Consumer Health Care Sustainability Initiative

Schering-Plough is currently making solid progress on several environmental sustainability initiatives related to energy efficiency improvements and greenhouse gas reductions, waste reduction and pollution prevention, supply chain management, and green building design.

To supplement the broader company efforts and to strengthen its business, Consumer Health Care (CHC) has launched a business unit-wide environmental sustainability initiative to pursue additional opportunities to act where it can create shared benefits for the environment and the business. Initial efforts are focused on developing specific objectives and goals, assigning ownership and accountability, and establishing appropriate business processes and systems to facilitate improvements in both new and existing products and processes. Global Safety and Environmental Affairs is supporting CHC's efforts and plans to work with the company's other business units in the future to share lessons learned.

The following examples of progress demonstrate the value of CHC's early efforts:

• CHC's site in Memphis, Tennessee, is achieving big environmental savings with its newly renovated reverse osmosis (RO) water system, which was completed in December 2008. With the installation of new technology and a recirculating water system, the site is saving 18,000 gallons per day. This means that 6.6 million gallons each year will no longer be sent down the drain as wastewater. In addition to the water savings, the site has reduced consumables, such as filters, water treatment chemicals, RO membranes, salt, etc.
• A comprehensive redesign of DR. SCHOLL'S® packaging has eliminated the use of PVC plastic in favor of a more environmentally friendly, recyclable material. The new packaging is made from the same material as plastic soda bottles, which is known as PET. This change is estimated to reduce overall plastic packaging materials by more than 400,000 pounds each year and overall packaging material by more than 200,000 pounds each year.
• Schering-Plough's Cleveland, Tennessee, site, a major manufacturing location for CHC products, was awarded a 2008 ENERGY STAR® designation from the U.S. Environmental Protection Agency. The ENERGY STAR® is a mark of distinction given to the most energy efficient manufacturing plants in the country. The Cleveland site is now one of only four pharmaceutical plants in the U.S. with this significant distinction.
• Changes in Lotrimin and Tinactin secondary and tertiary packaging have reduced case cubes by 66 percent, eliminated the need for 3,700 pallets per year, saved 23,000 gallons of diesel fuel per year, and reduced paperboard and corrugate by 161,000 and 61,200 pounds, respectively, per year.
• Changes in Coppertone Continuous Spray Sunscreen club store packaging have reduced packaging materials by 85 percent and eliminated 74,840 pounds of packaging waste per year.

CHC's Environmental Sustainability Initiative is a key element of Schering-Plough's commitment to develop environmentally sustainable products and processes.

Right First Time Continuous Improvement Initiative

BELIEF

As stakeholder expectations around sustainability continue to increase, continuous improvement initiatives offer compelling opportunities to further improve Safety, Health and Environmental (SHE) performance. Building safety and environmental considerations into initiatives can increase value, accelerate implementation, decrease material costs, and reduce liability and the risk of potential SHE-related compliance gaps and nonconformities.

Effective integration of SHE management efforts into these initiatives will allow facilities to avoid risks from non-compliance with regulatory requirements, as well as discover new ways to improve operational processes and achieve the highest standards of SHE performance. Lean methods create a continual improvement-based, waste elimination culture that involves workers at all levels of the organization. There are a variety of common lean methods, including Kaizen rapid improvement events, just-in-time manufacturing, value stream mapping and total productive maintenance. Lean thinking focuses on three objectives:

• Reducing production resource requirements by minimizing inventory, equipment, storage and production space, and materials;
• Increasing manufacturing velocity and flexibility; and
• Improving quality and eliminating defects.

Environmental-related wastes carry large financial burdens, create potential health and safety hazards, and require time-consuming support activities and management. Chemicals and hazardous materials used in processes often demand costly support activities, such as regulatory compliance management and reporting activities; use of personal protective equipment; and the investment, operation, and maintenance of pollution control equipment and/or non-hazardous and hazardous waste management and disposal.

Chemical substitution, process improvement changes and other strategies can reduce the need for such non-value-added activities. Reducing the volume of material, water, energy, chemical usage and wastes (hazardous and non-hazardous) yields cost savings and significant safety and environmental benefits.

OWNERSHIP

Right First Time (RFT) continuous improvement initiatives are based upon Lean Enterprise, Six Sigma principles and the DMAIC (Define, Measure, Analyze, Improve and Control) process, but have been enhanced and adapted to fit the business utilizing Schering Plough's Supply Improvement Process (SIP) model. The program is focused on encouraging and enabling all colleagues within Global Supply Chain and the Global Quality Organization to look for opportunities and generate ideas that can help minimize any aspect of work that is not adding value. Projects are prioritized and evaluated against business fundamentals and often contain, (and always consider) Environmental and Safety aspects. Of the projects identified so far in 2009, 15 to 20 percent of initiatives include SHE components.

Support is provided through a network of trained professionals at the local, regional or business function level. To date, close to 50 percent of Global Safety and Environmental Affairs staff have received a minimum awareness-level training, with select staff completing more extensive training to either Yellow or Green Belt level. Facilitation of projects is typically a part-time assignment or extension of a SHE professional's full-time responsibilities. Projects are typically driven by cross-functional teams, with governance and oversight from either site or corporate level. The project management process is organized around six steps to success:

PASSION

RFT Champions at Schering-Plough manufacturing facilities encourage colleagues to apply RFT methods to improve SHE performance ranging from regulatory compliance management and reporting systems to chemical and waste management processes at the site level. The following are examples of SHE considerations which have been applied to RFT projects:

1. Commit to eliminate environmental wastes through RFT implementation.
2. Recognize new improvement opportunities by incorporating SHE-related icons and data into process and value stream mapping activities.
3. Involve site-level staff with SHE expertise in planning for and implementing RFT events on processes with safety/environmental opportunities.
4. Find and drive out environmental wastes in specific processes by asking key questions and using process-improvement tools.
5. Empower and enable colleagues to eliminate waste in their work areas through increased awareness, training and workplace evaluation checklists to identify potential SHE concerns/issues.
6. Explore opportunities to incorporate environmental considerations into process and product design activities. Discuss other potential areas of collaboration for improving organization results and competitive advantage.
7. Focus on prevention programs addressing the primary hazards (based upon a review of Global SHE Performance Metrics) and place an emphasis on the major contributors and around specific opportunities:

SHE BUSINESS IMPACT / VALUE ADDED

Below are just a few examples of the significant impact site-level SHE-related continuous improvement projects have had on the business over the past few years.

Safety, Health and Environmental Assessment
of External Manufacturers (EM)

Schering-Plough was a leader in its industry sector in initiating a formal safety, health and environment (SHE) assessment program for contract suppliers in March 2004 to manage SHE risks, liabilities and business interruptions associated with selected suppliers. SHE assessments are conducted on suppliers of active pharmaceutical ingredients (APIs), synthesis intermediates, bulk and finished products, and other critical supply items. Priority for conducting assessments is given to suppliers that utilize Schering-Plough proprietary technology, suppliers of products marketed under the company's name, unique suppliers of key synthesis intermediates or active pharmaceutical ingredients to be used in company products, and manufacturers specifically identified in our drug registration filings.

For established suppliers that have already provided services to Schering-Plough, the priorities are established based on their potential risk categorization. Suppliers are pre-screened and placed in potential risk categories based upon six factors. These pre-screening factors include: the country of location of the supplier, types of manufacturing processes employed, use or manufacture of hazardous/potent substances, and other criteria. Questionnaires are subsequently used to collect additional background information on the suppliers. Any of the suppliers falling into higher risk categories are targeted for on-site SHE risk assessments. For all new suppliers, SHE risks assessments are carried out as part of the due diligence evaluations. Suppliers are evaluated based on the potential risks associated with their SHE programs and potential impacts on the safety and health of colleagues and surrounding communities, as well as potential impacts on the environment.

Since the launch of our program, more than 350 suppliers have completed SHE survey questionnaires and approximately 200 on-site facility assessments have been conducted. All suppliers identified as medium to high risk in these assessments have initiated formal action plans to implement our recommendations for improvement, or they have been replaced with lower SHE risk suppliers. Follow up evaluations of these suppliers are scheduled on a defined timetable.