Corporate Social Responsibility Report

Social, Ethical and Environmental Responsibilities

A responsible approach to our stakeholders and the wider community is seen by the Board to be fundamental to the Group. The conduct of the Group towards social, environmental, ethical and health and safety issues is recognised to have an impact on our reputation and the implementation and improvement of policies and systems is ongoing.

The Board takes ultimate responsibility for Corporate Social Responsibility (“CSR”) and continues to be committed to developing and implementing appropriate policies to create and maintain long term value for Shareholders. Sound business ethics help to minimise risk, ensure legal compliance and enhance Company efficiency.

The Sustainability Committee (the “Committee”) was set up in October 2009 and has its own terms of reference, which were approved by the Board in July 2010. Copies can be obtained from the Company Secretary or via this website. The Committee is chaired by Ed Torr, the nominated Director responsible for environmental policy, and its members are representatives from each of the business units. The Company Secretary is secretary to the Committee. The Committee has met twice this year.

The Committee is responsible for establishing and maintaining the Group social, ethical and environmental policy. The following report details how we have applied the main principles of this policy, a full copy of which can be obtained from the Company Secretary or via this website.

Social Responsibilities

The Board recognises that the Group has a responsibility to its stakeholders and therefore encourages the business units to contribute to the social and economic welfare of the local communities in which they operate. It recognises that by taking voluntary action in this area it is helping to protect and develop its own business.

The Committee had reviewed the way in which donations (either in the form of money or stock) are made by the business units to charities and as a result has established a Group Donations Policy, which became effective 1 July 2011. From this date, each business unit has discretion to allocate funds to local community groups, employee nominated charities and/or animal welfare charities. In addition, the Group will donate annually to three charities, being an animal welfare charity, an environmental charity and an employee nominated charity. We hope to provide details in respect of these donations in next year’s report.

Below is a selection of what has taken place during the 2010/2011 financial year

Animal Welfare

• NVS has teamed up with The Blue Cross; one of the UK’s leading animal charities, collecting bags of clothing and bric-a-brac from participating veterinary practices throughout the UK and delivering them to The Blue Cross shops. During the year, this joint venture has raised £100,000 worth of income towards helping sick and homeless animals in the care of The Blue Cross.
• As in previous years, the businesses have donated obsolete and/or short dated stock, damaged products and consumables to various charities, ensuring that such stock is not provided to charities where the donation-in-kind could be sold to third parties. DVP UK donated over £11,000 worth of medical supplies to the Worldwide Veterinary Service, a UK registered charity committed to improving the treatment and welfare of all animal species throughout the world. In addition DVP continued to provide assistance to a charity called Help the Street Cats of Morocco which it has been involved with since 2006 providing supplies of Sedator, Alvegesic and Atipam

Race for Life
Tracey Beech, Melanie Vanhuls, Rachel Horton, Carol Allen, Claire Owen and Helen Hall all took part in the ‘Race for Life’ event on 22 May at the agricultural showground in Shrewsbury. They completed the 5k course generating sponsorship of £15 and with DVP UK matching sponsorship, making a grand total of £1,031.

Donna Louise Trust Foundation
Danny Roberts of NVS handing over a cheque for £540 to the ‘Donna Louise Trust Foundation’, the donation was raised from the sale of damaged goods to NVS employees.

Environment

• As in previous years Dechra has maintained its investment in the Corporate Membership Scheme for the Staffordshire Wildlife Trust (the “Trust”) donating £2,000. The continued support provided by the Company has assisted the Trust to continue with their education, conservation and community projects throughout Staffordshire. As in the previous year head office employees and representatives from NVS assisted the local community in a litter pick at Parrot’s Drumble, an area of ancient woodland situated adjacent to the NVS warehouse in Talke Pits.
• DVP EU has agreed to donate DKK0.02 for every kilowatt per hour used for the period 2011 to 2015 to Energreen ApS for the construction of new green energy production facilities within Denmark.

Other

• Each year DVP EU nominates a Danish charity. This year they donated DKK3,000 to the Danish Cancer Foundation. Furthermore as reported in the previous Annual Report, DVP EU has continued its sponsorship of three children through SOS Children’s Villages, and in addition DVP EU has provided sponsorship to the University of Munich, totalling €3,000.
• NWL has continued its links with local schools by offering a number of work experience placements to four children from local schools and two veterinary students.

Health and Safety Policy

The Group attaches great importance to the health and safety of its employees and the public. The management are responsible and committed to the maintenance, monitoring and promotion of a policy of health and safety at work to ensure the care and well-being of its employees and on-site visitors. All of its UK sites are registered with the British Safety Council.

Each unit within the Group has an active Health and Safety Committee comprising representatives from both management and employees. The workforce nominates employee representatives. These committees meet on a regular basis to carry out a review of risk assessments and standard operating procedures as well as investigating any concerns raised by individual employees. Each site has the requisite number of employees trained in health and safety legislation.

The Group commenced reporting Lost Time Accident Frequency Rates (“LTAFR”) as a non-financial key performance indicator during the 2008/2009 reporting year. The LTAFR is a calculation of all injuries that would be statutorily reportable under Reporting of Injuries, Diseases and Dangerous Occurrences Regulations (“RIDDOR”), normalised per 100,000 hours worked. This measure provides information to help monitor and control accidents and injuries to the workforce and is widely used as a key performance indicator throughout industry. Over the course of the last twelve months the number of accidents has increased from 14 to 15. None of these accidents have resulted in a work-related fatality or disability. It is hoped to reduce this during the 2011/2012 financial year. More detail in relation to this and other non-financial key performance indicators can be found on pages 30 and 31.

Any material health and safety issues or incidents which occur are discussed in detail at both the monthly business unit board meetings and the PLC board meetings. The discussions include details of the incident that took place and also details of any remedial action which has been taken in order to mitigate or prevent a recurrence of the incident. Twice a year a comprehensive health and safety report is presented at each of the business unit board meetings and then reported to the PLC board meeting the following month for discussion and review by the Directors.

The Transport Risk Committee assesses risks relating to the Group fleet and establishes control procedures, including regular licence checks of all individuals who are able to drive company vehicles, investigations into all accidents and a disciplinary procedure for speeding offences. During 2010 this committee introduced an online driver risk assessment for all company car and commercial vehicle drivers. The results of the assessment enabled the Company to identify any drivers at risk and to provide further training to those drivers. The drivers identified as requiring driver development training have now undertaken the training and this has been positively received. All new company car and commercial vehicle drivers as part of their induction must complete the on-line driver risk assessment. All company car and commercial drivers will be reassessed every three years. The Transport Risk Committee has reviewed the company car policy during the year with the aim of reducing its impact on the environment, resulting in a reduction in the selection of cars to be made available to employees and reducing the overall CO² limit for all cars to 160 CO²/km. This committee has met four times during the year. All issues raised by this committee are reviewed by the Board as part of the bi-annual health and safety review.

Simon Evans is the nominated Director responsible for Health and Safety policy.

Employees

We recognise that the success of the Group is dependent on our ability to attract, develop, motivate and retain skilled employees. The Group commenced reporting labour turnover as a non-financial KPI during the 2008/2009 reporting year, and this is measured using the standard formula:

Total number of leavers over a period x 100
Average total number employed over period

The Group has established a target of no more than 15% Moving Annual Turnover; during the 2010/2011 financial year we achieved 19.03% (2010: 15.88%). The main cause of this increase is attributed to the restructure of the warehouse operation within NVS where numbers of hourly paid employees have dropped from 387 to 349 over the financial year, a reduction of 38 posts.

In October 2010 a steering group was established to review how the management of both individual and team performance is managed throughout the Group, with a view to establishing a process that adds value to the business. The steering group was chaired by the Group HR Director and consisted of representatives from around the Group. They considered ways of improving performance, developing individuals and teams and managing behaviour that is consistent across the Group and providing support to managers.

The group determined the underlying principles and standards of behaviour that are needed to achieve and promote a high performance culture and as a result have developed a performance and development review (PDR) process that incorporates:

• a set of behavioural standards that are linked to Group core values;
• a mechanism to annually review team members; and
• a route for team member development.

As a result, the Dechra Values were launched in June 2011 throughout the business, a summary of which can be found on the inside front cover of the 2011 Annual Report and further information can be obtained via this website. Further detail in relation to the PDR process can be found in the Remuneration Report on page 55 of the 2011 Annual Report.

The Board fully endorses these values and believe that they encapsulate Dechra›s business ethics and set standards that all employees wish to achieve and ultimately exceed.

Dales is registered with ‘Investors in People’ and takes on a number of apprentices each year via the Modern Apprenticeship Scheme. Such employees are assisted in achieving National Vocational Qualifications (”NVQ“) as part of their apprenticeship, usually work-based but also involving literacy and numeracy modules. During the year one further apprentice has been employed and is currently studying for the NVQ Level 2 Business and Administration. In addition the following qualifications have been obtained during the current financial year; NVQ Level 2 in Performing Manufacturing Operations and Team Leading, Diploma in Operations Management and A Level Chemistry.

At NVS, one employee has completed NVQ level 3 in Team Leading and one employee has gained CIM Professional Diploma in Marketing, whilst two employees are studying for NVQ Level 2 in Customer Services and three for Level 2 in Business and Administration.

It is the Company’s policy to provide equal recruitment and other opportunities for all employees, regardless of age, sex, sexual orientation, religion, race or disability. The Group gives full consideration to applications from disabled people, where they adequately fulfil the requirements of the role. Where existing employees become disabled, it is the Group’s policy whenever practicable to provide continuing employment under the Company’s terms and conditions and to provide training and career development whenever appropriate.

The Group has encouraged employees to share in the growth of the Company through eligibility to participate in the SAYE Scheme. The SAYE Scheme is offered to UK employees only, with 17.38% of the UK workforce participating in the 2010 grant (2009: 18.83%), the decrease in participants this year can be explained by HMRC’s decision to reduce the three year scheme interest rate to nil. The SAYE Scheme has been established for over en years and has a consistently high take up rate. The graph below shows the percentage of employees who have taken up the SAYE Scheme over the last five years.

Business Ethics

The Board expects all of the Group’s business activities to be conducted in accordance with the highest standards of ethical conduct and in full compliance with all applicable national and international legislation; in doing so we aim to maintain a reputation for acting responsibly and with integrity.

The Board has formalised its expectations in respect of business conduct into a policy known as The Code of Business Conduct (the “Code”). The Code aims to set a standard of conduct which applies throughout the Group and ensures, amongst other things, that:

• all third parties are treated fairly, openly and honestly;
• our employees do not accept or offer bribes, facilitation payments or other inducements; and
• employees must avoid direct and indirect conflicts of interest (and where this is not possible, the employee must follow the procedure set out in the Code in order to ensure that the employee is removed from the position of conflict as soon as possible).

Written confirmation of adherence to the Code and notification of any conflicts, by all relevant employees, takes place annually.

A whistle-blowing policy is also in place whereby employees may report, in confidence, any suspected wrongdoings within the business where they feel unable to discuss any such issue directly with local management. Details of the whistle-bowing policy are contained within the Dechra Pharmaceuticals PLC Employment Handbook and on this website.

Environmental Policy

The Group recognises the importance of good environmental controls. It is the Group’s policy to comply with environmental legislation currently in place, adopt responsible environmental practices and give consideration to minimising the impact of its operations on the environment. During 2010 the Committee confirmed the Group KPIs as energy consumption, fuel, travel and waste. The Committee members were tasked with collating data relating to the KPIs internally for a 12 month period with a view to gaining an understanding of whether or not these were the correct KPIs for the Group. The Committee has yet to meet to discuss these in detail and any decision will be reported in next year’s report. In terms of fuel, waste and travel we can report the following changes:

Fuel

In respect of fuel, the number of company car vehicles with a CO² limit of more than 160 CO²/km has been reduced. NVS fleet policy ensures that CO² emissions are taken into consideration when procuring new delivery vehicles in order to ensure that low emission vehicles are sourced. Generally, delivery vehicles are replaced every three years via leasing agreements and alternative fuel vehicles are always considered on the replacement anniversary. During the year the HGV fleet speed limiters have been fixed to 53 miles per hour which will assist in reducing the amount of fuel consumed by the fleet and should also assist in reducing carbon emissions. The average miles per gallon as at the end of June 2011 and June 2010 were as follows:

The HGV fleet complies with the Euro 5 standard, a European regulation which sets emission limits for each category of pollutant emissions, such as carbon monoxide, nitrogen oxides and combined emissions of hydrocarbons and nitrogen oxides.

Travel

In respect of travel, use of the video-conference facilities is recommended as priority over travel. During the previous financial year, video-conference facilities were installed in NVS, Denmark and Dales with a satellite function at Shrewsbury. In the US video-conference facilities are provided by a third party. Whilst the Committee appreciates that face to face meetings are beneficial it is hoped that the use of the video-conference facilities can reduce the number of flights.

Waste

In respect of waste, the Group is a registered member of a compliance scheme in respect of the Waste Packaging Obligations Regulations. In addition, NVS operates a recycling programme which ensures that all trunking depots (seepage 25 of the 2011 Annual Report) return their general waste to the main depot at Stoke-on-Trent. The general waste is then sorted for collection by third party waste management companies. Dales also actively monitors its recycling rates. Dales continues to comply with, and exceed, effluent discharge standards into local water supplies, which is regularly monitored by Yorkshire Water Authority. Standard operating procedures are in place to ensure that all contaminated waste is disposed of under strict controls. Furthermore, all exhaust air is fully filtered from the manufacturing unit before discharge. DVP EU is legally obliged to submit an annual report to the Danish Ministry of Environment in respect of its environmental impact.

+ data collated on a calendar year basis ∞ plastic and metal

DVP EU also monitors:

• Annual energy consumption: In 2010 energy consumption totalled 1,748 MWh (compared to 1,519 MWh in 2009). The increase is primarily due to an increase in energy consumption processes in manufacturing.
• Water: In 2010 water usage totalled 2,372 m³ (compared to 2,382 m³ in 2009). Although there has been a slight decrease in usage compared to the previous year, over a five year period the usage has remained relatively stable. During 2008/2009 Dales implemented and embedded the lean manufacturing strategy into its operations, thereby assisting the business in achieving a decrease in the time between placement of the customer order and end product shipment. The implementation of the lean manufacturing strategy into the business has provided concrete results to date; specifically the time taken for a product to travel through the manufacturing cycle (from raw materials to stores as a finished product) has reduced during the financial year from an average of 19 to 16 days. Currently 20 employees are working towards a certificate in Lean Manufacturing (Business Improvement Techniques), which will bring the total trained at the business to 200. Dales continues to work towards achievement of its ISO 140001 status.

The Group continues to review its environmental controls and encourage its own staff, suppliers and customers to achieve similar standards.