Bayer Aktiengesellschaft (BAYN) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by. Welcome to Bayer's Conference Call. [Operator Instructions] I would now like to turn the conference over to Matthias Berninger, Head of Public Affairs, Science and Sustainability. Please go ahead.

Thank you very much, Emma, for introducing today's call. And also thank you to all the participants who are joining us, I think, in different time zones. So therefore, good evening, good afternoon, and good morning, and I hope you have a great day wherever you are listening in today. We brought you a couple of slides today which should give you an update on the progress we made in the last 12 months in implementing [ biological ] sustainability and also an update on the conversations we had with you in December of last year where we initially introduced our approach to sustainability to the investors. Next slide, please. Before I go there, and we will have, later, a time on the call to talk about that as well. I want to quickly also share a bit of observations related to the current pandemic. We have been very active in the course of this year from the start, when the pandemic started to appear as a problem in China, all the way to today, in driving our response to COVID-19. For us, the health and safety of our employees, but also many others in our value chain, has been a clear priority. And we've been able to kind of set up, I think, like many other companies, good measures to ensure employee health. We also -- and that goes hand-in-hand, have been quite active in ensuring business continuity. The good news for the categories we operated in and are still operating in is that they are essential categories. So we were able, in close collaboration with regulators and other key decision-makers around the world, to ensure that our operations could continue even where -- when it was difficult given the pandemic response of the authority. We also have been working on readjusting some of our capabilities in order to aid the fight against COVID-19, and we will continue to do that as well. Claus Runge is one of the people on the call. Today, he leads public affairs, science and sustainability, but also market access for the Biopharmaceuticals division. And together with Claus, they've been very active to ensure that what Bayer has to offer is also activated here. And last but not least, on the humanitarian side, we, of course, have both in the health space, but also in the small owner pharma space, leveraged our foundation, the engagement of our employees around the world, in order to help people who are very, very much in need to be supported. So all of those things have taken quite a lot of time, but they have not derailed our sustainability strategy. If at all, they have further confirmed that we are moving in the right direction. And the vision of health for all, hunger for none is a very good guidepost also for crisis response like the one I just talked about. Next slide. We cover quite a range of topics today, and I hope that we reach the right level of detail for you. We have a Q&A at the end of this call. If you have more detailed questions, we also offered a couple of individual conversations and group conversations to dive deeper into topics. But please let us know where you need more detailed informations or give us feedback where we are too much in the weeds. I hope that we strike the right balance in the information we're going to present later today. I'm not walking you through the agenda. This slide just give you an overview of the topics that we will touch on in the next couple of minutes. Next slide. I talked about the journey which we have been undergoing. For me, the September of 2019 was a very important milestone because that's when the Board of Management and the Supervisory Board of Bayer agreed on a certain approach to sustainability. We had defined how we want to do that and communicated that to you by end of last year. And we also have been working on a corresponding vision that was launched both publicly, but also of course to our employees in February of 2020. Throughout the year, as you can see on the slide, we have made a couple of very important decisions. For me, the most important decision is that Werner Baumann, our CEO, agreed to take on the role as Chief Sustainability Officer. And that in our strategy conference process this summer, we fully integrated sustainability topics in our long-term discussion. So those were the 2, I think, very important measures. I'm going to talk more in detail about a decision with you, as the investors, took in April 2020, and that is to approve a new compensation scheme that would also broaden what we are trying to do in sustainability. And with that, we can go to the next slide. Throughout the last 2 years, we have built a team that drives sustainability. Many of the team members are on the call today. So they will also be able to answer questions later on. I already spoke about Claus Runge, you can see on this picture here. But I want to introduce to you the team that we have built. Vera Hahn has taken on the role of heading corporate sustainability. She brings a very deep experience into Bayer. She has been working on sustainability in the material science space when that topic was not on everybody's mind. She also has a deep experience in the area of finance and in the area of business in general. And 1 of the reasons why I'm happy to have her on board is that she managed our business in Russia for many years, so she knows how to drive change in a complex business environment. Daniella Foster joined us from Hilton about a year ago, a little bit more than a year ago now. She leads our public affairs and sustainability work in the Consumer Health business. She has been a leader in the sustainability space and has driven many transformations before. And of course, that helps big time in this division which looks at the health care category. And that category, as we all know, in COVID, has become more important, and the role of it has become more evident in the discussions. Sara Boettiger has just joined us, and she is now enjoying an onboarding in a work-from-home mode. But she has been a lead sustainability export at -- for agriculture at McKinsey, has a long career, and will lead public affairs and sustainability for Crop Science. And Klaus Kunz, who is with us today, has been the architect of the sustainable intensification approach, which is the hallmark of our Crop Science strategy. He comes with deep knowledge, a very long career in R&D, deep knowledge of kind of all the inner workings of Crop Protection. And therefore, really helps us to drive this transformation in the business. I talked about Claus already. And last but not least, Monika leads our corporate innovation, the social innovation part, which is really important in this space. And she also leads the foundation, which is part of our lineup as well. We also have fully adjusted the focus of our foundation in the area of Health for all, hunger for none. And we refocus our efforts on the lower/middle income countries rather than overinvesting in the richer countries. Next slide. We're now going to talk about how and why we fully integrated sustainability in our strategy. And I want to start with a few slides that kind of helped to overall give you a flavor of how we think about this. Since December, our strategic architecture has matured, and the great collaboration we have with our strategy team is really helpful here. You can look at this picture through different lenses. But what I want to say is that if you have a vertical and a horizontal view on that, on the horizontal view, you see that we have a vision that is clearly focusing on being a more inclusive business. And that is mainly expressed to the words of All and None. You are in a very different business strategically if you are talking about health for all versus all for health. So there is a clear shift to become a more inclusive business and to tap into profit pools that normally not have been our focus. The purpose stays the same as it was before. Science for a better life is, for us, the engine, how we want to drive this change. And we are at the intersection of a lot of scientific and technology innovations that, if we marshal them in support of sustainability, we believe that this is also a very important ingredient for a successful business. And then last but not least, when Werner Baumann spoke about the integration of Monsanto into Bayer. He talked about the Bayer values and that the Bayer values will be a foundation of how we do business. So you find those fundamentals in the life values. On the horizontal level, you see a couple of areas we focus on group-wide, and then you see the 3 businesses we operate in. And for us, sustainability is a core element as to how we want to operate in those 3 businesses. So it's not an add-on, and that's reflected in the way this is described horizontally. And with that, we can go to the next slide. You've seen the slide, as you were part of the conversations in December. Just as a recap for you, we made a strategic choice to focus on being an impact generator. And therefore, our sustainability approach has to be one where, for us, being a successful business and advancing the sustainability agenda is both kind of interchangeable. So we are very unapologetic about the fact that we want to generate impact, and at the same time, also drive new business models. I will give you a couple of examples later in this presentation. But for us, this is really a business and a growth opportunity. And from that vantage point, it's not necessarily only about what the sustainability team does, but really what Team Bayer does in order to achieve that. This strategic choice has a couple of consequences in terms of how we govern the strategy. For example, the full integration of sustainability-related metrics in our long-term compensation is a necessary precondition to set the pace and also the direction of the journey in the direction of becoming an impact generator. This was, I think, a very important decision, and it has been confirmed in the course of the last 12 months that we want to move in that direction. Next slide. I wanted to show you this slide because, for me, it expresses in the best possible way, why we believe we can really have an impact, and why Bayer as a company is probably uniquely positioned in the sustainability space. So just a few days ago on August 22, we marked the Earth Overshoot Day of 2020. The good news is the Earth Overshoot Day was later in the year than in all the years before because this trend that we are consuming ever more resources and well more than the globe can replenish has been a bit slowed down as a result of the global slowdown and standstill related to the reaction we all were part of to the pandemic. But I think the real remarkable thing is that, even this radical slowdown gave us less than a month in terms of less emissions or less reserves needs. And of course, the social consequences of the slowdown is something that everybody sees in their communities, and especially the poorer community has experienced a very traumatic way as we speak every day. So what this planetary kind of view helps us to do is to think about, okay, what needs to happen in order to push back the date to where it was when I was born, in the 1970s, which when we roughly used as much resources as the bio capacity of the earth would be able to replenish. It's not a perfect model. But if you look at what the initiators of the model have described as the key areas we need to act on in order to do that, Bayer is written all over that. So deforestation is highly linked to agricultural value chains, as we all know. So forest protection, but also investments in reforestation. Afforestation is of one of our Environmental Science businesses. It's something where Bayer has both a huge responsibility but also has started to really help to kind of turn the tide in terms of forest protection and reforestation. We will talk about our approach to decarbonization. It's pretty clear that if we were able to successfully decarbonize, we'd have a chance to get to a better balance. And you can see here in the -- with the value of 90 days, that this is still the most important measure. But I want to come to the last measure on this slide. When you look at the investment and family planning, if we were able to live up to the global goals on sustainable development, and if we were able to provide access to family planning for everyone who wants that, we could also have a huge impact on addressing some of those challenges. So what I want to say here is that the social innovation part is often not dimensionalized in the right way. Probably the most important investment in development and the most efficient investment is in an area that is clearly in the focus of our strategy. We can make efficient -- current technology is more efficient, and that's certainly true in agriculture. And that would help a lot to reduce the environmental impact. We are in crop protection for a reason. So the reduction of food waste is something that is integral to our business. And you may have seen investments we have done in the area of vertical farming recently. The shift of food systems to rebalance plant-based and animal-based nutrients is a very important element of rebuilding the world as well. So when you look at Bayer's role, you will see that we -- both with our scale, with our R&D budget, and with the decisions we took on our strategy, that we are equipped to provide solutions and support our strategies that really help us to move in a better direction with a strong focus on innovation rather than stand still. Next slide. There is no presentation about sustainability without the logos of the global goals and sustainable development. I don't want to walk you through all of the details. You have all seen that and heard that a lot. What I want to say though, is that another way to look at our systemic relevance is to realize in how many areas we can have an impact at scale. In some areas, we are even the decider factor. So I believe, in the area of food system change as well as in the area of kind of access to family planning, also increasingly in the area of water, I think we are a real systemic and highly relevant player. So from that vantage point, we see we have a responsibility here. We want to live up to that responsibility. We want to reduce where we are diluting efforts to achieving the global goals of sustainable development, but we also want to dial up the game where we can really provide solutions that get us to achieving those very important, and dare I say, also reaffirmed goals when I look at the global response to COVID-19. Next slide. In January, when people still came together in Davos, a lot of slides have been shown as often in Davos. But I think the global risk report of 2020 summarizes also the other reason why we focus so much on sustainability. From a risk management perspective, it's very clear that, certainly for our Crop Protection business but also generally, our for Crop Science business, but also generally for buyer, the sustainability-related risks are becoming more and more evident. And we have had really good discussions for us to understand our risk exposure in many of those areas. And therefore, I think this is just a confirmation that, apart from this being a business opportunity, it's also a very important lens to manage risks in a different way. Next slide. So now let's go into the details, after a few slides of framing, how and why we're going to go about this. And let's talk about the targets. And this is the topic that I think is key. Gillian Tett, who leads FT's U.S. kind of business, who's the Chief Editor in the United States for the FT, said that accountants will be the real heroes in the sustainability debate. And I think she has a point. We spend a lot of time on defining our measures and also defining on where we are today as well as how we're going to set the targets. You can see on this slide the main topics we are working on. Of course, there are many other things we do in our operations. But these are the ones, the Board of Management and our team had aligned as the key topics. We have 2 categories here. We have honed in on 4 goals that will be reflected in the long-term incentivation. And we have added a couple of goals that are of huge strategic relevance in addition to that. And I will walk you through all of those calls in detail in the following slides. The important point I want to make at the start is we will not only measure how we are doing against these goals, but also make sure that we independently audit how we're going to do that. So for us, it's really important that we apply the same rigor in governance on these topics as we would do in the financial space. But we have to recognize that also comparing us with many other companies, that, that is not the easiest exercise. So we spend a lot of time and a lot of brain power on getting that as right as we could. But I want to tell you that, in our book, getting this right will only accelerate the progress in the space. Next slide. Let me start with carbon. And of course, when you look at the carbon emissions, what you have almost in every business is that most of the carbon emissions of businesses are outside of their own operations. So basically, the framework that the science-based target initiative uses -- many other use, is to look at Scope 1 and 2, which are your direct emissions; to look at Scope 3, which is your supply chain, if you will; but also your attendant value chain. In the Bayer case, the overall impact our extended value chain has is quite huge. On the back of the envelope, if you look at agriculture as a sector or food systems as a sector, you easily are part of a value chain that is that of a big country, yes, like India, for example, on the back of an envelope. When you go into our immediate Scope 1 and 2, you realize that the emissions are still very high, but much more manageable. And usually, the lowest value is within your own factory gate. And that's why we decided to focus on our immediate commitments on both Scope 1 and 2 and Scope 3. I will talk in a second also about what we're going to do in the value chain. You see it on the slide already. But with regard to the scope of the science-based target initiative, we have aligned on an approach, and we have set the targets that are related to Scope 1, 2 and 3. Then that will also be the foundation for the incentivation of the Board of Management. Next slide. On this slide, I have a bit of a comparison of the different decarbonization projects. So you basically have some companies that commit to carbon-neutral growth, and therefore, forward-looking, invest in business models that do not require additional carbon emissions. And then you have companies who take out carbon emissions out of their supply chain. We have decided to be amongst the quite small number of businesses that lives up to the 1.5-degree target that the science-based target initiative is defined. And therefore, our target will be a 42% absolute reduction in carbon emissions with regard to our Scope 1 and 2 kind of ambition, and then an additional roughly 12.5% reduction, but for 3 -- to be precise, in the area of Scope 3. The reason why this is important is you can see there are many companies out there who go even further. You're probably aware about Microsoft's announcement to completely offset all their carbon emissions throughout their life cycle. Google has made a similar announcement and also reported success already in that space. So I think that a lot of the tech companies have been even more aggressive than we are, but we believe that what we are doing here is right on the curve that also the UN expects from us. But Bayer will also be part of this business ambition for 1.5-degree Celsius that looks at the 2050 target. So we will ultimately continue the journey of reducing our carbon emissions. But the fourth step of being confident today to say that we will reach a minus 42% reduction of our emissions, and we will offset the additional 58% of today's envisions is, in our book, the right way and the prudent way to go about this. Next slide. This slide describes a bit how we're going to do that. Of course, the absolute reduction is a combination of reducing our emissions and renewable energy. And then I already talked about the additional offsetting measures. We believe that in a mix of CapEx and OpEx, that this will overall cost us up to EUR 700 million until 2030. That is to say that the CapEx investments, of course, have a return on investment. So in our book, we see a trend of higher energy prices, focusing on green and energy reduction of emissions, innovating our processes, will ultimately pay off. With regard to the offsetting, we ironically hope that the offsetting is more at the higher end than at the lower end, and I will talk about this later a bit, because one of the business models we are investing in is a business model that helps farmers to benefit from in-setting carbon emissions of third parties, companies like Bayer, who make a commitment like the one you see on the slide. Now in the Scope 3, we have to now reconnect with our suppliers to draft the part in which we can demonstrate the 12.3% reduction I referred to earlier. Some of those reductions will be a result of inherent action. For example, countries that may focus on renewable energies where we have a lot of suppliers. But we will also initiate quite a lot of initiatives to achieve all of that. In total, this is quite a significant contribution to decarbonization, but it's also a slide that drives my optimism. Having looked into this long and hard, I believe that decarbonization is much easier than many people think. So in the light of announcements like the EU Commission's announcement on their 2030 carbon reduction targets, I can say from the years of intensive work, this is doable. And this should be done within frameworks like the science-based target initiative that make initiatives of companies comparable. Obviously, the bulk of our emissions reductions will be in the Crop Science business because the Crop Science business is also kind of, at least when it comes to our Scope 1 and 2, the main area where decarbonization happens. So Klaus and his team -- Klaus Kunz and his team, and of course the group-wide teams, are working very closely to make that happen. Next slide. I've already talked about the business ambition for 1.5 degrees. So if you think about what happens after 2030, I believe that the UN is now setting the standard. And the standard will be that companies need to reduce their gross emissions to as much as possible, and that rest of it needs to be offset. So we will further have to work in our business innovation on how we deliver Crop Protection, other services and product in the base that reduce carbon emissions. So it requires quite a lot of more thinking, but we believe that we will learn a lot in the next 10 years to then address the following 20 years. So given our thinking on carbon reduction to this point, I'm quite optimistic that we will get good solutions here that allow us to live up to the business ambition that the UN and many countries, including the European Union, have set for 2050. Next slide. Now I go to the 3 targets that are on the left-hand side of the initial slide, which are more in the area of social innovation. But of course, getting them right has also a strong sustainability effect on the environmental side of things. What you will see in the following slide is the result of looking at how many farmers we reach today and what we need to do in order to get to the next place. And that's going to be true for all the 3 targets. We have done really, really intensive work to understand how many smallholder farmers we reach. And our market in the smallholder space is, compared to our market in the more advanced farmings and larger farms, of course, relatively small. Today, we reach around 42 million smallholder farmers. We believe that we can reach 100 million farmers only if we add to our commercial forecast, also big leaps. And those big leaps are very much linked to providing access to better imports for farmers, to provide access to education for creating partnerships, for really driving digital solutions and many other things. One of the things that drives our optimism though is that we have started a couple of pilots and we looked at what's possible. And based on those results, we believe that those big leaps are possible. So what we're going to do is we're going to measure our progress between now and 2030, and we're going to set the course of this year targets for 2024 so that the kind of duration of the long-term incentives is also aligned with a clear target. And all of those target-setting and measuring will be fully aligned with our external auditors. So it will be auditable and therefore, transparent for you going forward. Next slide. I already referred to a couple of things we are doing. And I also talked about that we make a bit of progress with our pilots. I think the strongest progress we have made under the leadership of [ Dina Ryan ] in India. And the ingredients of the progress are: Great partnerships, a very strong focus on women because the majority of smallholder farmers are females, and a focus that says that doesn't only focus on inputs or increasing yield but really looks at food systems in a very different way. To some extent, the COVID crisis helps to accelerate this focus. So we feel that there is even more attention, not less attention, to driving resilience of those communities. And driving resilience is the underlying kind of uniting element of the smallholder strategies. We also hope that we will win over more partners in development finance because their goals in the smallholder space, and our goals, are very aligned, and that is something we are actively talking about. And we made some progress in that space as well. Next slide. On the environmental side in agriculture, I want to talk about the 2 KPIs we have defined that you saw on the initial slide as well. Those 2 KPIs are crucially important. We know that agriculture is a major contributor to climate change. But we also have seen that we can reduce greenhouse gases quite dramatically. And the work we have done was looking at how much is possible in the space of reducing emissions through further driving note farming through better crop rotations, through introducing rice that can be planted in dry conditions and not in patties, through cover crops, and all of this. So what our scientists and our data pools, also what we learned from our digital business model tell us is, the carbon reduction in agriculture is absolutely possible at a large field and given that the soil is one of the key drivers here, is also a huge impact globally. So we feel very emboldened from what we have learned in the last year that we can reduce our carbon emissions quite significantly. And we focus on both crops and countries with the highest potential. I already mentioned that we, in addition to that, also have launched our carbon initiative, which seeks to partner with farmers and others to generate opportunities for farmers to sell carbon credits, i.e. to in-set carbon emissions of others. So there is a path into a net positive agriculture when it comes to carbon emissions and there are business opportunities. What we learned is that apart from the economic activities, digital is key for those initiatives so that the costs of confirming that carbon emissions are actually kind of -- carbon is actually removed from the atmosphere are not prohibitive for those kind of business models. So digital is key here. Sensors, both in the soil as well as our data pools in Climate Corp. and other digital initiatives, indicate that we can create a model where the focus is on rewarding the farmers for what they are doing and not on rewarding the system that controls that. The second topic is equally exciting. The reduction of the overall environmental impact of Crop Protection. We are, by far, leading with our innovation budget in Crop Science. And one of the big challenges in the debate about reduction of pesticides is often that the discussion is very volume-based and very abstract. We see that challenge currently in the discussions in the European Union. Our teams, and Claus, who's on the call today, can give you much, much more details about that, have worked on a model that allows us to identify kind of what the environmental impact of Crop Protection looks like. And we are focusing currently on those kind of petrochemicals in our portfolio that has the highest impact and how we can replace them through innovation or sometimes just through discontinuing them so that we really reduce the environmental impact and therefore make a more significant contribution to protecting biodiversity. I said at a slide very early on that those who abstractly kind of criticized the crop protection industry don't take into account how much food -- what actually worked on the field, how big the food losses would be without crop protection and without the innovation we have in this space. But I believe we can only win this argument in the public debate, and therefore improve also the overall market valuation of the crop protection category, if we come up with a data-driven solution to reducing the impact in the area of societies are concerned about. Next slide. In the area of pharmaceuticals, we focus on the topic of family planning. And I already indicated that initially, last year, we decided to focus on that because there was a lot of pull from many organizations, people asking us that they would like to have more products from the Bayer side and better support of the space. As we look even closer at the data, we realized that the sustainability impact of family planning is probably the biggest out there. I believe that the topic of family planning deserves the pool position in the [ STG ] discussion. And that's what we are working against. On the one hand, we have a target to provide access to 100 million women in lower and middle income countries to modern contraception. We currently reached roughly 38 million, and our goal is, in a combination of adding additional products and partnering on social innovation, to reach that target. The global gap is roughly 200 million to 230 million women. So we hope with us kind of making this bold move, we also attract others to chime in. Generally speaking, the more we drive awareness of this topic, the more drive political intentionality behind closing the gap the better. And if we don't get there, many of the sustainability targets will be out of reach by 2030 or out of reach in its totality. We also have made a very strong commitment over the year that focuses on Bayer even more on women's health. You've seen some of the announcements of new investments. I also want to say that we invest in long term innovation, for example, nonhormonal contraceptive technologies, that might even help us to achieve this target in the future. But overall, I'm very happy to see that women's health has become a stronger focus in the overall Bayer Pharmaceuticals strategy. With the majority of smallholder farmers being women, access to health for those women is one of those elements that helps us both in the crop space as well as in the pharmaceutical space. Next slide. One of those initiatives that will help us to get to the 100 million target in addition to us investing in additional supply is described on this slide. So the partnership with the Johns Hopkins University, of course, partners like the Gates Foundations are involved in that as well, will help us to especially target social innovations in cities. So how can we improve family planning and reproductive health in those geographies and in the cities is something we have been working on for quite a while. There is a link to the challenge initiative. I recommend for you to have a look at it. We believe that the impact of this program will be quite significant. So we, in the past, have been solely focused on supplying product. We are now more and more part of the orchestra that drives the overall family planning discussion. Next slide. The additional target in the Pharmaceuticals division is about access to health. The shift from all for health to health for all means that we need to look harder at how we can reach 100 million people in low and middle income countries with pharmaceutical product that we currently priority -- from a priority perspective, sell in the better-off countries, so to speak. And Claus has really brought to life these 2 very important roles. He has to drive sustainability and to be our steward for market access. And has looked at a very convoluted pricing strategy and has streamlined it in a way that, on the one hand, increases our opportunity to offer life-saving medicines to people who currently don't have access to medicine. I think post-COVID, it's clear for everybody that half of the world doesn't really have access to many of the products we take for granted. At the same time, we are, of course, also carefully watching that this good deed doesn't get punished by influencing, for example, a reference price systems and diluting our profit pools in other parts of the world. So it's not an easy approach, but we believe that, after having done some catch-up and after having done some pilots, that these 100 million people in low and middle income countries will benefit from the access to medicine. It will also be a good business for Bayer. And this combination, I think, is very much in line with what we try to achieve as our sustainability strategy. We want to generate additional growth and profit to what we are doing here, but we want to do it with the eyes open of some of the areas in the world that are currently very excluded from access to health. Next slide. In the area of consumer health, we again have one of the 100 million targets. Heiko Schipper and his team, I think, really started to redefine what this health care category is even before we were confronted with COVID. We see more and more that the health care category is much more strategic and much more relevant, and there is no place where you see it more than in underserved communities. This is the only target where we have decided not only to focus on low and middle income countries. And the reason being that there are many countries around the world, and the one where I am speaking from today to you is one of them, the United States, where a lot of people don't have access to health. And in health care, we believe that we can -- or health care, we believe that we can make quite a difference here. It's very interesting. You saw like the 3 numbers: 42 million; 38 million; and here, 41 million people we reach in those categories. They all sound similar, but that is more coincidence that, that happened. But also an expression that we didn't have a good inclusive growth strategy in the past. So what we want to do here again is kind of 80-20. We want to drive access-driven growth. And then we want to, in addition to that, help to drive access to health through strategic partnerships. And this could be in many, many areas. I think there are quite a few therapeutic areas we should focus on. We had just finished with the work of the foundation, a program to develop heart health standards in Ghana. And when you look at that program and if you look at the recommendation, you realize how important this category is. We are also critically important in the area of micronutrients. That's another pandemic nobody talks about. And the lack of access to micronutrients is really a pandemic because it reaches many people around the world at all ages and also at all income levels. So the 2 ends of the bookshelves for Bayer. Consumer health in this space is, on the one hand, an investment we recently announced in Care/Of, which is a digital driven, highly personalized offering for improving your micronutrient kind of access. And on the other hand, with the work of the sustainability here, we reach the people that don't have good access to nutritionals and all on. So we are really all in and tackling this micronutrient challenge that is well known like a threat of pandemics was very known, but the actions are not in line with what the -- in this case, the world knows about that. Next slide. On the next slide, I want to talk a bit about the partnership approach. So again, in the past, I think Bayer has been working more technically on partnerships. Often, we have been asked to be part of something. The big shift that is led by Daniela here, and she has done it before in the hospitality industry, is for us to be kind of a spider in the web, the center of those partnerships. And what you see here in the area of micronutrients is kind of the design as to how we want to give an additional push to that discussion. So there is a similarity for the family planning conversation. All the way back to President, George W. Bush, when he was President, the World Food Program addressed the micronutrient challenge for the first time. But really, the concerted efforts in that space hasn't reached scale. So our ambition here is the 360 Partnership Approach, on the one hand, and to really create a more powerful consortium. As a leader in nutritionals, we believe we are very well positioned because we already have strong relationships with many of the suppliers. And on the back of that, we now -- we are now broadening into many other areas and try to create a strong correlation that, in combination with what we will invest, will really improve the access to American nutrients for people who currently don't have the means or the knowledge or both to stay healthy through balanced diet and the access to micronutrients that they can't get through the diet and their daily realities. Next slide. I talked about the value creation topic earlier. There's been couple of examples on this slide. We have just put a few on there, both in the area of access to medicine, the new carbon capture model in the area of agriculture, our work on patient access programs in countries like India, also in the small holder space. One of the very important things is as we drive the resilience of small holders, they are able to purchase ag input products. And if we do that in a way that gives them access to technology that further drives their resilience, we believe that this becomes a self-fulfilling prophesy and a mutually reinforcing kind of opportunity. I also want to share one example of the approval of Chagas treatment, where recently, we were asked by FDA to focus on that, because as a result of immigration, Chagas became a bigger problem in communities in the United States as well. We have invested in that and in return, we got a priority voucher from the FDA. So this looks like a classic CSR initiatives, but the way the program was designed gives us the opportunity to skip the line on one of our pharma innovations when it comes to seeking future FDA approval, and that has a huge value to us given the innovations we are working on. So the very important message here is we want to generate additional sales and profits through our focus on sustainability. And we have enough examples collected over the last 12 months that drives my confidence that we can do that at a scale that is visible even for a big company like Bayer. Next slide. The last chapter is really about the governance topic. So if you will, the G ESG that is focusing on the sustainability of related topics, and I'll walk you through a couple of those governance measures we took in the last 12 months. I already talked about the integration of sustainability measures in the remuneration of the Board of Management. And this is a decision and you took as our shareholders during our last AGM, which was an online AGM, and I'm very glad that we were able to help changing the legislation and regulation to make that happen. But during that AGM, you also got to vote on this long-term incentive scheme. What we heard from you in consulting with you in the course of the last year is that 20% is sort of like the upper limit of what ESG targets should kind of -- should -- but the share of ESG targets should be in an overall long-term incentive program, yes? And this is what we have reflected here. So if you look at the ESG targets, the way we will suggest to our Supervisory Board to split that is that 10% or half of the ESG targets will be related to decarbonization. And the other 10% will be related to the 3 100 million targets. That's going to be the basis of our suggestion. The targets are currently being defined. And in the normal process is that Bayer by, I would say, November, we will have more clarity on exactly what our 2024 targets will be. But what you have seen in this presentation already is we have established baselines. We have established what constitutes progress, and we have introduced an external auditing muscle to this that will allow us to define the target in a way that will be very transparent to you. So that's our attempt to not only talk about sustainability and normatively kind of postulate that we want to drive sustainability, but also reward our leadership in this space. Of course, the Board of management is one thing. The second topic we are working on together with -- also our work council and many others involved is to similarly integrate sustainability in the incentive schemes of the employees at Bayer. So both happen simultaneously. And we will have kind of news on that in terms of finalization before year-end. Generally speaking, there will be short-term incentive elements in sustainability that come on top of that. So this is really only the long-term incentive part of it. And we hope that this is a model that also many other companies are following, both in terms of the amount as well as in terms of the auditability of your target setting, which, of course, also means you have to have highly quantitative targets rather than more qualitative targets in your scheme. Next slide. We are committed to introduce a sustainability council. This council has started its work. It was -- took a bit longer as a result of COVID to get to where we want to. But our first session on an amenable leadership has been very promising. And the lineup is, of course, quite diverse. We have expertise from different geographies around the world. We have people who are more in the area of inclusive growth and how to work with low and middle-income country communities. We have also experts in the area of sustainable finance in here. So we have a broad mix. We introduced that council early on. For me, the key role this council has is to help Werner Baumann to kind of both see even further in the future, but also to drive the full integration of sustainability in the business strategies. And one of the elements that is in scope for this sustainability council, which is a bit different than in most other companies we compared us to is that our R&D investments. So our innovation strategy is also something this council will look at. And of course, all that they have talked about will be reviewed, the progress will be reviewed. And you will hear independently from the council with regard to what they think is working and not working in terms of Bayer's buyer's approach to sustainability. Next slide. We introduced the Bayer Societal Engagement principles to clarify what the Bayer values would be. This is a code of conduct that changes the way we engage with key stakeholders. You are one of those key stakeholders in this engagement principles. But when you look at our work on creating transparency in our scientific networks, when you look at how we approach public policy stakeholders, what the limitations to lobbying and influencing strategies are, when you look at the different forms of dialogue, we seek to civil society organizations, also with a view to seek common ground rather than controversies that don't move things forward. This is all integrated in those principles. They have been approved by the end of last year. And of course, they help me to drive the right behaviors across the organization. We probably will never be perfect. But I think with the BASE principles, we made a decisive step change in terms of how we engage with the public compared to what you historically have learned about Bayer also in some of the litigations. Next slide. We are integrating sustainability across the board. I already talked about the strategic planning. So really important that the strategy team and the sustainability team work very closely together. I already mentioned the risk management topic. The slide that I shared with you from the World Economic Forum is something that I also see reflected in many of your communications. So obviously, you are concerned about the risks of your investment portfolio in the same way we are concerned about our business. But I want to spend a few minutes on the M&A process. The M&A process is kind of both. On the one hand, our acquisitions have positioned Bayer now in such a systemic relevant position. But on the other hand, through our acquisitions, we also kind of acquired quite a few problems in the area of reputation, sustainability, business conduct and so on. We are fully integrated in all the relevant M&A processes to ensure that going forward, there is a stronger voice for this kind of concerns. And the recent acquisitions that we have communicated, small and big, are ones where we have a say, and of course, generally, you will see a stronger focus on both mergers and acquisitions and already a strong focus on our investment fund lease by Bayer in the area of sustainability. So the sweet spot of sustainability on the one side and innovative business on the other side is one where we will continue to pay a strong focus. But in the process, in the due diligence, conduct and sustainability have now a much different focus. And of course, that's in learning you would expect that we had based on the experience we collected in recent months. Next slide. Last but not least, I want to share a bit of the external view on Bayer. Including some of the data of the Bayer reputation. The first one is one you know probably better than we do. We, of course, follow all the ESG rating agencies in the same way you do. One of the challenges we have here is that in some areas, we are worried about the inconsistency of the different rating agencies and the way they look at things. So what we would like to see is a stronger convergence on the rating agency side. And we will also like to have a different dialogue about some of the standards of the rating. I'll give you one example. I, from looking at all the data, I cannot accept that one of the raters believes that GMO per se is bad. This is something neither the -- EAT-Lancet Commission on the future of food, which published a report in January of 2019 nor the -- even the Catholic Academy of Sciences of the Vatican sees it that way, there is still this underlying kind of, I want to say, more movie, more reputation driven view of some of the sustainability topics that is a challenge. So I generally believe that we have to be -- that we have to make sure that we live on the same planet. We look at the same problems that the rating agencies are not completely divergent. And we have those conversations. We also started to publish where we disagree with them. On the ranking side, I believe this convergence is now about to happen. There was a really encouraging announcement just this week. And I can only encourage that the different ranking and reporting standards kind of converge to a place that allows us to better understand what the expectations are. And you to invest much less time in just comparing with those and rather focus more on how this business transformation is really happening. So we are looking at both. And of course, my personal KPIs are very much revolving around internally working on improving our ratings, both in terms of what we are doing in sustainability as well as how we are perceived by the public. Next slide. This is a slide that I want to share with you. It's one data point out of the Bayer's global brand tracking. We will, going forward, be more transparent about our global brand tracking results. But the reason why I wanted to show you this slide, this data, which is representative. It's a high-quality survey that we are doing for many, many years that is from spring of this year. And what we see here is that the topic of social environmental responsibility is now only second in the eyes of the people in almost every country to the view on economic success. So that was very encouraging for us because it further confirms that a strategy that seeks to combine the sustainability topic and the business direction and strategy topic is the way to go also in the eyes of people around the world. And certainly, we heard those signals from you as well. I want to say that overall, we have made progress in the Bayer reputation quite significantly compared to 2019. And also not only as much as the categories we are operating in. So we have done a lot of triangulation. I think overall, Bayer's reputation has improved. Now the reason why it has improved is, I think, partially the shift in our litigation strategy in 2019. Partially, the focus on our sustainability strategy. And partially, in the area I'm talking about here, the overall effect of COVID and the understanding of larger parts of the world's population that we can't just talk about all of the challenges that I touched on today, that we really have to act. So we feel quite good about the improvement. But we also know that in order to further strengthen our reputation, we have to continue on our journey to reduce the controversies we are confronted with. That's why the dialogue with people who are criticizing us is so critical and such a critical element of our public affairs and communication and stakeholder engagement strategy. Next slide. This is kind of the slide that should summarize what I shared with you in the course of the last hour. Basically, you see the areas that we believe have been the most relevant areas where we have been moving to deliver against our commitment. But I don't want to walk you through all of them and much rather leave the time for a discussion with you. As I said earlier, and we can go to the next slide, I have a couple of my team members with me today. So during the Q&A, I also -- wherever that if you do, I will ask my colleagues to chime in. And I want to thank you for spending this hour with me. Thank you very much for your attention, and I look forward to your questions.

[Operator Instructions] The first question comes from the line of Joel Jackson with BMO Capital Markets.

I have 2 questions. I'll ask them one by one. So my first question is you talked about having a goal of reducing crop protection impact on the environment by 30% by 2030. Can you talk about your methodology to measure the environmental impact of Crop Protection Chemicals? And what are some of the near-term examples of the leaders here to reach this target?

Shall I?

Joel, I can do this. But I know somebody who can be even better at that, and that is Klaus. Please go ahead, Klaus.

Thank you very much. And thanks for asking that question. We take a little pride in the fact that we manage in a real, very nice collaboration, I would call it a co-development with many universities to flesh out a model, to measure environmental impact, which I think is much better than anything which was out there so far. It's taking into account the properties of active ingredients. It's taking into account the application scenario, the volumes. So I think the cropping system and the country and it gives us the opportunity to zoom into in a given country and to see which of the pesticides applied in that crop country really contribute to a high impact. So it covers a large range of inputs. Actually, you know we submit doses of 50,000 to 100,000 pages. And it boils this down, but in a way which maintains the accuracy of the information into a number, which gives you an idea, what is the impact of an individual substance contributing to the overall end of pesticides in that given crop. It helps us also to understand in which crops is the impact actually particularly high. So we still have countries where we have a lot of generic active ingredients, old active ingredients, which have come with a much higher impact, particularly old insecticides. It gives you also an idea that some molecules, which are used at high volumes, especially herbicides and especially a particular herbicide, actually have a very low environmental impact compared to other molecules applied in the same crop and country. So if I would like to share one highlight from our first -- zooming into all those crops and countries is the fact that if you look into corn in the U.S. and if you look at how we have seen, based on that measure, the contribution of active ingredients to the overall environmental impact. The molecule which contributes with the Bayer's far highest volumes, which is glyphosate, does almost not contribute to the overall environmental impact. That's an interesting outcome. I think for us, it's extremely important to say that, that measure and that methodology was developed by a University of Copenhagen in the lead and others. So really not by the industry, but by externals, who have a very critical look on pesticides. And maybe the other thing I would like to mention is that we have not finalized the analysis, but we are almost close to say that already in our R&D operations, particularly in research, when we look for new molecules, we have already implemented criteria, which almost perfectly matched with that environmental impact target reduction. So we feel that the portfolio we have and the technologies which we have, which will also include digital, traditional application, seeds and trades technologies, biologics as alternatives to chemical and crop protection, that the combination of those portfolios will help us to achieve this 30%. Did that a help?

That's helpful. Excuse me. Sorry.

No, I just wanted to ask if that was a sufficient answer?

Yes, it was sufficient. So my second question would be, so you have the sustainability council that you've launched a few weeks ago. So what should we expect as the first actions since the sustainability council? And if we look at year out, 3 years out, 5 years out, what would be success or lack of success from that council, in your mind? And how will we judge it and how do you communicate it to investors?

For me, the biggest success would be if our innovation strategy is kind of in full service of the sustainability-related needs of the globe, so that we don't just look at it on a status quo, but also in our future. The second success is that you will see that the inclusion of sustainability in our operations runs deep in the organization. So that the council stimulates the right conversations with the leaders and the leadership teams to kind of drive this transformation, which is a transformation for Bayer. And then the third thing is they all have very specific expertise in certain areas, so to really leverage that expertise. So an example, Carolyn Miles, who, for many years, led Save the Children. So she has been working on the health situation of women and girls for a very, very long time. Having somebody like her are helping us to better understand that there is a difference between good intentions and doing good, i.e., to really design our programs in a way that works. This is on a very technical level what we would also see in our programs. The most important thing this council does is it brings everybody together. So the different divisions and all the players in the place and kind of breakthrough silos. So they make connections that we sometimes don't see, even though we are a highly metrics organization. That would be a few. I also want them to step on our feet if we move out of the territory of impact generation, for example, into CSPR. So if what we are doing is not living up to our strategic intent, I hope and I believe the council will make that pretty clear. And the days where council members are voted off the island because they criticize the company are also over, I think, generally in business, but most certainly in Bayer.

The next question comes from the line of Frank Wagemans with Achmea Investment Management.