Independent Assurance Report on the 2020 Novartis in Society ESG reporting

To the Board of Directors of Novartis AG, Basel

We have been engaged to perform assurance procedures to provide limited assurance on the following aspects of the 2020 global health & corporate responsibility (GH&CR) reporting of Novartis AG and its consolidated subsidiaries (Novartis Group) included in the Novartis in Society ESG Report 2020

Scope and Subject matter

Our limited assurance engagement focused on the following 2020 data and information disclosed in the consolidated Novartis in Society ESG Report 2020 of the Novartis Group for the year ended December 31, 2020:

  • The “ethical business practices performance indicators” on page 69, the “access to healthcare performance indicators” on page 70, the “people performance indicators” on page 71, the “supply chain performance indicators” on page 72, and the “health, safety and environment performance indicators” on page 73 (GH&CR indicators)
  • The materiality determination and stakeholder engagement process of Novartis at the Group level according to the requirements of the GRI Sustainability Reporting Standards (GRI Standards), published by the Global Reporting Initiative (GRI) and disclosed as “the 2017 Corporate Responsibility Materiality Assessment Results Report” on page 68 and as applied to the Novartis in Society ESG Report 2020 as indicated on in the section "Corporate responsibility material topic boundaries".
  • Reporting processes and related controls in relation to data aggregation of GH&CR indicators

The following indicators are not subject to this Assurance Report. Consequently, we do not express any conclusion on this data.

  • The “pharmacovigilance, safety profile and quality of drugs performance indicators” section
  • The indicators as noted within the “ethical business practices performance indicators” section, as follows:
    • The “animal testing indicators,”
  • The indicators as noted within the “people performance indicators” section, as follows:
    • The “gender split of leavers”
    • The “median tenure in years by gender”
    • The “internal promotion by gender”
    • The “revenue producing roles by gender”
    • The “Novartis IT and engineering workforce by gender”
    • The “number of employees by employment contract (permanent and temporary), by gender”
    • The “number of employees by employment contract (permanent and temporary), by region”
    • The “number of employees by employment type (full-time and part-time), by gender”

Criteria

The management reporting processes with respect to the GH&CR reporting and GH&CR indicators were assessed against GRI Standards guidelines and Novartis Group internal policies and procedures, as set forth in the following:

  • Guideline on Corporate Responsibility Management at Novartis and the Code of Ethics
  • Procedures by which the data for the GH&CR indicators reporting is gathered, collected and aggregated internally

The management reporting process with respect to the sustainability-linked bond “strategic innovative therapies patient reach” and “flagship programs patient reach GH&CR indicators were assessed against the terms and conditions as outlined within the Final Listing Prospectus dated 21 September 2020.

Inherent limitations

The accuracy and completeness of GH&CR indicators are subject to inherent limitations given their nature and methods for determining, calculating and estimating such data. Our Assurance Report should therefore be read in connection with Novartis Group guidelines, definitions and procedures on GH&CR reporting.

Novartis Responsibilities

The Board of Directors of Novartis AG is responsible for both the subject matter and the criteria as well as for the selection, preparation and presentation of the information in accordance with the criteria. This responsibility includes the design, implementation and maintenance of the internal control system related to this reporting process that is free from material misstatement, whether due to fraud or error.

Our Responsibilities

Our responsibility is to form an independent opinion, based on our limited assurance procedures, on whether anything has come to our attention to indicate that the GH&CR indicators are not stated, in all material respects, in accordance with the reporting criteria.

We planned and performed our procedures in accordance with the International Standard on Assurance Engagements (ISAE) 3000 (revised) “Assurance engagements other than audits or reviews of historical financial information“. This standard requires that we plan and perform the assurance engagement to obtain limited assurance on the identified GH&CR indicators prepared, in all material aspects, in accordance with the Novartis Group internal policies and procedures.

A limited assurance engagement under ISAE 3000 (revised) is substantially less in scope than a reasonable assurance engagement in relation to both the risk assessment procedures, including an understanding of internal control, and the procedures performed in response to the assessed risks. Consequently, the nature, timing and extent of procedures for gathering sufficient appropriate evidence are deliberately limited relative to a reasonable assurance engagement and, therefore, less assurance is obtained with a limited assurance engagement than for a reasonable assurance engagement.

Our Independence and Quality Control

We have complied with the independence and other ethical requirements of the Code of Ethics for Professional Accountants issued by the International Ethics Standards Board for Accountants, which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behavior.

Our firm applies International Standard on Quality Control 1 and accordingly maintains a comprehensive system of quality control, including documented policies and procedures regarding compliance with ethical requirements, professional standards, and applicable legal and regulatory requirements.

Summary of Work performed

Our assurance procedures included, among others, the following:

  • Evaluation of the application of Group guidelines: reviewing application of the Novartis Group internal GH&CR reporting guidelines
  • Management inquiry: interviewing personnel responsible for internal reporting and data collection
  • Assessment of key figures: performing tests on a sample basis of evidence supporting selected GH&CR data concerning completeness, accuracy, adequacy and consistency
  • Inspection of documentation and analysis of relevant policies and principles: inspecting relevant documentation on a sample basis, including Group GH&CR policies, management reporting structures and documentation
  • Assessment of the processes and data consolidation: reviewing the management reporting processes for GH&CR reporting and assessing the consolidation process of data at Group level and the related controls
  • Evaluation of the materiality determination and stakeholder engagement process: inspecting the principles of the Novartis materiality assessment process providing the basis for the adherence to the GRI reporting requirements, addressing the soundness of the methodology, the identification process, the determination of the impacted stakeholders, as well as the prioritization based on the assessed impact of Novartis

We have not carried out any work on data other than outlined in the scope and subject matter section as defined above. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our assurance conclusions.

Limited assurance conclusion

Based on our work described in this report, nothing has come to our attention causing us to believe for the period ended December 31, 2020, in all material respects that:

  • The GH&CR indicators outlined in the scope and subject matter section and disclosed in the 2019 GH&CR reporting of the Novartis Group are not stated in accordance with Novartis Group internal policies and procedures;
  • The sustainability-linked bond “strategic innovative therapies patient reach” and “flagship programs patient reach” GH&CR indicators are not stated in accordance with the terms and conditions as outlined within the Final Listing Prospectus dated  21 September 2020;
  • The materiality determination and stakeholder engagement process of Novartis does not adhere to the principles and guiding factors defined by the GRI Standards; and
  • The reporting processes and related controls in relation to data aggregation of GH&CR indicators are not functioning as designed.

PricewaterhouseCoopers AG

PricewaterhouseCoopers AG (Graphic)
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Kris Muller

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Jennifer Kodat

Basel, January 25, 2021