Case Study in the Evolution of Sustainability: Baxter International Inc.

Abstract

Baxter International Inc. (Baxter) is a global, diversified healthcare company based in Deerfield, IL. In 2011, Baxter had sales of $13.9 billion and employed approximately 48,500 people worldwide (Baxter’s 2011 Sustainability Report). Baxter is also recognized for its efforts toward environmental/sustainability performance and reporting. The company defines sustainability as ‘a long-term approach to including our social, economic and environmental responsibilities among our business priorities. Baxter’s efforts in this area align with and support our mission of saving and sustaining lives.’ This case study attempts to analyze the progress of the company on its journey along the path toward sustainability. The formal environmental initiatives at Baxter were started in the 1970s. The acquisition of American Hospital Supply Corporation intensified the environmental challenges for the company. A new environmental course was set in the 1990s that led to the development of the State-of-the-Art (SOA) Environmental Standards. At this time, the company started measuring its efforts and began publishing an Environmental Financial Statement in its annual public Environmental Report. In 2005, an executive level Sustainability Steering Committee was proposed and subsequently created in 2006 to accelerate the integration of sustainability within all facets of the organization. This case study articulates the evolution of Sustainability at Baxter Inc. As a result of its efforts, Baxter has received numerous awards and accolades for its efforts in sustainability performance and reporting. For example, in 2011 Newsweek Magazine ranked Baxter the 4th greenest company in the United States (Newsweek Magazine, October 17, 2011, accessed online at http://www.baxter.com/press_room/features/2011/newsweek_green_rankings.html). Going forward, it would be noteworthy to see whether Baxter can keep up its momentum and continue to be a sustainability leader.

Appendices

Appendix 1

 

Baxter priority sustainability and 2015 goals—people
2015 Goal	2011 Progress
1. Baxter will promote a safe and healthy workplace
Implement best-in-class programs designed to protect the safety and improve the health of employees that result in performance in the top three of industry peers	Compared to 2010, Baxter improved its recordable case rate by 5% and its cases with days lost rate by 6 %. However, the company’s days lost rate rose by 20 %. In 2011, Baxter launched a three-pronged approach to enhancing its safety culture and performance. In 2010, the most recent year data was available, Baxter’s cases with days lost rate ranked third of industry peers. 1 As part of the BeWell@Baxter strategy, the company offered free seasonal flu vaccinations to 98% of the global employee population during 2011
2. Baxter will promote an inclusive and diverse workplace
Create and sustain an inclusive culture where diverse ideas, backgrounds, experiences and perspectives are respected and valued	All Baxter employees company wide completed training on how to contribute to an inclusive culture. Additionally, all employees were required to add an inclusion goal as part of their individual goals for the year. Also during the year, Baxter established two Business Resource Groups, “Building Women Leaders” and “Latinos@Baxter”
3. Baxter will promote ethical conduct and legal compliance
Continue to champion internal and industry-wide ethical sales and marketing practices by	In 2011, Baxter’s major efforts in the United States focused on implementing a program to comply with the Physician Payment Sunshine Act. Outside the United States, Baxter enhanced its risk-based anticorruption education program by piloting an intensive anticorruption risk education session in the Asia Pacific region, in addition to the awareness and comprehensive training offered annually to employees who regularly interact with government officials and healthcare professionals
Implementing Baxter’s enhanced US Healthcare Compliance Program and International Anticorruption Program within the company
Working with US and international trade associations, non-governmental organizations and governments to harmonize and enforce standards on financial interactions with healthcare providers that allow for appropriate education, research and dialogue on products and services and discourage improper incentives	Baxter continued work with Eucomed and Advamed on a European approach to third-party anticorruption efforts, sharing Baxter’s perspectives and helping to create a standard industry approach. Additionally, Baxter’s China Ethics and Compliance team made progress with the China Association of Enterprises with Foreign Investment R&D-based Pharmaceutical Association Committee on advancing an industry-wide ethical sales and marketing code

Baxter priority sustainability and 2015 goals—operations and products
2015 Goal	2011 Progress
4. Baxter will drive a sustainable supply chain
Reduce Baxter’s US car fleet greenhouse gas emissions per kilometer by 20 % from 2007 baseline	In 2011, Baxter’s US sales car fleet achieved a 4.1 % reduction in greenhouse gas (GHG) emissions per kilometer driven compared to 2007
Incorporate sustainable principles into Baxter’s purchasing program with select 100 suppliers	Baxter now embeds sustainability components into the purchasing, sourcing and supplier management process in nine countries, and conducted its third annual global supplier sustainability survey
5. Baxter will drive reductions in its carbon footprint
Reduce greenhouse gas emissions 45% indexed to revenue from 2005-baseline	In 2011, Baxter’s net GHG emissions from operations equaled 717,800 metric tons carbon dioxide equivalent (C02e), a 34 % reduction compared to 2005 indexed to revenue, and an absolute decrease of 7 %
Increase facility energy usage of renewable power to 20 % (of total)	In 2011, 19 % of Baxter’s energy use for operations was from renewable energy sources. Of this amount, 8 % was from the use of biomass fuel and 11 % was the renewable energy component of purchased electricity and RECs
6. Baxter will drive reductions in its natural resource use
Reduce energy usage 30 % indexed to revenue from 2005 baseline	In 2011, Baxter used 8,869 trillion joules of energy, a reduction of 24 % compared to 2005, indexed to revenue, and an absolute increase of 7 %
Reduce water usage 35 % indexed to revenue from 2005 baseline. To help achieve this, by 2010 evaluate potentially vulnerable watersheds associated with Baxter facilities and establish aggressive water conservation goals for high-risk areas	In 2011, the company used 13. 8 million cubic meters of water, a reduction of 33 % compared to 2005, indexed to revenue, and an absolute decrease of 6 %. Baxter’s absolute water consumption increased by 4 % from 2010 to 2011
Implement two projects to help protect vulnerable watersheds or provide communities with enhanced access to clean water	Baxter worked with two non-governmental organizations on proposals to protect watersheds and enhance sanitation in communities near manufacturing facilities located in water-stressed areas. The company expects to fund and implement both of these projects in 2012
Reduce total waste generation 30 % indexed to revenue from 2005 baseline	In 2011, Baxter generated 70,700 metric tons of waste (including 65,000 metric tons non-hazardous and 5,700 metric tons regulated}, a decrease of 11 % compared to 2005, indexed to revenue, and an absolute increase of 26 %. A product recall in the Europe, Middle East, and Africa region resulted in approximately 9,400 metric tons of total waste in 2011, 13 % of the 2011 global total. Excluding this waste, Baxter would have experienced a decrease of 23 % compared to 2005, indexed to revenue, and an absolute increase of 9 %
Eliminate 5,000 metric tons of packaging material from products sent to customers from 2007 baseline	Since the base year of 2007, Baxter has implemented projects that have reduced the amount of waste sent to customers by 4,300 metric tons, 86 % of its goal.
7. Baxter will drive enhanced product stewardship
Further sustainable product design by identifying and minimizing life cycle impacts and proactively eliminating or minimizing known substances of concern in new products and packaging as feasible	Baxter’s XENIUM+ synthetic dialyzers became the second Baxter product to receive Carbon Footprint certification from the Carbon Trust. Baxter has continued the global marketing rollout of FLEXBUMIN [Albumin (Human)]-the first and only albumin in a flexible, plastic container - which is the world’s first medical product to receive Carbon Footprint certification from the Carbon Trust (in 2009, re-certified in early 2012)
Identify new opportunities to replace, reduce and refine (3Rs) the use of animal testing!	Baxter is committed to enhancing animal welfare through the 3Rs— replacement, reduction and refinement. In 2011, Baxter further reduced the number of animals used in quality testing of certain biotherapeutic drugs and vaccines. The company also in creased the a mount of information collected per animal that reduced the number of animals necessary to fulfill specific regulatory requirements

Baxter priority sustainability and 2015 goals—world
2015 Goal	2011 Progress
8. Baxter will strengthen access to healthcare through product development and strategic product donations
Create a new business model to improve access to healthcare for the “base of the pyramid” (developing economics)	Representatives from the organization Enterprise for a Sustainable World interviewed Baxter business leaders from around the world to understand where and how the company is currently selling products in regions with high “base of the pyramid” 1 (BoP) representation or has technology well suited for use in the BoP. The company also began a review of its emerging technology portfolio
Work with donor partners to develop and implement a strategic product donation plan beginning in 2010 that includes: being the first on the scene following disasters and tragedies, contributing most needed products to stabilize supply, and contributing most needed products in least developed and developing economies	Baxter continued working with AmeriCares and Direct Relief International to pre-position products so they are available for emergencies as well as to meet ongoing needs in underserved communities. The company shipped products with long shelf lives to aid partners in the first and fourth quarters of 2011. These proactive strategic donations helped facilitate timely support to 75 countries
9. Baxter will Strengthen the Company’s Commitment to Education, Especially Math and Science
Facilitate learning of math and science through biotechnology education for Chicago Public Schools teachers and students, and partner with other educational organizations to provide similar opportunities in other locations	In the 2010–2011 school year, the Science@Work: Expanding Minds with Real-World Science program, a multi-year commitment to Chicago Public Schools, reached nearly 14,000 students and almost 150 teachers in 55 schools through the provision of in-depth biotechnology teacher training and module lesson plans (and a total of more than 45,000 students and 530 teachers in more than 150 schools since 2008). Baxter also contributed to several other educational initiatives during the year, in Chicago and in other locations

Appendix 2: Case Questions for Instruction Use

The case of Baxter International, Inc. can be used for classroom use, especially for graduate students. This case discusses how a large company incorporated Sustainability within its operations and, ultimately, its strategy. Given the laxity of strict environmental regulation from the federal level (the EPA), what incentives exist for companies to take on leadership in sustainability? This case can be used to probe the role of companies in sustainability leadership.

General Questions

• 1. How and why does a company, started in 1931, decide to embrace sustainability? Who were the leaders who thought about this concept? (Note: A good jumping off point is immediately before that decision is made and Baxter management considering whether to incorporate sustainability in their company.)

• 2. Had something happened to spark this interest? Had leadership been reading about it? What prompted even thinking about sustainability? Why were they interested in sustainability before most other companies were (and ultimately, why did they decide to do so on their own??) (Note: At this point, what would follow is Baxter’s history and description, where the concept of “sustainability” was in the early 1990s, what the benefits, challenges, risks, obstacles, etc., were.)

• 3. Who were the stakeholders in this decision? (Note: Kind of a preamble to the actual decision, which would be announced in the class.)

• 4. Given the absence of climate legislation in the US, why would companies risk media exposure to report on environmental indicators. (Note: Attempt to have students articulate the drivers that can be used to incentivize companies to be sustainable.)

Specific Questions

• 1. Was carbon offsetting used prior to Robert Parkinson’s tenure as CEO?

• 2. Was there a marked difference in sustainability/green focus when Parkinson joined the company? If so, what specifically changed?

• 3. Was Robert Parkinson, CEO, involved in sustainability work in his prior jobs? (Loyola, Abbott)

• 4. How did Baxter get involved in the Chicago Climate Exchange? As a founding member does Baxter act any differently than other CCX members?

• 5. What should Baxter do to continue its momentum?

• 6. If you were the CEO of the company, would you have done anything differently. What are the various pressures faced by the senior leadership in the C-suite?

• 7. Compare and contrast Baxter with other competitors. Students can look at other medical devices companies in Europe and Asia (Seimens Medical (Germany), Philips Medical Systems (Netherlands), B. Braun (Germany), Fresenius (Germany), Smith & Nephew (UK), Terumo (Japan), Gambro (Sweden), etc.

Appendix 3: Sustainability Awards and Recognition for Baxter Inc.

• 2012—250 Best Companies to Work for In Mexico—Great Places to Work Institute—Mexico

• 2012–2005—Global 100 Most Sustainable Corporations in the World

• 2012–2007, 2005–2004, 2002–2000—100 Best Corporate Citizens—Corporate Responsibility Magazine (formerly Business Ethics Magazine)

• 2012-2011—Maplecroft Climate Innovation Index US 100

• 2011-1999—Dow Jones Sustainability Index (DJSI)

• 2011-2009—First in the Healthcare Category of the Newsweek Green Rankings

• 2011—Socially Responsible Company-Mexican Center for Philanthropy

• 2011—AmCham Corporate Social Responsibility Award-Cartago, Costa Rica

• 2011—Bloomberg-Vestas Global Corporate Renewable Energy

• 2010—Chair’s Award of Merit—United Way of Peel Region—Canada

• 2010—Governor’s Sustainability Award for Continuous Improvement—Illinois, United States

• 2010—Recognition of Best Practices in Corporate Social Responsibility—Mexican Center for Philanthropy

• 2010—Yangtze River Delta Pharmaceutical Corporate Social Responsibility Award—Shanghai, China

• 2009, 2007—World’s Most Ethical Companies—Ethisphere Council

• 2008—Highly Commended (large business category)—Western Sydney Industry Awards Excellence in Business Practice—Toongabbie, New South Wales, Australia

• 2008—Platinum Award for Innovative Approaches to Environmental Stewardship and Sustainability in Healthcare—Building Common Ground Conference—Burlington, Ontario, Canada

• 2007—First Annual Corporate Citizen Award for Environmental Sustainability—League of Women Voters of Illinois (http://www.baxter.com/about_baxter/company_profile/awards_and_honors.html)