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ERM verification statement

Environmental Resources Management Limited (ERM) was appointed by GSK to undertake an external verification assessment of its environment, health and safety (EHS) reporting within the GSK 2005 Corporate Responsibility report (The section on Environment and the Health & Safety pages within the Employee Practices section).

This is the fifth year of our involvement as an external verifier with GSK. The objectives of our assessment were to: check that the EHS data presented are accurate, and that they represent GSK’s performance fairly; critically review the completeness and relevance of the information presented; and, assess the effectiveness of GSK’s data management and reporting systems. The pages of GSK’s report that contain EHS data verified by ERM are marked with the following symbol.

Scope of assessment
During the period October 2005 to February 2006 we conducted the following tasks:

• Assessments at six globally significant sites¹ and telephone interviews with 13 additional sites to review EHS data management and reporting processes;
• Review of corporate data collation and internal verification processes at GSK offices in the UK;
• Review of the content of the EHS sections of the 2005 Corporate Responsibility report, including checking sample group data, to assess its completeness, relevance and accuracy; and
• Interviews with corporate personnel to obtain supporting information on GSK’s EHS performance in the following areas: acquisitions and divestitures; contaminated land; auditing of GSK sites, suppliers and contract manufacturers; H&S reporting relating to the US sales force; and, setting of performance targets.

Overall assessment
Subject to the scope of our assessment and comments set out below, we believe GSK’s EHS reporting in the 2005 Corporate Responsibility report is a complete, relevant and accurate representation of GSK’s performance. From our review we have made the following findings and recommendations.

Findings

Reporting
This year, GSK has reported on its progress against the five year performance targets it set in key areas of environment, health and safety. We found that GSK has made good progress on strengthening internal reporting processes and better understanding the reasons for EHS performance change against its targets.

GSK provides a wide range of information in its report but it is not always clear which are the material issues facing the business. We found inconsistency in the level of detail provided on reasons for performance change, for example how changes at major contributing sites significantly affect the Group total.

GSK has improved collection of data from contract manufacturers and suppliers, and has expanded the number of contract manufacturers from which it collects key EHS data in 2005. There are ongoing challenges in collecting complete and accurate data for GSK to be able to report on its broader EHS footprint.

One of our 2004 recommendations related to the limitations of EHS performance data, in particular the potential scale of statistical uncertainty, which is under consideration by GSK. The 2005 report does not consistently cover the significance of potential limitations of the data such as calculation method or robustness of sampling techniques to understanding performance change, for example calculating VOC emissions.

Data accuracy
GSK has continued to make progress to improve the accuracy of its EHS data by introducing further internal data checks with the globally significant sites. ERM identified a number of material data inaccuracies through its assessments at site level and checking of sample group data, in part due to changes in the reporting schedule in 2005 that were introduced to meet the deadlines of the Corporate Reporting program. These inaccuracies were subsequently addressed by GSK to ensure accurate reporting in the 2005 Corporate Responsibility report.

There have been improvements in energy performance following the introduction of a business-specific energy management programme which have also helped to ensure more accurate data reporting. GSK is rolling out new system functions to help integrate EHS management and data collection.

We found challenges associated with accurate and complete health and safety incidents reporting and investigation at site level, including a weakness in formal internal processes to check compliance with GSK’s requirements on accurate reporting and full investigation of incidents. In addition, we found examples of misreporting due to poor understanding of the corporate reporting requirements and data entry errors.

Recommendations
We recommend that GSK:

• Explains which of the issues it reports on are material to the business and prioritises its reporting accordingly;
• Reports further on how trends in outsourcing affect its overall EHS footprint and performance, and expand further the reporting on EHS impacts of contract manufacturers and suppliers;
• Improves the accuracy of environmental and incidents data by introducing additional mechanisms to check completeness of data reported by sites and by providing additional training to sites on reporting and data management;
• Reviews formal processes to check compliance with GSK’s requirements on accurate reporting and full investigation of incidents; and
• Looks for opportunities to further align data management at corporate and site level, integrating reporting and core business processes where practicable.

ERM

March 2006

GSK response to verification statement
After verifying GSK’s EHS reports for five years, many of ERM’s recommendations point to improvements that we work on every year. For example, every year we improve processes for collecting data, clarify definitions and instructions, provide training to the people at sites who gather and enter their site data, improve the processes for analysing and summarising the data and try to understand the changes from year to year.

Explain materiality
In 2001, as part of the planning process that resulted in our 10-year EHS Plan for Excellence, we conducted a review of reporting. We considered the measures of our EHS impact used within the company. We used the Global Reporting Initiative and surveys from investment rating organisations and environmental organizations as indicators of stakeholder expectations for EHS reporting by companies of our size. From this exercise we concluded that the information and metrics we include in this report are material to GSK. We decided to be consistent in our reporting for the five year period of our Plan for Excellence. As we move into the next five year period, we will again review the materiality of the information and metrics we report and will continue to report what our external stakeholders consider important.

Trends in outsourcing
It is our goal to report, in the aggregate, the EHS performance of our contract manufacturers and key suppliers. We hope to use this to report the total EHS footprint for GSK products and to use this as the basis for our improvement targets. We request EHS information from all our contract manufacturers and key suppliers every year but response is voluntary and the rate is very low. We intend to make response to this questionnaire an integral part of future contracts.

Accuracy of site EHS data
A comprehensive global EHS information management system is in place to help sites manage their EHS data. We use the same system to collect the data for this report and for internal reporting. We recognise that the past error rate of initial entry varies between 25% and 50% and we have put in place a thorough data verification process to correct the errors. We are attempting to address this situation by providing additional web-based training. We are also conducting a formal review of the information that has been requested from sites to see if it can be simplified, while still meeting the needs of our stakeholders.

Review the processes to check compliance with reporting and investigation of incidents
We have completed the first phase of our audit programme, conducting a comprehensive baseline review. In 2006 we are starting a risk-based audit process. We will include a review of reporting EHS data and investigation of incidents as part of this process. We will also increase our level of training in these areas.

Align Corporate and site data management
We will be conducting a formal review of our information management practices to identify improvements that can be made in both the Corporate and site processes.

¹ Globally significant sites are defined as sites that contribute 5% or more to a GSK EHS target

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