At Merck, protecting the health and well-being of our employees and the public by protecting and preserving the environment, ensuring the safety of our employees and those who live in the vicinity of our facilities, and being in full compliance with the law are all fundamentally important to the way we operate.

Our mission and values are articulated by Merck’s corporate Environmental, Health and Safety (EHS) Policy. In addition to compliance with all applicable country, regional and local safety and environmental laws, we strive for EHS performance that is among the best in the pharmaceutical industry.

Merck's commitment to environmental, health and safety begins with the company’s Executive Committee, which has established the corporate EHS Council. This council, composed of senior-level executives, is responsible for overall EHS governance as well as leading and driving enterprisewide excellence in EHS management and performance. Specific Council duties include:

• Establishing EHS strategy, policy and management systems
• Providing enterprisewide oversight of EHS issues, risk mitigation and control strategies
• Monitoring the EHS performance of the company and establishing continuous improvement targets
• Promoting and recognizing EHS excellence in the company's divisions
• Allocating resources and taking EHS performance into account when determining divisional and individual compensation and awards

To support the achievement of these goals, the EHS Council has established the EHS Standards Committee. This committee, composed of senior-level managers, is responsible for understanding the intent of Council goals, ensuring that the EHS programs and systems developed will deliver on those goals in their organizations, and, once approved by EHS Council, supporting implementation of those programs and systems in their areas. This partnership reflects the principle that delivery of EHS performance is the responsibility of business and operations personnel supported by corporate and site EHS professionals.

Merck's vice president of Global Safety and the Environment is responsible for communicating to the Executive Committee and to the corporate EHS Council our progress on goals, objectives and metrics and other material issues, as well as recommending both long- and short-term objectives and metrics. Responsibility also includes addressing those needs through the EHS Standards Committee.

Our corporate EHS organization is responsible for:

• Developing corporate policies, procedures, guidelines and standards, goals, and tools and programs to drive EHS compliance and performance improvements
• Providing technical and regulatory support to site safety and environmental groups and to operating organizations
• Auditing Merck's operating organizations to confirm that appropriate programs are in place to ensure compliance, employee safety and environmental protection
• Looking both externally and internally for emerging trends, issues and practices that should be addressed in our operating organizations
• Anticipating, tracking and commenting on new regulations affecting our business

Our site and operating area EHS professionals are responsible for implementing programs and supporting the EHS needs of their partners, which might include manufacturing, research operations, sales and/or administrative activities, by:

• Ensuring that line management fully understand EHS requirements
• Establishing, assessing and improving EHS programs
• Providing regulatory and technical support to employees and the operating areas
• Routinely assessing the performance of the operating areas against both regulatory and Merck requirements
• Acting as the primary liaison with local regulators and inspectors
• Investigating incidents and developing corrective action plans to address identified root causes

EHS Policy, Management System & Procedures

The EHS Policy documents Merck's EHS mission and values and serves as a vehicle to communicate them to all employees.

Merck's EHS Management System follows the classic “Plan, Do, Check and Act” model and is implemented through a set of interwoven business processes that span the corporation.

• The planning process includes development of goals, objectives and metrics based on a review of company performance, EHS programs, applicable regulations and other external factors [PLAN]
• EHS Procedures, which are integrated into the EHS Management System, detail the program implementation expectations for sites and operating organizations. The Procedures are developed and reviewed by representatives from EHS, Legal and the affected operating areas. The EHS Standards Committee provides governance over changes to EHS Procedures and enables business engagement in the development and implementation of new or revised EHS Procedures. [DO]
• Governance committees, from the Corporate EHS Council through site compliance committees, review performance and progress against objectives. Central audits and self-assessments surface issues. Monthly and annual performance metrics reflect progress. [CHECK]
• The EHS Management System includes procedures and programs that drive the discovery and resolution of EHS concerns [ACT]

Internal Auditing Program

For more than 20 years, Merck has conducted internal corporate safety and environmental audits of our facilities worldwide. Audits are scheduled through a risk-based process. As a result, manufacturing and research sites are typically audited every two or three years; a few large sites are audited annually. Sales and business offices and our warehouses are less complex, and are typically audited every five or more years. In many cases, particularly outside of the United States, our internal auditors work with independent consultants who have regulatory expertise in the laws of the host country.

In the last few years, we have enhanced our corporate EHS audit practices to make them more detailed and rigorous, helping to better identify compliance and performance issues.

• Our audit team leaders are full-time professional EHS auditors with extensive experience in auditing procedures, regulatory requirements and hazard recognition
• Our audit team pool consists of staff members with extensive subject-matter expertise who receive biannual training in the audit process
• We place a strong emphasis on rapid and sustainable resolution of all identified compliance issues. Audit teams provide coaching as appropriate during the audit and frequently remain on site after the audit to provide formal training and/or additional expertise.
• Findings from our audit program are used to alert other Merck site EHS managers to potential compliance concerns, both through routine summaries and as focused alerts
• Audits are also used to identify proven practices to be shared with other sites

Training

Training is critical to ensuring that our managers, our EHS staff and our employees worldwide understand their roles in driving EHS performance, and have the knowledge and skills to fulfill their responsibilities.

Manager training covers specific management responsibilities with regard to compliance and promoting a "safety first" culture. Training includes conducting EHS inspections, driving closure of findings, contributing to incident investigations, and communicating effectively about EHS requirements and expectations to drive desired behaviors.

EHS staff training is based on established standard curricula designed to drive more consistent technical expertise and improved EHS support capabilities around the world. The curricula address technical training needs from core fundamentals through expert-level topics using both internal subject-matter experts and approved external instructors. In 2011, additional emphasis was placed on business skills competencies aligned with Merck's Leadership Behaviors. This overall approach to EHS staff training helps us develop EHS professionals at all levels of our organization.

Our EHS Management System defines the comprehensive EHS training expectations for employees. The program includes standardized guidance documents that provide clear expectations on topics and content. In 2011, 37 core content modules were developed and translated into seven languages to support the training needs of local sites and to globally align our employee-training content, which is available in both instructor-led as well as in e-Learning formats.

Performance

Merck's centralized environmental, health and safety (EHS) information system allows us to collect, manage, learn from and share our safety and environmental performance data more efficiently. We continue to explore ways to expand the scope and use of EHS information systems to enhance our ability to collect, maintain, analyze, learn from and report EHS data. Historically, we have collected and analyzed both leading and lagging metrics to identify potential trends and opportunities that could help us to drive EHS performance improvement. In 2011, we added information from our internal EHS audit program to the EHS information system to help us identify additional opportunities.

Regulatory Inspections

In 2011, Merck received 197 inspections by EHS regulatory agencies around the world. This represents a 13 percent reduction in the number of regulatory inspections from the prior year. These inspections helped to confirm the positive compliance status of our facilities. Where compliance issues were identified, they did not represent significant risks to human health or the environment and are not expected to result in significant enforcement actions. Corrective actions to address identified issues were implemented in a timely manner.

Environmental Events

Merck experienced 76 water permit exceedances in 2011, versus 94 in 2010, and 7 air permit exceedances in 2011, versus 12 in 2010. These events were generally minor and temporary.

This report reflects the number of spills and releases at our facilities greater than 55 gallons and those of any amount requiring reporting to a regulatory authority. Merck experienced 123 spills and releases in 2011, an amount comparable to the prior year’s. More than half of these were spills of either brine or wastewater or were spills into secondary containment. One spill in 2011 had the potential for adverse impact. This incident was of short duration and the spilled substance, which reached the ocean, has low toxicity to fish and invertebrates. Appropriate corrective measures were implemented and learnings were shared with other Merck sites. As a result of this incident, an environmental regulatory agency issued a notice of violation (NOV) to the facility. Spills and releases outside of secondary containment are assessed through rigorous procedural and technical methods to understand potential impact and drive appropriate mitigation strategies when needed.

Citations, Notices of Violation, Fines & Settlements

Merck received 8 safety NOVs in 2011, compared with 14 received in 2010. The 2011 NOVs include notices from regulatory agencies with a primary focus on EHS issues. Merck paid two safety-related fines totaling $7,500 in 2011.

Merck received 26 environmental NOVs in 2011, which is a 19% reduction from the prior year. Merck paid $1,791,765 in fines associated with environmental enforcement actions in 2011. The major portion of the 2011 fines, $1.5 million, was related to an agreement with the Department of Justice (DOJ) [representing the Environmental Protection Agency (EPA)] to resolve issues identified during multimedia environmental inspections that occurred in 2006 at two Merck sites in Pennsylvania—West Point and Riverside. As noted by both the DOJ and the EPA, discrepancies identified during the inspections resulted in no environmental harm and were promptly corrected.

Commitments

• Comply with the letter and spirit of all applicable laws, regulations and other requirements designed to protect safety, health and the environment
• Create and maintain a safe and healthy working environment for all employees, contractors and guests
• Protect our environment and the communities in which we operate; conserve resources, promote recycling, reduce hazardous-material use and prevent pollution
• Promote a global standard of care that minimizes EHS impacts from our operations, products and partnerships
• Foster a culture of EHS excellence built upon integrity, accountability, collaboration and the active participation of all
• Continuously improve our systems, processes and performance and integrate EHS throughout our global operations
• Engage stakeholders and communicate our progress and performance
• Provide appropriate resources and build individuals’ knowledge and capabilities to achieve these commitments