Bayer Aktiengesellschaft (BAYN) Earnings Call Transcript & Summary

Hello, everybody. Everybody, a big thanks for joining us today on our webinar on enhancing transparency at Bayer. It's a very important topic for us because we want to address this, what you are concerned about. And we want to make a significant step forward in this direction. Along this sense and along those lines, we want to address 3 topics specifically today. And we have issued reports. We have issued a new report on the UN Global Compact and how Bayer adheres to the UN Global Compact. We have issued a quite significant report on GM crops, genetically modified crops. And we have also just updated our report on neonic insecticides, which we have published last year. In the next slide, I just want to give you a short overview on the agenda for today and introduce you to the presenters actually. My name is Klaus Kunz. I'm leading external engagement and performance reporting at Bayer. But the first speaker will be Rodrigo Santos, the President of the Bayer Crop Science Division. He will give a keynote introduction and his perspective on what matters in agriculture for him and why he thinks transparency is crucial going forward. He will be followed by Cristina Alonso. She's responsible in Bayer for sustainability, safety, health and environment. And she will provide you a short overview on the governance and all the actions that we take to adhere to the UN Global Compact. And the main wait for today -- for today's session is carried by Jessica Christiansen. She's the Head of Sustainability and Business Stewardship in the Crop Science Division, and she will provide you insights into the benefits, into the challenges, into perspectives on genetically modified crops. And if we still have some time in the end before the Q&A, I will give you a short update on the neonic insecticides, what has happened in the last year. This [ was ] explained in a much broader sense last year to you, but we just want to make clear that these are not onetime efforts that we take. These are efforts which are constant and very important for us. So we will keep you updated on all those topics on a regular basis. With this, I would just want to -- need to make one disclaimer before we go into the matter. There's a cautionary statement. I'd like to draw your attention to this cautionary language that is included in our safe harbor statement as well as in the materials that we have distributed today. So please be aware of this. It's a regular reminder, but it's important. And I'm already looking forward to your questions in the Q&A, which will come at the end. We want to have minimum 20 to 30 minutes Q&A. And the instructions for this Q&A will be posted in the chat, and we will also give you some more instructions when we -- at the time. With this, I want to hand over to Rodrigo and ask him to make a keynote and introduce the topic for today. Thank you.

Thank you very much, Klaus. Thanks, everyone of you for participating today. Thanks for giving us the opportunity to have this conversation, this dialogue. I'll be brief here because I do understand that you want to see more the experts on the subject but also to really ensure that we have a good time for the Q&A that we can address some of your concerns that we understand it's very important. So thanks again. Let me start. Let me go on to the Slide #1. And I'll share a little bit of a very brief story here. I'm working on this industry for 25 years now. My passion about the sector was created when I was very, very, very young, working with my grandfather on his very small farm, a small holder as we normally say, and I got question about this topic. And of course, the university -- I'm agronomist -- as a background. And the key element of the discussion that we have today is that working with different sessions, Davos or all the different elements of the discussion is that we have 2 really important challenges for the society. The first one is how can we produce enough affordable, safe and healthy food for 10 billion people in this planet that we're going to get in 2050, with a higher demand for food that we have. This is the first significant challenge that we have. And the second one, how we do that on a sustainable way, how we preserve more, how can we really do that food production at the same time that we mitigate climate change and we keep valuing diversity and many elements that we have that is extremely and equally important than the food security. So if you go to the next slide, you're going to see that we do believe, and that's probably the key message that I want to share with you today here from my side is that we -- at Bayer, we have 8,000 scientists working every day, focused on agriculture. And now our belief is that, yes, we can address these 2 challenges. We can produce more, and we can conserve more at the same time. We can produce more using less land. We can even move the needle instead of being responsible for 25% of the green gas emissions, even sequest carbon on the soil using sustainable practices. So that's our firm belief. If you ask our organization that works daily, and this is our passion, right? We work daily [indiscernible], morning, afternoon, every day. Our scientists is doing that. And one of the key elements that we believe the key answer for that is science, is innovation, is technology. On this slide is a very interesting slide that just show how much land was used in the different times of -- that you see here from early [ 1900s ] to 2000, 2018, 2019 and even the future now with the new Smart Corn System that we are planning to launch in the coming years, the amount of land needed to produce this amount of corn that you see on the right here on this slide. And the key element of this one is like the use of technology, innovation, science really helped us to produce more. I'll give one information that I think is very unique. In the last 40 years, through the use of that, we were able to increase 60% the yield and the production when we have a 5% increase in terms of area planted with agriculture. In the last 40 years, 60% more yield and only 5% more area. By the way, when we project ourselves for the future, we project that 98-plus percent of the increase of food production was coming from the used land that we have today. We don't need to expand the area to get that equation done. Of course, we believe that one. So our scientists, our innovation, our investment that we have, we have -- we invest close to EUR 2 billion per year on innovation, science, technology for agriculture. But as equally important of this investment and those innovations you're going to see on the next slide and this is probably the key element of today, we need to do a better job sharing that, sharing to the society and different stakeholders what science can do for agriculture and how important is that innovation with full transparency, addressing all the concerns they have or anyone have about the technologies, the innovation that we are bringing, how we -- why we believe that it's safe. At the same time, it is extremely important to address these 2 key elements. We're going to have this today, right? So Jessica, Cristina and Klaus will share a little bit of that with you today. But again, we're going to have enough time for the communication. I want to finish this conversation with my personal story here. I was, 3 weeks ago, in the field visiting a farmer, and he was showing me that a carbon pilot that we have, right, carbon farming that we call here and how he was able to increase the soybean and corn yield. At the same time, on that field after 2 or 3 years, we were able to demonstrate that it was sequestering carbon. It's just one example of how innovation with the right practices and the right governance can really drive the 2 elements that we have here. So let me transition right now because I feel very excited about some of the information that you're going to see here today and again for the Q&A. Thank you very much for your participation and for your attention. And with that, let me go to Cristina.

Thank you, Rodrigo, and thank you to everybody in the line for taking the time -- for being with us today. It's a pleasure to have you here and to introduce to you the work that we have been doing on transparency and around these reports. So if we move to the next slide, I'm pleased to introduce to you today our new UN Global Compact Adherence Report. Let me explain a little bit why we have done that. I believe all of you in the call are familiar with the UN Global Compact. And you know that in its own works, the UN Global Compact defines itself as the world's largest corporate sustainability initiative. So it has actually over 16,000 company members. And basically, what it does is a call to action to all of us as companies, as corporations to align strategy and operations with the universal principles that they have listed -- rights, labor, environment and anticorruption -- and also then a call to action to take action to advance together the SDGs. Bayer is actually one of the founding members of the UN Global Compact. So that means we've been on board since year 2000 when they were founded. And we were one of the -- yes, mid-single-digit number of companies that came on board at the -- right at the beginning of this adventure that has really gone very long ways already. Since then, we have continued to expand our commitments around the UN Global Compact and the different initiatives that have been coming up. And here, you see some of the most significant ones around climate, around water and also around women's empowerment. So this has been important to us, and we continue to do that and to expand our commitments as time goes on. How do we report on how we adhere to the UN Global Compact? Well, actually, our sustainability report is our annual communication on progress around that and around any -- all the other sustainability aspects that we drive as a company, and you will find the information there. And also here to mention that, of course, our sustainability report undergoes limited assurance by the auditor. So all the information that is there is proofed under limited assurance. Now then why a new report at this time? Well, actually, because we have been listening to you, and we have received a lot of questions and really see that there is a lot of right things in these questions. So basically, although all the information of our adherence to the UN Global Compact is in the sustainability report, it's not easy to locate. It's embedded. It's throughout the report, and it's really difficult to get an overview from that. And this is why we have taken action towards more transparency, generating more transparency on what we do and generated this report. Basically, if you go to the next slide, what we have done is we have underlined our adherence to the 10 UN Global Compact principles and followed an OECD assessment for that. Let me explain a little bit more what it means and what you will find in the report. So basically, what we've done is that we have taken the UN principles, and for each one of these principles, we have used the frame of the OECD due diligence guidance for responsible business conduct to assess the risk to ensure that we have actions in place and that we measure progress. So basically, why we have done that? Well, actually, this has been some of the comments we have received as well and is -- well, if you want to make it visible, can you use one frame that is really internationally acknowledged? And we thought that the OECD due diligence guidance was a very, very good choice for that. So if you go to the report, what you will find for each one of the principles is the following. First, you are going to find the policies that refer to this principle, the policies that we follow as a company. And then you are going to find, as a second step, how we assess adverse impacts, what is -- what we are using to assess those. You will find them in our third step: how do we mitigate those adverse impacts? What do we have in place? And then as a fourth one, also how do we track both implementation? And how do we track results? The fifth step that you will see is how do we communicate around those. And finally, on the sixth step, you will find, which are the remediation steps that we have in place, the mechanisms for remediation in case that, yes, there is no alignment with one of the principles. So you will find that in all the reports so that each one of these principles can also be read as a stand-alone. Now we also recognize that there has been specific question around the environmental principles. And this is why we are providing also some additional reports on the content around GMOs and an update on the neonicotinoids insecticides. Now if you go to the next one, and this is going to be my closure slide, it's -- actually, we welcome very much the feedback that we received from you, and we can only agree to the need from industry to increase transparency towards the UN Global Compact principles and also towards many of the other actions that we do towards sustainability. And this report, which is the first time that we generated that way, describes our adherence to those mechanisms, to those principles and also how do we do this due diligence in a very transparent way. And let me also point out here that actually the UN Global Compact does say -- does not evaluate the adherence to the principles. We recognize that there have been some a few ESG rating agencies that, in their interpretation, in their own methodology, have raised questions around GMOs and around neonicotinoids and have said that they do not fully comply with the environmental principles of the UN Global Compact. And this is why we have the 3 dedicated reports for that, which we see as a vehicle, an important vehicle for us to enter in dialogue with you, and we are pleased that you joined us today for that. So with that, the reports that you see, they provide additional insights of our adherence to the UN Global Compact. They make them available not only for you in the call, but we make them available for the public, for everybody to see who has interest. This is what we want to do at Bayer. This is what we believe in. And with that, I hand over to my colleague, Jessica Christiansen, who is going to take us to the -- through the topic of GMOs and our perspectives on that. So please, Jessica.

Thank you, Cristina. And it's an absolute pleasure to join you guys today to discuss this critical topic. So if we go to the next slide, Here's what we're going to cover. You've heard from Rodrigo and Cristina, we just published this report. So I'm going to give a high-level overview of the content that's within the report. And really, why are we here today? So when we launched GMOs back in the '90s, we've learned the hard way, as Bayer, that we need to listen more, we need to address some of these concerns, educate more when we launched such technology as disruptive as GMOs were to the food industry. And so that's what we're doing. As Cristina and Rodrigo said, transparency is key. So I'm going to cover at a high level and leave enough time for you guys to ask some questions and have a good dialogue. So we're going to go through really the basics: what is genetically modified organisms and GMO? And what's it look like in the market and then the food system? What's our footprint in that as Bayer? And we're going to hit some of these controversies and some examples of those in the discussion today, too. Along with, again, those transparency commitments that you've heard a lot about already. And then you'll see throughout the discussion why GM crops are really part of sustainable agriculture as we go to produce more with less and hit higher productivity standards for our food security. And then we'll wrap up with a few conclusions. So we can get right into it. Let's go to the next slide. So let's start with some basics. So plant science has been constantly evolving since the dawn of time, right? So for thousands of years, plant breeding has been in place. And really what we mean by plant breeding is you cross the plant with a desired trait or characteristic with another plant with another desired trait or characteristic, and you get a new plant. And hopefully, you select, over time, a stronger, more productive, more efficient plant. So that's traditional breeding. And we focus a lot on that, too, by the way as Bayer, and we have a lot of investments and innovations in our breeding engine. Then at the beginning in the 1980s, genetically modified organisms, the research around those, began to take off. And really, what that is, is you take a gene, a desired trait or gene from one organism, and you insert that into another in a very targeted, specific area of the genome. So for example, you take an insect-resistant gene from a bacteria, insert it into a corn plant in a specific area. So it's super selective and targeted. And really, GM technology did revolutionize the agricultural industry as far as productivity goes. So as we think about the benefits of GM, it's been in the market for over 25 years now -- I think 26 years. And you think about the productivity increases, the improvements to our crop resiliency, in food security as well as benefits to land use. So Rodrigo showed that picture earlier in his discussion with corn. Since the inception or launch of GM crops, there was an estimated -- I think it's cumulative 231 million hectares that has been preserved, not plowed or cultivated because of GM technology. So it's been very important as you think about land use situations. So now what's coming and what's here actually as far as in our R&D pipeline is gene editing. And gene editing is in a lot of different industries, and agriculture is one. So gene editing is interesting because it's really mimicking nature. So it's you find a particular sequence or a gene within the plant's genome to either activate or deactivate. If it's a good trait you want to highlight that more, you can turn it on, or you can turn it off if it's something that's not desirable. So this is really going to propel more innovation and faster. So we don't have any commercialized products that are gene-edited at this time, but we have several in the pipeline today. So if we go to the next slide. So when you think about the footprint of GM crops, a lot of people are surprised that there's quite a few crops out there. You can see it on the slide here that are genetically modified. So there are several crops, not just the big row crops that people think about with maize and soybean and cotton. But maize and soybean and cotton do make up the predominant share of hectares globally. There's about -- so basically maize, soybean, cotton account for about 94% of all GMO hectares as you can see, with the top 5 countries highlighted below producing the majority of those hectares. And as far as market value, GM crops make up about 52% of market value seed -- total seed market value versus conventional crops. So the footprint is pretty large of GM crops. And actually, it's been growing. So I think over the past several years, it's grown from 2019 to 2021. It's been a 3% increase in surface [ STIR ] or increase in GM crop production, transitioning from conventional. So if we go to the next slide. Here's a little bit about the Bayer footprint and where we sit. We're one of many GM crop developers. So there's more than 30 that our players in our market. So the ag market is quite heterogeneous and mixed. So you have some big companies like Bayer. You have some small and midsized companies that are in the GM space as well. So it's a good competitive mix of companies and technologies. In the major markets for Bayer, which would be the Americas, so U.S. and North America or in LATAM, so to speak, so Canada, U.S., Brazil, Argentina predominantly. We're one of the market leaders. You can see that. We're not #1 in everything, but we are leading in a lot of areas. Corn is a good example in Brazil, where Corteva's market share is a bit ahead of ours, for example. But you can see there's a competitive mix amongst the majors here. We do have a leading position in many of the important seed markets. So this is also important as you think about the food production. On the last slide, I showed there was 5 major countries that produce. If you think about trade flow and food security, Europe, for example, about 70% of its imports are from GM crop commodities. So from an EU standpoint, they can't be self -- they can't produce enough in their oil seeds and grains and feeds. So they need to import. So even in countries that don't cultivate, there's a lot of importation of GM crops. So these big GM-producing regions really do supply a lot of the global food chain. So if you go to the next slide, here's a snapshot of what our R&D process looks like. So Cristina mentioned a bit about the diligence that we put in, right? So in general, it takes us 12 to 16 years to develop a trait and cost about USD 115 million. So it takes a while. We have very regimented phases in our development, a lot of which obviously is driven by regulatory requirements. There's lots of different regulatory agencies that require safety studies, whether it be for human safety, for nontarget organisms, for plant biodiversity. There's lots of required studies. And we also have our own standards as well, as Bayer, before we would advance products from phase to phase. So there's a lot of time and effort that goes into -- and resources that goes into ensuring products are absolutely efficacious to meet their growers' needs and, very importantly, do not negatively affect the food or feed in our environment chain. So that's just a snapshot of what goes into launching a new genetically modified trait in crop. If we go to the next slide, we're going to get right into some of these more controversial topics. So here's one, biodiversity, right? So this is a slide that is talking about the monarch butterflies. So pollinators has been a big topic when it comes to agriculture and intensive agriculture areas and pressure on pollinators. So this is one with the monarchs that a ton of external effort has been put in from many institutions, academic and private industry as well, into researching and understanding what's causing the decline in monarch butterflies. So first of all, we do acknowledge that agriculture is part of that, right? So as you can see, we're probably around less than 20% of the cause of some of the monarch declines, right? What we've learned is there's a lot of variables that play here. So it's a multifactorial issue. And what we, as Bayer, can do is -- to help with that is around this habitat piece because where ag is concerned, if you think about the U.S. and you see this migratory path, pretty complicated, right? You see them flying in and flying back, when they overwinter to Mexico. So what we're focused on is really trying to understand habitat loss. So our herbicide-tolerant GMO crops do a fantastic job of eliminating milkweeds, which are a weed to a grower but that's also the host plant for monarch product-wise, right? So we have been working -- and we'll get to that in just a second. How can we help with that? How can we help actually to reintroduce more milkweed and more habitat for the monarch butterflies. But there's other issues such as climate change, where they overwinter, and some other dynamics that really are going to take a collected effort across multiple industry and the public-private partnerships to work together to solve. So if you go to the next slide. This is really what we're doing as Bayer. So what can we do? And what have we been doing to help with this issue? We, first of all, are reestablishing milkweed, that habitat, right? So this goes to the biodiversity angle of this and making sure we're having habitat restoration for these critical species. So, so far, 500 million stems, as you can say, have been added to the landscape throughout the U.S. And this is really in partnership with the U.S. Fish and Wildlife Service. So we've put about USD 10 million into multiple programs around monarch restoration efforts. So we work with different universities. As you can see, Iowa state's working on some different programs as well. As well as, of course, labeling. So if you think about our Crop Protection business, making sure we have the right application requirements and labels and restrictions to minimize off-site movement as well. And then you think about the innovation through GM crops. So what's clear is insect-protected GM crops don't impact monarchs directly. So those are very targeted. Sometimes, I get that question. That genetic modification is super targeted to the pest of concern, which might be a caterpillar, for example. That is more of a bull worm or something of that degree, right, the negative insect we're trying to address. Those -- that doesn't directly impact monarchs. So really, it's more about optimal land use with the HT system, as I mentioned, and making sure we have that conservation and partnership to ensure that habitat restoration for monarchs. So if you go to the next slide, let's hit another topic that we've gotten a lot of feedback on is plant genetic diversity. So we've got a lot of questions and feedback around, well, GM crops have a negative impact on plant genetic diversity. And so what we've done -- first of all, I guess, let's explain -- let's define genetic diversity in plants. So this is really defined as a variety of genes within a particular population or species of plants, right? So there's been some over 900 studies reviewed by the National Academies of Science, as you can see, that really didn't find any major connection between genetic diversity decline and GM -- this GM seed industry. But what is clear is that farmers are selecting and purchasing different varieties of choice. They want to go for the highest-yielding variety, right? So there is some decline due to commercial sales selection, so to speak. So there's not a natural impact because of GM, but it's more of growers selecting high-performing varieties. So for us, we need to make sure we can continue to have good diversity in our portfolio. If you go to the next slide. Another topic that we get questions on is coexistence. And so what does coexistence mean? It means, well, can GM crops coexist near non-GM crops? The answer is yes. So the ag industry is very well trained as far as how to manage different fields and different crops. Farmers are typically pretty good about knowing what their neighbors are doing, right? So there's been a lot of work around this. And when you think about coexistence, one of the major concerns is cross-pollination. Will the pollen flow from the GM field over to a non-GM field? That's extremely rare. And it really only happens -- for example, a GM corn plant can't pollinate in organic soybean field or an organic cotton field. So it's pretty rare. One thing we want to be really clear on is that we are unaware of any open litigation claims around cross-pollination or contamination. So there just isn't any. And so that was one of the pieces of feedback we received. There is no litigation to settle because there's no open claims around this issue. So for us, if you go to the next slide, what's really important here is for us to continue to have these pillars around codesigning sustainable farming practices. And first, it's on the product safety and ensuring responsible use. So whenever we launch new products, there's lots of trainings. There's agreements that growers need to understand and sign on how to manage the crops. GM crops have been growing successfully, again, for over 25 years. So there's a lot of experience in many of these countries. We do a lot of biodiversity assessments and so -- just to really make sure we know how that plant is going to react in the environment. We don't want it turning into a weed species, and so we do a lot of that work going back to our R&D in pipeline and our phases. We do a lot of that work upfront to just make sure we're understanding that piece. And then we have a responsible management pillar, which is really around stewardship. So we have adopted different practices, and we -- and through third-party industry pieces as well. So CropLife, for example, Excellence Through Stewardship. So as an industry, we're all committed to this. And this is throughout the life cycle of a product, not just before launch or right at launch. It's a continuous cycle. So for us, we have to really manage this long term, and it's a full commitment from the companies to do so with our growers. So if you go to the next one. Here's another big -- a hot topic that we often hear as we've been listening is, okay, what about smallholder farmers? Do you guys sue smallholder farmers over intellectual property or IP rights? So what we're committed to, I know there's a perception that smallholder farmers don't have access to GM crops because of IP protection. And yes, IP protection is absolutely critical to companies like Bayer because it does take so long to develop and is very expensive. So we need patent protection, and we absolutely need to uphold the principles of patent protection. However, we understand that smallholder farmers in this poverty sector really need help and support. And so we are not enforcing IP rights with a smallholder that's saving seed for their own private or noncommercial use. And we have our commitment actually to empower and enable 100 million smallholder farmers. So for us, the goal is to help them rise above and get to more of that commercial scale farming, right, so to get to that cash liquidity. The next slide is really around transparency again because I want to hit this again. So as I started out, why are we having this conversation on GM? It's because we've learned some hard lessons, right? So we really do need to listen more. And the team has been doing that. We need to address things more transparently. We need to make things accessible. You heard that from Rodrigo and Cristina, all these reports are available. We've made a lot of our regulatory data available as well. So tons of information. We also need to engage and communicate more. So it's not only about transparency, but it's about actively engaging as well. So here are some examples here on this slide around the Bioethics Council. So we have that. The independent -- we have an Independent External Sustainability Council, which is amazing, a group of parties that are really good critics too, at times, and that's what we need, is to get that honest feedback. Of course, we have our Bayer Supervisory Board. And then a key part of our internal structure has been integrating sustainability and business strategy. So the team I sit on now sits together. And if you go to the last slide. I just want to close here by saying there are some trade-offs when you think about food security and feeding billions of people, as Rodrigo started off with. But we're committed -- we're absolutely committed as Bayer to conserving and producing more with less. Our innovation, we absolutely believe, contributes to sustainable agriculture in many ways, whether it be preserving land use, reducing pesticide application, herbicides and insecticides with the use of GM technology to producing more with less water, for example. So we're going to continue to innovate in this space. We have to, and that's what we all need to do. But we appreciate the feedback, as always. It's been very, very good and constructive. It makes us better. I hope you guys will take a look at the GM report because there's a ton of detail, obviously, that I didn't address in the discussion that I quickly went through today. But I'm going to stop there. And I'm going to hand it back over to you, Klaus, to continue on and then get to the Q&A in just a bit. So thank you very much, you guys.

Thanks a lot, Jess. I hope that was meeting your expectations and your needs -- your information needs. And I really hope that you can see that we make a real effort here to address topics, concerns and that we also want to address things that we could have done better. And along those lines, what could we have done better, I want to just give you a super quick update on the neonic topic for the last couple of minutes because it should not be the major element of the presentation as of today. But what we have been talking about last year was primarily, first of all, understanding and prevailing, why were these products introduced in the early 90s? And it's just a short reminder that when they were introduced, they were placing -- they were really replacing very, very toxic products, which are still in some markets as of today. And that's really still a concern because they -- part of them, some of them still are an actual threat to farmers if they are not used in the right way for their personal health. And these neonic insecticides, you could even sell in a home and garden shop, and it was not dangerous for people. So that was really a major breakthrough. However, there will be incidents that was not foreseen -- that was not foreseeable based on the studies that were done at these times. And what I just want to share very quickly with you once again, like last year, is we took a lot of learnings from these incidents. We took a lot of measures from these incidents. And also the way that we look into new products as of today is very different from the way we have been doing this. Like 30 years ago today, bee safety is an integral part of the testing in the pipeline even of very early research candidates. So we would not promote molecules to the [indiscernible] with a high bee toxicity. However, you will see that we still have the new mix in some areas of our portfolio, and this is just a quick explanation why. New products have been coming through the pipeline like Movento and Sivanto, even biological control products like FLiPPER, partly replacing neonic applications and still providing solutions to the growers. But what this is all about is what we have learned. And that there are 2 different basically application schemes of neonics. One is the seed treatment. You take the seeds, and you do a coating around the seeds. It sounds actually really cool because there's no spray -- no wind can take the spray away. But if you don't do the seed treatment properly, then the dust may get around, and that was exactly what happened in 2008. And there was a large number of measures being taken after this that today, there's huge -- there are certifications and there are many, many technical evolutions and developments, which make sure that these amounts of dust cannot be embraced anymore; that there's a strong adhesion of these materials to the seed and the dust emissions are massively reduced. So the risk from seed treatments have been reduced systematically, and we have also not seen any comparable incidents anymore like we had them in 2008, nothing of the same dimension. On the spray application side, is very -- it's actually fairly simple. You cannot spray these products into flowering crops. You have to avoid any exposure to bees. So we have worked massively on the labels. We have taken a couple of products out of the markets, out of certain crops where we couldn't make sure that the standards are being followed. And also -- and this is very important for me to say, in some countries and especially in Europe but also in North America, the bee topic, the pollinator topic has very high attention and also has a very high emotional attention. There are other countries where the bees don't play such a role in the public discussion and also do not cause such emotional reactions. But it's a very important topic. So independent of local regulations and independent of local perceptions, we have introduced those measures around the globe because this was really a clear thing to do and a big learning for us. And we are not just going where local regulations allow in the old style. We have been introducing those measures everywhere and every country. On the last slide, and that's actually all what we wanted to talk about today, is the updates that we have been doing in the last 12 months. Most of the measures have been taken beforehand, but we continue to work on label language. We continue to work also through the associations to work on better label language so that farmers around the globe can use and can easily understand the labels and also easily understand what they can do and what they cannot do. And you can see the label, which has been developed by CropLife International, which will be included after FAO approval, hopefully, very soon, you see the visual is very easy to understand. And I think that's very important, but it's still connected to the need of having appropriate safe-use trainings. We have been doing almost 3 million trainings last year, 2.7 million trainings for farmers where this is part of the training -- it's part of the safety training. But on top of this, we are reaching out to universities, especially in those countries in Asia and Africa, where there's not enough awareness for these type of topics to engage the students go back into their communities and spread the message. There has been some updates from the Canadian authorities basically supporting that there is still use cases which are worth and which can be under adequate risk measures and risk mitigation measures being used, and there is no better alternatives in these markets yet. But most importantly, I just want to draw your attention quickly to this. In Europe, the topic was discussed very critically. We had some authorities, even governments making very strong statements about these neonic insecticides. However, we have seen in the last year a number of emergency approvals, authorizations where governments have seen that the farmers were going into deep, deep issues, for example, in sugar beets. And the same, we have this year. When those solutions were not available, basically, they were losing their complete harvest. And we think that, for example, this new treatment used in sugar beet is one of the safest uses you can imagine because the seed treatments are extremely solid. Extremely, there's almost a 0.0 dust deflation from sugar beets. And this is why we support those emergency authorizations while, of course, we respect the general decision in Europe to not commercialize neonics anymore. This was an update. What I hope you can see is our massive effort to address the topics which are of concern. We are very keen on your feedback. Whether we have done it properly today, I guess you have seen that we were a little bit struggling in a couple of moments with technology. I hope you can accept that and more look at the content then, at these little issues. What I really want is that you give us feedback where you don't agree, where we were not speaking clear enough, where we used the wrong words or maybe too much technical language, which was not necessarily helpful. But you can see we are making these efforts coming both from a technical but also very strongly, as Cristina pointed out, from a governance perspective because this must be embedded in the organization in a systematic way. And you can count on us that we will continue to address these topics in the most open way that we can. Thank you very much. With this, I want to introduce the Q&A session.

So we are very happy to address your questions. [Operator Instructions] Okay. And now please ask us questions. That's what this is all about. Thank you. The first question comes from Christian Faitz from -- of -- with Kepler Cheuvreux. Please, Christian. We are curious for your question.

Yes, Klaus. I have 3 questions, if I may, and I might ask them one by one. First of all, what is the contribution of your digital tools offering FieldView to reducing inputs in the field? Can you put a number on this by any chance?

I think this is -- I may take the question because I think we do not have a super precise answer. And I think this is just an evolving topic. We are just building the tools especially, and I think that's what you're mostly referring to is reducing chemical inputs into the fields. These tools are under construction and not yet fully implemented. If you ask my personal opinion, I think you will see at least double-digit percentages of chemicals being reduced through precision application, while, for example, at the same time, when it comes to precision sowing, these digital tools even offer the opportunity to more precise sowing to even increase the density of crops in the fields. But from a chemical perspective, you will see the reduction coming. It's too early to conclude whether it's 20%, 30% or 50%. I have seen presentations by some companies, nonmachine companies talking about 80%. I think that is too much.

Yes. Okay. Now second question [ I'll ask will be ], all in all, where are you on nitrogen fixation as this could also significantly reduce the farmers overall CO2 balance, I guess, at the end of the day? And I know you have a couple of products in your pipeline. Where are we on that?

When it comes to nitrogen fixation, maybe Jess has some complementary information. I think we are very early in the process. I would still call it research. We are investing into these projects. We are doing joint ventures even with companies in Argentina, for example. We are, I would say, still a good way away from a market introduction. Jess, you are the crop science expert. Do you have any additional insights?

No. You said it well, Klaus. I think the important piece is we're looking at it from multiple angles as well. So you look at it from breeding and genetics. You look at it from biological products like plant health products. So we're trying to go about it in several areas, which I think is also the right way to go. But we're -- it's still in the pipeline. So it's still coming, but definitely agree with the impact -- the positive impact that's going to have for here.

And the impact per crop field could be something like a 20% reduction of nitrogen intake -- artificial intake, I guess, right?

Could be. Could be even more. And you know nitrogen reduction can also come through digital technologies. Once again, like you can do precision application of pesticides, you can do precision application of fertilizers. If you understand the soil profile of your field, you also better understand where you need to fertilize more and where you may, can or might fertilize significantly less. So once again, I think one of the most disruptive opportunities to drive reduction of inputs and increased sustainable profiles of agriculture is digital precision agriculture.

Okay. Perfect. And last and final question, I promise. Do you see any potential in protein-based crop protection? And do you have any related products in your current pipeline?

To my knowledge, that's not in our, I would say, core research at this point of time, protein-based crop protection. I was -- when you started to say protein-based, I was expecting protein-based meat production and things like this, which I think will come sooner or later, but that's a completely different topic. When it comes to crop protection, all I can say is that crop protection, as we look at it today, is not anymore just chemicals. It's not just synthetic insecticides, fungicides and herbicides. It's integrating biological control. And that's going a little bit in the direction that you mentioned. It can come from bacteria or other sources where we can expect biological control opportunities. If you look at herbicides, it's even going much broader. We call it integrated weed management. Their chemical control is one part of it. Biological control is one part of it. Machinery is one part of it. Using the right cropping approaches is one part of it. Using cover crops is another part of it. So this -- it's a quite multidimensional toolbox in the meantime, and it's not anymore the pure chemical input. While you forgive me if I say that as being a chemist, just forgive me that I say it's -- there's a kind of a demonization of the word synthetic in the context of crop protection. For me, what makes the difference is not necessarily whether it's synthetic or not. What makes the difference are the properties of the 2.

I would say to -- Klaus, to add real quickly is from a protein basis, there's also native traits in the plant. So these are not genetically modified, but native traits can come from breeding that have resistance to diseases, for example, that you can complement with synthetic or biological chemistries and digital tools. So it is a system approach to Klaus' point.

Do we have more questions or feedback? I mean not necessarily questions. Also, if you have a feedback for us, if you want to share with us that this way of -- as Jess explained, what are these GMOs? Was that helpful or not? Any feedback is highly appreciated. So I think now we have a couple of questions coming in. I don't know. I would like -- just a second, please. I think for the sake of time, somebody -- if somebody who raised their hand, just unmute himself and says his name. Here, we have [ Henrik Schmitz ]. May I ask you to put your questions? Thank you.

Yes. Thank you very much, Klaus, Cristina and Jessica and also Rodrigo to for providing this very helpful insight here indeed. And although I still have to go through the reports in more detail and will surely come back also with further questions, it was a very good overview so far. My question -- and thanks also for Mr. Faitz for taking the lead on some of the details here. In terms of GMO analytics and bringing together what you, Cristina mentioned in the beginning, in terms of your product management program in terms of also aligning that with the UNGC but also along the OECD principles here, could you elaborate a little bit on how these 2, let's say, phases are interacting? And how do you ensure the product safety along this very long development phase? And what kind of targets have you set yourself going forward in terms of facilitating that, making it probably more efficient, transparent? That would be great.

Thank you. Maybe I can say a couple of words, and then I will hand over to Jessica to you to provide more details. I think in general terms, the OECD framework that we see is actually what we do. Let's say, a lot also in research and development and also in management of any product in crops -- in our Crop Science Division and also in Pharmaceuticals is a lot about really setting up standards and doing a risk assessment and then doing a risk management and then iterating and iterating those. So in other areas of the company, for example, in other established standards, for example, the PDCA: plan, do, check and act. So these are always the circles that enable us to set up standards and then do appropriate evaluations and actions. So basically, also in the research and in the development arena, we do the same, maybe in a different scale, but we also set up standards. Often, standards are given by regulators, but we also have situations and areas where all standards might be higher than what the regulations say. Klaus has given a couple of examples on the neonicotinoid, where our labels might be more stringent than probably what the regulatory environment would allow in one or the other country. And then basically around along these standards, we will then generate the data, we will assess, and then we will manage these risks, which could be -- in some cases, could be, for example, limiting the use of this product up to giving up a product or an asset in research or even late in development, which is very, very hard for companies. So that -- you will find all of this. And I can also add that, for example, we launched already some time ago, our transparency initiatives to provide other reports for Crop Protection products, and then we extended it to our GMO products. So -- and you will find always this logic behind. And yes, I hand over then to Jessica, if you want to provide a little bit more to that.

Yes. No, that's a great setup, though, Cristina. So when you think about this -- and I briefly touched it when I was going through the phases of our pipeline. So each gene that we add to a GM crop is thoroughly studied to test basically potential ecological, mammalian toxicity, allergenicity even. It basically is a rigid, rigorous set of studies to get in support of risk assessment. So is there -- what risk -- or is there any risk to human environment safety? So that comes from the cultivation country. So if we're going to launch in the U.S., there's a rigorous set of requirements that we have to go through, but it also comes from international standards. So we mentioned OECD, but there's FAO, WHO. So we follow all those international standards as well. So each cultivation country has their own set of standards. We follow international guidelines and, as Cristina says, often have higher standards internally at there. The other thing I'll mention is even for a country that's importing a GM commodity or commodity derived from GM crops, there was a process oftentimes, of course, for import approvals. So even if you're not going to grow it in that country, we go through a very rigorous process for that commodity testing for safety or food and feed.

Thank you. Thank you, Cristina. And Jess, the next question comes from [ Ilwats Daniels ].

[ Ilwats Norrie Daniels ] [indiscernible] Asset Management. First of all, I would like to compliment Bayer with the presentation and the level of transparency. Very interesting, and I'll probably have to read all of it to get a better understanding of it. But I would like to go back to the start of the presentation, where you refer to UN Global Compact and the assessment of the company in relation to various trade defenders. The score that's been awarded to or attributed to Bayer by some of these rating agents also reflects continued use of glyphosate, an ongoing debate and litigation. I didn't hear this aspect in the presentation, and I'm sure it's probably somewhere in the reports that you have in place. But if we're talking about UN Global Compact and external assessment of the company, how would you consider that in relation to Monsanto's legacy and continued glyphosate use?

Yes. Thank you for the question. Maybe I can just also add that also Monsanto, as a company, was a signatory of the UN Global Compact, came in a little bit later than Bayer but was also part of this. And really here, I mean in -- really to our evaluation, glyphosate per se does not mean a deviation of the UN Global Compact, neither do actually the other topics that we have talked about. So we talk about glyphosate, and we have different analysis, of course, of glyphosate in several other interventions and activities, and we will continue to do that. I mean you will see also our positions, and everybody knows that we are in the litigation process. But from the UN Global Compact perspective, we believe that glyphosate is adequately assessed and is assessed transparently just as you can see in any of our publications and in all the activities we have done on transparency, for example. If you know well also that glyphosate is currently within the European registration process. And we were the first company who already provided full transparency to the dossier that was submitted even at time of submission, so very early on. So that's what we believe. We acknowledge that we are in the litigation process. And that said, that we have followed all the paths that are decided there. And maybe I don't know -- yes, sorry.

Yes. It's just that the perception of Bayer that's driven by part of this litigation process impacts its UN Global Compact ratings and success by data vendors. And you briefly mentioned that at the beginning of the presentation. I think you've answered the question in terms of the ongoing litigation, so thank you for that.

Great. I mean we -- of course, the litigation plays a major role in these conversations. It's not in the focus of today. If you have any questions related to litigation, please reach out to us, and we will get back to you about the details, where we stand, where we -- what the strategy is. It's -- we didn't put it into the center of this presentation today. We have another question from [ Gerald Bucher ]. [ Gerald Bucher ], please?

Hello. Can you hear me? I have one more question about your assessment on the impact on the biodiversity of your GMO products and Crop Protection products. You gave in this presentation 2 very prominent examples: monarch butterflies and bees. But I thought would be very interesting for me. Do you have a more general strategy, so like, I think, a representative sample of insects that are significant for preserving biodiversity? Because, I mean, if you don't approach this in a systematic way, there is obviously danger of -- or it's just checking the insects that have -- that's got media attention. So [indiscernible] you are using now?

Yes. Do you want me to start with this one, Klaus?

Yes.

Yes. So great question, first of all. So as far as the -- when we're evaluating new products, as they're going through the pipeline, we look at a lot of nontarget organisms. So not just the one that's in the media or the one that's in danger today, so to speak. So to answer your question, yes, and that's part of a lot of the required studies too, by the way, is to look at several of the insects that are considered beneficials or nontarget organisms. So we definitely do that. As far as biodiversity more holistically, yes, I mean, it's great feedback. When we look at new products and product concepts, we absolutely need to be considering those geographies, the pest spectrum, the native plant species. I mean biodiversity is a big space, right? But yes, we definitely look at more insects than just bees and monarchs to very specifically ask -- to answer your question.

Maybe I can complement a little bit, Jess. We have made a commitment 3 years ago when we said we want to reduce the environmental impact of Crop Protection by 30% going forward. And we -- that's easily said, but when you start to think about it, what does it mean? It exactly ties into your question. What does it mean, environmental impact? It means all the things out there, not just the bees and the butterflies. It means all the earth forms, the beetles and all the other things, the fishes, the birds. So we worked with the University of Denmark. Actually, they work with us and many other universities. They came up with something which, I think, is really a little bit groundbreaking here: a methodology, which is boiling all the data that we produce, as Jess explained, in regulatory processes and other processes. They are able to boil all the data into an index, which gives us an indication of which products have a higher environmental impact, which comes with lower environmental impact because as you rightly say, is much more than bees and butterflies. So the commitment that we have made is not set on bees and butterflies. It's on overall environmental impact. And I think that's really the next step to go. Does that -- will that be crucial to restore biodiversity? I think it's not enough, but it's what we can do as a company right away. This is where we have to [ surface ] our own products. So I mean that assessment, that methodology is now developed. It's based on already existing methodologies, but no one ever has used a methodology like this to assess a global portfolio. We have done this. We know where our spots are, but we also know that through a lot of measures that we have taken in the last couple of years, we already have -- you may believe it or not, but we already have a fairly low impact from our Crop Protection when related or compared to the crop protection of other companies, which are still selling the old products, which we have all taken out of our portfolio. And just to give you examples of such type of commitments that we have been taken, we are not commercializing any product anymore, which is classified as WHO tox Class 1. That is a -- that's basically tox Class 1 is a statement related to human toxicity, but it's a very strong indicator also about environmental toxicity because mammals are apparently environmental elements, and it's a good indicator. And that was already, I think, a strong step to reduce the impact of our portfolio beyond bees and butterflies. We also have a commitment to only commercialize the product when it's registered in at least one OECD country. So these are voluntary hurdles that we have put up for ourselves, which I think make us already now a leader. But going forward is not enough. We will continue to reduce the impact of our products. But the good news is we have a methodology to much more holistically assess this impact, addressing your really good question. Thank you. If you are interested, we can share more information.

Yes, that would be great. It's interesting just how many different species are included in your studies and so on. Yes, that's a very interesting first information.

I just want to add on this is we had a discussion just yesterday here in Berlin, a roundtable on biodiversity. You always need to make a compromise because you want to have a large number of species, but you cannot test all species. You always need to select, as you say, representative species. But what's the right selection of these pieces? And how far can you conclude from those testings on biodiversity [indiscernible]. I would say, to be continued, what we want is to make our contribution to the discussion in a helpful way and in a very honest way. Thank you. We -- at this point of time, we have no more questions. Does anyone have something on his heart or her heart, which should find a way into our ears? Would be much appreciated. None? If not, then I would like to thank my -- the speakers: Cristina and Jess, Rodrigo. I think -- and I also want to thank, honestly speaking, if I may say that and use the opportunity here, the team. They're compiling all these materials. We -- it's going away for us. It's basically taking a new route out of this pure defense thing into a very open dialogue, addressing topics very openly, which in the past, we should have addressed openly but didn't do. So we are on a learning curve here. You help us. And this is why I close, of course, my closing remarks with a big thanks to all of you, all your questions. Please keep us -- helping us being perceived as a transparent and open company. We have a lot to offer. And we want to offer a lot. And it's related to health and nutrition. So it's actually Bayer, as a company, which can really make a positive difference, and we work very hard to be able to bring this message across in a credible way, and we acknowledge that we have a lot to do. Thank you very much. And I hope to hear and see you again not too far down the line. And if you have any follow-up questions, you can reach out to us. You will find these materials on the website. I think the instructions are in the chat. So whenever you have any questions and you will go through the report and you will see some things which you don't understand or you find them strange, please reach out to us. Thank you very much, and have a nice day, everybody.