HSE Performance Review

Health and Safety

The leading cause of injuries at Lilly, affecting all business sectors globally, is ergonomic factors (workplace conditions that pose a risk of injury to the musculo-skeletal system of the worker). Lilly continues to aggressively implement a comprehensive ergonomic injury reduction initiative called Ergo Answers. Our program focuses on training employees, raising employee awareness, conducting proactive ergonomic assessments, and reducing or eliminating factors that cause the greatest ergonomic risk within Lilly facilities. Unfortunately, we have not yet realized a reduction in our injury rate. In 2006, we are putting greater emphasis on injury reduction in the offices at our corporate center where our injury rate has increased over the past few years. We intend to complete assessments of more than 80 percent of our office workers at this location and provide improved office equipment where appropriate.

Another area of concern is injuries due to motor vehicle accidents. In 2005, the number of collisions per million miles driven in the United States decreased by 7 percent compared to 2004. We attribute the decrease to increased awareness among our sales associates and a heightened commitment by sales management to motor vehicle safety. We will continue to use our eight-element Lilly Motor Vehicle Safety Program to pursue our improvement goal.

 

Environmental Events

In 2003, we established a metric for “serious environmental events,” defined as a significant regulatory compliance event; an event that results in a complaint from an agency or the public; an event that could create an impairment to aquatic life, wildlife, or human life; or an agency enforcement action. Our goal is zero environmental events by 2007.

We have reduced environmental events from 13 in 2003 to 3 in 2005. The data has shown a downward trend for several reasons, including enhanced awareness at our sites about controlling environmental events by reducing the variability in our operations; environmental hazard reviews of key operations; capability assessments that resulted in improved processes; and better root-cause analysis of events when they occur.

Resource Use

Energy

As a large multinational company, energy use is one of the most significant aspects of our environmental footprint. Our total energy consumption in 2005 was approximately 16 billion megajoules, a 4 percent increase over 2004 due to the addition of capacity at new facilities. When normalized by sales, energy use decreased by about 2 percent compared to 2004, from 1.12 to 1.10 million megajoules per million dollars of sales. We have established a 2010 goal of realizing a one-third reduction in energy intensity (energy consumption normalized by sales) and a corresponding reduction in greenhouse gas emissions from our operations, compared with the baseline year of 2003.

 

Water

In 2002, Lilly began collecting data on the total amount of water being brought into its manufacturing and R&D sites worldwide, either through direct extraction or from municipal sources, as well as the quantity of water demand necessary to conduct operations. From these data, we have begun to track a Water Conservation Index, which is the quantity of water intake divided by the quantity of water demand. The index indicates the degree to which a facility reuses water internally to meet its total demand; the lower the index, the more internal reuse is occurring at a facility.
Beginning in 2004, we calculated Water Conservation Indices from sites with water intakes exceeding 200,000 liters per day (about 53,000 gallons per day), which represents 12 Lilly sites worldwide. Of those sites, five reported an index of less than 0.1 in 2004, which means that they take in less than one liter of water for every 10 liters of actual water demand needed for operations. While results show that some of our bulk manufacturing sites are doing very well in conserving water, we are striving for further improvements.


The volume of total water intake at all our operations declined by 4 percent in 2005, compared to 2004; when normalized to sales, the decline was 9 percent. About half of our total water use occurs in manufacturing operations in Indiana, where a significant proportion of our total manufacturing capacity is located. We continue to monitor the installation and startup of new equipment at these facilities to identify future water conservation opportunities.

Biodiversity

Lilly is continuously working to protect habitat and minimize the impacts of our operations on ecosystems. We are committed to engaging in conservation projects and habitat enhancements on the more than 7,300 acres of land that we own around the globe, as well as supporting conservation efforts outside our own properties.

Tippecanoe Laboratories, Indiana, U.S.

Since 1997, Lilly has been a corporate member of the Wildlife Habitat Council (WHC), a nonprofit organization dedicated to protecting and enhancing wildlife habitat. The WHC helps large landowners in the United States manage their unused lands in an ecologically sensitive manner for the benefit of wildlife and certifies sites that meet its stringent requirements for habitat enhancement.

Lilly’s WHC-certified Tippecanoe Laboratories site in Lafayette, Indiana, includes 1,486 acres of farmland and 607 acres that are managed for wildlife by a 100-member wildlife habitat team, made up of employees, retirees, their families, and numerous community volunteers. The team’s projects include prairie restoration, tree and shrub plantings, a butterfly garden, nest box placement and monitoring for bluebirds and house wrens, and walking trails to help promote awareness of environmental issues and efforts to enhance the property.


More than 750 elementary, middle school, and high school students use the Tippecanoe Laboratories site every year through WHC’s Corporate Lands for Learning program. In addition, six schools from Purdue University use the area as an outdoor lab, including the school of agronomy, entomology, environmental sciences, forestry, horticulture, and environmental engineering. This program allows students of all ages to engage in activities designed to teach about a variety of habitats and historical resources. They follow the walking trail through prairies, observing such species as bluebird, wood ducks, herons, and beavers. A team of Lilly scientists, teachers, and community environmental leaders has developed curricula allowing students to perform experiments on site and return to their classrooms to analyze the data.


In 2005, we initiated a long-term relationship between the USDA Forest Research Center and Tippecanoe Laboratories. Forest plantations were installed on 5-acre parcels for the purpose of developing improved genetic traits in hardwoods species (walnut and butternut). The project will last at least 15 years. This is a win-win situation for the research center, since the Lilly site is located only two miles from the Purdue Campus, and other research locations are located over 100 miles away.


Lilly ARBOR Project, Indiana, U.S.

The Lilly Foundation continues to support the Lilly ARBOR Project, an initiative of the Center for Earth and Environmental Science at Indiana University – Purdue University at Indianapolis. ARBOR is an acronym for Answers for Restoring the Bank Of the River, and its primary goal is to develop an outdoor research and experiential learning site for teaching principles of science-based environmental stewardship. As a part of this long-term project, faculty, students, and community volunteers (including many Lilly employees) have worked together to plan, implement, and monitor reforestation on 8.5 acres of riverside corridor along the White River in downtown Indianapolis, Indiana, U.S.

 

Lilly Development Centre, Mont-Saint-Guibert, Belgium

Since acquiring our 11-hectare (22-acre) research site in Belgium in 1993, Lilly has worked diligently to enhance habitat and improve species diversity on the portion of this property that is maintained for wildlife. In a partnership with the local university, Catholic University of Louvain-la-Neuve, conservation scientists worked with Lilly to plan a biologically diverse ecological preserve focusing on reintroduction of native plants. Implementation began in 1994 with the planting of 5,000 trees over a 5-acre area, including more than 20 varieties of trees and incorporating a walking trail and information signs. We also maintain an orchard and a wild grass area that attracts native insects and butterflies. Lilly has also provided information to other companies that are interested in how to establish wildlife areas at their own sites.


Erl Wood Facility Conservation Management, Erl Wood, England

Lilly’s R&D center at Erl Wood has joined hands with the local Wildlife Trust to gain a greater understanding of the 47-acre site in Surrey, England. As an established institution in the area, the Trust has vast experience and local know-how in managing nature reserves and sites of interest. Through this collaborative effort, we are developing a conservation management strategy for the site. Besides habitat preservation, the site enhancements being planned will provide Lilly employees the opportunity to explore the site through nature trails, guided walks, and environmental challenge days.


Other Initiatives

Other new biodiversity projects include a 15-acre wildlife habitat at our Greenfield Facility. This will be constructed in 2006, and is being done as part of the facility’s stormwater management plan. Also in 2007, there will be over 150 acres of riparian vegetation established along the Wabash River at our Clinton Facility.

 

Emissions, effluents, and waste

Climate change and greenhouse gas emissions

The issue of global climate change is increasingly important to our stakeholders and to our business, as public concern and policies create risks and opportunities associated with greenhouse gas (GHG) emissions.

We track direct and indirect GHG emissions from our operations, including manufacturing and non-manufacturing facilities, wastewater treatment plants, and employee air travel. Indirect emissions, which compose about 70 percent of our total GHG emissions, represent the quantity of GHGs emitted by off-site electric utilities, energy providers, and other service providers engaged in activities on our behalf. These activities include:

  • Electricity generation
  • Steam generation
  • Chilled water production
  • Off-site waste incineration
  • Wastewater treatment at publicly owned treatment works (POTWs)

More than 80 percent of Lilly’s GHG emissions (direct and indirect) result from energy use. We have set a goal to achieve a one-third reduction in the energy intensity and corresponding GHG emissions of our operations by 2010, compared to a 2003 baseline.


As part of this initiative, we have improved our data collection, developed an energy policy, and created a $10 million annual capital fund for energy and waste reduction projects. From 2003 to 2005, our energy usage increased by 2 percent while our sales grew by 16 percent. This translated to a 13 percent reduction in our GHG emissions intensity (in thousands of kilograms of CO2-equivalent emissions per million dollars of sales), demonstrating progress toward our reduction goal.


We are an active participant in Climate RESOLVE (Responsible Environmental Steps, Opportunities to Lead by Voluntary Efforts), an initiative involving some of America’s largest companies aimed at voluntarily controlling emissions of GHGs linked to global warming. The Business Roundtable developed Climate RESOLVE in response to U.S. President Bush’s challenge to the business community to voluntarily reduce GHG intensity by 18 percent by 2012. Lilly and other companies participating in the program have pledged to seek innovative and cost-effective methods for mitigating GHG emissions while fostering continued economic growth.

Ozone depleting substances

We are actively phasing out the use of all ozone-depleting substances, but they are still present in some of our heating and cooling and refrigeration equipment. Our 2005 emissions of ozone-depleting substances were nearly zero – a reduction of 98 percent compared to 2004.

Sulfur Emissions

Sulfur oxides and other acid gas precursors contribute to acid rain formation and are reported in terms of sulfur dioxide (SO2) acidity equivalents. For Lilly, acidification pollutants are mainly sulfur dioxide (SO2) and nitrogen oxides (NOx). Air emissions of both compounds result primarily from fossil fuel combustion for steam production at our manufacturing sites. In 2005, our SO2 emissions declined 15 percent in total and 19 percent normalized by sales, compared to 2004. We expect SO2 emissions to continue to decline in 2006 and to decline significantly after 2007 as several sites convert to lower sulfur fuels, including one site that plans to replace coal-fired boilers with natural gas units.

U.S. Agency Honors Tippecanoe Laboratories with Clean Air Award

An air quality program that has improved productivity at Tippecanoe Laboratories received national recognition in early 2006. The EPA honored the Indiana plant’s flexible air permit with a Clean Air Excellence Award in the regulatory/policy innovation category. Tippecanoe management and corporate environmental affairs partnered with the Indiana Department of Environmental Management (IDEM) to develop the permit, which is based on the site using emissions control and continuous emission monitoring systems that exceed state and federal regulatory requirements.

By applying the state-of-the-art technology to all foreseeable changes over a five-year period, the permit—one of only a few “flexible permits” in the U.S.—enables the plant to implement process and equipment changes without extensive IDEM permit reviews for each change. In 2005, the program saved the company and IDEM more than 1,000 hours of permit development and review time, and no projects were delayed due to the permit process.

The permit has also simplified compliance management by consolidating overlapping—and sometimes inconsistent—requirements, allowing environmental staff to spend more time working on improvements to our site environmental management systems and waste minimization efforts. The permit has enhanced Lilly’s ability to respond to ever-changing market demands for our products through productivity-driven changes.


Solvent Emissions

Lilly uses solvents in a wide array of activities at its laboratories, pilot plants, and manufacturing operations. The vast majority of the solvent emissions occur at the bulk scale manufacturing sites in Indiana. Most significant sources of solvent emissions are equipped with state-of-the-art emission control systems. In many locations, we use formal leak detection and repair programs to find and repair small leaks of solvent vapors. Furthermore, many of our manufacturing processes are equipped to recover and reuse solvents. We determined that an effective way to measure our progress in minimizing solvent emissions is to express loss as a percent of solvent used. We believe that our target of 1 percent loss as a percent of use is nearing an industry “best practice.” In 2004 and 2005, we exceeded our target by minimizing solvent emissions as a percent of use to less than 0.5 percent.

A subset of solvent emissions to air is reportable under the Toxics Release Inventory (TRI) requirements in the United States. We have seen these air emissions continue to decline due to the factors cited above and to the discontinuation of processes that historically used large quantities of TRI chemicals.


Wastewater

The majority of Lilly’s wastewater and the greatest amount of total chemical oxygen demand (COD) that our facilities discharge directly to surface water come from three bulk pharmaceutical manufacturing locations in Indiana, U.S., and Ireland. The Indiana manufacturing plants—Clinton Laboratories and Tippecanoe Laboratories—discharge to the Wabash River under permits issued by the Indiana Department of Environmental Management. Discharges from both plants are significantly below the allowable discharge limits for total COD. The Kinsale, Ireland, plant operates under an Integrated Pollution and Prevention Control license issued by the Irish EPA in 2005. It discharges to Kinsale Harbor.

2005 Water Discharge Data by Site

Average discharge flow

Average daily COD

Permit limit

Clinton

7.78 mgd

625 lb/day

15,559 lb/day

Tippecanoe

8.40 mgd

1,438lb/day

14,025lb/day

Kinsale

0.3 mgd

290 lb/day

9,900 lb/day

lb/day = pounds per day
mgd = million gallons per day

 

We have a longstanding commitment to monitor the biological diversity of both the Wabash River and Kinsale Harbor. Lilly and the Cinergy Corporation (a regional electric utility that also discharges to the Wabash) have jointly funded river studies for more than 30 years.


We have also commissioned a long-term study of Kinsale Harbor, which is located along the southern coast of Ireland. This study, begun in 1978 by researchers at National University of Ireland, Galway, was recently completed. The monitoring results suggest that the minor changes observed in the aquatic life of Kinsale Harbor are associated with natural stresses, such as storm events, rather than any discharge effects from our facility. Overall, the ecologic system of the harbor has shown a high measure of resilience and an ability to thoroughly disperse wastewater discharges.


Waste Generation and management

We have adopted a corporate goal to realize a one-third reduction in the purchase of hazardous materials as a percentage of sales by 2010 through innovative process and facility design. Consistent with the Corporate Waste Management Policy, we have adopted an additional, internal goal to reduce waste generation. Although there are two approaches, the desired result is the same—reduce the amount of waste we generate as a result of our operations.

 

We plan on achieving our goals by three means:

1. Using green chemistry [link to green chemistry section] to assist in design of our manufacturing processes to reduce the number of kilograms of waste generated per kilogram of product made.
2. Increasing solvent recovery to reduce the amount of solvent waste created during manufacturing.
3. Continuing use of waste minimization plans at all sites to drive reductions in everything from paper to production wastes.


Waste minimization has a multiplying effect. It will generate savings across the Lilly business, and it will generate safety and environmental improvements inside and outside the company’s boundaries.

Compared to 2004, our 2005, solid waste generation declined 7 percent in total and 12 percent normalized by sales, while waste recycling declined 1 percent. Beneficial reuse of byproducts of our production process rose by 35 percent and 28 percent normalized by sales.

Beginning in 2005, we are reporting waste generation and management using categories developed for the pharmaceutical industry because we believe this provides us the most useful information for managing our wastes.

 



 

Our corporate environmental affairs group coordinates and conducts reviews of commercial waste management facilities in the U.S. and Puerto Rico to verify that they are being operated in an environmentally appropriate manner. Sites outside the U.S. conduct reviews of the commercial waste management facilities they use, following the same corporate procedure. The frequency of the reviews is based upon the type of service that is supplied.

For example, incinerators (hazardous and non-hazardous) are reviewed every three years, while non-hazardous waste landfills are reviewed every five years. A review may involve a site visit where the reviewing team observes operations, examines documentation, and interviews facility personnel.

 

Compliance and Liabilities

Efforts to reduce the number of accidental releases to the environment showed continued success in 2005. The number of reportable accidental releases worldwide dropped from 5 in 2004 to 2 in 2005 that were significant enough to be reportable to the respective government agencies. None of these releases resulted in any identifiable threats to human health or the environment. One of our goals for the remainder of this decade is to achieve a level of zero serious environmental events.

There were no fines or monetary penalties imposed by government agencies in 2005.

Compliance Performance Summary

2001

2002

2003

2004

2005

Environmental fines

1

2

2

1

0

Environmental fines (U.S. dollar amounts)

$3,000

$17,000

$71,392

$18,000

0

Reportable accidental releases

14

14

12

5

2

Health and safety fines

0

0

0

1

0

Health and safety fines (U.S. dollar amounts)

-

-

-

$1,479

0

Environmental audits of Lilly facilities*

7

5

12

13

14

Health and safety audits of Lilly facilities*

6

9

14

16

16

*Beginning in 2002, all environmental audits of Lilly facilities were joint health, safety, and environmental audits. There were 12 of these joint audits conducted in 2003 and 13 in 2004. The additional health and safety audits (4 in 2002, 2 in 2003, 3 in 2004, 2 in 2005) represent process safety management audits.


Under the Comprehensive Environmental Response, Compensation, and Liability Act, commonly known as Superfund, we have been designated as one of several potentially responsible parties with respect to fewer than 10 sites. Under Superfund, each responsible party may be jointly and severally liable for the entire amount of the cleanup. We also continue remediation of certain of our own sites. We have accrued for estimated Superfund cleanup costs, remediation, and certain other environmental matters, taking into account, as applicable, available information regarding site conditions, potential cleanup methods, estimated costs, and the extent to which other parties can be expected to contribute to payment of these costs. We have reached a settlement with our liability insurance carriers providing for coverage for certain environmental liabilities.

We are committed to making health, safety, and environmental (HSE) considerations a priority in new product development and manufacturing. This necessitates identifying and managing risk by evaluating the potential HSE impacts of our operations and products as well as the HSE capabilities of our suppliers and third-party operations.

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