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Merck: An Effective Treatment with Just a Few Unwanted Effects

By Michelle Bernhart (True Blue Communications) on January 04, 2010 at 4:22pm.


The 2008 corporate responsibility report from Merck & Co., the global pharmaceutical company operating as Merck Sharp & Dohme in most countries, represents good progress from its two predecessors, including greater emphasis on stakeholder engagement.

Content:

The report covers five priority areas that Merck identified through materiality analysis:

1. Researching new medicines and vaccines to address unmet needs
2. Improving access to medicines, vaccines and health care
3. Ensuring confidence in product safety and quality
4. Conducting business ethically and transparently
5. Managing the company's environmental footprint

Merck has done an excellent job of tracking sector- and company-specific metrics, such as the percentage of top 20 global burdens of illness addressed by Merck products, number of low- and middle-income countries using Merck’s vaccines in the public sector, and major public-private partnerships to improve access to medicines. It’s not always clear, however, what the reader is to make of some of them. For example, is it positive, negative, or irrelevant that Merck experienced 151 calls to its ‘AdviceLine’ in 2008?

Where data are presented in percentages, though, it’s easy to be impressed by Merck’s performance in some areas, such as by the percentage of HIV/AIDS patients receiving Merck medicines for which Merck earns no profit (76) or the percentage of top 20 global burdens of illness addressed by Merck products (53).

It’s also heartening to see that the company has established measurable employee engagement targets, such as scoring at or above the 75th percentile in the annual Culture (employee) Assessment by 2011 and increasing global female representation at the senior manager level to 36 percent by 2012.

The report also focuses extensively on ethics, including supply chain ethics, with improving numbers to back up the narrative. Another positive is the CEO’s mention of - and support for - US health care reform, a critical issue for all US-based organizations and their stakeholders, but one that does not appear in enough corporate responsibility conversations.

Communication:

The Spartan but functional layout, both online and in the stand-alone report, gets the job done, although this reviewer found herself longing for black - as opposed to nearly transparent white - text on the many light-colored backgrounds used throughout the report.

Online, positives include clear, uncluttered pages, while negatives include no obvious links to the rest of Merck.com, such as to the home page, Investor Relations, or About Us sections. The subtle, and no doubt unintended, effect is that corporate responsibility is not well-integrated at Merck.

Additionally, although the online navigation is mostly logical, groupings like “Summary Data, Awards and Resources” are odd and confusing. Delving into this section reveals further strange bedfellows, including speeches, news releases, key activities, and benchmarking information, as well as progress against the UN Global Compact and Millennium Development Goals. It’s as if the web designers threw the report’s many components at a fan and left them wherever they landed.

In other areas, the micro-site includes nifty interactive features, such as a useful map that shows representative activities in each of Merck’s five priority areas, and an animated materiality matrix. We’ll forgive the fact that the matrix stops short of showing which issues were assessed, and doesn’t indicate the results of the analysis, especially since Merck’s goals, progress, and future plans are so clearly presented elsewhere in a simple and sufficient table. Another plus online is the well-done report survey. Less clear is how Merck uses the feedback collected by the survey.

Usually, the web version of a sustainability report is more detailed than the PDF/print version, and that generally seems to be the case here, although some discussions are more expansive in the PDF/print document. The organization of the PDF version is more logical, making it more cohesive and easily navigated. Unfortunately, the URLs provided in the PDF/print version do not work, and although clicking on them in the PDF does route to the correct pages, this won’t help print readers.

It has become popular in sustainability reports to include a smattering of brief statements from internal and external thought leaders. Often, these are intended to provide context for the material issues with which an organization is grappling. Just as often, however, these statements fail to circle back to the organization itself, leaving readers unsure exactly how the issue affects the subject organization and how well the company is dealing with a particular challenge compared to its peers. The 2008 Merck report falls somewhere in between. Outside expert commentary offers a useful, if rather broad, framework for Merck’s five priority areas, while internal executives provide insights (also rather generic) about Merck’s approach to the issues. Future reports - and perhaps dialogue with stakeholders as well - would be enhanced by adding more specificity, both about context or challenges and the company’s response. In part because Merck has done such a good job of identifying and tracking its performance against unique metrics, readers need narrative context, normalized data, and industry-specific insights to adequately assess Merck’s commitments and performance.

As a final note, the PDF/print report includes an excellent, book-like index that makes searches easy, but the microsite lacks a search function entirely, a shortcoming that, coupled with the sometimes illogical subject matter groupings, erodes efficiency.
 
Credibility:

The report adheres to GRI application level ‘B’, addresses the Access to Medicines Index, and covers Merck’s progress on the UN Global Compact principles and toward achieving the Millennium development Goals. Throughout, the authors do a credible and consistent job of incorporating the company’s messages about its business and its global health-related mission. Even the environmental section is presented solidly in the perspective of human health. The net result is a document that manages to report on diverse issues and key performance indicators while remaining cohesive and believable.

Kudos to Merck for convening a group of external stakeholder advisors and publishing their previous input and the company’s responses. However, some of the Merck responses seem to miss the intent of the stakeholder recommendations. Consider the stakeholders’ request for Merck to provide clearer metrics on the safety of Merck’s products. In response, the online report merely provides a link to a brief discussion of anti-counterfeiting efforts. To be sure, counterfeit drugs pose a safety risk, but the stakeholders asked for metrics (which are not provided in the response) on Merck’s own products (not necessarily imitators) and did not appear to be limiting their request to counterfeiting.

Similarly, the external stakeholders’ recommendation to provide more information about how employees are engaged in materiality analysis seems to have led only to a mention of surveys, with no hint at their results or what issues employees cited as significant. The language, in fact, is frustratingly vague: “In direct response to employee feedback from our 2008 [culture] survey, the company is including certain areas as specific measures on our 2009 internal company performance scorecard”. What areas? Which measures? How, if at all, have they contributed to Merck’s decision making on corporate responsibility?

It’s not clear that Merck took the external stakeholders’ advice to heart. After four clicks (five if you start at the Merck.com home page), it is possible to locate an employee engagement score (which declined slightly from 2007 to 2008), but even this section of the online report fails to summarize the nature of employee feedback and does not comment on the reduction in engagement. Perhaps most telling is this statement: “We have focused our CR reporting on … material issues which we have identified through an assessment of factors in the global business environment, the pharmaceutical sector and Merck specifically, as well as feedback from external stakeholders”. [emphasis added] Disconnects like these somewhat diminish credibility in an otherwise strong report.

Recommendations:

1. Improve corporate responsibility-related dialogue with employees to strengthen the materiality assessment process, and report on the nature of employee input.
2. Provide context throughout the report.
3. Publish results of the very good online report survey.
4. Consider assurance.

Michelle Bernhart is the founder of True Blue Communications LLC, which helps organizations strengthen sustainability performance, achieve strategic objectives, enhance brand, and manage risk through credible and engaging communications. www.truebluecomm.com