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Environment

This year we have completed the first five years of our Environment, Health & Safety (EHS) Plan for Excellence, which marks an important milestone in our journey to environmental sustainability. Environmental performance is reported in these pages. Health and safety performance is reported in the Employee section

In 2001, we set “stretch” targets in consultation with the business to address EHS issues of concern to our stakeholders. When we set these targets we had identified some proposed improvement projects which would help us to achieve them but we did not have specific underpinning projects to achieve all the environmental targets.

Performance
We have achieved many of the EHS targets. We met or surpassed targets in energy consumption (and related carbon dioxide emissions), water consumption, wastewater organic material (measured as chemical oxygen demand), non-hazardous waste, and ozone depleting substances used to produce our inhalers.

For volatile organic compound (VOC) emissions to air we achieved a significant reduction and almost achieved our ambitious target of a 30% reduction.

We also set an ambitious target for ozone depleting compounds in ancillary equipment, where we achieved a 36% improvement.

In some cases changes in the business helped us to make progress (eg wastewater quality and emissions of solvents to air). But in two cases - hazardous waste disposal and recycling – changes made progress more difficult. We did not meet targets in these areas due to factors such as maintenance of recycling systems, movement of products to production facilities without recycling equipment, and new product introduction.

We provide details of performance in each area on the performance pages of this section.

EHS management
A solid foundation of programmes and management systems contributes to the progress we have made. GSK has moved towards what I describe as a “self-regulatory” EHS culture, which focuses first on achieving legal compliance and manages EHS proactively based on our understanding of the risks, liabilities and opportunities. It is part of our strategic objectives to achieve operational excellence and to be a responsible company.

Our EHS structure includes:

1. Management system based on a set of Global Standards incorporated into a framework of EHS programmes
2. The EHS Plan for Excellence, which identifies our ten-year strategic vision for EHS in GSK
3. The CEO’s EHS Excellence Awards which recognise outstanding projects at GSK sites around the world

We feel that we have made significant progress in improving the performance of EHS in GSK but we realise that there is always more to do. First, we need to embed this culture so that people really understand the business benefits of good EHS practice: enhanced productivity, quality and employee relationships, which are beneficial for GSK’s performance and reputation.

Investors
This is already understood by investors. They appreciate not only our progress but the transparency which means we are open about the areas where we have not done as well as we had planned.

This has been borne out by the positive ratings that GSK receives from the various investor ratings.

GSH has been recognized in these indices:

• Dow Jones Sustainability Index (DJSI) for 2005: DJSI members are the top 10 per cent of their industry sector. They are selected from the 2,500 largest companies in the world. Selection is based on a best-in-class approach covering economic, social and environmental criteria.
• Business in the Environment Index Premier League: This is the third consecutive year that GSK has been listed in the Premier League, achieving a score of 97 per cent for 2004 data. The index rates environmental management and environmental performance.
• Carbon Disclosure Project's Climate Leadership Index: GSK is one of only three pharmaceutical companies named to the Climate Leadership Index. The Carbon Disclosure Project is a coalition of 155 institutional investors with more than $21 trillion in assets. The Climate Leadership Index includes only companies that are well positioned to respond to the financial implications of climate change, compared to their FT500 peers.
• FTSE4Good 2005: The FTSE4Good Index Series only includes companies that meet globally recognised corporate responsibility standards, and facilitates investment in those companies.
• 100 Most Sustainable Companies: GSK was one of only four pharmaceutical companies identified in the Global 100 Most Sustainable Corporations in the World. This is a project initiated by Corporate Knights with Innovest Strategic Value Advisors, a leading research firm specialising in analysing “non traditional” drivers of risk and shareholder value covering performance on social, environmental and strategic governance issues. Launched in 2005, the annual Global 100 is announced each year at the World Economic Forum in Davos.

Ratings like these help investors identify companies that will meet their investment goals and are important to GSK's reputation. They are achieved by our pro-active approach to EHS and sustainability and the company-wide reporting of EHS performance data. These index listings are a tribute to the many EHS professionals and other managers and staff at all the GSK sites who report the data on which these listing are based,

Investors and other stakeholders also appreciate our commitment to dialogue – just as much as we appreciate the value of stakeholders’ perspectives. We have now created a formal Stakeholder Panel but we have also consulted widely with GSK people as we move to the next five-year plan period.

The future
Internal and external engagement has helped us to focus on these major challenges for the immediate future:

• Occupational exposure to chemicals
• Driver safety
• Process safety
• Pharmaceuticals in the environment
• Hazardous chemicals usage
• Energy conservation

In the longer term, we can see three possible steps to becoming a more environmentally sustainable business:

• Improve natural resource efficiency and decrease the amount of waste we generate. We are looking more broadly than production to include the efficiency of all our operations
• Move from relying on non-renewable chemicals to renewable materials
• Move from using synthetic chemical routes to biological systems to create medicines

It will take many years to achieve this transition, but it is part of the journey towards being an environmentally sustainable company.

James Hagan

Vice President,

Corporate Environment, Health and Safety

About the environment section of this report
This is the 6th year that we have reported on our environmental performance. The legacy companies (Glaxo Wellcome and SmithKline Beecham) individually published EHS reports for a number of years prior to the formation of GSK in 2000. Copies of these reports are available on the Corporate Register.

Further background information on our approach to managing environmental issues is available in the Environment, Health and Safety section of our website.

Note on the scope of the data
The environmental data covers the calendar year 2005. It is collected from all of our 81 pharmaceutical and consumer manufacturing sites, 6 of our 8 biologicals manufacturing sites and 18 of 20 pharmaceutical and consumer research and development sites as well as all 7 distribution centres, 6 of 8 major office locations and 4 of the smaller office and sales locations. We include available data for sites that were in operation for all or part of the year.

Notes attached to the charts explain the scope and data collection process for each parameter in more detail. Unless specified as being per unit of sales, figures are absolute numbers (ie total consumption of energy, water etc.)

Verification
The environment,health and safety sections of this report are externally verified by ERM (Environmental Resources Management). Web pages to which the verification applies are indicated by this symbol See ERM’s verification statement.

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