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Living as a member of a global community it would be irresponsible for us to ignore some of the environmental challenges that face the world today. Climate change and the impact human activity has had on natural resources have become a very real concern for us at Adcock Ingram. South Africa's hosting of the UN Climate Change Conference (COP17) discussions in Durban at the end of 2011 indicate positive strides towards reaching a legally binding global agreement on reducing carbon emissions and the handling of the impact of climate change.

Adcock Ingram is committed and willing to work with the national governments within all the regions where the company has operations to make a positive contribution to their efforts to combat the impact of climate change. It is undisputed that this impact will have a direct effect on the health of people and therefore on the business. Adcock Ingram believe the company is in a unique position to provide value in this regard.

As a conscientious organisation Adcock Ingram has given increased focus to elements such as energy, water usage and waste management. Many other considerations are incorporated as part of daily business activities.

In the last year Adcock Ingram recognised the need for an environmental policy. This is in development and will be submitted to the board of directors for approval.

Health and Safety Audit

Health and Safety	Audit Score	Target for Year Under Review	Target for 2012

R & D	98 %	95 %	95 %
Clayville	96 %	95 %	95 %
Wadeville	96 %	95 %	95 %
New Road, Midrand	98 %	95 %	95 %
Critical Care	92 %	95 %	95 %
15th Road, Midrand	96 %	95 %	95 %
Durban	98 %	95 %	95 %
Port Elizabeth	98 %	95 %	95 %
Cape Town	97 %	95 %	95 %
Bloemfontein	98 %	95 %	95 %

Environmental Control System Audit Results for Adcock Ingram Sites

Environmental Control System	Audit Score	Target for Year Under Review	Target for 2012

Wadeville	94 %	90 %	90 %
Clayville	93 %	90 %	90 %
Midrand distribution center	92 %	90 %	90 %
R & D	96 %	90 %	90 %
Aeroton	91 %	90 %	90 %

Looking Forward

"To position Adcock Ingram as a benchmark healthcare company, that has fully internalised and implemented a cutting edge Sustainability Strategy by considering the economic, social, environmental and financial issues in context in which we operate both now and in the future."

The commitment to a formalised environmental programme has been championed by the CEO and the responsibility for this program has been assigned to senior executives within the supply chain and financial functions. Regular reports will be provided at executive and board meetings and progress will be measured against defined targets.

Several new manufacturing projects have been undertaken during 2010 and will continue into 2012. Inherent in each of these projects is a commitment to implement and utilize environmentally friendly initiatives in order to continue on the path to becoming a more environmentally aware and compliant organisation.

Over the next year, Adcock Ingram intends to empower staff on a variety of sustainability issues through internal awareness campaigns. The awareness campaigns will aim at behaviour change. This will be in conjunction with changes within the working environment to facilitate the behaviour change where possible.

In addition, the company is looking at ways to collect and collate more detailed information of various consumables in a manner that will add value to the assessment and improvement of processes and procedures as well as facilitate additional disclosure. A combination of these efforts will have both a cost and resource saving impact.

Climate Change

The anthropogenic impact on climate change is without question. The uncertainty relates to the extent of the impact. The South African government has stated their intent to reduce carbon emission by 34 % on business as usual scenario by 2020 and by 42 % by 2025. This however is conditional on attaining financial and technical support from the international community.

At Adcock Ingram, there is a belief that the company is making constructive contributions to these efforts. An increased focus on climate change and other sustainability issues has become more prevalent in the way the company conducts its business. Adcock Ingram believes that this is the beginning of the journey and the business is glad to report that throughout the company there is increasing evidence of efforts by employees to make a positive impact on these issues. Adcock Ingram now has dedicated resources focusing on sustainability considerations, including the issue of climate change and other environmental, social and financial considerations and implications.

Adcock Ingram has also increased its involvement in workshops and discussion groups looking at climate change over the last few months of the financial year. The UN Climate Change Conference (COP17) taking place in Durban at the end of 2011 was an ideal opportunity for businesses in South Africa to show its commitment and support in addressing this global issue and demonstrate their efforts to operate as more conscious businesses.

Carbon Footprint

In a world where the impact of business on the environment, direct or indirect is of fundamental importance, Adcock Ingram have become increasingly aware of the company's activities and their implications for all stakeholders. Over the last few years measuring Adcock Ingram's carbon footprint has allowed the organisation to gain a better understanding of operational emissions. This is only a start. The business is using the findings of the carbon footprint conducted as at 2010 financial year end as the base year. The footprint was done by Global Carbon Exchange, and independent vendor.

Environmental Control System	Financial Year Ended 30 September 2011	Financial Year Ended 30 September 2010

	Tonnes	Tonnes
Scope 1
Company-owned/controlled vehicles	5 227	17 303
Stationary fuels	10 049	10 918
Fugitive emissions (Kyoto)	57	133
Other (non Kyoto gases)	1 743	1 571

Scope 2
Electricity	32 456	27 744
Total Scope 1 & 2 and Other	49 532	57 669

Scope 3
Business travel	7 340	7 946
Employee commute	4 687	3 518
Outsourced distribution (import)	8 919	18 254
Outsourced distribution (export)	1 190	549
Packaging materials	26 183	8 623
Paper use	28	46
Waste	8 134	5 254
Water (embedded CO2e)	277	516
Total Scope 3	56 758	44 706

Total	106 290	102 375
Tonnes Per Employee	19.01	28.37

Carbon Disclosure Project (CDP) and Water Disclosure Project (WDP)
In the last year Adcock Ingram once again worked with Global Carbon Exchange to facilitate Adcock Ingram's response in the CDP. This process as always is one of introspection and essential findings on Adcock Ingram's efforts in terms of the company's carbon considerations from both a risk and opportunity.

In the year under review Adcock Ingram willingly participated in the WDP. This has not been rolled out to all JSE Listed companies but as a water conscious business Adcock Ingram appreciates the need to evaluate and monitor usage and disposal of effluent. The company's participation has highlighted the need to keep more detailed information on water.

Water

There is no doubt that this natural resource is fundamental to Adcock Ingram's business. The availability of usable water will impact on the sustainability of the company. With this acknowledgement Adcock Ingram have become increasingly aware of the management of this scarce resource. The company is investigating ways to limit waste water and looking at innovative ways of saving on this resource as well as costs in the long term. Adcock Ingram will aspire to enhance the current management processes and report progress on more efficient usage of this precious resource.

Some of Adcock Ingram's efforts include:

The use of grey water for irrigation
Recycling brown water for use in lavatories
Borehole water is used for irrigation
Constantly looking at ways to improve recycling water at the plants

Case Study: 5-litre Can Project

This project was undertaken as the cleaning process resulted in water remaining in the container due to the nature of the handle on the can. An investigation was conducted and a new design developed by employees with a design house.

Benefit Measurements

Primary Metrics: Cycle time
Current units: 1 800 units/shift
New design will increase outputs by 27 % (2 300units/shift)
Speeding up of the rinsing process will reduce the cost of the product by R2.80 per unit
Total Annual Savings = R2.5 million (R2.80 x 0.9 million units p.a)

Secondary Metrics: Cost of new can
Current Price: R5.55 each
New Price: R4.30 each
Savings: R1.25 per can
Total Annual Savings = R1.1 million (R1.25 x 0.9 million units p.a)
Total Savings = (cycle times savings + cost reduction on new can) = R3.6 million p.a

Potential Additional Savings

The new can will require a new cap as well. Currently negotiating lower prices. (Estimate savings in the region of R45 000 p.a)
Overtime and weekend work will be stopped (labour cost saving)

Adcock Ingram's Critical Care Division trounced all other national contenders to take first place - Gold - in the Corporate Division of the annual Productivity Awards in October 2011.

Energy

Without a doubt this is a key consideration for all businesses, particularly in South Africa in recent years. Adcock Ingram has reviewed a number of initiatives to reduce energy consumption throughout the business. This covers a range of processes and is ongoing. These efforts are increasingly conducted from a more coordinated manner within the business. Adcock Ingram has started an energy audit to establish a baseline for the company's consumption at a number of the sites. This will allow a more focused approach on how to reduce energy consumption in certain processes, resulting in less carbon emissions as well.

Some of Adcock Ingram's efforts include:

Energy reduction efforts are on-going with constant evaluation and assessment
Commissioning of an energy audit to establish a baseline
Using energy efficient lighting in new developments or in retrofitting
Consideration of solar energy for emergency lighting
Implementation of energy saving initiatives at the Durban distribution centre

Case Study: The Quest for Energy Saving

Creative energy thinking resulted in 49 % saving in energy, an estimated R2 million saving in energy costs at the Midrand Distribution Centre over five years. It also resulted in a saving of R8.5 million in capital expenditure. The project team earned a Green Supply Chain Award for the best energy saving project over R10 million for this fine effort.

Adcock Ingram's national distribution centre in Midrand is the core of the Group's national supply chain. MCC regulations require that the 8 000sqm high rise warehouse be air-conditioned to ensure optimal storage conditions for Adcock Ingram products. This required inter alia, temperatures remaining between 18 – 25 deg.

Professional consultants provided estimates which illustrated that the total power requirements for the site would be 1 800 kVa against the total incoming, poor power supply of 1 000 kVa – this at the time when South Africa was experiencing its worst ever energy problems. Eskom advised that it would take 3-5 years before the incoming power supply could be increased to required levels.

The project team was therefore faced with a crisis and a desperate need to halve the estimated power demand without compromising on air-conditioning (the major power consumer on the site), lighting and other energy shortages.

Extensive research led to the discovery of a 'variable refrigerant volume' (VRV) system commonly used in Japan for office cooling (never in a warehouse application). Estimates showed that the VRV system for the warehouse (coupled with insulation improvements) would reduce air-conditioning demand from 800 kVa to 350 kVa. The building was made airtight and the warehouse roof was lifted and Rock Wool insulation inserted under the sheeting. This contributed to a 20 % reduction in air-conditioning power requirements.

Traditional warehouse lighting was replaced with T5 fluorescent lights connected to passive infra-red sensors. The latter turned off the lights when there was no movement in the area.

A change to high frequency charges reduced the power requirement for charging batteries by 15 %. Multiple batteries were introduced to allow charging in non-use periods.

A building management system was installed to manage all energy components of the warehouse and office block. This included air-conditioning, temperature control and monitoring, peak power demand, access control, security and use of the generator.

This case study illustrates that significant benefits can be achieved based on a simple, aggressive approach and 'out of the box' thinking as traditional techniques are not necessarily the best options when saving energy is a priority.

With acknowledgement to Industrial Logistic Systems, Daiken and Johnson Controls.

Waste Management

There is a highly developed waste management process in place at the Aeroton site. This has been running for a number of years with continual improvement made to the process. Recycled materials are cardboard, pallets, plastic and steel. This process has resulted in the commissioning of a dedicated resource to assist in the maintenance of this operation. There are specified vendors, pre-approved to remove the waste. Waste is weighed and an invoice is sent to the respective vendor.

Adcock Ingram has become increasingly aware of the waste generated through the entire lifecycle of the products. The company is looking at the process from cradle to grave and exploring ways that we could possibly limit the environmental impact.

Some of Adcock Ingram's efforts include:

Having generated income of almost R600 000 from waste recycling
Having developed a dedicated waste management site at the Midrand offices
Looking at the nature of product packaging

Distribution

Adcock Ingram's distribution business received the Best Project over R10 million Award at the Green Supply Chain Awards in August 2011. This was based on energy saving efforts undertaken by re-engineering building, lighting, air-conditioning and incoming power supply infrastructure, operational processes and management systems. This resulted in a reduced overall demand to below 800 kVa, in comparison to the estimated 1 600 kVa required, half the expected power requirement, as calculated by engineers, at the Midrand distribution site.

In November 2010 similar applications were undertaken at the Durban distribution site. Lighting and air-conditioning were adapted. Adcock Ingram is looking at the viability of rolling out some of these initiatives at other distribution sites.

Adcock Ingram is aware of the pending carbon tax and is looking at how this will impact operations, particularly from a distribution perspective and how this can be managed.

Since May of 2011 there has been greater consolidation of Critical Care, Pharmaceutical and now NutriLida deliveries. This has resulted in fewer delivery trips and therefore less carbon emissions.

Critical Care has been integrated into Pharmaceuticals distribution centres to facilitate the consolidation and improve distribution to customers. This has not resulted in any system changes and Adcock Ingram believe the company will see additional reductions in carbon emissions in the next financial year. The 15th Road site is due to cease operating within the next financial year. The links between this site and Midrand required numerous trips which will no longer be needed. This will again contribute to carbon emission reduction efforts.

When negotiating contracts with distributors Adcock Ingram undertakes a thorough review. The company focuses on the vendor's replacement policy which incorporates issues such as fuel efficiency, maintenance, vehicle selection criteria and impact on terrain. Adcock Ingram also focus on speed and percent of driving that takes place in the "Green Band" (this is the range in which a vehicle is the most economical).

Adcock Ingram is looking at developing a new distribution centre in Cape Town. The company is looking at incorporating a number of green elements in the development of this site.

Administration

Adcock Ingram's Human Capital department has invested R29 640 in an electronic system allowing employees access to their payslips and other relevant information electronically. This system allows access to historic data and is available to all employees who have access to a computer. Not only will this result in financial savings, but will also have a significant impact on the amount of stationery used for communication from the Human Capital department. Environmentally there will be a reduction of paper use.

Midrand Head Office & Warehouse Facility

A number of energy, water saving and waste management initiatives have been implemented at the site and are inherent in the design of the original building. These include:

A Building Management System (BMS) with an intelligent energy management system control which manages the overall energy usage on site. Savings through this system are estimated to average more than 30 %. Elements of this BMS system that contribute to the savings are the energy manager (controlling energy consumption and peak loads by switching off equipment at critical times without compromising functional standards in the building), timers (controlling air-conditioners, geysers and lights) and intelligent control systems that ensure that the distribution warehouse is controlled to strict Medicine Control Council (MCC) temperature standards
This BMS system also offers a comprehensive monitoring system to track water usage, electricity usage, critical alarms on equipment like the generator, fresh air systems, fridges, freezers, fire systems, access control, alarms and air-conditioning systems. This is monitored on a 24/7 basis in the central control room
Insulation was installed (to cover the total roof surface). An estimated savings figure from the engineer/manufacturer is stated as
40 %
The front of the building has trellises to aid cooling in the main office building and creepers have been planted to grow up these trellises
Rain water is channeled into containment/drainage ponds. This ensures better flood control and water is also fed back into the groundwater system. Rain water catchment project is looking at taking water from the roof and parking areas into the rainwater catchment pond. An automatic drain pump will send water for irrigation when it reaches a certain level. Adcock Ingram will look at developing an additional pond for this at a later stage
A rain sensor installed on the irrigation control system ensures that water is saved when it is raining
The borehole on site contributes to water savings
The warehouse is equipped with motion sensitive lighting control
The auditorium and boardroom lights and air-conditioner are controlled by motion sensors
In the process of installing heat pump technology to replace geysers' element heating. Expected savings will vary between 75 % and 85 % (depending on air temperatures around the heat pumps)
More than 80 % of the fluorescent lights in the building are controlled by electronic starters (leading to lower energy usage and higher globe-life expectancy). There is an ongoing drive to replace the balance of old ballast systems with electronic starters
There is a process in place to ensure that fluorescent lights are disposed of according to strict prescribed environmental process
The diesel tank system on site was also built in accordance with strict local authority environmental rules (bund walls to control spillage/leakage and fire protection system) and the necessary certificates are being renewed on an annual basis
Flat screen technology (as opposed to CRT) is used on all computer terminals
Technology drives numerous electronic office initiatives
Paper and other waste recycling initiatives are in place
As a new initiative a waste sorting section has been constructed to facilitate in waste management. This will result in waste sorting within the warehouse as well. This will be rolled out in the new financial year
With the arrival of the Gautrain a number of employees have chosen to use this mode of transport to get to work. There will be a pedestrian gate built to allow staff easier access to the building
Initiatives have been taken to reduce the impact of the noise levels from the warehouse on the neighbours. A wall has been constructed around the refrigeration plant
Quarterly fogging is conducted in the building using environmentally friendly chemicals
All cleaning materials used are environmentally friendly
Plans to develop a herb garden to provide for the canteen on site
A road was built in order to avoid destruction of a wetland that exists behind the building
The koi pond was temporary relocated in order to preserve the fish and plant life. The fish will be returned to the permanent ponds on completion of the construction
Looking at the viability of solar panels to support emergency lighting

Midrand Head Office & Warehouse Facility

Clayville Manufacturing Facility

As this is a new facility, many environmental initiatives have been inherent in the design and equipping of the facility:

Process HVAC (Heating, Ventilation, Air Conditioning and Cooling) design is on the basis of maximal energy efficiency while achieving regulatory demands for pressure cascades and clean room conditions. Use is made of physical and computerised design elements driven by a complex Building Management System to ensure minimal or no energy consumption during production downtime
Energy saving lighting design is applied throughout the facility with a range of energy efficient lighting applications deployed depending on the purpose of the various areas.
Provision is made for recovery of process effluent through a self contained effluent pit to hold contaminated water for treatment and safe disposal
A Geothermal heat exchange system will power the air conditioning for both the office and warehouse components of the project, reducing the consumption of electricity to only the difference between the constant 18 degrees supplied by ground and the 23 degrees Celsius state to be achieved in warehouse and offices
Process water (reverse osmosis) will be recycled for domestic use – basins, drinking water, toilet flushing and gardening water will all be from the purified water process run off
Manufacturing process equipment and methods have been reviewed and the most energy efficient technologies and methods have been applied wherever possible. Process automation will ensure that process times are minimised and consistent, there is little room for discretion and consequently process variation is minimised
Solar power will also be implemented for dock levellers and weighbridges

Wadeville Manufacturing Facility

A new office facility and extension to the factory was added in 2009 with many electricity and water saving initiatives being implemented at the same time:

Motion sensitive lighting has been installed throughout the office building
Tinted glass has been installed on the office buildings to assist with temperature cooling
Air conditioning in the office block is controlled by motion sensors
The transformer ballasts of fluorescent lights have been replaced with electronic ballasts, using less energy
Solar heating for the canteen geyser has been installed
External flood lights are controlled by day/night switches
Light dimmers have been installed in the boardroom and training room
Power factor correction has been installed in all three substations
The Air Handling Unit (AHU) and compressors are fitted with variable speed drives to control the speed of operation depending on demand

Bangalore Manufacturing Facility

In 2008, Adcock Ingram entered into a JV in India and built a new PIC compliant tablet and capsule manufacturing facility which offers the following environmental benefits:

Motion sensitive lighting has been installed throughout the facility
More than 50 % of lights are Compact Fluorescent Lamps (CFL), which provides a 30 % Energy saving as compared to conventional fluorescent lamps. This in turn contributes 137 kWh (units) savings per day and 41 511 kWh (units) annually
Energy saver for lighting system is installed, resulting in a 12 % of energy saving. This contributes savings of 37 595 kWh (units) per annum
Fuel additive for the diesel generator results in a 4 % savings on diesel. This results in savings of 7 770 litres of diesel every year
Borehole water is used for the entire facility
Treated effluent is used for toilet and garden water requirements
The Steam boiler is in the process of being replaced with a hot water generator for the granulation equipment and coating area. This will result in savings of 5 500 litres of diesel per month and 66 000 litres of diesel per annum
The above project will result in 250 KL (kilo litres) of water savings per month and 3 000 KL per annum and savings of 300 litres of chemicals per annum
A Building Management System (BMS) for Heating, Ventilation and Air Conditioning (HVAC) is to be made operational. This will result in net savings of 15 % electricity which equates to 448 110 kWh units per annum
External floodlights are controlled by day/night switches
Staff are made aware and are disciplined in the application of energy saving practices which include switching off lights when not in use
Heat recovery has been implemented at Block B by controlling the exhaust and supply of air through Air Handling Units
Solar street lights are being investigated
Rain Water harvesting is being investigated

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Adcock Ingram Head Office

Physical Address:

1 New Road, (c/o New Road & 7th Street),
Midrand,
South Africa

Postal Address:

Private Bag X69,
Bryanston,
2021,
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Telephone:

+27 11 635 0000

Customer Service:

0800 113 844

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S 25 58.518, E 28 6.342

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Orders

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Adcock Ingram International

Adcock Ingram East Africa Ltd

Physical Address:
Semco Industrial park
Mombasa Road
Nairobi Kenya

Postal Address:
P.O. Box 101674 Code 00101
Nairobi Kenya

Telephone:
+254 0202510601/2

Fax:
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Ayrton Drug Manufacturing Company Ltd - Ghana

Physical Address:
B1/24 Tesano Abeka Road
Accra, Ghana

Postal Address:
P. O. Box 2149
Accra, Ghana

Telephone:
+233 302 245090 / +233 302 222235 / +233 244358981/2

Fax:
+233 302 241804

Adcock Ingram Healthcare Private Limited - India

Physical and postal Address:

#64, 3rd Cross, V R Layout
Ramamurthy Nagar Main Road
Banasawadi, Bangalore 560043
India

Telephone:
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Fax:
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DATLABS (PVT) LTD Head Office - Zimbabwe

Physical Address:
45 Falcon Street
Bulawayo
Zimbabwe

Postal Address:
P.O. Box 8476
Belmont
Bulawayo
Zimbabwe

Telephone:
+263 9 470092-5/460179/466950/466963

Fax:
+263 9 470832

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Physical Address:
1st Floor NCR Building
188 Samora Machel Avenue
Harare
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The following terms and abbreviations mean:

Adcock Ingram – Adcock Ingram Holdings Limited

AICC – Adcock Ingram Critical Care (Pty) Ltd

API – Active Pharmaceutical Ingredient(s) used in the manufacturing of products

ARV – Antiretrovirals, used in the treatment of HIV and AIDs

BBBEE – Broad based black economic empowerment, as defined by the codes of BEE good practice

BEE – Black economic empowerment

BMS – Building Management System

CSI – Corporate Social Investment

DMD – Drug management and development

DoH – The Department of Health of the Republic of South Africa

DTI – Department of Trade and Industry

EDP – Executive Development Programme

FDA – The Food and Drug Administration, a regulatory body in the United States

FMCG – Fast moving consumer goods

GP – General Practitioner

HVL – High volume liquids, used in the context of the plant currently being developed by Adcock Ingram at Clayville, Gauteng

IFRS – International Financial Reporting Standards

IT – Information Technology

JSE – JSE Limited, the securities exchange on which the shares of Adcock Ingram are listed

KTI – Kagiso Trust Investments

MCC – Medicines Control Council, the regulatory body responsible for evaluation of and monitoring the quality, safety and efficacy of medicines on the South African market

MHRA – Medicines Health Regulatory Agency of the United Kingdom

OTC – Over-the-counter products, available without prescription

PIASA – Pharmaceutical Industry Association of South Africa, an industry body

PIC/S – Pharmaceutical Inspection Convention and Pharmaceutical Co-operation Scheme

PTG – Pharmaceutical Task Group, an industry body of which Adcock Ingram is a member

R&D – Research and Development

ROI – Return on Investment

RONA – Return on net assets

SADC – Southern African Development Community

SEP – Single exit price, the price determined by regulation, at which medicines may be offered for sale on the South African private market

SIP – Strategic Industrial Programme

TGA – Therapeutic Goods Administration of Australia

TLC – Tender Loving Care (Pty) Ltd

TSG – The Scientific Group (Pty) Ltd

VMS – Vitamins, Minerals and Supplements

WHO – World Health Organisation

ZAR – South African Rand

Health and Safety Audit

Environmental Control System Audit Results for Adcock Ingram Sites

Looking Forward

Climate Change

Carbon Footprint

Water

Energy

Waste Management

Distribution

Administration

Midrand Head Office & Warehouse Facility

Clayville Manufacturing Facility

Wadeville Manufacturing Facility

Bangalore Manufacturing Facility

Adcock Ingram Head Office

Physical Address:

Postal Address:

Telephone:

Customer Service:

GPS:

Prescription & OTC HealthcareProfessionals Orders

Gauteng

Telephone:

Fax:

KwaZulu-Natal

Telephone:

Fax:

Western Cape

Telephone:

Fax:

Free State

Telephone:

Fax:

Eastern Cape

Telephone:

Fax:

Adcock Ingram Critical Care

Physical Address:

Postal Address:

Telephone:

Fax:

Prescription & OTC Healthcare
Professionals Orders