial resistance (AMR) laid out by the AMR Industry Alliance.

We have developed a plan to expand internal water quality standards to Novartis R&D locations and all API suppliers in scope.

Nature assessment

By 2030, we plan to implement water use reductions for own and supplier sites based in water stressed basins that have potential material impacts on these basins. We will set site-specific targets for both our own and supplier sites in these areas. Sites are identified through our nature assessment, which follows the TNFD framework and guidance by the Science Based Targets Network (SBTN).

Water targets

Water consumption reduction target

• Target: Reduce water consumption in our own operations by half by 2025, compared with our 2016 baseline
• Progress: 57% reduction achieved since 2016 - target met and maintained

Water quality targets

• 2025 target: No water quality impacts from manufacturing effluents by 2025

  • Manufacturing sites meeting water quality standards: 97% (2024)
  • High-risk suppliers meeting water quality standards: 100% (2024)

• 2030 target: No water quality impacts from manufacturing effluents by 2030

  • Own sites meeting water quality standards: 100% target (including all manufacturing sites and labs)
  • All suppliers meeting water quality standards: 100% target (including all suppliers of active pharmaceutical ingredients)

Water stress basin targets

• Target: Implement water use reduction for own and supplier sites based in water stressed basins
• Status: Site-specific targets to be set for material sites in own operations and upstream suppliers

Basin-specific targets will be established for material sites in own operations and upstream suppliers.

Water consumption data

Water usage performance indicators

Water consumption target progress

Key notes:

1. 2023 and 2022 water usage performance indicators have been updated from the prior year published performance indicators to include the Novartis entity Abadia Retuerta and a revised estimate from the Sandoz/Novartis split for manufacturing operations in Austria after segregated meter reading data was available.

2. The definition for water consumption was changed to align with the GRI standards. In previous years, water discharged via treatment was included in water consumption and it has now been classified as water discharged.

3. Water withdrawal includes water used for cooling and returned to the environment without the need for additional treatment.

4. Total water consumption is defined as total volume of water withdrawn by an organization, less any water discharged outside of the site boundaries through municipal waste water systems or directly to aquatic environments.

5. Target water consumption includes water discharged via treatment and water lost through evaporation or other destinations.

6. Environmental data excludes water usage at the Novartis entity Abadia Retuerta.

Biodiversity and ecosystems transition plan

We have begun assessing and evaluating nature-related risks and opportunities in our operations and upstream supply chain using the LEAP approach (Locate, Evaluate, Assess and Prepare) developed by the Taskforce on Nature-related Financial Disclosures (TNFD). We are assessing the role of biodiversity to complement water and waste as nature-related pillars of our environmental sustainability strategy as our understanding of impacts, risk and dependencies matures.

In 2024, we conducted a nature assessment for own operations and upstream supply chain, aligned with the TNFD LEAP approach. In 2025, we will conduct further analysis to understand the impact on Novartis, the environment and society, including an assessment of downstream value chain impacts. In parallel, we are working with industry peers and WBCSD on an industry-specific roadmap on nature.

Potential material impacts from our own operations and upstream supply chain include those related to climate, water and raw material use. All but raw material use are covered by our existing environmental sustainability strategy. We therefore aim to implement a sustainable sourcing program, starting with a pilot in 2025. In parallel, we are conducting nature assessments at priority sites close to nature-sensitive areas. Where material, we will establish site-specific nature management plans.

The impact from our own operations is driven by GHG emissions, water use and water quality. The impact in our upstream supply chain is mainly driven by GHG emissions, water use, water quality and land use from raw materials.

Biodiversity and ecosystems policies

We set minimum, mandatory requirements for the management of water, waste, wastewater and pharmaceuticals in the environment. Each part of the organization is required to protect the environment by reducing risk; to ensure individuals are appropriately skilled, competent and fit for performing their tasks properly; and to comply with environmental regulation.

Our environmental sustainability strategy includes nature-related considerations, and we are developing specific policies for biodiversity and ecosystems management based on our ongoing nature assessments.

By 2030, we plan to implement water use reductions for own and supplier sites based in water stressed basins that have potential material impacts on these basins. Sites are identified through our nature assessment, which follows the TNFD framework and guidance by the Science Based Targets Network (SBTN).

Actions and resources for biodiversity and ecosystems

Nature assessment implementation

In 2024, we conducted a nature assessment for own operations and upstream supply chain, aligned with the TNFD LEAP approach. In 2025, we will conduct further analysis to understand the impact on Novartis, the environment and society, including an assessment of downstream value chain impacts.

Industry collaboration

In parallel, we are working with industry peers and WBCSD on an industry-specific roadmap on nature.

Sustainable sourcing program

We therefore aim to implement a sustainable sourcing program, starting with a pilot in 2025. In parallel, we are conducting nature assessments at priority sites close to nature-sensitive areas.

Site-specific management plans

Where material, we will establish site-specific nature management plans for priority sites close to nature-sensitive areas.

Integration with existing programs

Potential material impacts from our own operations and upstream supply chain include those related to climate, water and raw material use. All but raw material use are covered by our existing environmental sustainability strategy.

Biodiversity and ecosystems targets

While we are in the early stages of developing specific biodiversity targets, our approach includes:

Water stressed basins

By 2030, we plan to implement water use reductions for own and supplier sites based in water stressed basins that have potential material impacts on these basins. We will set site-specific targets for both our own and supplier sites in these areas.

Site-specific targets

Basin-specific targets will be established for material sites in own operations and upstream suppliers, identified through our nature assessment which follows the TNFD framework and guidance by the Science Based Targets Network (SBTN).

Future target development

As our understanding of impacts, risk and dependencies matures through our ongoing nature assessments, we will develop more specific targets for biodiversity and ecosystems management.

Resource use and circular economy policies

We set minimum, mandatory requirements for the management of water, waste, wastewater and pharmaceuticals in the environment. Each part of the organization is required to protect the environment by reducing risk; to ensure individuals are appropriately skilled, competent and fit for performing their tasks properly; and to comply with environmental regulation.

We seek to minimize discharge of active pharmaceutical ingredients (APIs) into water systems, and do not dispose of waste containing APIs in landfill.

Waste management policies

We have established policies for waste reduction and circular economy approaches:

• Reduce the amount of waste sent for disposal by half by 2025, compared with a 2016 baseline
• Further reduce our impact with a new target to reduce the amount of waste sent for disposal by 30% by 2030, compared with a more recent 2022 baseline
• Eliminate polyvinyl chloride (PVC), a long-lasting plastic, in secondary and tertiary packaging at Novartis sites by 2025

Circular economy approach

As part of our continued commitment to waste reduction and the use of recycled materials, we focus on improving process efficiencies and using more recycled plastics and reusable shipping boxes.

Actions and resources for resource use and circular economy

Waste reduction activities in 2024

In 2024, we reduced the amount of waste sent for disposal by 17% from the prior year, bringing the reduction to 72% since 2016. With this we have met, and seek to maintain, our 2025 target. Further, we reduced the amount of waste sent for disposal by 23% since 2022 (our baseline for 2030 targets).

Circular economy initiatives

As part of our continued commitment to waste reduction and the use of recycled materials, in 2024 we improved process efficiencies and used more recycled plastics and reusable shipping boxes.

PVC elimination

By the end of 2024, we had eliminated 100% of PVC in packaging compared with 2016. Our 2025 target is applicable for 24 manufacturing sites handling final product packaging, all of which have already eliminated PVC in secondary and tertiary product packaging.

Plastics reduction

We have established a baseline for reducing plastics in packaging and devices and have continued to remove single-use plastics in workplaces.

Resource use and circular economy targets

Waste reduction targets

PVC elimination target

Additional commitments

• Established baseline for reducing plastics in packaging and devices
• Continued removal of single-use plastics in workplaces
• Focus on using more recycled plastics and reusable shipping boxes

Resource inflows

While specific detailed resource inflow data is not provided in the available sections, the report indicates our focus on:

Raw materials and sustainable sourcing

Potential material impacts from our own operations and upstream supply chain include those related to climate, water and raw material use. All but raw material use are covered by our existing environmental sustainability strategy. We therefore aim to implement a sustainable sourcing program, starting with a pilot in 2025.

Recycled materials

As part of our continued commitment to waste reduction and the use of recycled materials, in 2024 we improved process efficiencies and used more recycled plastics and reusable shipping boxes.

Water usage

Our water consumption data shows:

We continued to reduce consumption by using more recycled water (where local regulations allow) and adopting less water-intensive production techniques.

Resource outflows

Waste generation and management

Water discharges

Progress on waste reduction

In 2024, we reduced the amount of waste sent for disposal by 17% from the prior year, bringing the reduction to 72% since 2016. We have met and seek to maintain our 2025 target of reducing waste sent for disposal by 50% compared with 2016.

Circular economy achievements

By the end of 2024, we had eliminated 100% of PVC in packaging compared with 2016, meeting our 2025 target for 24 manufacturing sites handling final product packaging.

API waste management

We seek to minimize discharge of active pharmaceutical ingredients (APIs) into water systems, and do not dispose of waste containing APIs in landfill.

Waste

Waste targets:

• 2025 target: Reduce waste sent for disposal by 50% from 2016 baseline – Achieved (72% reduction achieved)
• 2030 target: Reduce waste sent for disposal by 30% from 2022 baseline – On track (23% reduction achieved by 2024)

2024 waste performance:

Waste management approach:

• In 2024, reduced waste sent for disposal by 17% from prior year, bringing the reduction to 72% since 2016
• Reduced the amount of waste sent for disposal by 23% since 2022 (baseline for 2030 targets)
• Improved process efficiencies and used more recycled materials and reusable shipping boxes
• Do not dispose of waste containing active pharmaceutical ingredients (APIs) in landfill
• Minimum mandatory requirements set for management of waste
• Sites required to protect the environment by reducing risk through established controls

Data scope:

• Environmental data for 2024 based on actuals from January to September, with estimates for October to December
• 2022 and 2023 data reflect full year actuals
• Excludes wastage at the Novartis entity Abadia Retuerta
• 2024 data in scope for external limited assurance

Policies related to own workforce

People & Organization Commitment Statement

Our People & Organization Commitment Statement supports our commitment to fair and respectful treatment of employees and to their development and growth. It also outlines how we support our overall commitment to uphold human rights for employees, to treat them with dignity and respect, and to provide equal opportunities.

Code of Ethics

Guided by global principles, we seek to create a fair and inclusive work environment by building an inspired, curious and unbossed culture. Our approach is rooted in our culture and values, encouraging our employees to always act with integrity. We have a Code of Ethics, which is a fundamental part of the terms of employment for all employees of Novartis globally.

Equal opportunity and non-discrimination

All employment decisions at Novartis are based solely on job-related factors, including the skills, qualifications, and experience of the individual, without regard to gender, race, ethnicity, or any other protected characteristics, as defined by applicable local laws. Novartis, as a global company, complies with the laws of each country within which it operates.

Pay equity principles

Pay equity (i.e. paying employees fairly for similar work based solely on job-related factors) is a fundamental principle of our employment policies, reflecting a commitment in our Code of Ethics to treat all employees fairly and respectfully.

Health and safety

We are committed to occupational health and safety and have built this into our Code of Ethics. We have an internal health, safety and environmental (HSE) management system that requires the implementation across our sites of strict health and safety controls that go beyond legal minimum requirements.

Processes for engaging with own workforce

Employee engagement surveys

We measure employee engagement every quarter through a voluntary and anonymous survey. It is sent to all employees and carried out by an external vendor to ensure independence. Aggregated results are used to identify potential risks and make improvements to working conditions, training and development, access to support programs and other areas where necessary.

Wellbeing monitoring

We maintain a Wellbeing Index, based on our quarterly employee engagement survey, which monitors perceptions of work-life balance and our commitment to wellbeing. This data is used to customize our mental health and wellbeing offerings.

Performance management

Our approach to managing performance includes frequent check-ins between managers and employees on goals, career development, feedback and wellbeing. It is designed to focus teams on activities that create the greatest near- and long-term impact.

Employee resource groups

More than 80 employee resource groups for business-related and cultural topics, which are open to all employees from all backgrounds, create a sense of belonging while offering members an opportunity for personal growth and development.

Collective bargaining and representation

The proportion of employees represented by an employee representative body or covered by a collective bargaining agreement rose slightly to 54% in 2024.

Processes to remediate negative impacts and channels for workforce to raise concerns

SpeakUp grievance mechanism

Employees are required to report actual or suspected incidents of misconduct and can do so in confidence while being protected against retaliation. The mechanism is also open to external parties.

Grievances can be filed via webform or telephone with an independent external service, which is available 24/7. Allegations can also be raised with any manager or Country President, any employee of our ERC, People & Organization, Legal or Global Security teams, or any representative of the local workers council.

Investigation and remediation process

Our process helps ensure that complaints are swiftly received, risk-assessed, prioritized, investigated and resolved. Allegations that represent a higher risk to Novartis are investigated centrally by dedicated investigators. Lower-risk cases are investigated or addressed locally.

After closure of an investigation, we have a remediation process that allows for both the allegation and the root cause to be addressed. Higher-risk cases that are substantiated undergo a central remediation process managed in close collaboration with our second line of assurance, the Corporate ERC Assurance team.

Employee surveys and feedback

Regular surveys (Employee Engagement Survey and Ethics Survey) provide insights on how comfortable Novartis employees feel to speak up.

ListenUp campaign

The ListenUp campaign aims to equip people managers to adequately respond to and address issues raised by their team members.

Taking action on material impacts and managing risks and opportunities

Talent management and development

We recognize that preparing for the future requires a workforce with a depth and breadth of skills. That is why we invest in the development of our people for current and future skills, offering access to business-critical, personal and professional development training.

We also place emphasis on continuous learning, career development and employees taking full ownership of their growth, guided by their manager and supported through enterprise tools and solutions.

Leadership development

We invest in our leaders to strengthen their ability to lead and develop people, navigate complexity, and deliver collective impact. We develop our leaders based on their needs and role, through training programs and on-demand measures, such as individual coaching and team effectiveness resources.

AI-enabled talent marketplace

Employees can use internal AI-based platforms to manage how they learn, find new roles, and develop their skills and experiences through new projects, job rotations, mentoring or volunteering.

Early career programs

In 2024, we enhanced our Early Career program to identify, hire and develop early career talent linked to future skill gaps, so that the business has pools of early career talent with the right specialized knowledge, skills and experiences.

AI upskilling

Additionally, we launched AI upskilling efforts to equip our workforce with the skills to leverage AI technologies, driving innovation and improving efficiency.

Mental health and wellbeing

We offer support and learning tools to help employees care for themselves and others by prioritizing their mental health and wellbeing. Through global and local campaigns and engagement activities, we build awareness and de-stigmatize the conversation around mental health.

We have a training program for Mental Health First Aiders, who are equipped with the skills and confidence to have supportive confidential conversations with coworkers and peers, and guide them to the appropriate professional support if needed.

Targets related to managing impacts, risks and opportunities

Human capital aspirations

Pay equity and transparency targets

EPIC commitments for 2027

We renewed our EPIC pledge in 2023 with aspirational goals for 2027:

• To maintain gender-balanced representation in management
• To review our human resources practices beyond base pay to eliminate any further potential sources of bias from the system
• To make the requirements of the new EU Pay Transparency Directive our global minimum standard for pay equity and pay transparency reporting

Future targets

• Employees covered by regular pay equity study for total pay: 2027 target (planning of global program started)
• Employees with total pay transparency to internal benchmarks: 2027 target (planning of global program started)
• Employees covered by review and remediation planning for key HR processes: 2027 target (review of global policies and procedures started)

Characteristics of employees

Headcount and employment

Novartis employed 78,310 people at the end of 2024, compared with 78,407 a year earlier. In 2024, employee turnover stood at 12%, down from 17% a year earlier.

Gender representation

Collective bargaining coverage

Employees represented by an employee representative body or covered by a collective bargaining agreement: 54% in 2024, compared with 53% in 2023 and 48% in 2022.

Collective bargaining coverage and social dialogue

Collective bargaining coverage

The proportion of employees represented by an employee representative body or covered by a collective bargaining agreement rose slightly to 54% in 2024.

Social dialogue mechanisms

Employees can raise concerns through various channels:

• Any manager or Country President
• Any employee of our ERC, People & Organization, Legal or Global Security teams
• Any representative of the local workers council
• SpeakUp grievance mechanism via webform or telephone with an independent external service available 24/7

Employee engagement

We measure employee engagement every quarter through a voluntary and anonymous survey sent to all employees and carried out by an external vendor to ensure independence.

Diversity metrics

Gender representation across organizational levels

Gender balance commitment

We maintained a gender balance in management (providing equal opportunities for both men and women to advance), with women representing 48% of our overall management globally at the end of 2024.

LGBTQI inclusion

In 2024, we rolled-out an LGBTQI Ambassador program to provide allyship and support to our community across the organization.

Employee resource groups

More than 80 employee resource groups for business-related and cultural topics, which are open to all employees from all backgrounds, create a sense of belonging while offering members an opportunity for personal growth and development.

Inclusive culture principles

To build a fair and inclusive workplace, we embed principles of fairness, equal opportunity, and belonging in internal policies and controls, including our Code of Ethics.

Board diversity considerations

When choosing new members to propose to the AGM, the Board aims for a balance of skills, expertise and experience. The Board considers gender, age, nationality, ethnicity, viewpoints, professional background and expertise in its selection process.

Adequate wages

Living wage commitment

We are committed to paying employees a living wage that meets or exceeds the amount for basic living needs, in line with our UN Global Compact commitment.

Pay equity principles

Pay equity (i.e. paying employees fairly for similar work based solely on job-related factors) is a fundamental principle of our employment policies, reflecting a commitment in our Code of Ethics to treat all employees fairly and respectfully.

Global pay gap results

Based on the latest data available as of December 31, 2023, women's earnings at Novartis in the aggregate are within one percent of men's, with a global mean pay gap of -0.3%. This compares with a gap of -0.9% in 2022. Companies in the benchmark Bloomberg Gender Equality Index had a mean pay gap of +17% for the same period.

EPIC commitments

In addition to our EPIC pledge, we are committed to paying employees a living wage that meets or exceeds the amount for basic living needs, in line with our UN Global Compact commitment.

Pay equity coverage

100% coverage is achieved when considering exclusions mainly due to contractual or legal constraints and the ongoing integration of acquired businesses.

Social protection

Comprehensive benefits package

We offer a range of competitive local and global benefits. Our local Novartis retirement, health and welfare plans protect employees against the financial consequences of disability or death, and provide attractive retirement benefits aligned with local social security requirements.

Employee Share Purchase Plan

Our Employee Share Purchase Plan (ESPP) enables permanent employees to voluntarily purchase Novartis shares at a 15% discount. The plan covers a majority of Novartis employees and its rollout to additional countries is assessed annually.

Parental leave

Parental leave is available to all employees regardless of gender or sexual orientation. New parents get a minimum of 14 weeks paid leave following the birth or adoption of a child, ensuring greater flexibility for birthing and non-birthing parents.

Flexible working arrangements

We provide a flexible, hybrid work environment that allows employees to balance their professional and personal responsibilities.

Mental health support

We offer support and learning tools to help employees care for themselves and others by prioritizing their mental health and wellbeing. We have a training program for Mental Health First Aiders, who are equipped with the skills and confidence to have supportive confidential conversations with coworkers and peers.

Persons with disabilities

Disability inclusion commitment

Novartis is a member of the International Labour Organization Global Business and Disability Network and the Valuable 500, promoting inclusion for people with disabilities in the workplace.

Partnership and collaboration

We also collaborate with international partners, such as Disability:IN, Purple Space and Business Disability Forum, to identify and develop best practice solutions to enable people with disabilities to participate as equal members of our organization.

Accessibility initiatives

Examples of this work include increasing physical and digital accessibility while integrating disability perspectives in relevant standards and practices.

Anti-discrimination policy

In accordance with the UN Standards of Conduct for Business, we also strive to tackle discrimination against employees who are lesbian, gay, bisexual, transgender, queer and intersex (LGBTQI).

Training and skills development metrics

Learning hours

Training and development approach

We recognize that preparing for the future requires a workforce with a depth and breadth of skills. That is why we invest in the development of our people for current and future skills, offering access to business-critical, personal and professional development training.

We also place emphasis on continuous learning, career development and employees taking full ownership of their growth, guided by their manager and supported through enterprise tools and solutions.

AI-enabled talent marketplace

In 2024, we ramped up the opportunities for our people to learn and apply new skills through our AI-enabled talent marketplace. Employees can use internal AI-based platforms to manage how they learn, find new roles, and develop their skills and experiences through new projects, job rotations, mentoring or volunteering.

Early career development

We enhanced our Early Career program to identify, hire and develop early career talent linked to future skill gaps, so that the business has pools of early career talent with the right specialized knowledge, skills and experiences.

AI upskilling

Additionally, we launched AI upskilling efforts to equip our workforce with the skills to leverage AI technologies, driving innovation and improving efficiency.

Leadership development

We invest in our leaders to strengthen their ability to lead and develop people, navigate complexity, and deliver collective impact. We develop our leaders based on their needs and role, through training programs and on-demand measures, such as individual coaching and team effectiveness resources.

Health and safety metrics

Injury and illness rates

Fatalities

HSE system coverage

Performance analysis

The lost-time incident rate for employees remained stable and fell slightly for third-party personnel, reflecting the continued reinforcement of our internal HSE Management system at site level. In 2024, the implementation of the HSE system was reviewed via our internal controls process and this assessment covered more than 99% of Novartis employees.

Work-life balance metrics

Wellbeing monitoring

We maintain a Wellbeing Index, based on our quarterly employee engagement survey, which monitors perceptions of work-life balance and our commitment to wellbeing. This data is used to customize our mental health and wellbeing offerings.

Flexible working arrangements

We provide a flexible, hybrid work environment that allows employees to balance their professional and personal responsibilities.

Parental leave

Parental leave is available to all employees regardless of gender or sexual orientation. New parents get a minimum of 14 weeks paid leave following the birth or adoption of a child, ensuring greater flexibility for birthing and non-birthing parents.

Employee engagement

We measure employee engagement every quarter through a voluntary and anonymous survey. It is sent to all employees and carried out by an external vendor to ensure independence.

Mental health and wellbeing support

We offer support and learning tools to help employees care for themselves and others by prioritizing their mental health and wellbeing. Through global and local campaigns and engagement activities, we build awareness and de-stigmatize the conversation around mental health.

We have a training program for Mental Health First Aiders, who are equipped with the skills and confidence to have supportive confidential conversations with coworkers and peers, and guide them to the appropriate professional support if needed.

Compensation metrics (pay gap and total compensation)

Gender pay gap

Based on the latest data available as of December 31, 2023, women's earnings at Novartis in the aggregate are within one percent of men's, with a global mean pay gap of -0.3%. This compares with a gap of -0.9% in 2022. Companies in the benchmark Bloomberg Gender Equality Index had a mean pay gap of +17% for the same period.

Pay equity coverage

Pay transparency initiatives

In 2024, we began reviewing our human resources practices beyond base pay to eliminate any further potential sources of gender bias from the system, starting with a review of global policies and procedures.

We also started planning a global program to make the requirements of the new EU Pay Transparency Directive our global minimum standard for pay equity and pay transparency reporting.

Employee Share Purchase Plan

Our Employee Share Purchase Plan (ESPP) enables permanent employees to voluntarily purchase Novartis shares at a 15% discount. The plan covers a majority of Novartis employees.

Global recognition program

Our global recognition program, Spark, encourages employees to recognize colleagues who have demonstrated behavior consistent with our culture and values.

EPIC commitments

We renewed our EPIC pledge in 2023 with aspirational goals for 2027 to maintain gender-balanced representation in management and make the requirements of the new EU Pay Transparency Directive our global minimum standard for pay equity and pay transparency reporting.

Incidents, complaints and severe human rights impacts

SpeakUp grievance mechanism results

Analysis of 2024 results

In 2024, a total of 1,607 allegations of misconduct were handled by the SpeakUp Office, compared with 2,059 in 2023. Of the total allegations in 2024, 946 (59%) were classified as higher-risk misconduct allegations warranting investigation by a central team. In 2024, 921 allegations related to higher-risk misconduct have been substantiated. These include allegations reported in previous years and concluded in 2024. Lower-risk allegations are addressed or investigated locally.

IT and data privacy incidents

We observed an increase in IT and data privacy allegations being substantiated in 2024, predominantly linked to data loss cases (allegations opened in 2023 were also included). The majority of data-loss cases are internally classified as higher risk allegations, centrally investigated and have a high substantiation rate due to automated detection measures. The number of substantiated allegations indicates that the detection measures are effective at identifying data leakages.

Investigation and remediation process

Allegations that represent a higher risk to Novartis from a reputational, business, financial, legal, and/or quality or safety perspective are investigated centrally by dedicated investigators. Lower-risk cases are investigated or addressed locally.

After closure of an investigation, we have a remediation process that allows for both the allegation and the root cause to be addressed. Higher-risk cases that are substantiated undergo a central remediation process managed in close collaboration with our second line of assurance, the Corporate ERC Assurance team.

Human rights incidents

The report does not detail specific severe human rights incidents, but indicates comprehensive monitoring through the SpeakUp mechanism and human rights due diligence processes across operations and supply chain.

Policies related to value chain workers

Third Party Code

Our external partner risk management (EPRM) framework is supported by our Third Party Code, which sets out the standards we oblige external partners to comply with, including human rights and environmental sustainability. Our Third Party Code is consistent with the Pharmaceutical Supply Chain Initiative (PSCI) principles for responsible supply-chain management. It is also in line with the UNGPs, as well as the OECD due diligence guidance for responsible business conduct.

Human rights commitment

Novartis is committed to upholding and respecting human rights. In our Code of Ethics, we commit to "conduct our business in a manner that respects the rights and dignity of all people." This is reflected in our Human Rights Commitment Statement, which establishes our foundational commitment to the International Bill of Human Rights, the International Labour Organization's core labor conventions and the United Nations Guiding Principles on Business and Human Rights (UNGPs).

Supply chain due diligence

External partners are regularly assessed and monitored against the labor and human rights provisions set out in our Third Party Code. We have a monitoring system in place that tracks remediation actions regarding human and labor rights at external partner sites, and their successful resolution through time-bound corrective action plans.

Supplier requirements

Bribery and corruption risks in our supply chain are addressed by our Anti-Bribery Third Party Guideline and Third Party Code. The Code is an integral part of every supplier contract. Our suppliers are regularly surveyed through audits that we commission from external companies, applying a risk-based approach.

Processes for engaging with value chain workers about impacts

Direct worker engagement

We concluded a pilot project aimed at engaging directly with workers in our supply chain. This involved a comprehensive survey on working conditions. To address the survey's findings, we are actively providing ongoing capability-building support to strengthen our external partners' ability to implement effective solutions.

Supplier engagement and assessment

All suppliers are subject to risk assessments when we engage with them and at a regular frequency thereafter. Suppliers flagged for high risk are subject to an onsite audit by our integrated assurance team.

PSCI collaboration

We collaborate with industry partners such as the Pharmaceutical Supply Chain Initiative (PSCI) on topic-specific supply-chain projects.

Supplier capability building

In January 2024, we introduced a redesigned and largely automated process to risk assessments to gain speed, improve quality and cover additional risk areas (e.g., business continuity management and human rights risks related to certain raw materials).

We are actively providing ongoing capability-building support to strengthen our external partners' ability to implement effective solutions based on survey findings from direct worker engagement.

Processes to remediate negative impacts and channels for value chain workers

External grievance mechanism

Our SpeakUp grievance mechanism is also open to external parties, including value chain workers. Grievances can be filed via webform or telephone with an independent external service, which is available 24/7.

Remediation monitoring system

We have a monitoring system in place that tracks remediation actions regarding human and labor rights at external partner sites, and their successful resolution through time-bound corrective action plans.

2024 remediation activities

Overall, we identified 2,615 remediation actions with our suppliers. Of these, 302 were associated with human and labor rights. The increase of remediation actions in 2024 was mainly driven by new assessment categories added by the Pharmaceutical Supply Chain Initiative (PSCI), as well as the finalization of legacy supplier assessments.

Capability building support

To address survey findings from direct worker engagement, we are actively providing ongoing capability-building support to strengthen our external partners' ability to implement effective solutions.

Third-party audits

We carry out risk assessments and selected audits among external partners in various risk areas including human rights; health, safety and environment; labor rights; information security; anti-bribery and corruption, and; business continuity management.

Taking action on material impacts on value chain workers

Enhanced due diligence framework

In alignment with the evolving regulatory landscape on value chain due diligence, we also enhanced our external partner labor rights due diligence and risk assessment framework.

Risk-based approach

The due diligence efforts are applied in proportion to the level of identified risk, which is determined by the probability and severity of potential adverse impacts. We carry out risk assessments and selected audits among external partners in various risk areas including human rights; health, safety and environment; labor rights; information security; anti-bribery and corruption, and; business continuity management.

Supplier risk assessment

All suppliers are subject to risk assessments when we engage with them and at a regular frequency thereafter. Suppliers flagged for high risk are subject to an onsite audit by our integrated assurance team.

High-risk market support

In 2024, we continued to develop human rights due diligence tools and processes to further support our operations in high risk and conflict-affected markets. These markets present unique challenges that require businesses to adapt their strategies to navigate and operate effectively.

Automated assessment process

In January 2024, we introduced a redesigned and largely automated process to risk assessments to gain speed, improve quality and cover additional risk areas (e.g., business continuity management and human rights risks related to certain raw materials).

Industry collaboration

We collaborate with industry partners such as the Pharmaceutical Supply Chain Initiative (PSCI) on topic-specific supply-chain projects.

Targets related to managing material negative impacts on value chain workers

Remediation targets and progress

Continuous improvement commitment

We are committed to reducing the percentage of overdue human and labor rights remediation actions and strengthening our external partners' ability to implement effective solutions.

Enhanced assessment coverage

The increase of remediation actions in 2024 was mainly driven by new assessment categories added by the Pharmaceutical Supply Chain Initiative (PSCI), as well as the finalization of legacy supplier assessments, demonstrating expanded coverage of value chain worker risks.

Capability building objectives

We are actively providing ongoing capability-building support to strengthen our external partners' ability to implement effective solutions based on findings from direct worker engagement surveys.

Integration with sustainability criteria

Contracts that include environmental sustainability criteria now cover 76% of Scope 3 emissions, which represents an increase of 19 ppts versus the previous year, demonstrating integration of sustainability requirements into supplier relationships.

Policies related to affected communities

Human Rights Commitment Statement

Our Human Rights Commitment Statement establishes our foundational commitment to the International Bill of Human Rights, the International Labour Organization's core labor conventions and the United Nations Guiding Principles on Business and Human Rights (UNGPs).

Code of Ethics

In our Code of Ethics, we commit to "conduct our business in a manner that respects the rights and dignity of all people."

Environmental policies

We set minimum, mandatory requirements for the management of water, waste, wastewater and pharmaceuticals in the environment. Each part of the organization is required to protect the environment by reducing risk; to ensure individuals are appropriately skilled, competent and fit for performing their tasks properly; and to comply with environmental regulation.

Community health considerations

We regularly measure water and air quality to make sure we remain within limits permitted by applicable local regulation. Sites with established regulatory limits, conditions or specific limitations on discharges are responsible for collecting data on a periodic basis.

Stakeholder engagement commitment

We engage across industries, listen to stakeholder concerns, and take individual or collective action. We also engage in collaborative efforts with stakeholders from civil society, investor communities and international institutions on our approach to human rights.

Processes for engaging with affected communities about impacts

Stakeholder engagement approach

We engage across industries, listen to stakeholder concerns, and take individual or collective action. We also engage in collaborative efforts with stakeholders from civil society, investor communities and international institutions (e.g., PSCI and Business for Social Responsibility's Human Rights Working Group) on our approach to human rights.

External grievance mechanism

Our SpeakUp grievance mechanism is also open to external parties, including community members. Grievances can be filed via webform or telephone with an independent external service, which is available 24/7.

Nature assessment process

In 2024, we conducted a nature assessment for own operations and upstream supply chain, aligned with the TNFD LEAP approach. In 2025, we will conduct further analysis to understand the impact on Novartis, the environment and society, including an assessment of downstream value chain impacts.

Local community monitoring

We regularly measure water and air quality to make sure we remain within limits permitted by applicable local regulation, which helps protect community health and environment.

Industry collaboration

We participate in policy discussions with partners through various stakeholder dialogues and industry platforms, which includes engagement with community representatives and civil society organizations.

Processes to remediate negative impacts and channels for affected communities

External grievance mechanism access

Our SpeakUp grievance mechanism is open to external parties, including affected community members. Grievances can be filed via webform or telephone with an independent external service, which is available 24/7.

Environmental compliance and remediation

Sites perform an annual self-assessment of their controls, and the assessments of a representative sample of sites are tested by an independent governance team each year. Conformance reviews and legal compliance audits are conducted at least every five years.

Community impact assessment

We conduct ongoing human rights due diligence across our business and ensure that we have policies and management systems in place to support our commitments, which includes consideration of community impacts.

Stakeholder collaboration on remediation

We engage in collaborative efforts with stakeholders from civil society, investor communities and international institutions (e.g., PSCI and Business for Social Responsibility's Human Rights Working Group) on our approach to human rights and community impact remediation.

Environmental monitoring for community protection

We regularly measure water and air quality to make sure we remain within limits permitted by applicable local regulation, with results that help protect community health and environment.

Taking action on material impacts on affected communities

Human rights risk assessment

In early 2024, we completed our company-wide annual human rights risk saliency assessment. This reaffirmed our focus on four previously identified priority areas, which include considerations of community impacts.

Nature and biodiversity assessment

We are conducting nature assessments at priority sites close to nature-sensitive areas. Where material, we will establish site-specific nature management plans.

In 2024, we conducted a nature assessment for own operations and upstream supply chain, aligned with the TNFD LEAP approach. In 2025, we will conduct further analysis to understand the impact on Novartis, the environment and society, including an assessment of downstream value chain impacts.

Environmental protection measures

We have mitigated physical risks to our sites by putting in place infrastructure (e.g., shelters, flood defenses), supported by administrative procedures (e.g., business continuity plans). These measures also help protect surrounding communities.

Water and environmental quality

We seek to minimize discharge of active pharmaceutical ingredients (APIs) into water systems, and do not dispose of waste containing APIs in landfill, which protects community water resources.

As of the end of 2024, 97% of Novartis manufacturing sites can demonstrate that they meet internal water quality standards, helping protect community water resources.

Community health considerations

Shifts in temperature and air pollution affect disease patterns. This is likely to influence the prevalence and severity of certain health conditions, in particular cardiovascular diseases, respiratory conditions, kidney diseases, lung cancer, and communicable diseases such as malaria and dengue. We consider these broader community health impacts in our climate adaptation strategies.

Targets related to managing material impacts on affected communities

Environmental targets supporting community protection

Water quality targets

• 2025 target: No water quality impacts from manufacturing effluents by 2025

  • Manufacturing sites meeting water quality standards: 97% (2024)
  • Progress: On track

• 2030 target: No water quality impacts from manufacturing effluents by 2030

  • Own sites meeting water quality standards: 100% target (including all manufacturing sites and labs)
  • All suppliers meeting water quality standards: 100% target

Water consumption targets

• Reduce water consumption in operations by half by 2025 (vs. 2016 baseline)
• Progress: 57% reduction achieved - target met

Waste reduction targets

• Reduce waste sent for disposal by 50% by 2025 (vs. 2016 baseline)
• Progress: 72% reduction achieved - target met
• New target: Reduce waste sent for disposal by 30% by 2030 (vs. 2022 baseline)

Nature and biodiversity targets

• Implement water use reduction for own and supplier sites based in water stressed basins
• Site-specific targets to be set for material sites affecting local communities

Climate adaptation measures

We assess and plan for climate-related impacts on communities, including changes in disease patterns and extreme weather events, as part of our climate adaptation strategy.

Policies related to consumers and end-users

Patient-centered commitment

Our access policies are designed to ensure we do our part to address affordability, availability and equity in healthcare, while recognizing that meaningful progress requires collaboration across the entire healthcare ecosystem. Our commitment is guided by the belief that innovative medicines and healthcare solutions should be available to all who need them, regardless of geographic or economic barriers.

Product quality and safety

We prioritize quality and safety at each stage of a medicine's life cycle. During clinical trials and after launch, we monitor the use of our medicines to identify possible adverse events and minimize risks to patients. In the production phase, we ensure product quality from raw material sampling and testing to packaging, testing and distribution of finished goods.

Quality management system

To ensure product quality, we maintain a robust quality management system for our medicines in full compliance with requirements from health authorities and other regulators. We have licenses and relevant International Organization for Standardization (ISO) and Good Practice (GxP) certificates for all our activities, including clinical trials, manufacturing, medical devices, supply, warehouse and distribution operations.

Pharmacovigilance commitment

Pharmacovigilance involves monitoring the safety of medicines. Our approach to achieve effective pharmacovigilance relies on safety monitoring both during drug development and in the commercial setting, as well as the timely assessment and reporting of adverse events.

Falsified medicines combat

We also work to identify and combat falsified medicines, which can pose a serious threat to human health. Our efforts are focused on mitigating risks across three distinct areas: counterfeiting, theft and illegal diversion.

Processes for engaging with consumers and end-users about impacts

Patient support and education

We also support education programs for patients, providers and pharmacists, and provide regular training to employees in adverse-event reporting. For some medicines, post-approval studies may be conducted to collect more data on possible long-term adverse effects.

Clinical trial diversity

Diverse patient representation in clinical trials is critical to our R&D efforts. Understanding how patients from different demographic groups respond to treatment is essential to developing effective and inclusive medicines. To this end, we incorporate diversity principles into all Phase III studies with US participation, aligning with FDA guidance.

Our teams establish enrollment goals based on disease prevalence and demographic factors such as race ethnicity, sex and age to recruit a representative US population.

Pharmacovigilance reporting

Reports of adverse events from various sources — including clinical studies, literature and spontaneous reports — are used to evaluate and optimize risk management actions for the proper use of our medicines.

Global access strategies

For each new product launch, we work to address non-clinical barriers that may hinder adoption and uptake. By collaborating with governments and healthcare systems, we develop innovative pricing and access solutions tailored to the needs of individual markets.

Stakeholder collaboration

We work closely with payers to implement system-level mechanisms that align payments with measurable health outcomes, helping reduce ineffective spending.

Processes to remediate negative impacts and channels for consumers and end-users

Pharmacovigilance system

Our pharmacovigilance systems are designed to comply with regulatory requirements for both individual case safety reports and periodic benefit-risk assessments. Reports of adverse events from various sources — including clinical studies, literature and spontaneous reports — are used to evaluate and optimize risk management actions for the proper use of our medicines.

This enables us to detect and manage pharmacovigilance risks that may emerge at any stage of a drug's life cycle. In accordance with international regulations, we share periodic safety reports with the relevant health authorities. We also perform regular benefit-risk analyses for our medicines to ensure their benefits continue to outweigh the risks.

Product recalls and remediation

We conduct thorough investigations whenever there is any evidence of deviation from quality standards, or if we detect failures in our processes. We take corrective and other measures where applicable, including proactively notifying health authorities.

Over the course of 2024, we experienced four recalls of nonconforming products, less than half the number in 2023. Of these, two were associated with moderate risk to patients (Class II recalls), though no patients experienced negative effects.

Quality remediation

Should we discover any gaps during audits, the audited entities are expected to resolve these through corrective and proactive actions (CAPAs). We monitor these and track adherence to the commitments to drive continuous improvement.

Falsified medicines response

We investigated every confirmed incident of falsified medicines reported to us — preventing falsified medicines from reaching and harming patients. We promptly notified local health authorities as required while also voluntarily reporting 100% of reportable incidents to the WHO within the recommended 10-day window.

Taking action on material impacts on consumers and end-users

Research and development for unmet needs

We systematically assess our R&D portfolio against unmet medical needs, integrating access considerations early in the development process. By the end of Phase II, we anticipate potential access barriers and enablers to ensure our investigational medicines have the potential to reach patients that could benefit the most.

Innovation and technology advancement

Novartis is working to transform its pharmacovigilance system, using technologies such as artificial intelligence to simplify processes and generate new safety insights for health authorities, healthcare providers and patients.

Global access implementation

We implement global access strategies for all new medicines launched. For example, our global access strategy for Fabhalta explores ways to partner with healthcare systems to expand access to this novel treatment for patients with paroxysmal nocturnal hemoglobinuria.

In 2024, we received 20 approvals in the US, EU, Japan and China, including US approval for Fabhalta (iptacopan) to treat adults with immunoglobulin A nephropathy (IgAN), a progressive, rare kidney disease in which the immune system attacks the kidneys.

Supply chain security

We have strengthened our supply chain security capabilities and governance to improve our ability to mitigate incidents of product theft in high-risk regions.

Product authentication

In 2024, we significantly increased the number of countries in which Authentifield devices are deployed and activated to 69, expanding our timely field product authentication capabilities from packaging (MoVE) to drug product (Authentifield).

Quality management

We successfully completed our first ISO 9001:2015 surveillance audit in 2024 without any nonconformities. In 2024, health authorities including the EMA, Swissmedic and FDA carried out a total of 124 inspections of Novartis clinical and manufacturing operations. All the health authority inspections were deemed acceptable, compared with 99.1% in 2023.

Targets related to managing material impacts on consumers and end-users

Access to medicines targets

Patient reach metrics

Innovation and approval targets

Product quality and safety targets

Key achievements in 2024

• Maintained 100% implementation of global access strategies for all new medicine launches
• Reached 296 million patients worldwide with our medicines
• Reduced product recalls by more than half compared to 2023
• All health authority inspections were deemed acceptable (100%)
• Maintained voluntary reporting of 100% of falsified medicine incidents to WHO within recommended timeframes

Business conduct policies and corporate culture

Code of Ethics and cultural foundation

Our approach is rooted in our culture and values, encouraging our employees to always act with integrity. We have a Code of Ethics, which is a fundamental part of the terms of employment for all employees of Novartis globally. It has been developed with our employees and is anchored in behavioral and decision science.

The Code of Ethics sets out commitments that are applicable across our business. It applies to all employees, and we further clarify our expectations through a suite of internal policies and controls.

Comprehensive policy framework

We have established comprehensive policies covering:

Anti-corruption and anti-bribery

Novartis does not tolerate any form of bribery, undue influence and/or corruption. Our Doing Business Ethically and Conflict of Interest policies outline these expectations for all employees. We also clearly set out our standards in our Code of Ethics.

Data and technology ethics

We have an Ethical use of Data & Technology Policy that, together with the AI Risk & Compliance Management Framework, contributes to the responsible use of AI across Novartis.

Trade sanctions and export controls

In early 2024, we launched our updated Trade Sanctions and Export Controls Guideline and implemented associated internal controls.

Anti-fraud commitment

In July 2024, we introduced the Anti-Fraud Policy to reinforce our commitment not to tolerate any form of fraud.

Training and cultural reinforcement

We conduct mandatory annual training for all employees on our Code of Ethics. Internal online tools, such as our Ethical Decision Explorer, have been designed to help employees navigate ethical dilemmas.

In 2024, the annual Code of Ethics training achieved a completion rate of 98.3%.

Regular assessment and improvement

We conduct a global Ethics Survey on a regular basis to measure our progress in embedding our Code across the organization and strengthening our ethical culture. We use insights it provides to drive conversations at global and local levels and take action where needed.

International commitments

We adhere to industry codes and are informed by the United Nations (UN) Convention Against Corruption and the Organisation for Economic Co-operation and Development (OECD) Convention on Combating Bribery of Foreign Public Officials. We are a signatory to the UN Global Compact (UNGC).

Management of relationships with suppliers

External Partner Risk Management Framework

Our external partner risk management (EPRM) framework enables risk management in a single, mandatory process and system as part of our integrated assurance system. The framework comprises governance, processes and internal controls, and applies a risk-based approach.

Third Party Code requirements

Our EPRM framework is supported by our Third Party Code, which sets out the standards we oblige external partners to comply with, including human rights and environmental sustainability. Our Third Party Code is consistent with the Pharmaceutical Supply Chain Initiative (PSCI) principles for responsible supply-chain management.

Risk-based assessment approach

The due diligence efforts are applied in proportion to the level of identified risk, which is determined by the probability and severity of potential adverse impacts. We carry out risk assessments and selected audits among external partners in various risk areas including human rights; health, safety and environment; labor rights; information security; anti-bribery and corruption, and; business continuity management.

All suppliers are subject to risk assessments when we engage with them and at a regular frequency thereafter. Suppliers flagged for high risk are subject to an onsite audit by our integrated assurance team.

Anti-bribery requirements

Bribery and corruption risks in our supply chain are addressed by our Anti-Bribery Third Party Guideline and Third Party Code. The Code is an integral part of every supplier contract. Our suppliers are regularly surveyed through audits that we commission from external companies, applying a risk-based approach.

Environmental sustainability integration

Contracts that include environmental sustainability criteria now cover 76% of Scope 3 emissions, which represents an increase of 19 ppts versus the previous year. Our sourcing practices have evolved to reflect environmental sustainability criteria consistently.

Supplier capability building

We have introduced an Environmental Sustainability Supplier Playbook, which is designed to provide comprehensive guidance to our suppliers on transitioning to sustainable business models. The playbook has been shared with more than 1,000 suppliers and integrated into the Pharmaceutical Supply Chain Initiative's (PSCI) standard supplier learning plans.

2024 remediation activities

Overall, we identified 2,615 remediation actions with our suppliers. Of these, 302 were associated with human and labor rights. We mandate external parties who pose a risk classified higher than 'low risk' to complete anti-bribery training.

Prevention and detection of corruption and bribery

Zero tolerance policy

Novartis does not tolerate any form of bribery, undue influence and/or corruption. Our Doing Business Ethically and Conflict of Interest policies outline these expectations for all employees. We also clearly set out our standards in our Code of Ethics.

Risk management framework

Our Doing Business Ethically policy and its supporting handbooks comprise a risk framework covering four requirements: (a) define clear objectives; (b) identify and assess the risk; (c) act appropriately; and (d) monitor, reconcile and learn.

To support implementation across our organization, the process requirements outlined in the supporting activity handbooks have been embedded within our BeSure system platform. This approach ensures that policy, processes and systems are integrated and can be monitored.

Comprehensive compliance system

Our comprehensive compliance management system is aligned with recognized international standards and best practices, and is designed to prevent, detect and correct systemic misconduct. The objective of our compliance management system is to maintain a culture of integrity designed to promote and enable ethical behavior.

Training and awareness

Our annual global compliance e-learning provides content to enable employees to make the right choices in the course of their work, and to perform with integrity. Global mandatory compliance e-learnings are rolled out to employees, including the ECN, and to the Board of Directors.

External contractors, who are hired through a temporary staff agency and supervised day-to-day by a Novartis employee, are also required to take these trainings. We mandate external parties who pose a risk classified higher than 'low risk' to complete anti-bribery training.

Supply chain anti-bribery measures

Bribery and corruption risks in our supply chain are addressed by our Anti-Bribery Third Party Guideline and Third Party Code. The Code is an integral part of every supplier contract.

Detection and monitoring

We have processes — such as Compliance Risk Assessment and Monitoring, Corporate ERC Assurance reviews, internal auditing, and the grievance mechanism — designed to detect and prevent misconduct.

Industry leadership

Working with Norges Bank Investment Management, we helped develop an anti-bribery reporting standard for the pharmaceuticals industry that was issued in 2022. We report against this standard, which is based on principles such as the UN Global Compact and the OECD Guidelines for Multinational Enterprises.

Incidents of corruption or bribery

Grievance mechanism results

Analysis of results

In 2024, a total of 1,607 allegations of misconduct were handled by the SpeakUp Office, compared with 2,059 in 2023. Of the total allegations in 2024, 946 (59%) were classified as higher-risk misconduct allegations warranting investigation by a central team.

The report does not provide specific breakdowns of corruption or bribery incidents within these overall misconduct figures, but indicates that all allegations are thoroughly investigated through established processes.

Investigation and response process

Where evidence of misconduct is detected, we take swift and appropriate action. Breaches of the Code of Ethics, policies, guidelines or local laws result in remedial, corrective or disciplinary action up to and including termination of employment.

Higher-risk cases that are substantiated undergo a central remediation process managed in close collaboration with our second line of assurance, the Corporate ERC Assurance team. This creates focus on ensuring that any remediation resulting from investigations is prompt, addresses the root cause, and is subject to follow-up.

Continuous improvement

We continuously evolve our compliance system based on many factors, including insights from internal and external sources and changes in the risk landscape. To measure the maturity and effectiveness of our compliance management system, we conduct regular evaluations of our program across more than 270 leading indicators.

Political influence and lobbying activities

Political engagement approach

We engage in dialogue with policymakers and other external stakeholders on relevant policy topics, including conditions for innovation in the life sciences and expanding access to medicine. Our aim is to represent the Novartis perspective by providing data and insights that enable informed decision-making.

We assess political, legislative and regulatory decisions that have a potential impact on patients and our industry. Furthermore, we participate in policy discussions with partners through various stakeholder dialogues and industry platforms.

Ethical standards and guidelines

The respective Novartis global guideline outlines the ethical standards that we follow in our engagements with policymakers and applies to employees as well as external partners working on our behalf. External partners are also subject to our anti-bribery due-diligence process as per our External Partners Risk Management Framework before they can be engaged.

2024 political engagement expenditure

2024 engagement focus areas

In 2024, our primary focus areas included advocacy efforts supporting various initiatives and policies designed to advance healthcare, drive innovation and enhance accessibility.

United States engagement

In the US, we engaged at both the federal and state levels to shape policies on drug pricing (e.g., the 340B program), the Inflation Reduction Act, and Pharmacy Benefit Managers reform. We emphasized engagement with policymakers, advancement of patient access, and efforts to uphold innovation and intellectual property protections.

European Union engagement

These efforts involved engagement with European Union institutions through EU institutional policymakers with special focus on the Critical Medicines Alliance, Corporate Sustainability Due Diligence Directive, EU Pharmaceutical Legislation, Urban Wastewater Treatment Directive, and the Patent Package. These efforts aimed to strengthen supply chains, advocate for regulatory and intellectual property protections, enhance EU competitiveness, and support environmental goals.

Industry collaboration

Engaging with trade associations also facilitates a collaborative approach to highlighting and solving issues that affect people with disease, and to ensuring an environment conducive to biopharmaceutical innovation. Our focus is on jointly creating solutions that help communities and society tackle the burden of disease.