Novartis AG

Results from engagement inform our strategy, risk management and reporting. We have policies governing our engagement with stakeholders, including the Novartis Commitment to Patients and Caregivers, Lobbying Guidelines, and our Third Party Code. [...] The respective Novartis global guideline outlines the ethical standards that we follow in our engagements with policymakers, and applies to employees as well as third parties working on our behalf. Third parties are also subject to our anti-bribery due-diligence process before they can be engaged. Appropriate training is provided to employees.

##### Lobbying reporting

Federal and state laws dictate what falls under lobbying in terms of expenditures, reporting and registration, and this is further clarified through guidance from the United States Senate and United States House of Representatives. The intent of the federal law is to provide transparency and accountability regarding persons who appear before the federal government advocating for poli­cies that would protect or benefit their constituencies. Included in the amount disclosed are labor hours of all ­Novartis associates who engage in lobbying; consultants and third-party expenses; and the portion of trade association dues related to lobbying. Registered state lobbyists comply with all reporting requirements as defined by each state.

###### Political engagement Impact and risk management The laws and regulations relevant to the healthcare industry are broad in scope, are subject to change, and could require us to incur substantial costs associated with compliance, or to alter one or more of our business practices. ###### Main policies We engage in dialogue with policymakers and other external stakeholders on relevant policy topics, including conditions for innovation in the life sciences and expanding access to medicine. Our aim is to represent the Novartis perspective by providing data and insights that enable informed decision-making. We assess political, legislative and regulatory decisions that have a potential impact on patients and our industry. Furthermore, we participate in policy discussions with partners through various stakeholder dialogues and industry platforms. Engaging with trade associations also facilitates a collaborative approach to highlighting and solving issues that affect people with disease, and to ensuring an environment conducive to biopharmaceutical innovation. The respective Novartis global guideline outlines the ethical standards that we follow in our engagements with policymakers and applies to employees as well as external partners working on our behalf. External partners are also subject to our anti-bribery due-diligence process as per our External Partners Risk Management Framework before they can be engaged. Appropriate training is provided to employees. [For further details, see the Public policy](https://www.novartis.com/investors/reporting-and-transparency-hub/public-policy) page of our corporate website. ###### Main activities in 2024 In 2024, our primary focus areas included advocacy efforts supporting various initiatives and policies designed to advance healthcare, drive innovation and enhance accessibility. These efforts involved, for example, engagement with European Union institutions through EU institutional policymakers with special focus on the Critical Medicines Alliance, Corporate Sustainability Due Diligence Directive, EU Pharmaceutical Legislation, Urban Wastewater Treatment Directive, and the Patent Package. These efforts aimed to strengthen supply chains, advocate for regulatory and intellectual property protections, enhance EU competitiveness, In the US, we engaged at both the federal and state levels to shape policies on drug pricing (e.g., the 340B program), the Inflation Reduction Act, and Pharmacy Benefit Managers reform. We emphasized engagement with policymakers, advancement of patient access, and efforts to uphold innovation and intellectual property protections.

At Board level, the Governance, Sustainability and Nomination Committee (GSNC) oversees performance regarding governance and ESG matters, including access to medicines, global health, environmental sustainability, and human capital management. The GSNC also discusses emerging trends and regularly advises the Board on ESG matters. [...] The ECN oversees operational management of ESG issues. The ECN-level ESG Committee, chaired by the CEO, meets every two months to review ESG performance and strategy. [...] The table on this page provides an overview of the governance of our four most material topics, identified as part of our materiality assessment (see page 15). [...] **Primary governance and oversight of our four most material topics** **Topic** **Board committee(s)** **ECN/management** **Patient health** - Audit and Compliance Committee - President, Operations **Innovation** - Science & Technology Committee - President, NIBR - President, GDD - Innovation Management Board **Access** - Governance, Sustainability and Nomination Committee - President, Innovative Medicines US - President, Innovative Medicines International - President, Global Health & Sustainability - ESG Committee **Ethical business practices** - Audit and Compliance Committee - Risk Committee - Chief Ethics, Risk & Compliance Officer - ESG Committee

At Novartis, we strive to engage in constructive dialogue with policymakers and other external stakeholders with the aim of improving access-to-medicines and patient outcomes. Our intent is to represent the perspective of Novartis in the policymaking process by providing data and insights which enable informed decision-making. We undertake political activities in a responsible and ethical manner with a view to creating a sustainable business environment. Our political activities include responsible lobbying, monitoring of the political environment at a global, regional, and local level, engagement with trade associations and financial contributions to support the political dialogue.

Results from engagement inform our strategy, risk management and reporting. We have policies governing our engagement with stakeholders, including the Novartis Commitment to Patients and Caregivers, Lobbying Guidelines, and our Third Party Code. [...] The respective Novartis global guideline outlines the ethical standards that we follow in our engagements with policymakers, and applies to employees as well as third parties working on our behalf. Third parties are also subject to our anti-bribery due-diligence process before they can be engaged. Appropriate training is provided to employees.

Dedicated public affairs teams; working with industry associations; meetings with regulators, governments, and other policymakers. Advocacy supporting value-based healthcare; measures to support innovation in the life sciences; constraints on healthcare spending; our therapeutic areas and expanding access to our medicines. [...] At Board level, the Governance, Sustainability and Nomination Committee (GSNC) oversees performance regarding governance and ESG matters, including access to medicines, global health, environmental sustainability, and human capital management. The GSNC also discusses emerging trends and regularly advises the Board on ESG matters. The ECN oversees operational management of ESG issues. The ECN-level ESG Committee, chaired by the CEO, meets every two months to review ESG performance and strategy. [...] The table on this page provides an overview of the governance of our four most material topics, identified as part of our materiality assessment (see page 15).

###### Political engagement Impact and risk management The laws and regulations relevant to the healthcare industry are broad in scope, are subject to change, and could require us to incur substantial costs associated with compliance, or to alter one or more of our business practices. ###### Main policies We engage in dialogue with policymakers and other external stakeholders on relevant policy topics, including conditions for innovation in the life sciences and expanding access to medicine. Our aim is to represent the Novartis perspective by providing data and insights that enable informed decision-making. We assess political, legislative and regulatory decisions that have a potential impact on patients and our industry. Furthermore, we participate in policy discussions with partners through various stakeholder dialogues and industry platforms. Engaging with trade associations also facilitates a collaborative approach to highlighting and solving issues that affect people with disease, and to ensuring an environment conducive to biopharmaceutical innovation. The respective Novartis global guideline outlines the ethical standards that we follow in our engagements with policymakers and applies to employees as well as external partners working on our behalf. External partners are also subject to our anti-bribery due-diligence process as per our External Partners Risk Management Framework before they can be engaged. Appropriate training is provided to employees. [For further details, see the Public policy](https://www.novartis.com/investors/reporting-and-transparency-hub/public-policy) page of our corporate website. ###### Main activities in 2024 In 2024, our primary focus areas included advocacy efforts supporting various initiatives and policies designed to advance healthcare, drive innovation and enhance accessibility. These efforts involved, for example, engagement with European Union institutions through EU institutional policymakers with special focus on the Critical Medicines Alliance, Corporate Sustainability Due Diligence Directive, EU Pharmaceutical Legislation, Urban Wastewater Treatment Directive, and the Patent Package. These efforts aimed to strengthen supply chains, advocate for regulatory and intellectual property protections, enhance EU competitiveness, In the US, we engaged at both the federal and state levels to shape policies on drug pricing (e.g., the 340B program), the Inflation Reduction Act, and Pharmacy Benefit Managers reform. We emphasized engagement with policymakers, advancement of patient access, and efforts to uphold innovation and intellectual property protections.

The Governance, Nomination and Corporate Responsibilities Committee (GNCRC) regularly reviews corporate governance principles and key governance documents against evolving best practice standards and new developments. [...] The ECN-level Trust & Reputation Committee, chaired by the CEO, meets every two months to oversee the company's environmental, social and governance (ESG) performance. In addition, we have an ESG Management Office to further embed ESG priorities across our business. [...] Stakeholder engagement is key to our ESG approach. We engage with our stakeholders through regular meetings, conferences and seminars; this engagement is a key part of building trust with society. For shareholders, we organize ESG investor days and issue a quarterly progress update.

## Political engagement [...] Global Public Affairs maintains an overview of budgeted and actual lobbying expenditures on an annual basis, provided by local and regional public affairs teams. [...] Local public affairs teams maintain an overview of intended political contributions and confirm the figures captured to the Global Public Affairs team. [...] The financial reporting system FCRS is the data source that reports the locally processed expenditures. [...] For the US PAC, US Public Affairs maintains an overview of the fund and discloses the amount disbursed to Global Public Affairs on an annual basis.

Clear and consistent messaging is key to our efforts to influence relevant advocacy and public affairs matters in the US, the EU and globally. We will leverage our country leadership teams to effectively influence at national and international fora. Development, sponsorship and communication of industry-relevant thought leadership will further enhance our efforts to engage with this important topic across our industry. [...] We will collaborate with industry partners to shape the environmental sustainability agenda across our sector. Clear and consistent communications and messaging with our diverse stakeholder group, including suppliers, customers, employees, shareholders and governments, will provide a single 'One Novartis' voice on environmental matters.

Malus and clawback policy Any incentive compensation paid to Executive Committee members is subject to malus and clawback rules. This means that the Board of Directors for the CEO, and the Compensation Committee for the other Executive Committee members, may decide – subject to applicable law – to retain any unpaid or unvested incentive compensation (malus), or to recover incentive compensation that has been paid or vested in the past (clawback). This applies in cases where the payout has resulted from a violation of laws or conflicts with internal management standards, including Company and accounting policies. This principle applies to both the short-term Annual Incentive and all long-term incentive plans. In October 2023, the Compensation Committee adopted a no-fault compensation clawback policy "for the recovery of erroneously awarded compensation" to all members of the Executive Committee and certain executive officers, in the event that the Company is required to prepare an accounting restatement, in full compliance with the U.S. Securities and Exchange Commission (SEC) Rule.

Clear and consistent messaging is key to our efforts to influence relevant advocacy and public affairs matters in the US, the EU and globally. We will leverage our country leadership teams to effectively influence at national and international fora. Development, sponsorship and communication of industry-relevant thought leadership will further enhance our efforts to engage with this important topic across our industry. [...] We will collaborate with industry partners to shape the environmental sustainability agenda across our sector. Clear and consistent communications and messaging with our diverse stakeholder group, including suppliers, customers, employees, shareholders and governments, will provide a single 'One Novartis' voice on environmental matters.

Federal and state laws dictate what falls under lobbying in terms of expenditures, reporting and registration. The intent of these laws is to provide transparency and accountability regarding persons who appear before the federal and state governments advocating for policies that would impact their constituencies. Included in the amount disclosed at the federal level are labor hours of Novartis associates who engage in federal lobbying; consultants and third-party expenses; and the portion of trade association dues related to lobbying. Registered state lobbyists comply with all reporting requirements as defined by each state.

Maintaining strong governance\n\nIn 2020, the Governance, Nomination and Corporate Responsibilities Committee (GNCRC) of the Board of Directors met four times and continued to oversee the company's strategy and governance on global health, corporate responsibility and other ESG topics at the Board level. Our new ESG targets and the issuance of a sustainability-linked bond were among the topics discussed by the GNCRC in 2020.\n\nThe Novartis Trust & Reputation Committee met six times in 2020. Chaired by our CEO, this sub-committee of the Executive Committee of Novartis (ECN) oversees progress and aims to accelerate decision-making in key ESG areas. Topics discussed in 2020 included potential gaps in our ESG performance, new ESG commitments, the environmental sustainability strategy, and diversity and inclusion.\n\nIn 2020, we created the position of Chief Sustainability Officer, who reports to a member of the ECN, to lead the strategy and execution of environmental sustainability across Novartis.\n\nWe also created the ESG Management Office in our Corporate Strategy group to further institutionalize ESG efforts across the organization. The new office will work with experts in divisions, functions and countries to develop a trust and ESG strategy framework and lead key ESG initiatives.\n\nIn addition, we are establishing an external advisory board to provide guidance to the Global Health & Corporate Responsibility (GH&CR) organization on strategy and related plans, policies and indicators.\n\nEngaging with policymakers\n\nNovartis also engages in dialogue with policymakers and other external stakeholders. Providing policymakers with data and insights enables informed decision-making conducive to improving patient outcomes. Additionally, we work closely with trade associations which create opportunities to raise industry standards and exchange best practices. A list of our memberships can be found in the appendix on page 88.\n\nNovartis makes financial contributions to support political dialogue on issues of relevance to the company or to certain government projects (e.g., for capacity building). Such contributions need to be fully compliant with applicable regulations, and we only make political contributions in countries where such contributions by corporations are both legal and generally considered appropriate. We publish the amounts of these contributions on our website and, for the US and Switzerland, in the Novartis in Society US and Novartis in Society Switzerland reports, respectively.

##### Ethical Business Practices

## Ethical & Compliant Behavior

**Definition: Processes and systems to ensure**
Novartis operates in line with high principlebased ethical standards especially in regards to
interactions with HCPs. Examples may include
adherence to laws, regulations and international
conventions (such as on Human Rights), and antibribery, anti-corruption and anti-trust legislation.

Other examples include supporting whistleblowing
channels, fostering open discussions on ethical
dilemmas, responsible lobbying and political
contributions, being sensitive over promotional
activities, drug prescription stewardship
and responsible incentive structures and
compensation.

##### How does it impact Novartis?

While stakeholders generally agreed that the
reputation of Novartis had recovered from legacy
integrity issues, trust remains easy to lose. Ensuring
we behave in an ethical and transparent manner is at
the very core of our license to operate as a company.
In addition, operating ethically and in compliance
with laws and regulations is essential for attracting
investment and ensuring Novartis is perceived as
a leader in the pharmaceutical industry. Finally,
scrutiny from governments alongside increased
societal expectations mean this will only increase in
prominence as a topic.

##### Stakeholder observations

There was general agreement among stakeholders
that Novartis has made significant progress in
recent years, and has created positive momentum
due to initiatives such as its code of ethics and the
conclusion of the 2020 settlements for investigations
into legacy behaviors. Many internal Novartis
respondents, felt that the company's investment in
online trainings has further supported compliance
awareness and had an impact on the company's
reputation. While some stakeholders noted prior
issues impacted their perceptions of Novartis, internal
and external stakeholders (particularly investors and
advisors) also often noted that the company had
significantly improved. They mentioned that under
new leadership, they felt Novartis had improved
in ensuring ethical and compliant behavior was
embedded in its processes.

As Novartis is a global company, stakeholders felt
it must keep in mind that what constitutes ethical
behavior, whether from a regulatory, political or
cultural standpoint, may vary from country to country.
Therefore, employees may benefit from further
information on companywide ethics/compliance i

local regulations. While Novartis has global systems
in place to report ethics or compliance concerns,
some internal stakeholders were unaware while others
felt company action in this area could be expedited.
In addition, stakeholders flagged moral concerns
related to the high price of cell and gene therapies
as well as with innovative biotechnologies in general.
Stakeholders also underlined ethical concerns in
the work environment, not specific to Novartis but
for the company's continued vigilance; for example,
operations in low salary countries, trust around
personal data and how R&D success was measured.

**Relevant links to Novartis**
**positions and resources**

[Ethics, Risk and Compliance](https://www.novartis.com/esg/ethics-risk-and-compliance)

[Code of Ethics](https://www.novartis.com/esg/ethics-risk-and-compliance/ethical-behavior/code-ethics)

[SpeakUp Office](https://www.novartis.com/esg/ethics-risk-and-compliance/ethical-behavior/speakup)

## Governance

All Novartis associates and third parties retained by Novartis to lobby on behalf of the company must act in accordance with the principles and rules established in the Novartis Global Guideline for Responsible Lobbying (PDF 0.1 MB). In addition, any third party that acts or lobbies on behalf of Novartis is subject to our anti-bribery due diligence process before it can be engaged. Appropriate training is provided to all associates engaged in lobbying. The due diligence process for all third parties engaging with political stakeholders has been strengthened.

Overall Novartis political engagement is – like any other Novartis activity – governed globally by the Novartis Code of Ethics (PDF 6.5 MB) and relevant policies, such as the Doing Business Ethically Policy and the Third-Party Guideline. Compliance with all Novartis ethics, policies and guidelines is subject to monitoring through Novartis auditing mechanisms.

In addition, the Executive Committee of Novartis (ECN), led by the Chief Executive Officer (CEO), is responsible for implementing the company's environmental, social and governance (ESG) strategy. The CEO chairs our ESG Committee, which oversees the company's ESG strategy, including ESG disclosures.

## Political engagement

#### ESG Category ESG Indicator

**Political contributions**

- Global political contributions

**Memberships in trade**
**associations**

- Global memberships in trade associations

#### Definition Methodology, calculation, data collection

Political contributions include monetary and non-monetary support for political parties, elected representatives or candidates seeking public office. Political contributions can also be made indirectly through support given to an intermediary organization, such as a think tank or trade association linked to or supporting particular political parties or causes.

We distinguish contributions for the US (Corporate and Political Action Committee (PAC)), Switzerland, Australia, and Japan.

The Novartis Political Action Committee (US PAC) is a voluntary and nonpartisan organization composed of eligible Novartis employees, board members and stockholders in compliance with federal and state laws. It receives funds from its members to contribute to the election of qualified candidates for public office.

Unit of measure: amount expensed for political contributions during the reporting period in thousand USD globally (total) and by country

Novartis is a member of external groups representing various stakeholders, including trade and industry bodies. Some of the trade associations may lobby on behalf of Novartis. This indicator captures the specific amount expensed for the memberships.

A global membership is a membership in a trade association that acts globally or regionally, whereas local trade associations act within the national boundary where they are registered.

#### Assumptions, scope and exclusions

Currently, Novartis only makes political contributions in the following markets: the US, Switzerland, Australia, and Japan.

Novartis PAC only uses voluntary funds received from eligible employees of Novartis to make political contributions. Members eligible to contribute to Novartis PAC are employees who are either US citizens or holders of permanent resident cards.

The amount disclosed for global memberships in trade associations is a total of global, regional and local memberships.

Political contributions are subject to a thorough due diligence process, local legal requirements review and are approved in advance by the relevant Novartis Country President, or his/her designee or delegate in Public Affairs.

Twice a year, Global Public Affairs (GPA) collects political contributions data from country heads of Public Affairs. GPA collects 9-month and 12-month data. Country data is compared with two data sources:

- Data from the financial reporting system FCRS

- Where possible, data from the compliance platform "BeSure"

Any discrepancy between figures and/or information is addressed jointly between GPA, country heads of Public Affairs and country FRA business partners.

For the US PAC, US Public Affairs maintains an overview of the fund and discloses the amount disbursed to Global Public Affairs on an annual basis.

The financial reporting system FCRS is the data source that reports the locally processed expenditures. Global Public Affairs maintains an overview of budgeted membership fees on an annual basis, provided by local public affairs teams.

GPA collects 9-month and 12-month membership data from the FCRS. This data is cross-referenced with membership data provided by country and regional public affairs teams, as well as with BeSure data, to ensure consistency.

Describe the process(es) your organization has in place to ensure that your engagement activities are consistent with your overall climate change strategy[…]Policy positions, targets and disclosures are aligned across Novartis through a number of ways. All major issues are aligned across business units and through Executive Committee (ECN)-level membership of the Environmental Sustainability Strategy Implementation Steering Committee, as well as via the Trust and Reputation Committee, which is a sub-committee of the ECN. Additionally, all disclosures are aligned through the Disclosure Committee. Quarterly meetings are scheduled to align with the Government Affairs and Public Affairs offices for the US and European Union.

Describe the process(es) your organization has in place to ensure that your external engagement activities are consistent with your climate commitments and/or climate transition plan?[…]The Novartis climate strategy and our commitment to become net zero by 2040 is used by our Communications and Engagement teams when they engage on climate related issues. If further technical content is needed they work with the Sustainability & ESG Office to ensure alignment. If any misalignment was identified, where activities seeking to influence policy were not consistent with our climate strategy and net zero target, the Sustainability & ESG office would seek to restore consistency between our position and any external advocacy.

Does your organization have a public commitment or position statement to conduct your engagement activities in line with the goals of the Paris Agreement?[…]Yes