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Sustainability Report 2022TABLE OF CONTENTS Strategy enable life-changing therapies for serious illnesses; treat more than 90 million patients worldwide with cardiovascular, diabetes and thyroid disorders every day; and help many couples to realize their wish to have a child. In our Electronics business sector, we are the company behind the companies, advancing digital living. Our semiconductor and display solutions can be found in almost every electronic device. Thus, we are changing the way information is processed, releasing the potential of data and opening up possibilities for positively influencing the way we live. In addition, our specialists also explore visionary new solutions at the intersection of our three diversified business sectors. Established in 1668, our exceptional track record shows we continuously reinvent ourselves and think long- term. This mindset is rooted in responsibility, care, and respect for our work, our people, our customers, patients, society, and our planet. We want to become the global 21st century science and technology pioneer, working toward an ambitious future sustainable progress for humankind. We hold the global rights to the Merck name and brand. The only exceptions are Canada and the United States. In these countries, we operate as MilliporeSigma in the Life Science business, as EMD Serono in the Healthcare business, and as EMD Electronics in the Electronics business. Apart from our three business sectors, our financial reporting presents five regions Europe, North America, Asia-Pacific, Latin America, the Middle East and Africa. As of December 31, 2022, we had 64,243 employees worldwide. The figure as of December 31, 2021, was 60,348 employees. In 2022, our 224 fully consolidated companies with personnel in 66 countries generated sales of € 22.2 billion. Our 101 production sites are located across 19 countries. Strategy the shareholders hold the remainder, which is divided into shares share capital. Our shares have been included in the DAX ® , the blue-chip index of the Deutsche Börse, since 2007. In September 2008, our company was added to the FTSE4Good Index, a sustainability index that assesses the social, ecological and ethical conduct of companies. Group strategy We are curious minds dedicated to human progress. We believe that scientific exploration and responsible entrepreneurship are key to technological advances that benefit us all. Our values – courage, achievement, responsibility, respect, integrity, and transparency – guide us in every step we take and in every decision we make. As a company, we have a strong foundation. These fundamentals have been defined by the Merck family. We always take them into consideration when discussing and deciding on our Enterprise strategy. We follow a risk diversification strategy with three distinct business sectors, and we avoid overexposure to any single customer, industry, or geography. We ensure resilience against business disruption and deep crises. With our science and technology focus, we want to be leaders in our fields of expertise and markets, always pushing the boundaries to find new solutions and drive innovation. We aim to create value for our business and for society. We continue to operate under our current ownership with the Merck family as the majority owner. We deliver sustainable value, and we want to maintain an attractive financial profile for example, a strong credit rating while assessing and considering the ESG environmental, social, governance impact of our growth ambition. Mergers and acquisitions MA are an important driver of our long-term value creation strategy with a focus on innovation-driven technology. Our ambition is to become the global 21st century science and technology pioneer. To achieve this, we will continue to focus on our “Big 3” businesses Process Solutions and Life Science Services, new Healthcare products, and Semiconductor Solutions. Until 2025, these businesses are expected to generate approximately 80 of the targeted sales growth, and more than 50 of total sales by 2025. Strategy management 7Our highly resilient business sectors are the foundation for our bold plans to accelerate efficient growth and seize organic and inorganic opportunities. We attribute our high capacity for resilience to several factors, notably Good financial position strong balance sheet, sufficient cash reserves and moderate fixed cost exposure High degree of diversification in the three business sectors amid low cyclicality Robust supply networks due to increasing localization Lower dependency on single regions thanks to diversified footprint Strong focus on sustainability as an integral part of the company strategy, linked with clear sustainability goals. You can find more information on our company strategy in our Annual Report 2022. Details on the sustainability strategy can be found there and here in the report. Strategy management 8Letter from the CEO A cascading series of global crises and conflicts starting with the Covid-19 pandemic has made our world much more complex and uncertain. The threats these global challenges pose to health, security, and sustainability were highlighted in two U.N. reports issued in 2022. The first stated that the 17 Sustainable Development Goals SDG under the 2030 Agenda “are in jeopardy.” The second declared that there is no longer a realistic pathway to restricting climate change to 1.5 °C. Moving forward, the only viable path to avoid the worst effects of the climate crisis is through the “rapid transformation of societies.” In short, we have only a few decades to fundamentally change the ways in which we consume food, energy and other resources while addressing global inequity in health, education and living standards. It will require nothing less than humanity raising the bar higher than ever before. As the leader of Merck, I am confident we can do it. Most of all, three things will enable society to rise above these challenges and thrive in the 21 st century resilience, collaboration and technology. Resilience underpins us Resilience allows us to navigate through tough times and seize the moment. It is what has helped our company for centuries to cope with and emerge stronger from major international economic and geopolitical crises. Our resilience is helping to ensure that we remain firmly on track to achieve our most important sustainability goals. By 2030, we aim to have integrated sustainability into all value chains and contributed to human progress for more than one billion people through sustainable science and technology. And by 2040, we expect to achieve climate-neutral operations. We made significant strides towards the achievement of these overarching goals during 2022. For example, the independent Science Based Targets initiative SBTi confirmed our targets to reduce direct Scope 1 and indirect Scope 2 greenhouse gas GHG emissions by 50 by 2030 compared with 2020. Furthermore, SBTi Strategy management 9confirmed our plans to halve Scope 3 emissions as a percentage of gross profit across our entire value chain by 2030. These targets will help us in complying with the goal of the Paris Agreement to limit global warming to 1.5 °C. Our direct and indirect GHG emissions fell by almost 10 in 2022, thanks to our reduction of process-related emissions, implementation of energy efficiency measures, and increasing the share of energy we use from renewable sources. After signing two new Virtual Power Purchase Agreements VPPAs in 2022, renewable sources now cover 90 of our electricity consumption in the U.S. and 55 globally. We look forward to securing additional VPPAs in Europe, the Asia-Pacific and other regions. It is also important to highlight some of our many significant SDG contributions. For Good Health and Well- Being SDG 3, I refer you to the latest benchmarking report of the Access to Medicine Foundation on how the top 20 largest research-based pharmaceutical companies support low-and middle-income countries. Our company advanced from eighth to fifth place in the 2022 ranking thanks to our strong performance in RD, intellectual property waivers and local capacity building. Regarding to gender equality SDG 5, we increased the percentage of women in leadership positions from 36 to 38 in 2022 and aim to achieve gender parity by 2030. And for life on land and below water SDGs 14 and 15, we committed globally to even higher animal welfare standards in 2022. Collaboration makes us stronger My second reason for confidence in the future advancement of society lies in how public and private organizations, including our company, have successfully collaborated in recent years. Through the pandemic, we learned how important it is to amplify our collective impact by aligning with a sense of urgency around a common purpose and shared values. Our company’s partnerships with more than 100 organizations to develop Covid-19 vaccines, therapeutics and diagnostic solutions are prime examples of collaboration at its finest. But also consider our efforts to improve health equity worldwide by building long-term partnerships with global and local stakeholders to help underserved patient populations. As one example, we have collaborated with the World Health Organization WHO and other NGOs across sub-Saharan Africa to combat schistosomiasis – the world´s second most devastating tropical disease in terms of public health burden and economic growth. By providing more than 1.7 billion praziquantel tablets to WHO over the last 15 years and enabling many other on- the-ground initiatives to prevent, diagnose and treat schistosomiasis, we expect to eliminate this disease as a public health problem by 2030. I am also proud to represent our Group on a new Health Systems Taskforce recently established under the Sustainable Markets Initiative. Together with six other pharmaceutical companies, we jointly agreed to ambitious near-term GHG reduction targets in 2022 and to collaborate with our global networks of suppliers to further accelerate the shift to a climate-neutral healthcare industry. Strategy management 10
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