Baxter International Inc. Sustainability Report 2000

Baxter International Inc. Sustainability Report 2000

balance

economic environmental

social

Sustainability is commonly defined as “meeting the needs of the present without compromising theability of future generations to meet their own needs.” It challenges us to meet a triple bottomline of economic prosperity, social responsibility and environmental quality. In essence, it requiresthat we balance the needs and interests of our various stakeholders while operating in a mannerthat sustains our business, communities and environment for future generations.

This is Baxter’s second annual sustainability report following the guidelines set forth by theGlobal Reporting Initiative (GRI) Sustainability Reporting Guidelines. The GRI is a multistakeholderinitiative working to establish a global framework for sustainability reporting at the organizational level.

Sustainable development is important to Baxter because it offers a structure for decision makingthat helps us anticipate and address important global trendsthat can have serious consequences for business and society.Things like population growth, the depletion of naturalresources, the globalization of markets, and increased publicdemand for corporate openness or “transparency.”

As a pilot company for the GRI guidelines, we are providing feedback on the development of the guidelinesbased on our experience in producing a sustainabilityreport. We fully support this initiative as one with significantbenefit to business and society, and one that raises the barfor global corporate responsibility.

balance

A business case for

sustainable development

Baxter was selected for the 2000 DowJones Sustainability Group Index

(DJSGI) as a medical productsindustry group leader. DJSGIis the world’s first global

sustainability index that tracksthe performance of leading

sustainability-driven companiesworldwide.

According to David E. Moran, presidentof Dow Jones Indexes, “Investors areattracted to corporate sustainabilitybecause, as a business strategy, it creates long-term shareholder value byembracing opportunities and managingrisks associated with economic, envi-ronmental and social developments.”

DJSGI consists of more than 200 com-panies that represent the top 10 percentof the leading sustainability companiesin 64 industry groups across 36 coun-tries. As of the end of August 2000, the market capitalization of this indexexceeded $5 trillion.

Editorial Board for the 2000 Baxter Sustainability Report

Corporate CommunicationsDeborah Spak, (847) 948-2349, [email protected] Tyska, (847) 948-3256, [email protected] Rafeedie, (847) 948-3675, [email protected]

Environment, Health and SafetyWilliam Blackburn, (847) 948-4962, [email protected] Sandborg, (847) 948-4757, [email protected]

Business PracticesGretchen Winter, (847) 948-4997, [email protected]

economic environmental

social

table of contents 1

Table of Contents

2 Our 2000 Sustainability Report Card

3 Chairman and CEO Statement

4 Corporate Profile

The matters discussed in this Sustainability Report include forward-looking statements that involve risks and uncertainties, including but not limited to, technological advancesin the medical field, demand and market acceptance risks for new and existing products, technologies and health-care services, the impact of competitive products and pricing,manufacturing capacity, new plant start-ups, global regulatory, trade and tax policies, actions of regulatory bodies, product development risks, including technological difficulties,ability to enforce patents, unforeseen commercialization and regulatory factors and other risks more completely reflected in the company’s filings with the Securities andExchange Commission. These forward-looking statements are based on estimates and assumptions made by management of the company and are believed to be reasonable,though are inherently uncertain and difficult to predict. Actual results or experience could differ materially from the forward-looking statements.

References in this report to Baxter are intended to refer collectively to Baxter International Inc. and its U.S. and international subsidiaries and their operating divisions.

HomeChoice PRO with PD Link, INTERCEPT Blood Systems, INTERCEPT Platelet System, INTERCEPT Plasma System, INTERCEPT Red Cell System, Nutriforum, Recombinateand Tisseel are trademarks of Baxter International Inc., its subsidiaries or affiliates.

7

Doing Business Locally—an Exampleof Pursuing Sustainable Development

10

Growing our Business—Identifyingand Responding to Global Health-Care Trends

15

Sustainability—a Key Element to a Successful Acquisition

16

Baxter’s Bioethics Policy

19

Corporate Governance

20

Maximizing Performance from the Outside In

21

Work/Life Balance—a Key Driver of Employee Engagement

24

Advancement of Women

24

Workplace Diversity—an IntegratedApproach

25

Giving Back to our Communities

27

Health and Safety Performance

31

Product Stewardship

34

Environmental Performance Summary

35

Stakeholder Engagement

35

Toxic Air Emissions/Eccoefficiency

38

Packaging Reduction/Water Use

39

Energy Efficiency

40

Dealing with Climate Change

42

Emergency Planning, Releases and Remediation

44

Affirmation of Process forEnvironmental, Health and Safety Data

44

Auditor’s Verification Statement forEnvironmental, Health and Safety Data

Inside Back Cover

Estimated Environmental Costs and Savings Worldwide

economic sustainability social sustainability environmental sustainability

Strengths

Values-Based Decision Making / pg. 8Our Shared Values of “Respect, Responsiveness and Results”drive the way we do business, and are communicated and reinforced regularly throughout the company. While these values are consistent throughout the organization, facilities areempowered to do the right thing for their local market.

Business Ethics / pg. 8Directly tied to our approach of values-based decision making is our widely lauded business practices program, which is builtaround the concept of integrity, a key element of Baxter’s SharedValue of “respect.” Baxter’s Global Business Practice Standardsis a guide, printed in 16 languages, for employees and suppliersto help explain the universal principles governing our business.

Bioethics Policy / pgs. 16–17Baxter was one of the first companies to develop a comprehen-sive bioethics policy to ensure that any decision by the companyto commercialize a biotechnology-derived agent or therapy willreceive careful consideration of the risks and the benefits of thetechnology to society in light of the available information.

Corporate Governance / pg. 19Baxter’s actions in the area of corporate governance have beenrecognized and benchmarked by several socially oriented invest-ment organizations and other public companies over the years. For example, in 2000, we decided to compensate our board ofdirectors solely in stock options.

Building Local Economies / pgs. 7–10 With more than half our sales coming from outside the UnitedStates, our philosophy is that we’ll best serve our local customersby leveraging local resources—employees, suppliers and facilities.As a result, the vast majority of products we sell are manufacturedlocally, and more than half of our employees are outside theUnited States.

Environmental Program / pgs. 34–43We have a well-established environmental program with definedreporting systems that allow us to track our performance againstenvironmental goals. In 2000, we reduced air toxic emissions 31 percent, cut regulated waste generation 12 percent, decreasedenergy consumption 3 percent per unit of production value andrecycled 34 million kilograms of nonhazardous material. Whileour environmental reporting systems and metrics, such as ourenvironmental financial statement are well established and recog-nized, they continue to evolve with the growing and changinginterests of our stakeholders.

Developmental Opportunities

Community Relations / pgs. 25-26Whereas community outreach is taking place at Baxter facilitiesworldwide, we lack a formal vision and coordinated approach forcommunity relations companywide. In response, we are workingto leverage the local involvement of our employees first by doingan inventory of the impact they are making in dollars and time,then by devising ways to better focus their efforts to make aneven bigger impact.

Diversity / pgs. 24–25Although our levels of female and minority representation gener-ally meet or exceed government standards in the United States,we recognize there is still work to do, especially with respect tothe representation of women and traditionally underrepresentedminorities, including blacks and Hispanics, in our pipeline to moresenior positions within the company. Moreover, as more regulationsare enacted globally relative to diversity and equal opportunity, wemust ensure that we have the systems and processes in place tomeet these objectives.

Product Stewardship / pgs. 21–33While we have made good progress in our drive to make ourproducts more sustainable, we need to do a better job of scrutinizing new products and processes for all aspects of sustainability. We also must more fully integrate and enforcethroughout our organization and that of our suppliers the environmental processes and procedures we have developed for product stewardship.

Social Responsibility Measurements and Verification

Though not addressed as a separate issue in the report, this is anunderlying theme to many of the articles contained in our socialsustainability section. We recognize a need to better measure andtrack our performance in this area, and are looking at ways toachieve that. Some challenges do exist in that there are not globally agreed upon standards, but we will closely monitor thismoving forward and will seek guidance regarding guidelinesunder consideration.

Workplace Safety / pgs. 25-27Our lost-time injury and illness cases rose in 2000 primarily dueto a lack of program systems being in place when productionsurges, new product processes and other operational disruptionsoccurred. Key systems were identified a few years ago, and manyfacilities are still in the process of establishing them. These effortsare being accelerated in 2001, including a defined companywidegoal for management attention to workplace safety.

2 our sustainability report card

Our 2000 Sustainability Report Card

Based on input collected for this report, we have established the following scorecard for Baxter in thearea of sustainable development. The areas highlighted below are addressed in detail in the report.

chairman and ceo statement 3

Chairman and Chief Executive Officer Statement

Dear Stakeholder,

To me the words often repeated by Baxter’s long-time Chairman and Chief Executive Officer

William B. Graham epitomize the concept of sustainability:

“Do well by doing good.”

That idea has become part of Baxter’s cultural fabric, and indeed has been for decades. The very nature

of what we do and the products we produce have a profound impact on the attitudes of our team

members and our corporate values.

Our products are used to save hundreds if not thousands of patients with critical medical conditions

each day—patients suffering from life-threatening conditions including kidney failure, immune disorders,

hemophilia and cancer, as well as traumatic injury. Certainly that gives our 42,000 team members

throughout the world pride in what they do each day, but it also carries with it a higher level of responsi-

bility and commitment to safety, quality, innovation, the development of all team members, ethics

and philanthropy.

I believe that we can do well by doing good. We can do well by providing a good return to our

shareholders, by providing a quality workplace and competitive benefits to all of our team members

around the world, by producing the highest-quality products while minimizing our impact on the envi-

ronment, and by making a positive impact in our communities and assisting others in need.

By no means is it easy to be successful in all of those areas all of the time. What we hope to do in

this report is offer some insight into the daily struggles and decisions that we face, the Shared Values

that drive those decisions and what I believe are the necessary building blocks for success as a corpo-

ration in an increasingly global, transparent economy. We accomplished a great deal in 2000, including

establishing Baxter’s Bioethics Statement of Principles, generating a 49-percent return to shareholders

for the year and reducing our air toxic emissions by 31 percent. However, our work is far from done.

We need to better focus our community relations, corporate giving and volunteerism programs in order

to make a more significant impact on access to health care throughout the world. We also need to enhance

workplace safety, as well as strengthen product stewardship efforts in taking responsibility for the impact

our products and therapies have on the environment and society.

By creating a culture that can effectively balance the needs of multiple stakeholders and empowering

our team members to “do well by doing good,” we can accomplish all of that and more.

Best regards,

Harry M. Jansen Kraemer, Jr.Chairman and Chief Executive Officer

2000 Baxter Portfolio

BioScience

– BioPharmaceuticals

• Recombinant

• Plasma

– Vaccines

– BioSurgery

– Transfusion Therapies

Medication Delivery

– Drug Delivery

– Anesthesia

– Nutritional Products

Renal

– Dialysis Products

– Dialysis Services

– Disease Management

– Xenotransplantation

Corporate Profile

Baxter International Inc. is a global medical products and services company with a mission of deliveringcritical therapies for people with life-threatening conditions through its three major businesses—BioScience, Medication Delivery and Renal. Our products and services are used to treat patientswith many conditions including trauma, hemophilia, immune deficiencies, infectious diseases, kidneydisease, cancer and other disorders. With 2000 sales of $6.9 billion, and more than 42,000 teammembers around the world dedicated to one mission, Baxter is recognized as a global leader indeveloping innovative solutions that improve patients’ quality of life.

4 corporate profile

BaxterS&PHealthcareComposite

S&P500

DowJones

Baxter Shareholder Return: 2000

-10% 34

%

49%

-6%

BaxterS&PHealthcareComposite

S&P500

DowJones

Total Shareholder Return: 1995–2000

18%

24%

22%

16%

All $ figures noted are U.S. dollar denominations unless otherwise specified.1. Excludes Edwards Lifesciences Corporation.2. Net income excludes the cumulative effect of an accounting change, special charges for spin-off costs, in-process research

and development and acquisition-related costs, net litigation, and exit and other reorganization costs, as applicable in each year.

200019991998

Operational Cash Flow1

(in millions of dollars)

$588

$588

$379

200019991998

Net Income1,2

(in millions of dollars)

$779

$915

$688

corporate profile 5

40% Medication Delivery

34%BioScience

26% Renal

2000 Sales by Business

46%United States

26% Europe

7% Japan9%

LatinAmerica

12% Asia andOther

2000 Sales by Region

15,700North America

11,300 Europe

1,200Japan

11,400 LatinAmerica

2,450 Asia

Total Employees as of December 31, 2000

BioScience

2000 Sales: $2.4 billion

Baxter’s BioScience business produces therapeutic proteins fromplasma and through recombinantmethods to treat hemophilia, immunedeficiencies and other blood-relateddisorders. Baxter also produces vaccines and biosurgery therapies,in addition to manufacturing blood-collection containers and automatedblood-cell separation and collectionsystems.

Medication Delivery


Baxter’s Medication Delivery businessmanufactures a range of productsused to deliver fluids and drugs to patients. Baxter provides intra-venous (IV) and irrigating solutionsin flexible, plastic containers, premixed liquid and frozen drugs for IV delivery, IV access systemsand tubing sets, electronic IV infusionpumps, solutions, containers andautomated compounding systemsfor IV nutrition, IV anesthesiadevices and anesthetic agents andambulatory infusion systems.

Renal


Baxter is a leading provider of dialysisproducts and services around theworld to support people with kidneydisease. We are a leading global man-ufacturer of products for peritonealdialysis, including dialysis solutions,container systems and automatedcyclers. Baxter also manufacturesdialyzers, solutions and instrumenta-tion for hemodialysis. In addition,Baxter’s Renal Therapy Servicesoperates dialysis clinics in partnershipwith local physicians in 12 countriesoutside the United States, RMSDisease Management Inc. contractswith U.S. health-care payers to pro-vide cost-effective kidney-diseasemanagement services across thecontinuum of care and Baxter’s RMS Lifeline Inc. provides vascularaccess services in the United Statesthrough dedicated outpatient centers.

6 economic sustainability

economic

economic sustainability 7

Doing Business Locally—

an Example of Pursuing Sustainable Development

A culture of sustainable development doesn’t happen overnight. It requires

continuous attention and communication at all levels of the company. Baxter

has many policies and procedures that support sustainability, but day-to-day

activities and real-life examples speak louder than words.

Baxter’s Cali, Colombia, facility is one example of pursuing sustainable

development on a daily and local basis. It’s a good example of how Baxter is

leveraging local resources, enforcing ethical business practices, contributing

to the economic and technological development of its communities and

advancing health care in the region. Areas it has identified for more attention include career development

and feedback channels for employees, as well as taking more of an active role in identifying and addressing

the social needs of its local community.

Workforce profile Baxter’s Cali, Colombia, facility, built in 1956, represents the company’s second international

facility. It is a manufacturing site for IV sets and solutions, dialysis products and blood collection, storage and

separation products.

The plant employs nearly 700 people, evenly divided between manufacturing and administrative jobs, with

approximately 15 percent of employees having worked there for more than 20 years. All of its employees are

Colombian, and about half the employees are women. Women also hold three of the seven most senior posi-

tions at the facility.

Baxter is one of the five largest private employers in Cali. It offers competitive wages and benefits, and is

a leading provider in all of the product markets it serves in Colombia, which is consistent globally and an

important part of the company’s growth strategy.

Manufacturing and selling products locally Nearly 75 percent of everything Baxter sells in Colombia is manu-

factured locally. This is mutually beneficial to the company and the country. Our philosophy is that we will best

serve our local customers by leveraging local resources—employees, suppliers and facilities. It allows us to be

closer and more attuned to our customers’ needs while contributing to local commerce.

Manufacturing locally also allows us to better manage currency fluctuations because manufacturing costs

reflect local currency, as does our pricing. This means our sales are not dramatically impacted by currency

fluctuations, which benefits our shareholders.

When it comes to manufacturing and selling products locally as part of a global organization, balancing

local and global market dynamics and business practices can be a challenge. To effectively operate as a global

company, we must embrace local cultures and respond appropriately to different market dynamics. This means

recognizing that in everything we do one size doesn’t fit all.

Values-Based decision making Baxter is committed to values-based decision making, and our Shared Values of

“Respect, Responsiveness and Results” drive the way we do business. While these values are consistent throughout

the company, facilities are empowered to do the right thing for their local market.

Cali is a good example of where Baxter’s Shared Values are communicated and enforced regularly to all employees.

It is an integral part of orientation for new employees. In addition, all employees must sign a card when joining Baxter

confirming that they understand Baxter’s Shared Values and business ethics, and commit to complying with these

standards. This is required of all Baxter employees worldwide. The Cali facility, however, has taken this a step further.

It presents a video on Baxter’s Shared Values annually to employees, and supplements this with an annual training

course for all supervisors and managers.

“In every relationship we have, our Shared Values drive that relationship,” explained Victor Pedroza, general manager

for Baxter’s Cali facility, who speaks passionately of the plant’s commitment to and communication around Shared

Values. “Regardless of market forces, we must stand firm on our Shared Values. We don’t do business if it’s not consis-

tent with our Shared Values.”

This is especially important in prohibiting the acceptance of bribes or gifts, and in contracting with third parties. Baxter’s

Global Business Practice Standards, explained below, prohibit the solicitation or acceptance of gifts, loans or other

special preferences from a person or organization that does or wants to do business with Baxter. Also, these standards

state that we cannot use an agent or representative to do anything Baxter policy prohibits, such as concealing improper

or illegal payments by passing money through an agent or representative or by granting larger than normal profits to

an agent or representative.

How to do business with Baxter—Baxter’s Global Business Practice Standards Directly tied to Baxter’s approach to values-

based decision making is its widely lauded business practices program, which is built around the concept of integrity,

a key element of Baxter’s Shared Value of “respect.” Baxter’s Global Business Practice Standards is a guide for employees

and suppliers, printed in 16 languages, to help explain the universal principles governing our business.

All employees must comply with Baxter’s business practice standards, and in Colombia and many of the other countries

where we do business, so must our suppliers. Cali includes language in its contracts requiring suppliers to comply with our

business practice standards and workplace safety requirements as part of our agreement to do business with them.

The Cali facility also is developing a formal business practice standards compliance program as part of its supplier

certification program. All of its major suppliers are required to complete the training and conform to Baxter’s Global

Business Practice Standards as a requirement of doing business with us. The program will include training and education

on these standards, certification, measurement and compliance monitoring. This will follow training and certification on

Baxter’s Supplier Quality Standards.

Representatives from Cali also are members of

Baxter’s Intercontinental Regional Business Practice

Committee. This is one of five Baxter Regional Business

Practice Committees, with Asia, Europe, Japan and

the United States/Canada/Caribbean representing the

other four. These committees, which are comprised of

members of senior management, are responsible for

applying the company’s business practice standards

at a local level.

In addition, a Business Practice Standards Help Line also is in place for anyone who works for or with Baxter world-

wide—an employee, supplier, customer—to call with a question or concern regarding business practices. The number to

call in the United States, Canada and Puerto Rico is (877) 229-8373. Outside North America the number is (847) 948-4964.


Baxter was named for the second consecutive year one of the “100 Best Corporate Citizens” by Business Ethicsmagazine, based on profitability and social responsibility.Four factors were considered in determining the list: totalreturn to investors, community relations, employee rela-tions, and customer relations.

Participating in the development

of a global business conduct

management system standard

Gretchen Winter, Baxter vice president and counsel, BusinessPractices, and Ethics OfficerAssociation board member

The Ethics Officer Association, of whichBaxter is a member, is exploring thefeasibility of developing a global businessconduct management system standardthrough the International Organizationfor Standardization (ISO) process. Sucha management system standard wouldbe similar to and consistent with ISO9000 and ISO 14000, two well-recognizedmanagement system standards in theareas of quality and environmentalmanagement. This consensus-basedbusiness conduct management systemstandard would serve as a benchmarkfor companies in measuring anddemonstrating the effectiveness of theirbusiness conduct programs, as well as astandard for business partners to meet.

ISO is recognized for its demonstratedability to facilitate consensus-based outcomes. Because the Ethics OfficerAssociation is a United States non-profitcorporation, we must begin this processwith ISO’s U.S.-member body, theAmerican National Standards Institute.However, we believe that this must be a global process and are encouragingmembers of the Ethics Officer Associationand others who are not based in theUnited States to contact us to discusssimilar initiatives that are underway inthe hope of better coordinating theseefforts. As a member of the Ethics OfficerAssociation, Baxter endorses this initia-tive and is lending its full support andassistance to the process.

For more information, please contactthe Ethics Officer Association at (617) 484-9400.

Employee development Building from Baxter’s companywide talent manage-

ment program, Cali has a well-defined succession-planning process whereby

it identifies high-potential employees, and as part of their development rotates

them into different positions at Baxter facilities around the world.

The Cali facility also has added to the companywide annual employee

performance evaluation form questions to help it better assess employee

development needs and respond accordingly. It is incorporating this feed-

back into specific training programs to generate the skills that will allow it

to develop the right work force for the long term.

Recognizing what it takes to develop and keep talented people, it also

includes a measure of employee satisfaction as part of the annual perform-

ance evaluation form. From this annual assessment, it has received a nearly

92-percent favorable employee satisfac-

tion rating, yet it also has learned that

it could do a better job in the area of

employee feedback and career develop-

ment, which the facility is working

toward. In both areas, the satisfaction

ratings were in the high 80s, but Cali’s

target is to achieve over a 90-percent

rating in all areas of measurement of

employee satisfaction.

Employee engagement To better engage employees in decision-making

processes, an employee suggestion program is in place whereby employees

earn points for making suggestions in areas covering cost reductions, product

design and services, environment, health and safety and productivity improve-

ments. An award is presented to the employee with the most points at the

end of each year.

Customer relationships Baxter’s dedication to developing and delivering

quality products and services is often a differentiating factor for it in markets

around the world, and Colombia is no exception. It realizes that “serving

the customer” extends beyond fulfilling an order request, but includes part-

nering with that customer in the delivery of quality health care for patients.

As an International Organization for Standardization (IS0) 9001 certified

facility, Baxter’s Cali facility is working with some large customers in the

area to help them also reach that certification level, benefiting the customer

and the Cali community by further enhancing the quality of local health-

care operations.


Employee Satisfaction Rating

from Cali’s Annual “Organization

Climate Survey”

1996 87.7%1997 86.7%1998 90.4%1999 91.4%2000 91.7%

Market dynamics—introducing life-saving innovations Baxter was the first company to

introduce IV solutions to the Colombian market, starting in 1956 with the production of IV

solutions in glass bottles at our Cali plant, followed by IV solutions in flexible plastic con-

tainers in 1968, which is the standard used today.

Since introducing these and other life-saving products and services to the market, competi-

tors both on a national and international level have followed. Baxter’s reputation for quality

products and services has allowed it to sustain its leadership in this market and expand its

production operations to meet demand. In 1995, Baxter invested in a major expansion of

its Cali facility, increasing production from 18 million units annually to 48 million units annually,

and creating 100 new jobs.

This example is not unique to our Cali facility, and is common across Baxter facilities

worldwide. When entering a country, Baxter extends its expertise in manufacturing to help

develop health care in the region, introduce new skills in the local population and expand

the area’s economy.

An integral part of the community As an integral part of the Cali community, Baxter has

a vested interest and responsibility to contribute to the welfare of the community, as do all

Baxter facilities in their local communities.

Pedroza serves on the State Economic Development Committee, which supports local

and national business development. The company also sponsors several local activities and

causes, but wants to do more.

Sustainable development requires us to be sensitive and responsive to the social issues

in the communities where we operate. To be effective in this we need to be actively engaged

in our communities, which is an area where our Cali facility is looking to do more. It hopes

to make inroads in improving its involvement in community-based organizations to better

identify and assist in the critical issues facing its community.

Preserving the environment Baxter’s Cali facility is one of many Baxter facilities to have

earned ISO 14001 certification, which requires an organization to monitor and measure the

environmental performance of its activities and services in order to continually improve

such performance. Baxter’s goal is to have all of its major operations ISO 14001 certified

by 2002, and encourages the same of its suppliers.

In accordance with this certification, the Cali facility continually investigates opportunities

to reduce waste and minimize its environmental impact. One example is the facility’s

accomplishment in reducing the thickness of IV bags, resulting in a material reduction of

113,000 kilograms a year. This also reduced the amount of material that needs to be disposed

and saved $180,000.

Baxter’s Cali facility is one example of how the drive toward sustainable development

is being woven into our corporate culture. Throughout this report you will learn more about

our performance in sustainable development, expanding on subjects introduced above.

“We have built a culture around our Shared Values and quality philosophy, which I

believe positions us, as well as Baxter facilities around the world, for sustained business

success,” said Pedroza. “I am proud to work for Baxter, and I can see that pride shared

throughout our facility. It stems from knowing you’re a part of a team built on integrity and

driven by continuous improvement, and knowing that what you do is making a difference

in people’s lives.”�


Baxter’s Cali facility represents one of about60 Baxter facilities thatare ISO 9001 certified,which is a compilationof numerous qualitystandards and regula-tions that have gainedinternational consensus.The application of thesestandards result inmore efficient processes,better quality productsand greater customersatisfaction. Baxter’sQuality LeadershipProcess, with whichemployees and othersperforming work onbehalf of Baxter mustconform, is based onand complies with ISOstandards.

Baxter’s Cali, Colombia, facility was the 1994 recipient of the ColombianGovernment’s National Quality Award.

Growing our Business—Identifying

and Addressing Global Health-Care Trends

Baxter’s growth strategy focuses on technological innovation and global expansion

in an effort to deliver high-quality, cost-effective medical products and therapies to

patients worldwide. This is a natural fit with sustainable development, which requires

us to anticipate and address important global trends that can have serious conse-

quences for business and society. By following our growth strategy we are advancing

health care worldwide and responding to critical health-care issues, both of which

are good for society and good for business growth.

As the population ages, there is a corre-

sponding increase in the number of people

with chronic conditions such as end-stage

renal disease and blood disorders, as well

as other life-threatening conditions including

cancer, infectious disease and trauma. This

generates an increased demand for many

of the products, therapies and services we

offer. It also brings with it the responsibility

to address related issues heightened by the

demand an aging population places on the

health-care system. Some of those issues and

how we’re responding are explained below.

Addressing a global nursing shortage

With the growth of the aging population and the resulting need for more health-care

resources, some countries are experiencing an alarming shortage of nurses needed

to care for this growing patient population. One area of concern is in renal care where

nurses play a critical role in managing the care of chronically ill patients. A global

nursing shortage coupled with the number of people with end-stage renal disease—

a number that is growing at about 7 to 8 percent annually—is putting tremendous

pressure on the ability to provide in-center hemodialysis treatment.

People with end-stage renal disease require dialysis or a kidney transplant to replace

the role of failed kidneys in removing waste and toxins from their body. With a lack of

donor kidneys, the vast majority of people with end-stage renal disease require dialysis,

either peritoneal dialysis, a home-based therapy, or hemodialysis, traditionally delivered

in a hospital or clinic.

Peritoneal dialysis, a therapy that Baxter pioneered more than 20 years ago and

remains the leading provider, is one solution to the nursing shortage in the nephrology

community. It allows patients to self-administer this life-saving treatment in their

own homes and requires far fewer nurses per patient than does traditional in-center

hemodialysis. As part of our product and service offerings for the hemodialysis

market, we expect to launch in 2002 a hemodialysis system for the home, which will

further advance options in home-care for dialysis patients.


70 80605040

150%

100%

50%

Aging Population

Global population age 40-80 expected to more than double by 2020

Percent of growth

Advancing patient care

Baxter’s HomeChoice PROwith PD Link is a home-dialy-sis therapy that leveragesadvanced computer technologyto communicate daily patienttreatment information to clinicians via a data card ormodem for better diseasemanagement and patientcare. The data card automati-cally downloads daily patienttreatment information, replac-ing the need for patients tomanually log this information.The modem option enablesclinicians to remotely monitorthis information on a dailybasis and identify and respondto potential problems betweentheir patients’ clinic visits.

Baxter currently has effortsunderway to Web-enable this system, allowing for two-way communicationbetween a patient and clini-cian via the Internet, withsimilar efforts underway inour other businesses.

Reducing the risk of medical errors With the demands on the health-care community expected to increase in correlation

with an aging population and medical errors already of great concern, the need for efforts to prevent medical errors

becomes more important. Baxter takes this responsibility seriously and has extensive programs in place to effectively

train the end-users of our products in an effort to enhance care and help clinicians reduce the risk of medical errors.

For example, our Medication Delivery business offers accredited on-line continuing education home-study programs

that are free to all clinicians with access to the Internet. These interactive training programs provide clinicians with post-

testing, immediate test results and a completion certification. Programs include courses in medication delivery, pain

management, nutrition and hemophilia. Baxter has issued over 20,000 certificates to pharmacists, nurses, case managers

and dietitians in the United States.

In addition, via Baxter’s Nutriforum Web site clinicians can view information on our parenteral nutrition products

and therapies relevant to their country’s specific regulatory environment. Since its launch in the fall of 1999, the Web site

has been translated into several languages and expanded to reach a global audience, with clinicians signing up from

more than 40 different countries. It also has received the HONcode (Health on the Net) seal, an international standard

established to help address the Internet’s main health-care issues—reliability and credibility of medical and health infor-

mation available through the Internet.

Enhancing blood safety Also focused on advancing the quality of health care are our efforts to move along a continuum

toward a zero-risk blood supply. These include the manufacturing and marketing of leukoreduction systems and a collabo-

rative effort with Cerus Corporation for the development of pathogen inactivation systems for use with red blood cells,

platelets and plasma for transfusion.

Leukoreduction involves the removal of white blood cells, which are associated with the transmission of certain

infectious diseases and the development of immune reactions in some transfusion recipients. Most of the major markets

in Europe, including France and the United Kingdom, have mandated leukoreduction for all cellular blood components

(red cells and platelets). Many other countries, including the United States, are taking a mandate under consideration.

Further along the continuum of blood safety, pathogen inactivation systems are being developed to inactivate a wide

variety of pathogens, including a range of viruses and bacteria such as HIV. Pathogen inactivation offers the opportunity

to inactivate pathogens that medical science has yet to identify and more than we test for today.

Baxter is collaborating with Cerus Corporation on INTERCEPT Blood Systems, which are being developed to inacti-

vate viruses, bacteria, other pathogens and white blood cells in red blood cells, platelets, or plasma prior to transfusion.

With Cerus, we have filed for a CE mark application for approval to market the INTERCEPT Platelet System in Europe

and are completing Phase III clinical trials of this product in the United States. Clinical trials also are underway for the

INTERCEPT Plasma System and INTERCEPT Red Cell System.

These new technologies are expected to bring with them added costs for the processing and transfusion of blood

products. We are working with our customers, third-party payers and government agencies to address the potential costs

associated with these initiatives.

Increasing the Availability of Life-Saving Therapies Worldwide

Many people in the world with life-threatening diseases go untreated because their countries have not yet reached a

stage of economic development to provide broad access to quality health care. Given our global presence, we are uniquely

positioned to help meet those needs. Several initiatives we have underway to introduce life-saving therapies to devel-

oping regions are highlighted on the next page.


Increasing dialysis treatment rates in Latin America Baxter was the first company to

introduce peritoneal dialysis to Latin America nearly 20 years ago, making life-saving

dialysis more affordable and accessible. Prior to the introduction of this therapeutic

option, many dialysis patients were left untreated due to a lack of resources necessary

to fund the infrastructure and health-care staffing needs for in-center hemodialysis.

“The number of people in Latin America who need dialysis and are being treated

has nearly doubled over the past decade, largely due to the affordability and accessi-

bility of peritoneal dialysis,” said Angel Rodriguez, vice president of Baxter operations

in Central America, Mexico and Venezuela.

Latin America has the highest peritoneal dialysis penetration rate in the world with

nearly 85 percent of patients in Mexico and about 40 percent of patients in Colombia

and Central America using this therapy. The peritoneal dialysis penetration rate is

especially high in the developing countries of Latin America due to the affordability

and availability of the therapy.

Addressing supply needs for the global hemophilia community While hemophilia,

a disease in which the blood fails to clot normally, affects as many as 300,000 people

worldwide, approximately three-quarters of this population receive little or no treat-

ment. This situation is most acute in developing countries, but even in industrialized

nations many patients continue to receive sub-optimal levels of treatment.

To help address this critical need, Baxter is increasing production of its hemophilia

therapies, particularly its Recombinate Factor VIII therapy for the treatment of hemo-

philia A. For this therapy, demand has consistently exceeded supply. Factor VIII, or

antihemophilic factor, is the protein in human blood that is critical for proper blood

coagulation and is deficient in people with hemophilia A.

Recombinant technology enables the insertion of genetic information, for making

a therapeutic protein, into the DNA of a cell. This modified genetic information instructs

the cell to produce the desired protein. The use of recombinant technology to produce

therapeutic proteins has the potential to reduce the need for other sources of raw

material like plasma.

Since 1995, demand for recombinant Factor VIII has nearly doubled on a global

basis. The heightened demand is due to numerous factors, including increased use to

prevent bleeding rather than treating patients when bleeds occur. By using recombinant

technologies, we can produce more Factor VIII and eventually expand its accessibility.

In 2000, Baxter received U.S. Food and Drug Administration and European regulatory

approval for additional processing suites expanding the manufacturing capacity for

Recombinate Antihemophilic Factor (rAHF) at our Thousand Oaks, California, facility. In

addition, construction is underway at our Neuchâtel, Switzerland, facility to help expand

production capacity for Baxter’s next-generation recombinant Factor VIII therapies.


Advancing global health care

A significant developmentBaxter has underway relatedto advancing global healthcare is the development of an influenza vaccine void of egg proteins, which cantrigger rare but potentiallyfatal allergic reactions in somepeople, and is limited in supply. Influenza is a threat to people worldwide, and isassociated with a high-mor-bidity and high-mortality rate.Current influenza vaccinesare derived from hens’ eggs,which involves a cumbersomeprocess requiring more thanone hundred million eggseach year.

Responding to the criticalglobal supply needs for aninfluenza vaccine, Baxter isdeveloping cell-derived vac-cines completely free fromegg proteins, antibiotics andthimerosal, thus minimizingthe risk of allergic reactions.The cell-culture system alsoallows for more rapid produc-tion of large volumes of thevaccine, which may lessen the likelihood of flu vaccineshortages like the one experi-enced in 2000. Thus far, clinicaltrials have shown Baxter’scell-derived vaccine to be welltolerated and safe and highlyimmunogenic in humans. Itfulfills all European Committeefor Proprietary MedicinalProducts criteria for safety andefficacy of influenza vaccines.


Building for the Future—Research and Development

Baxter researchers have numerous efforts underway to extend and improve the lives of people around the world by

introducing new and enhanced therapies, products and services for the treatment and prevention of disease. We invest

approximately $1 million a day in research and development activities. To better coordinate and advance these efforts

across our different business lines we announced the appointment of a chief scientific officer, Norbert G. Reidel, in

March 2001.

While research and development activities are underway across all of Baxter’s businesses, some of the more dramatic

examples reside in our BioScience business where we expect to introduce an average of two new products a year over

the next decade. These products include:

– The first recombinant Factor VIII therapy for the treatment of hemophilia A that excludes any added proteins or raw

materials derived from human or animal sources in the manufacture, purification and formulation of the final product;

– More than 20 new vaccines to prevent conditions including peptic ulcers, stomach cancer and coronary artery disease;

– Recombinant hemoglobin, which could be used instead of blood to deliver oxygen to tissues in cases of blood loss;

– An advanced blood separation and collection device; and,

– New biosurgery and tissue engineering therapies based on Baxter’s Tisseel fibrin sealant platform.

In our Medication Delivery business we are combining our electronic flow-control pumps with other bedside monitoring

systems to play a greater role in the gathering and management of patient data, as well as working toward moving

beyond intravenous drug delivery to other methods of delivery. We also are expanding product lines in our Anesthesia

& Critical Care, Clintec Nutrition and Specialty Therapies business units.

In our Renal business we have efforts underway to expand products and services to patients, providers and payers.

One example is advancing hemodialysis treatment options for patients by developing offerings not only for the tradi-

tional dialysis center environment but also for the home and self-care or limited-care settings. We also are developing

new synthetic hemodialysis dialyzers, as well as continuing the development and registration process for peritoneal

dialysis solutions and therapies to address the different needs of this patient population.

As we continue to advance our research and development activities, we want to better engage our employees and lever-

age their ideas for how to improve our products, therapies and processes. One approach we are taking is the development

of an Innovation Site on the company Intranet where employees can submit ideas. We also are training “idea coaches” who

will work with individuals to help them think through their ideas from a technological and business standpoint to ensure

that each idea is given careful thought, analysis and the opportunity for development.�


Q. What role do social due diligence factors play in our

decision to acquire or partner with a company?

A. Once the strategic fit and economic considerationshave been taken into account, the social due diligencefactors must be met. Over the last couple of years thesocial due diligence factors have taken on increasingimportance in our decision whether or not to acquire orto partner with a company. These include a company’s fit with our values, business practices, environmental,health and safety commitments, and manufacturing and quality procedures. It’s no longer just a question ofwhether the potential acquisition will provide the financialreturns, but Baxter, and other companies, are starting to realize that the social factors have a direct impact onthe ability to meet those financial returns.

Q. How important in the due diligence process is another

company’s fit with our values?

A. Very. If we’re going to buy a company, it’s going tohave to be a fit with our Shared Values—respect, respon-siveness and results. Studies show that companies whodo cultural due diligence, which incorporates values,have the best chance of success in meeting the financialgoals of the acquisition. According to recently publishedstudies, about 50 percent of acquisitions fail to meetfinancial goals. Cultural due diligence is an important stepthat we cannot overlook in the integration process.

Q. What is the most important element in the integration

process?

A. Communication. One of the first priorities and meas-ures of success is how well we communicate in that firstweek and first 90 days with our key internal and externalconstituents (e.g. customers, employees, governmentofficials, suppliers) about the acquisition, why we’re doingit and the impact on them.

Q. How do you measure success in an integration?

A. By how well we capture the value. We must clearlydefine at the start of the process what we hope to get out of the acquisition—resources, new technology,growth—and measure our performance towards thatvalue goal. How do we capture that value? Studies showthat the elements that make up sustainability—people,values, environmental factors, integrity in business practices—must match up between the companies for the financial benefits to be attained.

Q. Moving forward, what are some improvements

we’re making in the integration process?

A. Enhancing communication, better integrating the cultures of the organization and better identifying andleveraging resources internally to lead the integrationprocess. For example, social due diligence factors are taking on increasing importance in our decision to acquire a company. I expect that to increase, and as a result, to make the integration process that muchsmoother. We also are starting the integration processearlier in the cycle of the acquisition and working to identify leading talent at Baxter who match the compe-tencies needed to successfully lead integration teams in areas including communication, human resources,quality, manufacturing, among others. Once identified,we will put them through extensive training and thenhave them lead an integration team full time for about six months. People are key, and this is an important element of success in any integration process.

Q+ASustainability—A key element to a successful acquisition

Bob Hurley, corporate vice president of integration management at Baxter,speaks below to the important role sustainability factors serve in

a successful acquisition. Integration management is a new position created at Baxter,indicating the increased attention we’ve given to this area of our business operations.It leverages Hurley’s more than 20 years experience in several different strategic,operational and international roles at Baxter.

Baxter’s Bioethics Policy

Baxter believes that biotechnology can provide significant benefits to humankind and that thesetechnologies carry with them responsibilities to the public. Any Baxter decision to commercialize a biotechnology-derived agent or therapy will receive careful consideration of the risks and the benefits of the technology to society in light of the information available. The ability to perform an activity will not automatically justify the activity. As a company, these principles and processesgovern our efforts to research, develop and provide critical therapies for patients worldwide.

Bioethics Guiding Principles

Baxter places the highest priority on the safety and efficacy of our products, and we support government agencies in

safeguarding the health and well-being of people throughout the world.

Baxter listens to and considers feedback from the public and responds to concerns about the social, ethical and technical

application of biotechnology in the research, development, manufacture and sale of our therapies. Baxter’s response to these

concerns will be based on ethical considerations and scientifically sound hypotheses, theories and data.

Baxter also actively participates in public discussions and professional forums promoting science-based policies and

regulations that serve the public interest as an ethical priority.

Baxter will determine whether the potential benefit of applied biotechnology to individuals and society outweighs the

risks. Baxter will seek to identify relevant risks and find ways to minimize those risks.

Baxter will ensure that any research undertaken by Baxter or at its direction is designed to produce valued health

enhancements or advancement of scientific knowledge.

Baxter adheres to accepted ethical and professional standards in the research, development, manufacture and sale

of our products to the medical marketplace as well as ethical standards of medical practice. These are represented by,

but not limited to, documents such as the following:

– Guidelines for Good Clinical Practices, Good Laboratory Practices, and Good Manufacturing Practices

– Nuremberg Code

– Declaration of Helsinki

– International Conference on Harmonization

– International Ethical Guidelines for Biomedical Research Involving Human Subjects

– National Institutes of Health Guide for the Care and Use of Laboratory Animals

Baxter is sensitive and responsive to concerns related to the conduct of research on human subjects. Specifically:

– Baxter seeks to ensure the dignity, privacy and safety of those participating in clinical trials.

– Baxter will maintain appropriate confidentiality of personally identifiable medical and genetic information.

– Baxter supports the process of informed consent and is cognizant of and responsive to circumstances that

might impact this process.

– Baxter requires independent review and approval by individuals unaffiliated with our clinical research

(e.g., Institutional Review Board, granting agencies, data and safety monitoring boards, medical advisory boards)

before and during human-subject research.

– Baxter will ensure the scientific rigor of all clinical research.

Baxter recognizes that protecting the environment and maintaining the biological diversity of our planet is of vital

importance to human life. Baxter believes in the importance of maintaining global biodiversity and sustainable use

of global resources.


Review

This bioethics policy, and the decisions that have been made under its guidelines, will be reviewed and revised

as appropriate based on technological advancements, legal and regulatory changes and current social and ethical

considerations.


Use of Animals in Research

Baxter supports the conscientious use of animals in researchwhen no other valid scientific alternative exists. To the extentpossible, Baxter will minimize the use of animals in our researchand, where utilized, will treat them humanely.

Transgenic Animals

Baxter believes that the development of transgenic animalshas great potential to provide new therapies. Baxter is awareof issues related to the establishment of transgenic animallines and will proactively evaluate any theoretically possibleadverse consequences of utilizing such animals. For example,Baxter has considered these issues in the context of xeno-transplantation and has determined that this technology hasgreat potential for improving the quality of human life and iscurrently the most viable potential solution to end the chronicshortage of transplantable human organs.

Genetically Modified Organisms

Baxter understands that there are social and ethical consider-ations associated with research involving genetically modifiedorganisms and will conduct its research in accordance withthose considerations.

Waiver of Informed Consent

Baxter recognizes that during life-threatening emergenciesinvolving incapacitated individuals it may not be possible toobtain prospective informed consent from patients, family, or legally authorized representatives. In such circumstances,we support the appropriate utilization of waived informedconsent established by federal agencies charged with theresponsibility to ensure public welfare and safety and sup-ported by local institutional and community standards,reviews and approvals.

Note: Any clinical trial utilizing waived informed consent must be approved by Baxter’s Executive Management Teambefore initiation.

Human Cloning and Germ-line Research

Baxter will responsibly utilize the knowledge base of thehuman genome to guide research and development and toproduce advances in medical therapies for the benefit ofmankind. These therapies will be designed and produced inan ethical manner to enhance the quality of life, extend lifeand to respond to critical needs in life-threatening conditions.Baxter will focus on the development of specific therapiesand will not become involved in human research intended toaffect germ cells, including the cloning of human individuals.

Human Embryos and Fetal Tissue as Research Materials

Baxter will not pursue research and development that useshuman fetal tissue or human embryos.

Framework for Application of Bioethics Guiding Principles

Baxter’s planning processes, policies and procedures consider these “Bioethics Guiding Principles” as we carry out research

and develop, manufacture and sell our products.

Baxter will assess the potential risks and benefits of proposed research and development. Research and development

is justifiable where:

– The potential risks to individual subjects are minimized.

– The potential benefits to individual subjects are enhanced.

– The potential benefits to individual subjects and society are proportionate to or outweigh such risks.

Baxter’s Executive Management Team, through the application of the “Bioethics Guiding Principles” and with the advice

of appropriate scientific and ethical advisors, will make the final decision on whether to proceed in areas that require

a consideration of bioethical issues.�

18 social sustainability

social

social sustainability 19

Corporate Governance

Baxter International Inc.’s board of directors and executive management team take very seriously their duty

to act in a manner that balances the needs of all key stakeholders. To that end, Baxter’s board recognizes the

importance of good corporate governance as a means of addressing the needs of employees, communities,

customers and shareholders. Baxter’s actions in the area of corporate governance have been recognized and

benchmarked by several socially oriented investment organizations and other public companies over the years.

Baxter first adopted formal governance principles in 1995, and put in place Corporate Governance Guidelines

in 1998 to address the role of the board in such areas as board composition, selection and operation, executive

compensation, fiduciary oversight, strategic and succession planning and social responsibility. The guidelines

help Baxter act in a way that is fair, balanced and self-critical.

From a social responsibility standpoint, the Public Policy Committee of the Baxter board of directors has

oversight responsibility for many of the areas addressed in this year’s report. For example, Baxter’s Corporate

Responsibility Office is directly accountable to the Public Policy Committee. The Corporate Responsibility Office

is responsible for developing and communicating Baxter’s business practice policies and procedures, monitoring

compliance with the policies and training employees in using corporate business practice guidelines. The Public

Policy Committee also receives several other management reports relating to sustainable development, including

employee health and safety, environmental practices, employment practices and charitable contributions, as

well as reports on public affairs and quality.

In 2000, Baxter took a leadership role in the area of director compensation through its decision to compensate

its directors solely in stock options. Previously, directors received a combination of restricted stock and cash,

as well as retirement and medical benefits. The board approved this new compensation structure in order to

more directly align its compensation with the interests of Baxter shareholders. Directors will now receive an

annual target grant of 10,000 stock options, with the actual grant amount based upon Baxter’s total shareholder

return as compared to the S&P Healthcare Composite Index.

Baxter also has established a proactive, process-oriented approach in the areas of chairman and chief executive

officer performance evaluation and succession planning. Baxter’s board has well-defined processes in place, in

which specific goals and objectives are established.

Specifically, with respect to chairman and CEO performance evaluation, the board’s Planning and Organization

Committee develops and implements the annual process for evaluating the chairman and CEO, which includes

the establishment of a link between performance and compensation. The evaluation includes measurable

performance objectives established by the chairman and CEO and approved by the committee, a written self-

assessment by the chairman and CEO evaluating the extent to which he/she has achieved such objectives and

a review and discussion of the self-assessment with the committee and the full board.

In regard to succession planning, the board’s Planning and Organization Committee oversees the process

in order to ensure that it is both rigorous and effective. The process includes an annual review by the Planning

and Organization Committee of potential candidates to succeed to the chairman and CEO position, from both

a short-term and long-term perspective. These processes ensure that Baxter’s leadership strengths are sustained

moving forward.�

Maximizing Performance from the Outside In

To maximize the performance of every Baxter team member worldwide, every-

one is encouraged to take an outside-in approach to thinking about why we

go to work every day. That is, why is it that we manufacture dialysis machines

for people with kidney disease, or why do we produce recombinant Factor

VIII for people with hemophilia? Understanding those basic external realities

helps in many ways, including guiding us in pursuing the correct innovations

and helping us energize the organization to do more.

One of the ways Baxter is helping our managers and supervisors toward

that way of thinking is through a program called the Global Supervisory

Development System. As part of this program, all managers and supervisors

participate in courses that focus on seven core areas of skills—goal setting

and metrics, workplace management, leading and engaging, coaching and

feedback, conflict prevention and resolution and decision making.

Each core area is specifically designed to help people within Baxter become

better leaders. Through this process, Baxter’s future leaders will be better

prepared to sustain the company moving forward. According to Chuck Labig

of the Baxter Institute for Learning and Development, “Having an outside-in

frame of mind, and honing in on essential leadership skill sets, will make future

Baxter leaders more decisive, focused and clear.”

Executive compensation

Our executive compensation philosophy is intended to assist Baxter in attracting, retaining and motivating executives

with superior leadership and management abilities. At the same time, our philosophy also is geared toward linking

executive compensation to shareholder value.

The Compensation Committee of Baxter’s board of directors establishes salaries each year at a level intended to

be competitive with the 50th percentile of salaries paid to executive officers at comparable companies, including both

health-care and non-health-care companies. Cash bonuses are intended to provide executive officers with an opportunity

to receive additional cash compensation (which, when combined with salary, is intended to provide a total cash com-

pensation target of approximately the 60th percentile of total cash compensation paid to executives in comparable

companies), but only if it is earned through achievement of specified performance goals.

To further align management and stockholder interests, Baxter initiated changes to the long-term incentive compen-

sation program for its senior executives. Under the new long-term incentive compensation program, Baxter’s senior

executives no longer receive shares of restricted stock and only receive stock options priced at fair market value on the

day of grant. Unlike restricted shares that have very little risk, stock options only have value if the stock price increases

over exercise price. The new all-stock option long-term incentive compensation plan establishes the overall competi-

tiveness of Baxter’s long-term incentive compensation program at the 75th percentile of the long-term compensation

opportunities provided to executives at comparable companies.

Mentoring and on-line learning

A big part of our leadership development is mentoring. Baxter’s Growth Through Mentoring Initiative forges connections

and long-term relationships with Baxter employees and facilitates a level of learning not always present in direct-report

relationships. The goals of the mentoring program are to create a safe, nurturing teaching environment, to develop a team

base open to learning new things and to create the next level of leadership in order to sustain Baxter’s long-term growth.

On-line learning also is a key component of maximizing our global team performance. From communications to

customer service to finance, Baxter offers its team members on-line training and support to help them better manage

their careers.


Global Employee Stock Options

To give Baxter employees worldwide an even greater stake in the company’s financial perform-ance and a greater share in the success they help to generate, inFebruary 2001, the company granted100 stock options to more than41,000 eligible Baxter employees.This is the first time Baxter has takenthis approach to allow employees to share directly in Baxter’s success,thus making a stronger connectionbetween individual performancefocused on business objectives andpersonal financial reward.

Employee engagement

Measurement of employee engagement criteria is key to maximizing performance. When team members feel fully

engaged, studies show that there is an overall increase in motivation and a decrease in turnover.

“Our overall goal is to increase employee engagement because it has a direct impact on the bottom line,” said

Angela Anello of the Baxter Institute for Learning and Development.

Some of the drivers of employee engagement at Baxter include confidence in the future direction of the company

and/or business units, satisfaction with their level of decision-making involvement, career growth opportunities and

support for balancing work and family responsibilities.

When these specific drivers are measured, appropriate action can be taken to improve overall employee engagement

from a corporate level, in addition to business unit and regional levels.�

Work/Life Balance—A Key Driver of Employee Engagement

Recognizing the impact work/life balance has on overall employee engagement,

Baxter works hard to create an environment that addresses work/life conflicts and

encourages open discussion. We know from survey results that we’re making

progress, but that we can still do more to address day-to-day work/life conflicts

from both a business and personal perspective.

One of the challenges we face is creating greater awareness and understanding

of our work/life initiatives and creating a flexible mindset in how these benefits are

applied to different work settings. Another issue we face is elder care, recognizing

the significant impact this has on our global work force, both from an employee

retention and personal needs standpoint.


Percentage of employees reporting

a work environment supportive of

work/life balance according to the

1999 employee engagement survey:

Asia 62%Canada 54%Europe 51%Intercontinental 65%Japan 41%United States 65%


The importance of a flexible mindset Communication about our work/life initiatives and management and employee

support and understanding of such initiatives is imperative to create a culture supportive of work/life balance. Numerous

studies show that work/life balance has a positive impact on employee retention and productivity, demonstrating a clear

business benefit to offering resources in this area. It also is an important element of our Shared Value of “respect.”

Not surprisingly, we have found that in a traditional office setting flexible scheduling is more common, particularly

with technology making it easier for people to work off site. In a manufacturing setting, flexible scheduling can be more

challenging, and telecommuting or a compressed work week may not be a feasible solution. This is where a flexible

mindset is especially important.

According to Rowie Molina, a supervisor in Baxter’s Blood Screening Lab, a good partnership between a manager

and employee is essential for flexibility to work in a manufacturing setting.

“If given flexibility to attend to personal responsibilities away from work, employees are more likely to give 100 percent

attention while at work,” said Molina, who supervisors a team of 20 people.

Flexibility for Molina’s team could be working second shift instead of first shift to care for a sick child or job sharing

if two people want to work part time. These are just a couple of approaches, and the solutions are often presented first

by the employee.

Recognizing the business need usually requires someone to be on site to do the job, Molina posts the schedule

three months out so flexibility can be built into the schedule. She also communicates the business needs to employees

so that they understand the important role they play in the process. The result has been employees planning ahead

for time off and balancing that with anticipated business needs. Another benefit has been improved performance and

lower absenteeism, with Molina’s team reporting two months of perfect attendance in 2000 and the remaining 10 months

reaching a nearly 99 percent attendance rate.

Elder care—a growing global issue Demographics show that elder care is a growing global issue. We are laying the

groundwork now, talking to employees and evaluating resources to see what the issues are and how we can help

employees address elder-care needs.

Our preliminary research surfaced several elder-care issues including: long distance elder care, in-home elder care,

addressing elder- and child-care needs simultaneously, and helping employees prepare financially and psychologically

for their own needs in this area. Elder care is an important issue for a growing number of our employees, and one that

impacts employee retention and productivity.

While in the United States we offer elder-care resources, it is clear we need to do more. Thoughtful planning and

preparation in this area is critical to sustaining a productive, dedicated work force. Flexibility has been shown to be a

valuable elder-care tool and a benefit we already support. In the United States, we also offer access to a resource and

referral network, an employee assistance program and in some areas back-up dependent care. Expansion globally is an

important issue that continues to be investigated to ensure that Baxter is providing appropriate tools and resources to

all employees dealing with the stresses of balancing work and dependent-care needs.

Moving forward we are focusing increased attention on the visibility of our existing work/life resources, and encour-

aging open communication and collaboration between management and employees in addressing work/life conflicts.

We also are working to identify and address elder-care needs, and partnering with our global human resources teams

to better address the work/life needs of a global work force. By anticipating and carefully preparing for work/life issues,

we strive to sustain an engaged and dedicated work force.

Q. What does work and life balance mean in Europe?

A. Work and life balance is defined similarly in Europe as in the United States, recognizing that employees needflexibility to balance their responsibilities at and awayfrom work in order to effectively manage both. What isdifferent is having both spouses working. This is not ascommon across Europe as in the United States. Culturally,the expectation in many European countries is still thatthe mother or father stays home to care for the childrenwhile they are young. In some countries, such as Spainand Italy, less than 50 percent of women are working outside the home. Yet in others, such as Sweden, nearly75 percent of women are working outside the home. As it becomes more commonplace that both parents are working outside the home, more and more peopleare working flexible schedules.

Q. Why do you think it is that there’s still an expectation

in many European countries that one spouse stay home

to care for the children while they’re young?

A. One reason may be that in Europe, child-care centerstypically do not take children who are still in diapers,often resulting in one spouse caring for the child duringthe very early years. Also, some European countries offerpaid leave for both parents or unpaid leave, such as inGermany, for both parents up to three years after thebirth of a child.

On the other hand, in Sweden, for example, state-funded child care is making it more financially feasiblefor both parents to work outside the home.

Q. Are Baxter facilities in Europe supportive of

flexible scheduling or alternate work arrangements?

A. It’s just now really starting to take off. We want tomake every effort to address an employee’s personalneeds, but in flexible scheduling the business need mustallow for it and trust is important. The supervisor needsto trust that based on the employee’s performance theycan effectively self supervise themselves and get the jobdone in an untraditional work environment. We havenoticed that when you allow flexible work arrangements,employee dedication is usually higher.

Q. What are some work/life benefits you offer today?

A. One example is in Vienna, Austria, where we employabout 2,500 people and there is a shortage of kinder-garten space. To help meet the needs of our employeesand the community in that regard, we have partnered withthe city of Vienna in establishing a kindergarten, whichhas been very well received. As in the cases of mostkindergartens, also called nurseries in Europe, they serve children who are out of diapers up to 6 years old.Sustaining a program such as this would not be common-place if there was not the employee base to support it, but in this case the community need and partnership helpedto fill that gap.

Clearly, as people have increasing needs from adependent-care standpoint, with dual-income householdsbecoming more popular and the increasing number ofpeople caring for aging parents, the need for work/lifebenefits is gaining increased visibility and attention.Providing work/life benefits allows us to sustain our workforce by making it possible for people to juggle responsi-bilities at home and at work, without having to give uptheir job. If that were not the case, we know we wouldlikely lose some valuable employees.

Q. How do you plan to approach work/life benefits

moving forward?

A. We are working to create a culture where employeesare comfortable speaking up if they have a work/life need,which I don’t think is always the case today. Also, we wantto increase awareness and support of flexible schedulingto help meet employees’ personal needs where the busi-ness need allows. Another issue of increasing importanceis elder care, which we will be looking at closely, consid-ering that in Europe the population is aging even fasterthan in many other parts of the world making this a veryreal concern to our employees.


Q+AWork and Life Balance—An Increasing Global Issue

Baxter has made a commitment companywide to help employees achieve balance in their work and personal lives. The United States is further along in

the visibility and adoption of work/life initiatives with dual-income households being more commonplacethan in many parts of the world, but that is changing. As it does, increasing attention is being givento work/life initiatives globally, as demonstrated in the example below of how work/life balance is approached in Europe, featuring an interview with Franz Landsberger, vice president of humanresources for Baxter’s BioScience business in Europe.

Advancement of Women

Advancement of our talent, including women who represent nearly half our work force, is a priority for Baxter, garnering

attention and resources both internally and externally. We have two women serving as corporate officers, representing

10 percent of corporate officers. Nearly 40 percent of Baxter officials, managers and professionals in the United States

are women, and 25 percent of Baxter’s global senior management team at the vice president level are women.

Whereas we have made progress in representation of women at the most senior levels of the company, we want

to do better and are increasing our efforts in this area.

One example is our participation in the “Women Leaders in a Global Economy” project being led by Boston College

Center for Work and Family, The Families and Work Institute, and Catalyst, a non-profit organization dedicated to the

advancement of women. Baxter is one of about a dozen companies participating in the study examining what women

in senior positions do to be successful. Selected Baxter women are being interviewed about what they perceive to be

obstacles or helpful practices. Data from all participating companies will then be used as a benchmark. In July 2001,

approximately 10 Baxter women executives will attend a forum in Prague, Czechoslovakia, to hear the results of the study

and to network with top women in other global companies throughout the world.

Through the Baxter Institute for Learning and Development, Baxter has adopted a mentoring program for employees,

which originated as a result of Business Women INC.’s (BWI) Glass Ceiling Study. BWI is an organization sponsored by

Baxter and Allegiance Corporation and is focused on promoting the professional and personal development of women

through information, networking and development opportunities. In 1997, BWI implemented a mentoring program that

has grown to about 60 mentoring pairs in just four years. Its success led to it being administered by the Baxter Institute

for Learning and Development, which is working towards making it a global program.

BWI includes about 400 Baxter employees. Formal chapters have been estab-

lished at Baxter facilities in northern Illinois, and Marion, North Carolina, yet any

facility can receive information on BWI via the company’s Intranet.

Baxter’s progress in advancing women into leadership positions, as well as

our support for work/life initiatives, led to a Catalyst Award in 1999 and a place in

Working Woman magazine’s “Top Companies for Executive Women” list in 2000

and 2001. However, we realize this is an area for more attention and are taking

efforts to do better.�

Workplace Diversity—An Integrated Approach

With about 42,000 employees in nearly 50 countries, Baxter is well versed on issues related to employing a diverse

work force. In fact, almost two-thirds of our employee population resides outside of the United States.

“If you look at the demographics of our worldwide employee population, the majority of our employees are people

of color,” says Vice President of Employee Relations and Assistant General Counsel, Stephanie Bradley. “The way that

Baxter approaches diversity might be a little different than in other organizations. Rather than having a separate initia-

tive, programs and processes specifically related to diversity, our approach is to integrate diversity considerations into

everything we do.”

This approach to diversity is reflected in Baxter’s Shared Values of Respect, Responsiveness and Results, specifically

in the value of Respect, which states: “Our environment is one of continuous learning in which all employees, regardless

of cultural background, gender or level of position can develop to their full potential. We value the unique contributions

of all individuals, recognizing the diversity of our work force as a competitive advantage.”

As a federal government contractor, Baxter is committed to equal employment opportunity and affirmative action.

About 16 percent of Baxter’s U.S. officials, managers and professionals are minorities, and approximately 10 percent

of our corporate officers are minorities. Although these levels of minority representation generally meet or exceed

government standards, we recognize there is still work to do, especially with respect to the representation of traditionally

underrepresented minorities, including blacks and Hispanics, in our pipeline to more senior positions within the company.

While representation of diverse groups is important, we view success at managing diversity as going beyond the

“numbers.” Our continuing challenge and opportunity is to reap the full benefit of having such a diverse global work-

force by ensuring that we value the contributions of people with diverse backgrounds and perspectives, and that we

actively promote the development of all of our employees to achieve their fullest potential.


Women Baxter Officers 10%*

Catalyst 2000 Census of U.S. Women Corporate Officers 12.5%

*Reflects data as of March 1, 2001

1999 Council on Economic Priorities

Minority Benchmark Survey Average

(2000 information not available at the

Baxter time of this report)

Minority Officers (2000) 11%

(1999) 19% 9.48%

Minority “Officials & Managers” (2000) 18%

(information available for U.S. and Puerto Rico) (1999) 15.25% 15.65%

Minorities in Top 50 Paid (2000) 10%

(1999) 14% 8.52%

Minority representation in some senior positions at Baxter decreased following the completion

of our spin off of our cardiovascular business in 2000, indicating we have more work to do

in increasing minority representation at some of our most senior levels.�

Giving Back to Our Communities

Through The Baxter International Foundation, Baxter is helping to meet critical health-care

needs in communities around the world where our employees live and work. Over the past

20 years, the foundation has made great progress in establishing a structure and vision

around increasing the quality, cost-effectiveness and accessibility of health care. In addi-

tion to the charitable giving efforts of the foundation, as part of our corporate citizenship

effort Baxter also is working to implement a more formal and coordinated approach to

community relations, supporting and building from efforts already in place at our facilities

around the world.

Increasing access to care The Baxter International Foundation supports the development

of better, more accessible and more affordable health care. It recently assumed the name

The Baxter International Foundation following a decision in December 2000 to split The

Baxter Allegiance Foundation into two separate entities. The Baxter International Foundation

represents the original foundation, continuing the same vision and programs.

The foundation is committed to breaking down barriers and opening doors to health-

care services for people in need, especially children, the elderly and minorities, and people

who are uninsured or homeless. In 2000, the foundation awarded $4.7 million dollars to

217 organizations in 32 states, Puerto Rico and eight foreign countries.

The foundation funds organizations that have the vision, drive and means within their

grasp to establish innovative, self-sustaining programs and to serve as a major force for

change in their communities. For example, in Mountain Home, Arkansas, hundreds of

health-care professionals and concerned citizens have joined forces to care for those who

fall through the cracks of the health-care system—primarily working people with no insurance

and not enough resources to afford health care. The Baxter International Foundation awarded

the Mountain Home Christian Clinic a $25,000 grant to fund their pharmacy program. This

program will help to alleviate the problem among the uninsured of often having to choose

between medicine or other necessities such as heat or food.

In 1994, the foundation gave its first international grant to help children throughout

Europe with life-threatening conditions. Since then, foundation grants have touched people

in all corners of the world. For example, only steps from a crowded market in Haina,

Dominican Republic, a physician at the Community Mental Health Center uses a $30,000


We actively seek qualified minority- and women-ownedfirms for our sourcingneeds, and increasedour purchasing from minority-owned firmsby 31 percent in 2000from 1999. We hope to increase that further in 2001. However, small businesses in the United States andPuerto Rico, whichoften reflect thoseowned by minoritiesand females, are rarelyfound in the areas of raw materials wesource due to barriersto entry presented bystringent federal regula-tions and related capitalrequirements.

Purchasing from

minority- and women-

owned firms in the

United States and

Puerto Rico in 2000

(comprehensive global

purchasing information

not available):

$1.3 billion Baxter total overall purchasing

$54 million(4.16 percent)

Purchasing from minority-owned firms

4.76 percent1999 Council on Economic PrioritiesMinority Benchmark Survey Average(2000 information not available at thetime of this report)

grant to provide much-needed medications for the elderly and for children,

many of whom suffer from malnutrition, intestinal infections and other dis-

eases common in developing countries. He is one of only 70 physicians and

four dentists serving 200,000 people in Haina, where many people lack

basic necessities such as drinkable water

and an adequate sewage system.

Across the sea, foundation funds are

helping children in the rural western

section of Ireland. The Mayo Women’s

Refuge Centre in Castlebar, Ireland, is

working to change attitudes and behav-

iors in a country where one in five

women are battered in their homes. A

$25,000 grant is helping them focus on

the next generation. Children who have

witnessed violence or been victims

themselves are building self-esteem,

learning ways to deal with anger and

aggression, and gaining problem solving

skills so the cycle of violence does not

continue with them.

Aiding employee philanthropic efforts

On an individual level, The Baxter International Foundation is adding to the

value of employees’ volunteerism and charitable giving with two special

programs. Employees in the United States who actively volunteered their time

in 2000 earned $43,500 in grants for their favorite charities through the Dollars

for Doers Program. Through the Matching Gift Program, the foundation provided

$519,492 in matching funds in 2000 to organizations that employees supported.

Taking an active role in our communities Baxter strives to be a good citizen

on many levels. Corporate giving and product donations are one piece. For

example, working with AmeriCares, an international relief organization, Baxter

donated $5.7 million in products to people and countries in need.

Meanwhile, local Baxter facilities are making a difference in their own

ways. Employees are energized to address needs in their own communities.

For example, in Tampa Bay, Florida, employees have organized for nearly

10 years a “Community Care Month” in the summer to support local charities,

usually benefiting children, the elderly or the homeless. The Baxter facility in

Round Lake, Illinois, has adopted Mano-a-Mano, a local family resource center

serving the area’s large Hispanic population. In Cartago, Costa Rica, the Baxter

facility makes an impact on its community by funding infrastructure projects,

local schools, health-care providers and other organizations.

Whereas community outreach is taking place at Baxter facilities worldwide,

we need a formal vision and coordinated approach for community relations

companywide. Baxter is working to leverage the local involvement of its

employees first by doing an inventory of the impact they are making in dol-

lars and time, then by devising ways to better focus their efforts to make an

even bigger impact. For example, on the drawing board is a Web-based

directory that will help match employees to local volunteer opportunities.

We expect to make significant progress in this area in 2001.


Advancing environmental,

health and safety activities

in our communities

Baxter facilities participated in nearly 150 environmental, health and safety(EHS) related events in their commu-nities during 2000. These included 29 school-related projects, more than20 conservation or tree-planting programs, and 18 events aimed atcleaning up beaches, roads, parksand natural areas. In addition, Baxterfacilities worked with various gov-ernment agencies, organizations andspecial-interest groups on 63 projects,which included educating the publicon EHS issues.

Working with the city of Neuchâtel,Switzerland, Baxter’s facility thereagreed to plant one tree for each live birth that occurred during 2000.Our Pisa, Italy, site sent bonsai treeshome with local elementary schoolstudents on the last day of classes witha message that read, “Take naturehome.” Along with two elementaryschools and local government organ-izations, the Aibonito, Puerto Rico,facility provided more than 200 treesto be planted at a community park.As part of this same event, allemployees who brought materialfrom their homes to be recycledreceived a tree and an adoption certificate. More than 1,000 employeesparticipated.

The Maricao, Puerto Rico, facilityhelped clean a rural area where achurch provides services to low-income families. Baxter’s site in Cali, Colombia, sponsored four campaigns throughout the year tomeasure automobile air emissions.Cars were re-checked after twomonths to ensure drivers institutedsuggested corrective actions to minimize air emissions.

Pat Morgan (right), executive directorof The Baxter International Foundation,realizes the importance of developinginnovative, sustainable programs toaddress critical community needs. Hereshe meets with representatives of theMayo Women’s Refuge Centre to dis-cuss a proactive approach they aretaking to prevent domestic abuse withthe help of a $25,000 grant from thefoundation.

Occupational Injury and Illness (OI&I) Performance

Per 100 Full-Time Employees (FTEs)1 and Direct Workers’ Compensation Costs

U.S. and Puerto Rico Worldwide

1996 1998 1999 2000 1996 1998 1999 2000

Cases Involving Days Away From Work Per 100 FTEs 0.84 0.54 0.68 0.89 1.28 0.84 0.89 1.03

Days Away From Work Per 100 FTEs 20.78 17.24 15.09 20.65 21.55 14.94 14.61 18.16

Recordable Cases Per 100 FTEs2 3.88 3.12 3.99 3.87 3.17 2.29 2.61 2.78

Workers’ Compensation (U.S.) ($ million) 5.90 4.80 4.20 5.60 – – – –

Costs for OI&I (Puerto Rico) ($ million) 2.703 3.50 3.30 3.80 – – – –

Performance to Goals Per 100 FTEs

1996–2005 1997–2000 2000

SavingsGoal Target Performance ($ million) Target Performance

Reduce Lost-Time Accidents 60% 27% 20% 103 7% (16)%

Reduce Injury and Illness Cases 50%4 9%5 (7)%5 – 9% (7)%

1. 100 FTEs = 100 employee work years = 200,000 work hours.2. Recordable Case = An occupational injury requiring medical treatment beyond first aid or any occupational illness.3. Estimated. 4. 1999-2005 Goal.5. Performance and savings are for 2000.


Health and Safety Performance Summary

Our 2000 Health and Safety Program

For more information on Baxter’s environmental, health and safety program, please visit our Web site at www.baxter.com/ehs

Facilities reporting in the health and safety section of the report* 225

Health and safety full-time equivalent employeesHealth and safety 65Occupational health 56

Total 121

External Awards 2000 81991–2000 58

* Health and safety rate data for some new facilities is not available for some years prior to 2000. Rates not available have been assumed to be the same as that for the year the data was first available. See the Affirmation of Process on page 44 for information on gathering H&S data.


Health and safety performance shows strong regulatory compliance but falls short of internal goals

In 2000, Baxter had 67 health, safety and fire inspections by the government and received only two occupational health

and safety citations. This is down from 1999 when we received five citations. We did not receive any fines for the year.

Another bright spot in our performance is that more facilities worked the entire year with no lost-time injuries and

illnesses. Worldwide, 139 of 225 facilities, or 62 percent, worked the entire year without a lost-time injury or illness.

Sixty-two facilities, or 28 percent, have worked three or more years without any lost workdays. In 1999, those results

were 60 and 18 percent, respectively.

As can be seen from the charts and table in this section, we did not make our target goals for reducing injury and

illness cases involving days away from work and total work-related injuries and illnesses in 2000. Moreover, our rates

in these areas increased.

Lost-time injury and illness cases rose primarily due to a lack of program systems being in place when production

surges, new product processes and other operational disruptions occurred. Key systems were identified a few years ago,

and many facilities are still in the process of establishing them. These efforts will be accelerated in 2001.

Unfortunately, we had one fatal traffic accident in Illinois.

00999896

1.28

05

0.51

0.84

0.89

Bas

e Ye

ar

1.03

Injury and illness cases involving days away

from work up 16% for year, down 20% since 1996

Work-relatedcases involvingdays awayfrom workper 100 full-timeemployeesworldwide G

oal

Cases involving days away from work per 100

employees1 US and Puerto Rico

1999 2000Baxter US and Puerto Rico 0.78 0.89US Industry2

– Instruments and related products 1.00 NA– All industry 1.90 NA

1. 200,000 work hours2. Source: US Bureau of Labor Statistics

00999896

3.17

2.29

2.61

Bas

e Ye

ar

2.78

Cases for all injuries and illnesses

up 7% in 2000*

*Includes both cases that involve days away from work and those that do not.

Totalwork-relatedinjury andillnesscases per100 full-timeemployeesworldwide

Total work-related injury and illness cases

per 100 full-time employees1 US and Puerto Rico

1999 2000Baxter US and Puerto Rico 3.37 3.87

US Industry2

– Instruments and related products 4.90 NA– All industry 6.30 NA

1. 200,000 work hours2. Source: US Bureau of Labor Statistics


A Safety Culture

Our intention is to give employees a safe workplace, and to have a work culture

where safety underlies everything we do. We have taken a number of steps to

improve our health and safety performance. These include:

– Establishing safety improvement as a key companywide business objective;

– Benchmarking internally and with other companies to identify best safety practices;

– Implementing best safety practices;

– Giving additional focus to health and safety concerns on audits;

– Providing special attention to facilities with poor health and safety

performance; and,

– Extending accountability for health and safety performance more broadly

throughout the organization.

Workers’ Compensation Costs Rise

United States workers’ compensation costs for 1,013 claims at United States

sites were $5.6 million compared to 951 claims at a cost of $4.2 million in 1999.

Global Requirements, Auditing, Management Systems

Baxter has established global environmental, health and safety requirements and is giving more prominence to health

and safety in auditing. We also use management systems to address health and safety issues.

Promoting Employee Wellness

As a health-care company, Baxter has a special interest in encouraging employee wellness. In 2000, we sponsored more

than 550 employee health-promotion events. These included almost 275 health screening and education projects and

about 150 health fairs and exercise programs. In addition, facilities offered employees and their families 100 different

opportunities to learn how to more effectively balance their work and personal lives, how to successfully change an

unhealthy behavior such as smoking and how to take advantage of numerous counseling resources for those in need.

At the Alliston, Ontario, Canada site, employees participated in fitness events to help raise thousands of dollars

for health organizations, including the American Cancer Society and the American Heart Association.

Some facilities set aside time every day for all employees to stretch, bend and exercise at their work stations. Others

offered a host of immunizations and health examinations from mammograms to uric acid profiles. In Marion, North

Carolina, nearly 1,000 employees or about half the work force participated in each of the many health tests offered

by the facility. Of the 967 participants who had their blood sugar checked, almost 15 percent found they had elevated

glucose levels, a possible indicator of diabetes. In the triglyceride screening, 23 percent of the 969 participants had

elevated triglycerides, a possible indicator or cardiovascular disease. Without this service, many of these employees

may have remained unaware of their medical conditions.�

Work-related lost workdays rise 24%

for year, down 16% since 1996*

*A lost workday is any workday beyond the day of injury or the onset of illness during which the employee was away from work because of a work-related incident.

Lostworkdaysper 100full-timeemployees

00999896

21.5

5

14.9

4

14.6

1

18.1

6

30 environmental sustainability

environmental

environmental sustainability 31

Product Stewardship—Working to Integrate Sustainability into our Products

Being good product stewards requires taking responsibility for the impact our products have on the environment

and society. We continuously look for ways to improve our products for our customers, to minimize the impact

they have on the environment and to be responsible stewards of our products throughout their life-cycle while

keeping them cost-competitive.

In doing so there are significant business benefits to be gained. For example, we are reducing costs in the

manufacture of our products, responding to regulatory requirements and establishing a competitive advantage by

taking an environmentally and socially responsible approach to the development of our products and therapies.

Product stewardship begins in the research and development stage

We design our products with the environment and customers in mind, using checklists to help us evaluate

the impact proposed new products and packaging might have on people and the environment. European

Environmental Engineer Patrick De Baere is currently developing new checklists and procedures to help research

and development personnel design our products and packaging to address customer, scientific, government

and environmental requirements. To determine these requirements, De Baere has reviewed legislation, studied

scientific data, considered company environmental policies, met with customers and talked with sales and

marketing personnel. We also are piloting a sustainability review tool that examines the life-cycle impact of

a product being designed.

Designing for the environment has led us to reduce the weight of products and packaging. Since 1990, we have

cut packaging 27 percent with the weight of one of our major IV product lines being reduced 16 percent. Some

of the new product materials we developed not only reduce material use, but also enhance product performance.

Also, as explained on page 16–17 in reference to our bioethics policy, before we bring a biotechnology-

derived agent or therapy to market, we carefully consider the risks and the benefits of the technology to society.

We adhere to respective ethical and professional standards in the research and development, manufacture

and sale of our products. We also believe in the importance of maintaining global biodiversity and sustainable

use of global resources.

“Environmental review of products is not just a one-step process. Environmentalrequirements are considered for a product’s entire life-cycle.”Dave Bacehowski / vice president, Container Technology Center, Corporate Research & Technical Services

Refurbishing products to extend lifecycle

Another element we consider in the development and manufacture of our products is how we can extend the

life of our products to reduce waste. In 2000, our Tampa Bay, Florida, facility refurbished 15,600 HomeChoice

automated peritoneal dialysis (APD) machines, which provide life-saving dialysis to people with kidney failure.

Machines that are refurbished are thoroughly checked before distribution to another patient, as well as upgraded

to the criteria for new machines, incorporating advances in technology and energy efficiency.

Extending the life of our APD machines through refurbishment kept 190 metric tons of material from becoming

waste and taking up landfill space in 2000. Moving forward we want to develop a global policy for refurbishing

products, which is under consideration by our Quality and Regulatory Leadership Team.

Reducing waste in our manufacturing processes

In addition to looking at ways to reduce waste in the development of our products, a decade ago, we set our first eco-

efficiency goals for air emissions, waste, packaging and energy in the manufacture of our products. Eco-efficiency helps

us further sustainability by using fewer resources and reducing waste. It’s also beneficial in that it saves money in the

manufacture of our products, as well as reduces costs for our customers in waste disposal.

Baxter facilities around the world have initiated eco-efficiency initiatives. For example, eco-efficiency projects

implemented at our Vienna, Austria, site include:

– Redistilling and reusing 700 metric tons of alcohol, which saves about $400,000 in hazardous waste disposal

costs annually.

– Substituting refrigerants like liquid nitrogen for ones that deplete the ozone layer.

– Turning 110 metric tons of plasma production waste into almost 3 million joules of renewable energy and fertilizer,

which saves the facility $35,000 per year. To do this, the facility partnered with the Institute for Agrobiotechnology

of the University of Agricultural Sciences.

– Switching from fuel oil to natural gas to increase energy efficiency by 15 percent and reduce emissions of

carbon dioxide, a greenhouse gas, and other pollutants.

(See the environmental section on page 34 for progress on eco-efficiency goals)

Building quality into our products and processes

Quality is an essential consideration in the development and manufacture of our products to ensure they are safe

and effective for their intended use. It is an integral part of our operations and reviewed at the highest levels of our

organization on a regular basis.

Baxter’s Quality System is defined in a Corporate Quality Manual, which is

based on the requirements of the International Organization for Standardization

(ISO) 9001 standard and establishes the requirements with which all Baxter

units must comply. In addition, since 1984, the company has employed the

Quality Leadership Process (QLP) as its primary approach to the deployment

of quality education and techniques. QLP methods are used to understand

and correct problems and to drive continuous improvement.

Baxter also provides more specialized training for engineers and technical

personnel through our Six Sigma Engineer program. This program provides

statistical tools and techniques to help engineers design products and

processes that are more robust and thus less likely to experience manufacturing

problems or field failures. More than 1,100 technical personnel have been

certified as Six Sigma engineers.

For quality professionals, Baxter offers a Certified Quality Professional

program. This consists of a series of courses, which are recommended for

those individuals who wish to expand their responsibilities within the Quality

or Manufacturing organizations. More than 7,000 Baxter team members have

participated in the curriculum that includes 17 different courses.

On a broader organizational level, Baxter established the Baxter Quality

Award (BQA) Process in 1989 using internationally accepted standards to

evaluate the quality and business excellence of the organization. The BQA

process is based on criteria for the Malcolm Baldrige National Quality Award,

and more than 101 Baxter organizations have participated in the BQA process.

In addition, Baxter has received 28 external quality awards worldwide over

the past 10 years.


Award recognition for

lean manufacturing

Baxter’s facilities in Marion, North Carolina, and Mountain Home,Arkansas, have each been recognizedin the past two years with the ShingoPrize. Sometimes referred to as the“Nobel Prize of Manufacturing,”Shingo recognizes manufacturers in the United States, Canada andMexico that demonstrate excellencein manufacturing leading to superiorcustomer satisfaction and businessperformance. The Mountain Homefacility and most recent award winner was lauded for lean manufacturing—itsreduction of waste in manufacturing—which resulted in an 84 percent reduction in lead-time and improved on-time delivery to morethan 99 percent.

Regulatory compliance and actions

As a manufacturer of medical products and therapies, we work in a highly regulated environment. All of Baxter’s facilities

are required to comply with the regulations set forth by the regulatory bodies in the countries for which they manufacture

and sell products. We take an active role in trade associations and standards organizations to understand and provide

input into regulations and industry standards.

For example, all Baxter facilities manufacturing products for sale in the United States must comply with the U.S.

Food and Drug Administration (FDA) regulations. The FDA regularly audits our operations, as do many other regulatory

bodies, and we welcome their feedback to assist us in producing and delivering the highest-quality products to our

customers. External reviews by the FDA, other regulatory agencies and notified bodies also serve to verify the effective-

ness of our internal corporate, business unit and local assessment programs.

In 2000, we received a warning letter from the FDA regarding a shipment of infusion pump components not being

readily available for FDA inspection. The matter, which resulted from miscommunication between our freight forwarder

and the FDA, was resolved. We also received one warning letter from the FDA regarding non-compliance with Good

Manufacturing Practice Regulations at our Round Lake, Illinois, facility. Areas for improvement were identified and

corrective actions were taken in keeping with our philosophy of continuous improvement and the matter was resolved

with the FDA.

Working with suppliers to design sustainable products

Our quality evaluation of suppliers includes consideration of the environmental, health and safety aspects of their oper-

ations. We work with suppliers to decrease resource use, waste, packaging and emissions. At the Singapore Woodlands

plant, 19 suppliers transport raw materials to the facility in reusable tote pans and plastic pallets. The tote pans, which

are imprinted with the supplier’s company logo for identification, replace cardboard shipping boxes. The supplier takes

the empty tote pans back during delivery. On average, 9,000 tote pans and 1,400 plastic pallets are reused each month.

This reuse practice reduces waste and saves trees.

The Istanbul, Turkey, facility holds a supplier day each year to share with suppliers the ways they can assist us with

environmental issues. Istanbul’s suppliers helped the facility to:

– Reduce the weight of 5- and 10-liter containers approximately 15 percent and cut costs $45,000 a year;

– Decrease the weight of amino acid product leaflets 25 percent for an annual savings of $7,500;

– Cut the weight of paper inserts in product boxes 9 percent, saving $8,000 per year; and,

– Reduce the weight of cartons 2 to 4 percent and increase the recycled content of carton liners, saving $22,900 a year.

Continuing our journey to sustainable development

While we have made good progress in our drive to make our products more sustainable, there is more to do as we move

forward. We must do a better job of scrutinizing new products and processes for all aspects of sustainability. We also

must more fully integrate the environmental processes and procedures we have developed for product stewardship

throughout the organization.�


1996–2005 1997–2000 2000

SavingsGoal Target Performance ($ million) Target Performance

Reduce Air Toxics1 80% 36% 71% 0.5 9% 35%

Improve Energy Efficiency1 30% 13% 13% 10.0 3% 3%

Reduce Regulated Waste Generation1 35% 16% 20% 2.3 4% 12%

Reduce Nonhazardous Waste Generation1 35% 16% 12% 4.9 4% 0%

Reduce Packaging1 20%2 10%3 6%3 7.13 2% 1%

Recycle Materials – – 13%4 22.7 – 4%4

Reduce Water Use – – 7% 0.5 – 3%

Total 48.0

1. Per unit of production value2. 1995–2005 Goal3. Performance and savings are for 1996–20004. Increase in amount of nonhazardous waste being recycled.


Environmental Performance Summary

Our 2000 Environmental Program

For more information on Baxter’s environmental, health and safety program, please visit our Web site at www.baxter.com/ehs

Facilities reporting in this section of the reportManufacturing, laboratory / R&D 84Warehouses 32Administrative / clinical / other 13

Total 129

New facilities not yet reporting 34Environmental (full-time equivalent) employees 71Awards

2000 181991–2000 209

Stakeholder Engagement

The patient is at the center of all we do and we actively seek patients’ feedback on our performance to better enable

us to incorporate their needs in the development of our products and therapies. For example, our Renal business has

patient advisory councils in the United States that comprise a wide-range of kidney disease patients, including those

from rural and urban areas, hemodialysis and peritoneal dialysis patients, young/working and older/retired individuals

and those who suffer from other disabilities. These patients help our engineers and marketers ensure that their designs,

structures, concepts and educational tools are well received by the patients who will ultimately benefit from them. It

serves as a vital sounding board before more comprehensive market research and development are pursued.

Also, as a participant in the Global Reporting Initiative and by issuance of this report, we are openly talking about

our performance in the area of sustainable development with CERES (The Coalition for Environmentally Responsible

Economies) and our other various stakeholders, and engaging in dialogue with them on our performance. We view our

participation in reporting on the triple bottom line as a proactive measure in response to interest from our stakeholders on

our performance as a good corporate citizen, recognizing the increasing significance this is having on business decisions.

In addition, in areas where we have been highlighted as a leader, such as in business practices and procurement

ethics, we have been responsive to our global stakeholders who have asked to learn from our approach. For example,

in November of 2000, Baxter in conjunction with the World Bank Institute participated in an educational video conference

on business ethics that was part of the Joint Vienna Institute Training Program. Attendees included business professionals,

public officials and academia from Austria, Bosnia-Hergovina, Kazakhstan, Macedonia and Russia. We addressed product

stewardship according to appropriate standards for developing countries in terms of product quality standards, environ-

mental, health and safety standards, supplier sourcing, supplier standards and educational opportunities. We explained

that good governance requires more than just adequate financial management, workplace relations and public service

employment. It also requires a framework and a new environment for leaders to guide their organization in an ethical way.

Through our Quality Leadership Process and Global Business Practice Standards we are incorporating such a frame-

work reflective of product stewardship.�

Reducing Toxic and CFC Air Emissions Saves Money and Conserves the Environment

Since 1988, Baxter has significantly reduced its toxic chlorofluorocarbon (CFC) air emissions, cutting them 98 percent

overall and more than 99 percent per unit of production value. These reductions have made the air cleaner, helped

conserve the ozone layer and have saved the company tens of millions of dollars.

We continue to stay ahead of schedule in meeting our 2005 goal of reducing air emissions 80 percent by 2005 based

on 1996 levels. We also have nearly accomplished the total phase-out of CFCs. In 1988, we released 754,000 kilograms of

CFC emissions. By 1996, releases were down to 26,000 kilograms, and in 2000, the company emitted only 200 kilograms.


1. Includes Baxter’s and contract sterilizer’s emissions of ethylene oxide.

2. Includes methyl ethyl ketone, trichloroethane, methylene chloride and others.

05Goal

30

CFC and toxic air emissions cut 31% in 2000;

CFC use down to 200 kilograms

Thousandsof kilogramsof CFC and toxic airemissions1

64

51

35

97

CFCs

EtO

Others2

Eco-efficiency

Reduction per unit of production value

1996–2005 Goal 80%1996–2000 Interim objective 36%1996–2000 Results 71%

Historical performance

1988–1996 as reported in 1997 96%

00999896Base Year

When we set our first air toxic and CFC reduction goal in 1989, we faced significant challenges to achieve it. Any substi-

tute material could not compromise the quality of our medical products. We also had to ensure that changes in materials,

procedures and processes would meet the stringent government standards for our highly regulated industry.

In reaching for our goals, we instituted numerous projects and procedures to eliminate ozone-depleting substances

from our production processes. In addition, we identified suitable substitutes that helped minimize the ozone-depleting

potential of our operations. When we attained our first goal, we set a new goal and continued to pursue reductions.

Only one operation, siliconization, still produces CFC emissions.�

Cutting Waste to Become More Eco-Efficient

During the past decade, we have become more eco-efficient in reducing our generation of regulated and nonhazardous

waste. Decreasing waste reduces risk, cuts material and handling costs, and lessens the impact our operations have on

the environment.

To enhance our waste reduction efforts, we undertook several new waste management practices in 2000. Using the

extensive database of environmental information we have compiled, we identified the facilities that are producing the

largest amounts of waste. These facilities received waste reviews and coaching on how to cut their waste. The informa-

tion in the database is also helping us to prioritize waste reduction projects and focus on those that could have the

greatest benefit to the company and the environment.

As the regulated waste chart shows, we are ahead of our goal to reduce generation of regulated waste 35 percent

from 1996 amounts by 2005, having achieved a 20-percent reduction. Our total regulated waste generation decreased

180,000 kilograms in 2000. We would have actually generated 690,000 kilograms more in 2000 had we continued gener-

ating the waste at the 1996 rate.


00999896Base Year

*Excludes wastes recycled on site.

05Goal

2.86

Total regulated waste generated down 180,000

kilograms for year

Millionkilogramsof hazardousand otherregulatedwastegenerated*

2.60

2.78

2.60

2.58

Regulated waste disposal

Recycled

Projected waste quantity at 1996 waste generation rate.

2.90 3.073.29

Eco-efficiency




1989–1996 as reported in 1997 33%

00999896

Ozone-depletion potential (ODP) of

operations slashed 99% since 1996

ODPequivalentsin metrictons

8 4 0.3

26

Reduction

Per unit of production value

1999–2000 92%1996–2000 99%


1989–1996 as calculated in 2000 98%

However, we are behind on our goal of reducing generation of nonhazardous waste 35 percent from 1996 levels by

2005. Total nonhazardous waste generation increased from 51 million kilograms in 1999 to 55 million kilograms in 2000.

To improve our nonhazardous waste eco-efficiency, we are developing new guidance and tools, as well as continuing

waste reviews of sites that generate the largest quantities of nonhazardous waste.

Although we did not keep pace with our goal, our eco-efficiency efforts are still paying off. During 2000, we generated

nine million kilograms less of nonhazardous waste than we would have if our waste reduction rate stayed the same

as in 1996.

Recycling of nonhazardous waste in 2000 amounted to 34 million kilograms, or the weight of 100 fully loaded Boeing

747 airplanes. This is up from 33 million kilograms in 1999. Recycling revenue was $7 million compared to $5.5 million

in 1999.�

Recycling of Nonhazardous WasteAmount Recycled Revenues

(Million Kilograms) ($000)

Item 1999 2000 1999 2000

Plastics 17.3 18.0 5,100 6,057

Cardboard 5.4 5.7 108 104

Pallets 4.4 5.2 374 894

Paper 2.2 2.1 (31) (45)

Metals 1.2 1.3 51 85

Drums 0.2 0.2 (13) (28)

Glass 0.6 0.5 2 2

Other 1.3 1.0 (50) (45)

Total 32.6 34.0 5,541 7,024


*Excludes wastes recycled on site.

00999896Base Year

05Goal

55

Nonhazardous waste reduction 2% behind

interim objective

Millionkilograms of nonhazardouswastegenerated*

Disposed

Recycled

Projected waste quantity at 1996 waste generation rate.

5660

64

52 51

55

50

Eco-efficiency




1988–1996 as reported in 1997 20%

Packaging Reduction Lagging

Progress toward our goal to reduce packaging 20 percent from 1995 levels by 2005 has been disappointing. However, the

packaging reduction data may be limited because some data may not have been reported. Efforts are being made to ensure

data is more complete in forthcoming years. Even though we did not achieve our goal, savings in 2000 were $1 million.

Between 1990 and 1995, we made considerable packaging reductions, but progress has slowed since then. We held

a companywide packaging conference in 2000, which identified a number of potential reduction projects. We expected

one of these projects to produce a substantial reduction. However, the project did not materialize because it caused too

much product damage. The packaging team is working with key manufacturing and packaging people to reinvigorate

the program.

Water Use Receiving More Attention

Water is important to us because it is a major component of our IV and renal dialysis

products. Our overall water use increased from 11.6 billion liters in 1999 to 12.2 billion

liters of water in 2000. This increase is mostly due to bringing new facilities on line,

expanding existing operations and increasing production in our water-intensive

solution product lines. However, as the chart shows, we are becoming more efficient

with this valuable resource. Thirty-four facilities examined their water usage and

have taken action to reduce water usage. We plan to set water-use goals in the next

two years.�


00999896

Water use efficiency steadily improves

Percentreductionin water useper unit ofproduction value

3 4 7Bas

e Ye

ar

Packaging reduction off target due to

focus on new products less opportunities,

and resource constraints

Percent per-unitreduction ofpackagingand solution-containermaterials

1990–1995 Reduction

Reduction since 1995

4 5 6

4 5 6

21

Eco-efficiency




1990–1995 as reported in 1996 21%

00999890-95

21 21 21

Renewed Focus on Energy Efficiency Benefits the Environment and the Bottom Line

Baxter set a goal to improve energy efficiency 30 percent per unit of production value from 1996 to 2005. We currently

have 140 energy-related projects underway to help us achieve our goal. By achieving our targeted reduction, we estimate

we can achieve $25 million in annual savings and cost avoidance in 2005. We are on track to meet our goal.

We held a worldwide energy conference in 2000 and an energy summit in

March 2001. At these sessions, we shared information and identified tactics

to help us further improve our energy-conservation efforts.

Steps we have taken and will continue to take to promote energy

efficiency include:

– Establishing a cross-divisional steering committee of key people to

promote and explore energy-efficiency initiatives;

– Doing facility assessments to identify energy reduction opportunities;

– Communicating energy-related issues and raising awareness through

conferences, recognition and the Internet;

– Establishing best practices and guidelines for energy management

for new and remodeled construction; and

– Pursuing new technologies.

We also are evaluating a wide variety of strategies to further advance our energy efficiency, including:

– Increasing information-sharing through regional conferences and targeted training;

– Additional benchmarking of other companies;

– Exploring government grants and programs;

– Using life cycle costing to more accurately determine future costs and savings of projects;

– Considering alternative financing for energy-reduction projects, such as leasing and performance contracting; and,

– Stepping up our determination of energy use of new products/processes/equipment.

Our total energy consumption continues to rise due to the expansion of the company. Thirty-seven percent of our

facilities have energy-conservation programs. Twenty facilities have ride-sharing programs, which help reduce the

amount of fuel employees use in traveling to work.�


Bas

e Ye

ar

00999896 05

30

On target to meet energy efficiency goal

Percent improvementin energyuse per unitof productionvalue

Goa

l

8 10 13

Eco-efficiency reduction

Per unit of production valueEnergy-related

Energy GHGuse emissions

1996–2005 Goal 30% 30%1996–2000 Interim objective 13% 13%1996–2000 Results 13% 12%

1. GHG Emissions = Greenhouse gas emissions.

“Energy conservation is an importantpart of manufacturing at Baxter.Since the early 1980s, we haveworked to reduce energy use andcosts to give the best product priceto our customers and to minimizeour environmental impact. Recently,saving energy costs and climatechange considerations have providedrenewed motivation to improveeven further.”

Ron Trudeau / Vice President, Facilities Engineering Services

Energy Use 1

FacilitiesCost of Energy

Amount Used Trillions of Joules ($ in Millions)

1999 2000 1999 2000 1999 2000

Electricity Million KWHs 774 814 2,787 2,930 50 53

Natural Gas Million Cubic Meters 55 58 2,121 2,230 7 10

Fuel Oil Million Liters 29 28 1,168 1,117 5 6

Wood (Scrap) Million Kilograms 93 92 730 722 3 3

Propane Million Kilograms 2 2 76 86 1 1

Total energy used by facilities 6,882 7,085 66 73

Aviation, Fleet and TrucksCost of Energy

Amount Used Trillions of Joules ($ in Millions)

1999 2000 1999 2000 1999 2000

Aviation Fuel Thousand Liters 871 1,015 24 28 1 1

Gasoline Thousand Liters 12,742 12,701 249 249 9 9

Diesel Fuel Thousand Liters 2,606 2,974 100 114 2 2

Total energy used by aviation, fleet and trucks 373 391 12 12

Total energy used 7,255 7,476 78 85

KWH Kilowatt-hour1. Energy use data throughout this report covers all Baxter’s facilities, but does not include employee and supplier transportation.

Amounts are calculated by adding the actual reported amounts from 129 reporting sites and the estimated usage for non-reporting sites, such as new sites.


Dealing with Climate Change

Climate change could potentially have serious environmental, health and

economic consequences for the globe. Baxter has taken concrete actions

and a cooperative approach to help address this issue. We are members

of the Business Environmental Leadership Council (BELC) of the Pew

Center on Global Climate Change. As a member of this council we have

committed to taking action to address climate change. In 2000, we piloted

the Greenhouse Gas Protocol (GHG Protocol), an international standard

for businesses to measure and report on greenhouse gases. For this report,

we used the GHG Protocol standard to calculate the emissions data from

fossil fuel use. Greenhouse gas emissions related to electrical consumption

were determined using the World Bank’s development indicators and electrical utility information.

Baxter is addressing climate change concerns through energy conservation and process changes. By cutting energy

consumption, we reduce the amount of fossil fuels that must be burned to provide the fuel we need. The chart and table

summarize our performance. Our reductions have primarily been accomplished by cutting use of chlorofluorocarbons

(CFCs) in our processes.�


00999690

Greenhouse gas emissions almost

eliminated from processes; focus turns

to energy conservation

Millionmetric tonsof carbondioxideequivalents

Greenhouse gases from processes (primarily CFCs)

Greenhouse gases from energy

0.73

0.66

0.65

5.32

Percent reduction in emissions in

carbon dioxide equivalents

Per unit ofproduction

1990–2000 Absolute valueEnergy (26) 32Process 99 99Overall 87 93

1996–2000Overall 11 29

*Includes wind-, solar- and biomass-generated electricity *The lower the number, the less the source contributesto greenhouse gas emissions.

Source: The Shell Report 2000, page 46

Energy sources for the electricity we use—

16% comes from renewable sources

1% Other Renewable*

24% Coal

24% Oil

14% Natural Gas

15% Hydroelectric

22% Nuclear

Carbon dioxide (CO2) emissions per unit

electricity produced by energy source*

Energy source Kg CO2 /KWH*Goal 1.05Oil 0.80Natural Gas 0.38Nuclear 0.02Hydroelectric (Renewable) 0.01

Climate Change Resources

Pew Center on Global Climate Changewww.pewclimate.org

Intergovernmental Panel on Climate Change www.ipcc.ch

U.S. Environmental Protection Agency www.epa.gov/globalwarming

Global-Warming Impact of Baxter’s Activities (1990 Base Year)Carbon Dioxide

Equivalents 1 2

(In Thousands

Actual Usage of Metric Tons)

Units 1990 2000 1990 2000

Energy 3

Electricity Million KWH 590 814 305 399

Natural Gas Million Cubic Meters 44 58 94 125

Fuel Oil Million Liters 25 25 86 85

Diesel Fuel (Fleet) Million Liters 2 3 6 8

Gasoline/Aviation Fuel Million Liters 13 16 23 30

Propane Million Kilograms 2 2 4 5

518 6524

Processes

Processes emitting

CFC-113 Thousand Kilograms 331 <1 1,621 1

Processes emitting

CFC-12 Thousand Kilograms 180 0 1,639 0

3,260 15

Total 3,778 653

KWH Kilowatt-hoursCFC Chlorofluorocarbon1. Carbon dioxide equivalent and emission factors from U.S. Environmental Protection Agency Climate Wise data.2. We used the GHG Protocol standard to calculate the emissions data from fossil fuel use. Greenhouse gas emissions related to electrical consumption

were determined using the World Bank’s development indicators and electrical utility information.3. Energy use data throughout this report covers all Baxter’s facilities, but does not include employee and supplier transportation. It is estimated employees

generate 100,000 metric tons of carbon dioxide per year commuting to work, contributing approximately two percent of our total global warming impact.4. This represents a 26-percent increase in carbon dioxide equivalents due to expansion of worldwide operations.5. Although we expanded worldwide operations, we eliminated nearly all of our carbon dioxide equivalents from our processes.

Emergency Planning, Releases and Remediation

Baxter facilities that could potentially have significant environmental emergencies are required to have emergency

plans. In 2000, we had no unauthorized releases of contaminants to the environment that were required to be reported

to the government. Continuing remediation at four contaminated sites, including former underground storage tank

sites, cost us $1.1 million in 2000. Future remediation of these sites is expected to cost approximately $1.3 million.

Puerto Rican wastewater issues remain our greatest compliance concern; fines continue to be low

In 2000, Baxter received 30 environmental notices of violation (NOVs), down from 31 in 1999. An NOV is a written govern-

ment notification identifying an environmental noncompliance that could result in legal action.

Twenty-one of the NOVs related to wastewater discharges in Puerto Rico. These resulted from increased production,

tighter regulations and decreased treatment capacity due to hurricane damage at one of the public facilities that receives

and treats our wastewater. The discharges primarily contained sugars and other organic materials.

Since the Puerto Rican wastewater authority has had trouble meeting the U.S. government’s limits for its own discharges,

it has set extremely strict discharge limits on the operations that discharge to its treatment facilities. The limits, which

are more severe than any we have encountered elsewhere, have been difficult for facilities to meet.

Our noncompliance with Puerto Rican wastewater requirements is not acceptable to us and will receive heightened

scrutiny in 2001. To try to meet the stringent discharge limits, one facility spent $300,000 to install evaporation equipment

and has begun evaporating its wastewater. The evaporated water is recaptured, condensed and re-used in non-product

processes. The waste concentrate is properly disposed. Another facility is trucking wastewater to an off-site disposal facility.

We incurred $6,975 for two fines, $4,000 relating to our Puerto Rico wastewater discharge and $2,975 in the Philippines,

in 2000 compared to no fines in 1999.


Managing waste disposal pays off in less liability

To minimize the risk of future liability, we require that all hazardous or other regulated waste be disposed only at prop-

erly operated, Baxter-approved sites. This strategy has kept our environmental clean-up costs for hazardous waste sites

relatively low.

Baxter has been named as a potentially responsible party for environmental clean-up costs at 16 hazardous waste

(Superfund) sites in the United States. Allegiance Healthcare Corporation, a company spun off from Baxter in 1996 and

now merged with Cardinal Health, assumed responsibility for 10 of these sites. Excluding legal fees, we paid $17,000

for ongoing remediation at the remaining six Superfund sites. The estimated exposure for Baxter’s current six sites is

$2 million, which has been accrued (and not discounted) in the company’s consolidated financial statements.

Audits boost health and safety focus

As Baxter expands and our operations and products become more diverse, environmental, health and safety (EHS) audits

play a major role in managing risk and ensuring safety. All operating units perform a self-audit each year. In addition,

auditors from outside the operating unit examined 27 facility programs in 2000. Of the facility programs audited, 12 were

in the United States, Puerto Rico and Canada, 12 in Europe, and three in Asia and Latin America. Audits were conducted

by ERM Certification and Verification Services as well as several internal audit teams.

Our auditors are giving more attention to health and safety concerns because our performance in this area slipped

during 2000 (see the Employee Health and Safety section on page 27). There were 20 regulatory and company audit

findings in 2000 that the company classified as “major.” One of these was considered a major regulatory item, and 19

were considered major items involving a company requirement. A major item is a serious deficiency that poses signifi-

cant risk to the company; failure to comply with an important regulatory requirement; or a lack of a key environmental,

health and safety management system element.

Company management systems cover health and safety

Baxter has used management systems standards for environmental concerns since 1991, and for health and safety issues

since 1995. In 1997, we integrated and streamlined the management standards for environmental and health and safety

into one standard for EHS systems: the Baxter EHS management systems (BEHSt) standard. The BEHSt standard is com-

patible with ISO 14001 but goes beyond current ISO requirements by covering health and safety. Our goal is to have all

facilities achieve 100 percent of the BEHSt standard by 2002. The chart shows our progress to date.

(ISO14001) One-Third of facilities certified to ISO 14001

The company has made a commitment to obtain ISO 14001 certification for all manufacturing, research and development,

and other major operations by 2002. As of March 21, 2001, 44 of the 106 facilities covered by this commitment have

received ISO 14001 certification.�


1. Target: Achieve 100% BEHSt by 2002.2. Thirty-four new sites have not been evaluated.

10075–9950–7425–49

Half of facilities have completed 75% or

more of Baxter’s EHS Management Systems

(BEHSt) Standard1,2

Numberof facilities

Percent of BEHStImplemented

53 32 338

Percent BEHSt implemented

50–74 75–99Divisions 1 4Corporate

BEHSt-certified facilities 33ISO-certified facilities 44

Affirmation of Process for Environmental, Health and Safety Data

We have designed and implemented procedures to collect, compile and validate the environmental, health and safety

information included in Baxter’s 2000 Sustainability Report with a goal of fulfilling the Good Environmental, Health and

Safety Reporting Principles (GERP). The GERP were developed with the assistance of CERES and others.

The environmental data in this report is compiled from an annual roll up of facility and division data into a database.

The health and safety data was gathered through the company’s BaxHealth centralized reporting system. Facilities enter

data into the system throughout the year.

There are several reasons for the difference among the number of sites included in our environmental data with those

for health and safety (H&S), and those given in the company profile. The company profile shows all facilities, including

new facilities. However, new sites do not immediately report environmental, health and safety (EHS) data. New sites have

phase-in plans for full implementation of EHS initiatives. Data for them will be included in future reports.

New sites are able to establish H&S reporting more quickly than environmental reporting. In some instances, a single

facility has one environmental program and several H&S programs because there are multiple business groups on site.

In other cases, one environmental program may cover more than one facility, but each facility has a separate H&S program.

Also, more sites, such as sales offices, are required to report on their H&S performance.

The cardiovascular business was spun off as a separate company on March 31, 2000. This report does not include

data from these operations. Data from previous years have been adjusted.

William R. BlackburnVice President and Chief CounselCorporate Environment, Health and Safety

Find the GERP and Terms and Conditions used in this report at www.baxter.com/ehs.

Auditor’s Verification Statement for Environmental, Health and Safety Data

We have been commissioned to verify reporting of environmental, health and safety (EHS) data contained in Baxter’s

2000 Sustainability Report.

Our verification included an evaluation of Baxter’s internal processes for gathering, collating, internally verifying and

presenting EHS data to determine conformance with the Good EHS Reporting Principles (GERP) developed by Baxter

and others. Our verification of the data in this report was carried out in conjunction with our audits of 27 Baxter facilities

against ISO 14001, EHS regulations and Baxter’s own EHS standards, which we performed over the period covered by

this report. We conducted site inspections, reviewed relevant documentation and interviewed accountable facility, division

and corporate personnel.

It is our opinion that the data presented in this report address Baxter’s key EHS aspects, are a valid representation

of Baxter’s EHS performance over the period covered by this report, and are presented in a manner that substantively

conforms with the Good EHS Reporting Principles.

ERM Certification and Verification ServicesBrian KrausChief Executive Officer


Estimated Environmental Costs and Savings Worldwide ($ in millions)1, 2

2000 1999 1998

Environmental Costs

Cost of Basic Program

Corporate Environmental–General and Shared Multidivisional Costs 1.6 1.5 1.5Auditors’ and Attorneys’ Fees 0.5 0.5 0.4Corporate Environmental–Engineering 0.4 0.5 0.6Division/Regional/Facility Environmental Professionals and Programs 6.0 5.7 6.3Packaging Professionals and Programs for Packaging Reductions 0.4 0.5 0.4Pollution Controls–Operations and Maintenance 4.6 4.8 4.6Pollution Controls–Depreciation 1.0 0.9 0.7

Total Costs of Basic Program ~15 ~14 ~15

Remediation, Waste and Other Response Costs

(Proactive environmental action will minimize these costs.)

Attorneys’ Fees for Cleanup Claims, NOVs 0.1 0.2 0.2Settlements of Government Claims 0.0 0.0 0.0Waste Disposal 4.8 4.7 4.7Environmental Taxes for Packaging 1.1 1.1 0.6Remediation/Cleanup–On-site 1.1 0.5 0.4Remediation/Cleanup–Off-site 0.1 0.2 0.3

Total Remediation, Waste and Other Response Costs ~7 ~7 ~6

Total Environmental Costs ~22 ~21 ~21

Environmental Savings

Income, Savings and Cost Avoidance from 2000 Initiatives

Ozone-Depleting Substances Cost Reductions 0.1 0.1 0.1Hazardous Waste Disposal Cost Reductions 0.4 0.0 (0.1)Hazardous Waste Material Cost Reductions 1.0 (0.1) 0.2Nonhazardous Waste Disposal Cost Reductions (0.2) 0.3 0.1Nonhazardous Waste Material Cost Reductions (0.1) 2.9 0.0Recycling Income 7.0 5.5 5.1Energy Conservation Cost Savings 2.8 1.5 1.1Packaging Cost Reductions 1.0 0.7 0.7Water Conservation Cost Savings 0.2 0.0 0.0

Total Report-Year Environmental Savings3 ~12 ~11 ~7

As a Percentage of the Costs of Basic Program 80% 79% 47%

Summary of Savings

Total Report-Year Environmental Savings ~12 ~11 ~7

Cost Avoidance in Report-Year From Efforts

Initiated in the Six Years Prior to Report-Year 3,4 ~63 ~64 ~76

Total Income, Savings and Cost Avoidance in Report-Year ~75 ~75 ~83

1. Details on the cost avoidance from initiatives completed in prior years and definitions of terms are provided at www.baxter.com/ehs.2. Given the manner in which data has been gathered and calculated, the totals have been rounded to reflect an appropriate degree of accuracy.3. In calculating savings and cost avoidance for waste reduction activities, it is assumed that production and distribution activity grew proportionately with

the cost of goods sold adjusted for changes in inventory and inflation. The six-year average growth rate through the year 2000 was seven percent, through 1999 - six percent, and through 1998 - six percent. To determine the financial values for each year, a three-year rolling average of the annual percent change in growth is used. Through the year 2000, the three-year rolling average was seven percent through 1999 - five percent, and through 1998 - three percent. We use this rolling average to avoid distortions due to startups and delayed environmental effects from production changes.

4. Accumulation of cost avoidance is terminated at seven years, which is the approximate life of new facility projects and product developments.

Des

ign

/ Par

agra

phs

Des

ign

Inc.

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cago

Baxter International Inc.One Baxter ParkwayDeerfield, Illinois 60015

View this report online at www.baxter.com/sustainability

C This report was printed with soy-based inks on recycled paper that used 30 percent post-consumer waste and was processed chlorine free.

© Baxter International Inc., 2001. All rights reserved.

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Baxter International Inc. Sustainability Report 2000