Within the reporting period, the Bayer Group has undergone the most radical restructuring in its 140 year history, with orientation towards innovation and growth. The Group now comprises of a holding company (Bayer AG), three globally operating subgroups (HealthCare, CropScience and MaterialScience) and three service companies. Focus in the reporting period has been on transposing the Global Compact principles into the new corporate structure and maintaining programmes to combat human rights abuses, child labour, discrimination, hunger, disease and environmental destruction. The Sustainable Development Report, prepared using GRI guidelines and indicators, gives an overview of Bayer''s programmes, records key performance data, and describes key governance activities. Of particular note:

Corporate Sustainability Board: This forms the heart of the Group''s sustainability management structure, and is chaired by the Group Management Board member for innovation, technology and environment. It is responsible for making decisions on objectives, strategy and major initiatives in the areas of sustainable development, CSR and Global Compact.

Branch issues: Whilst maintaining common ethical values, the subgroups have adopted programmes to address their individual branch issues. HealthCare focuses on reduced animal testing, combating anti-bacterial resistance, HIV diagnostics, anti-malaria drugs and has established an independent advisory committee on ethical issues (Bayer International Bioethics Advisory Council). CropScience used a multi-stakeholder consultation process to develop its business strategy for Sustainable Agriculture, pursues a responsible approach to genetic engineering and aids in the disposal of obsolete pesticides. MaterialScience focuses on innovative products, applications and processes to reduce energy consumption and environmental impact.

Integrating Principle 10: Bayer''s existing guidelines for legal compliance, corporate responsibility and anti-corruption have been updated, and set out basic principles for dealing with colleagues, customers, suppliers, other companies and authorities.

SUPREME supplier evaluation: Suppliers are evaluated by Bayer staff according to health, safety and environment (HSE) performance criteria based on Responsible Care and Global Compact Principles 7 to 9. The evaluation protocols are available to procurement personnel world-wide, with Bayer and suppliers agreeing on measures to continuous improve performance.

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GRI Indicators: Improved data collection was expanded to cover 444 production, warehouse, office and research sites, recording 93 data sets. For transparent and efficient reporting, 12 key performance indicators (KPIs) were selected in the areas of social issues, transport safety, environmental emissions and the resource use. The data presented demonstrates Bayer''s continued improvement in HSE performance.

Corporate Sustainability Board: The status of existing sustainability goals was reviewed and new goals for each individual subgroup and service company for 2003/4 were adopted. In addition, specific HSE targets based on current KPIs are being developed.

Branch issues: Using alternative methods, HealthCare now uses 60 % fewer animals for testing than 10 year ago. In addition, HealthCare and partners have set up the European Antimicrobial Susceptibility Surveillance in Animals, which is collecting and analysing samples, helping to address anti-bacterial resistance. The new Sustainable Agriculture strategy of CropScience focuses on three core areas: R&D investment in innovative technologies; consultation and services throughout the product life cycle; and, encouraging good agricultural practice, including management of water, energy and biodiveristy. Concerning the disposal of obsolete stocks, CropScience participated in projects in Brazil, Mozambique, Namibia, Pakistan, South Africa and Swaziland, has initiated new co-operations in Ethiopia and Senegal, and is supporting the African Stockpiles Program. MaterialScience has made considerable reductions in CO2 emissions by converting to newer, energy saving technologies.

Integrating Principle 10: To transpose policy into action, Bayer AG, the three subgroups and the three service companies have each established a Compliance Committee and appointed a Compliance Officer. All Compliance Committees report to the responsible Corporate Co-ordination Board, headed by the Group Management Board Member for Finance.

SUPREME supplier evaluation: Bayer aims to cover 80 % of the total procurement volume with SUPREME. Currently the tool is in its "Roll Out" phase, with priority evaluation assigned according to purchasing volume, strategic importance of the materials/services, critical markets/suppliers and potential for improvement. SUPREME enables Bayer to channel procurement to the best suppliers