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• Key Indicators Table

Energy Usage and Greenhouse Gas (GHG) Emissions

Prior to 2008, Lilly had set a goal of reducing our energy intensity (normalized to sales) and greenhouse gas emissions intensity (normalized to sales) by one-third by 2010, compared to a 2003 baseline. We attained that goal two years early in 2008. Our achievement can be attributed to extensive efforts at our manufacturing sites and our corporate center to search for energy reduction opportunities and implement projects to reduce energy usage.

In 2008 we set new energy consumption and greenhouse gas emissions goals. Going forward, we have established a more aggressive goal based on energy used per square foot of facility space rather than energy use normalized to sales. We call this goal an “energy efficiency” or “energy density” goal. Using the year 2007 as a baseline, we aim to reduce energy usage per square foot of facility space by 15 percent by 2013.

While manufacturing pharmaceuticals is less energy-intensive than many other industrial processes, Lilly’s operations are relatively energy-intensive due to the nature of our processes and products. We use fermentation processes to produce several products. These processes use more energy and water, and generate more waste than many other pharmaceutical production techniques.

• an energy policy
• an engineering standard for energy-efficient design
• grassroots site energy teams that identify energy reduction projects and initiatives
• an energy assessment process
• communication of our energy reduction targets so that employees are aware of and engaged in contributing to energy conservation
• an energy and waste reduction fund to finance energy-related capital projects

Some of our successful energy-related capital projects include a co-generation facility at one manufacturing site, lighting retrofits, and installation of high-efficiency chiller systems. To date, Lilly has invested approximately $18 million in projects with an average return rate of less than two years.

We track both direct and indirect GHG emissions from our operations. Direct emissions include those from manufacturing and non-manufacturing facilities, and from our distribution and sales transportation. Indirect emissions, which comprise about 69 percent of our total GHG emissions, represent an estimate of the quantity of GHGs emitted by energy service providers while producing electricity, steam and chilled water on our behalf.

Because our GHG emissions are linked to energy usage, our progress towards meeting our energy reduction goal shapes our progress in meeting GHG emission reductions. If we achieve our new 15 percent energy density reduction goal, we will reduce CO2 emissions by nearly 340,000 metric tons per year. This is equivalent to removing 50,000 mid-sized cars from the road.

Water Use

One of Lilly’s new HSE goals is to reduce water intake by 25 percent by 2013 compared to a 2007 baseline of more than 33 billion liters per year. Although most of our facilities operate in communities where water supplies are plentiful, we believe it is important to reduce our water consumption in light of global concerns regarding access to water.

Lilly tracks the total amount of water being brought into its manufacturing and R&D sites worldwide, either through direct extraction or from municipal sources.

Air emissions

Note: Emission values are in metric tons.

Waste Generation and Management

In 2005, we began tracking and reporting waste generation and management using categories developed for the pharmaceutical industry. We believe this provides us with the most useful information for managing our wastes. Our goal is to reduce waste disposed in landfills by 40 percent by 2013, with 2007 as the baseline.

In 2008, our total solid waste generation decreased by 9 percent compared with the previous year. Hazardous waste generation increased by 2 percent, and waste recycling decreased by 16 percent.

Beneficial reuse is an important waste management method for Lilly. For instance, several of our products are manufactured using fermentation, which uses microorganisms to make the active ingredient. The microorganisms eventually become non-toxic biological byproducts that we offer to farmers for use as fertilizer.

Biodiversity

Lilly has a long history of working collaboratively to protect habitat and minimize the impact of our operations on ecosystems. We engage in conservation projects and habitat enhancements at sites throughout the world. We also support conservation efforts in the communities where our facilities are located.

Since the early 1970s, Lilly has worked in conjunction with the Indiana public electricity provider Duke Energy (formerly Public Service Indiana) to conduct fish sampling in the Wabash River. The sampling program documents species' diversity, size, and health, and provides a key indicator for the overall health of the river. Over the years, the river’s health improved significantly. The fish sampling program provides an important foundation for evaluating the effects of ongoing efforts to address potential impacts on the river’s health.

At our Clinton, Indiana, facility, Lilly is implementing a long-term land stewardship program in conjunction with the Sycamore Trails Resource Conservation and Development Council, the local soil and water conservation entity, to restore 300 acres of floodplain along the west bank of the Wabash River. We are undertaking this effort as part of the Wabash River Heritage Corridor Commission’s mission to protect and enhance the natural, cultural, historical, and recreational resources, and encourage the sustainable development of the river corridor.

Lilly has invested in a comprehensive strategy to ensure the long-term sustainability of this critical project by enhancing and maintaining this floodplain property. Approximately two-thirds of it will remain in its current use as cropland, which will generate the income necessary to maintain the river corridor over the long term. Lilly began the project in 2007 by enhancing 10 acres of wetlands. In 2008, Lilly planted 25 acres of trees along the river and, in 2009, will plant 20 acres of grasses suited to growing in moist environments. This project will greatly enhance the environmental quality of the area by introducing native plant species, such as prairie grass, and transitioning to more diverse habitats, including wetlands, grasses, and trees. In addition, the plan will benefit wildlife by providing travel lanes that will allow animals to migrate more safely.

We have also commissioned a long-term study of Kinsale Harbor near our manufacturing site in southern Ireland, which began in 1978. This study, conducted by researchers at National University of Ireland, Galway, suggested 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 dispense wastewater discharges.

Other Issues

In addition to the issues for which Lilly has set goals and tracks progress, there are other emerging topics that our stakeholders seek to better understand.

• Green Chemistry

The biggest improvements in Lilly’s environmental and safety profile will be driven by new production processes that are inherently safer, use fewer resources, and result in less waste. We continue to discover and develop these processes through “green chemistry.”

Our goal was to cut hazardous material purchases normalized by sales by one-third by 2010, compared with those in 2003. By 2007, our hazardous material purchases were more than 50 percent below the 2003 baseline. We attained this goal due to efficiency gains, solvent recovery, changes in our product mix, and supply chain decisions.

Our scientists and engineers work to apply the most up-to-date science when designing our medicine production processes, evaluating attributes that predict the future HSE burden of a process, along with more traditional criteria such as yield, quality, cost, and equipment needs.

To accomplish this, we have established material use efficiency standards at critical steps in the product development process, including the Process Mass Intensity (PMI) factor, a ratio of material used per unit of active pharmaceutical ingredient produced. We evaluate the PMI factor at key development milestones. If the standard is not met at the checkpoint, management review is triggered.

These standards are driving improvements in process efficiency. For example, a recent improvement to a process under development will reduce hazardous material usage by more than 80 percent, saving more than three million kilograms of those materials needed per year. The process change will also eliminate the need for six million liters of water per year.

• Pharmaceuticals in the Environment

Lilly is committed to understanding the potential effects of products in the environment as well as in humans. Using improved testing technologies, scientists at various locations around the world have detected very low levels of certain drug products in streams and rivers. Reported concentrations are extremely low, ranging from parts per trillion to parts per billion.

As a precautionary measure, pharmaceutical products are subjected to environmental and other testing as part of registration protocols before the product is marketed. We are continuing to examine the science to determine what the potential impacts of pharmaceuticals in the environment might be. Although Lilly is not aware of data showing pharmacological effects, we recognize that additional testing may be required. We are working with federal agencies and others in the pharmaceutical and scientific community to answer these questions responsibly.

• Packaging

Pharmaceutical packaging is highly regulated and must fulfill many functions, including providing information, resisting counterfeiting, protecting the contents from tampering or access by children, and protecting the product during transit. Packaging is also a source of cost and waste. Lilly operations around the world have developed innovative packaging approaches that contribute to the bottom line and improve our environmental performance by cutting both waste and costs. Since 2007, we have implemented packaging reduction and productivity improvements that have saved more than $14 million.