Sustainable Conduct – Responsibility in Value Creation Production and Logistics Production Bayer operates production facilities at more than 130 sites in 34 countries. The safety of our employees, the environment and the areas near our sites is a top priority for us when operating our facilities. We steer these processes through our management systems for the areas of health, safety, environmental protection and quality (HSEQ schließen HSEQ stands for health, safety, environment and quality. ). Our commitment extends beyond the scope of legal requirements. For capital expenditure projects exceeding €10 million we perform a voluntary ecological assessment. In the case of acquisitions, we examine whether the applicable environmental and occupational safety regulations and fundamental employee rights are complied with at the production sites in question. New production sites may not be set up in areas that are statutorily protected with regard to natural characteristics, biodiversity or other factors. Online Annex: A 220.127.116.11-1 limited assurance Few production sites close to protected areas In a comparison of the geographical coordinates of our production sites against those of internationally recognized protected areas (ASEAN Heritage, Barcelona Convention, UNESCO-MAB Biosphere Reserve, Wetlands and World Heritage Convention and Ramsar Convention), we identified three sites that are within a radius of three kilometers from such areas. These are the Blesbokspruit protected areas in South Africa, Moreton Bay in Australia and Reserva Costa Atlantica de Tierra del Fuego (Atlantic Coast of the “Land of Fire”) in Argentina. None of the sites examined was directly located in any of the named protected areas. As part of its Group-wide crisis management, Bayer operates a global early warning system – the Bayer Emergency Response System. Online Annex: A 18.104.22.168-2 limited assurance A corporate policy provides a globally applicable standard procedure for recording and reporting unusual incidents such as hazards to the safety of our employees, plants or facilities, and regulates the Bayer Group’s crisis management. The handling of such incidents is the responsibility of the local crisis organization / emergency response team. For this purpose, organizational precautions with defined responsibilities and procedures have been implemented at the sites / in the countries. Depending on the situation, these involve business partners and the local community around the sites. We continuously work at our production sites to react more rapidly to market developments through increased flexibility and the expansion of capacities. To achieve this, we invest in our global production network. Pharmaceuticals and Consumer Health Both segments operate their own production sites around the world in which active ingredients are manufactured and in which formulation and packaging services are performed for the product portfolio. Both Pharmaceuticals and Consumer Health continuously invest in their global production networks. Production capacities for the manufacture of hemophilia A products are being established at the Wuppertal and Leverkusen sites in Germany through the currently biggest capital expenditure program of Pharmaceuticals with a total volume of around €800 million. Consumer Health’s largest investment project, with a volume of around €50 million in 2017, comprises the multiyear modification and expansion of the production site in Majinpu, China. Strategic Investments in Property, Plant and Equipment at Pharmaceuticals and Consumer Health 2017 Pharmaceuticals Production capacities for rFactor VIII therapies in Wuppertal (Elberfeld) and Leverkusen, Germany Expansion of research and development laboratory capacities in Wuppertal, Germany Modernization of research facilities in Berlin, Germany Modernization of site infrastructure in Wuppertal, Germany Modernization of production in Leverkusen, Germany Construction of new research building in Wuppertal (Aprath), Germany Expansion of production capacities for Eylea™ in Berlin, Germany Consumer Health Reconstruction and expansion of production site in Majinpu, China 2016 Pharmaceuticals Production capacities for new rFactor VIII therapies in Wuppertal (Elberfeld) and Leverkusen, Germany Expansion of research and development laboratory capacities in Wuppertal, Germany Modernization of research facilities in Berlin, Germany Modernization of site infrastructure in Wuppertal and Leverkusen, Germany Expansion of production capacities in Beijing, China Expansion of Quality Control Biologics in Berkeley, California, U.S.A. Consumer Health Reconstruction and expansion of production site in Majinpu, China Crop Science The crop protection products of Crop Science are mainly produced at the segment’s own production sites. Numerous decentralized formulation and filling sites enable the company to quickly react to the needs of local markets. At these sites the active ingredients are processed and packaged according to local requirements and application areas. Production of seeds takes place at locations close to our customers in Europe, Asia and North and South America at our own farms or under contract. We invested some €2.5 billion overall in property, plant and equipment between 2014 and 2017 to satisfy increased demand for crop protection products and seed. This included investment in the replacement and expansion of production capacities and in research and development facilities. Here the focus was on the United States, Germany and India, and on expanding our network of breeding stations for various crops, particularly to the Netherlands and Brazil. Strategic Investments in Property, Plant and Equipment at Crop Science 2017 Capacity expansions for herbicides in Muskegon, Michigan, and Mobile, Alabama, U.S.A., and Frankfurt and Knapsack, Germany Construction of a production facility for insecticides in Dormagen, Germany Expansion of production capacities for fungicides in Dormagen, Germany Expansion of research and development facilities in Monheim, Germany Establishment of breeding stations for various plant species worldwide Expansion of research and development facilities in Raleigh, North Carolina, U.S.A. Expansion of production and research greenhouses in Nunhem, Netherlands Construction of a production facility for fungicides in Kansas City, Missouri, U.S.A. Expansion of production capacities for insecticides in Vapi, India 2016 Capacity expansions for herbicides in Muskegon, Michigan, and Mobile, Alabama, U.S.A., and Frankfurt and Knapsack, Germany Construction of a production facility for insecticides in Dormagen, Germany Expansion of production capacities for fungicides in Dormagen, Germany Expansion of research and development facilities in Monheim, Germany Establishment of breeding stations for various plant species worldwide Expansion of research and development facilities in Raleigh, North Carolina, U.S.A. Animal Health We procure the active ingredients for our Animal Health products both from internal sources within Bayer and external suppliers worldwide. Our globally marketed animal health products are mainly manufactured at the sites in Kiel, Germany, and Shawnee, Kansas, United States. In 2017, we undertook initial capital expenditures totaling some €90 million through 2021 at the Kiel site in connection with a site expansion that will take several years. We manufacture some 60 percent of the Animal Health products we market worldwide in Kiel. Efficient logistics concept implemented Logistics at Bayer comprises not just the transport and warehousing of goods, but in fact the entire steering and monitoring of all flows of goods and logistics data for the Bayer Group. We work continuously to develop logistics concepts that account for safety, environmental and cost aspects. Areas of focus in the ecological field include the reduction of CO2 emissions, for example by minimizing air transport or using logistic concepts that include rail- and waterways. Transport Routes Our logistics organization operates according to management systems and directives with global validity. We use both internal capacities and external logistics partners for storage and transport services. Bayer selects these according to strict safety, environmental and quality criteria. Alongside the Corporate Supply Chain function, each segment maintains its own logistics activities that are aligned toward the unique circumstances of the respective business model and products.