ESG Material Issues Assessment

Strategic Focus

Descriptions of Impacts, Ricks and/or Opportunities

Elanco's Approach

Additional Resources

Animal welfare — companion and farm animals

• Elanco’s products positively impact and support farmers, producers, veterinarians and pet owners by enhancing animal health and alleviating animal pain and stress.
• Emerging animal health and welfare challenges present business opportunities for us to innovate, attract new customers and meet the needs of existing customers.

Elanco has maintained a rich pipeline of innovation for over 70 years, currently comprised of more than 150 active programs across species and development phases. Elanco provides support and resources to farmers and veterinarians to help ensure optimal farm and companion animal welfare — including online and in-person trainings, welfare evaluations and consultations.

Animal Welfare Issue Brief

Innovation and Intellectual Property Issue Brief

Animal welfare, 2023 ESG Report

Animal welfare — research animals

• Elanco relies on animal testing to research, develop and achieve regulatory approval of select new animal health products.
• Animal testing is highly regulated and a topic of interest in many communities. If not managed appropriately, this issue exposes Elanco to potential negative financial effects such as regulatory fines for non-compliance, increased operating costs to align with regulatory requirements and/or decreased revenues due to potential company reputational impact.

Elanco’s animal welfare standards meet or exceed local, national and international laws and regulations. Elanco’s global animal welfare team is tasked with the implementation and oversight of our animal welfare program, which includes regular animal welfare audits of company-owned and contract research organizations’ facilities.

Animal Welfare Issue Brief

Animal welfare, 2023 ESG Report

Strategic Focus

Descriptions of Impacts, Ricks and/or Opportunities

Elanco's Approach

Additional Resources

Anti-microbial stewardship

• Elanco antibiotics are critical to treating and preventing bacterial infections that affect the lives of all animals.
• Elanco’s antibiotic products can positively impact public health by helping control the spread of zoonotic diseases and by helping prevent and treat bacterial infections in farm animals and pets.
• Antibiotic resistance is becoming a more significant global concern, resulting in stringent regulations governing antimicrobial use — which, if not properly managed, could expose Elanco to potential restricted label claims resulting in reduced sales, negative financial effects such as regulatory restrictions for non-compliance with applicable regulations and/or increased operating costs to align with such requirements.

For more than two decades, Elanco has worked with global leaders — including farmers, veterinarians, scientists and healthcare industry leaders — to develop long-term, responsible approaches for addressing antimicrobial resistance. Elanco’s business aligns with a tiered approach to antibiotic stewardship, prioritizing animal-only antimicrobials as the first choice, followed by a tiered approach based on WHO ranking of antimicrobials.

Antimicrobial Stewardship Issue Brief

Antimicrobial stewardship section of the 2023 ESG Report

Farmers, producers and food systems

• Elanco’s farm animal business depends on understanding and meeting the needs of farmers and producers
• Elanco’s products have the potential to enable farmers and producers to increase their yields, positively impacting their lives and supporting their livelihoods
• By increasing access to Elanco products in emerging markets, Elanco can expand its positive impact and benefit from a business opportunity
• With increasing pressure on the agricultural industry to produce a safe and abundant food supply while minimizing environmental impact, Elanco could realize increased demand for products such as feed ingredients and farm management systems that help producers reduce emissions and measure the impact of sustainability efforts

Elanco supports farmers, producers and resilient food systems with products, services and initiatives that promote animal health, welfare and productivity. Our products and services can help customers reduce feed inputs per animal, increase yield from the same number of animals and operate more sustainably with reduced overall emissions. We offer tools that help our customers measure their greenhouse gas emissions, establish baselines and demonstrate improvement — opening the door for potential new revenue streams related to their sustainability efforts.

Our Managing Animal Health and Acaricides for a Better Africa (MAHABA) initiative supports small-scale producers, farmers, and customers. Our Elanco Knowledge Solution (EKS) team supports customers through training, data systems and technical advice.

Farmers, producers and food systems section of the 2023 ESG Report

Strategic Focus

Descriptions of Impacts, Ricks and/or Opportunities

Elanco's Approach

Additional Resources

Energy and emissions

• Elanco relies on energy to power its operations and much of the energy available from public utility providers remains fossil fuel based.
• Elanco may be exposed to potential financial risks associated with volatile energy prices or taxes and fines related to use of carbon-based fuels or emissions.
• If not managed appropriately, Elanco could be exposed to potential greenwashing accusations if our disclosures regarding GHG emissions and/or climate-related targets do not align with our actions and progress — resulting in the potential for decreased revenue from adverse reputational impacts, investor sentiment and/or potential governmental fines.

We’ve expanded our GHG emissions reporting boundary to reflect our full operational control and enhanced disclosure transparency. We continue to pursue conservation and efficiency measures to reduce energy consumption and GHG emissions, and we continue to advance toward our 2030 renewable electricity goal.

Greenhouse Gas Emissions and Energy Use Issue Brief

Energy and emissions section of the 2023 ESG Report

Operational waste

• Elanco operations generate waste, which may negatively impact communities and the environment if not managed appropriately.
• Elanco may be exposed to financial risks associated with waste regulations — such as increased operational costs and the potential for fines/penalties if waste is not managed appropriately.

Elanco’s HSE organization maintains standard operating procedures detailing appropriate processes for disposal of both non-hazardous and hazardous waste. Elanco is advancing multiple initiatives to reduce our waste footprint by increasing recycling and reuse, where practicable and appropriate.

Operational waste section of the 2023 ESG Report

Water and biodiversity

• Elanco relies on abundant, clean water to manufacture our products.
• As a water user, Elanco could be exposed to financial risks such as fines or penalties resulting from improper chemical levels in effluent from our operations, manufacturing shutdowns to address a potential issue, fines associated with natural resource usage and/or reduced ability to secure the needed raw materials to manufacture our products.
• As natural resources such as clean water become more scarce in many areas because of climate change, Elanco could see a potential increase in demand for products that enable livestock producers to maintain production levels with fewer animals — reducing producer reliance on natural resources, such as water. Elanco may also experience increased demand for products that treat new and/or increased occurrence of animal disease, given the connection between climate change and disease incidence.

Elanco seeks to reduce adverse impact on the health of ecosystems where we operate. We’re continually working to enhance our operational water efficiency and ensure the appropriate treatment and release of wastewater — abiding by all local, regional and national water quality standards. We also ensure alignment with our internal Elanco Aquatic Exposure Guidelines.

A significant percentage of active pharmaceutical ingredients are derived from molecules found in natural products. Elanco assesses how our manufacturing processes could impact biomes and we’re working externally with organizations focused on restoring natural landscapes and helping mitigate and/or prevent biodiversity loss.

Water and biodiversity section of the 2023 ESG Report

Sustainable packaging

• Well-designed packaging is essential to facilitate reliable transport from manufacturing site to end user, prevent loss of product, protect product quality and efficacy, help ensure safe handling and inform users about product ingredients and appropriate use.
• Improper disposal of product packaging may negatively impact the environment and local communities.
• If not managed appropriately, Elanco may be exposed to potential financial risk associated with packaging-related regulation non-compliance. This could include fines, penalties and/or fees — including extended producer responsibility schemes — which could increase our operational costs.
• Growing customer demand for “more sustainable” packaging presents a potential strategic opportunity for Elanco to rethink our packaging design and materials, and to potentially increase revenue by meeting customer preferences.

Elanco is committed to packaging that ensures the integrity, quality and safety of the contents for the end user. We’re working to increase the use of more environmentally friendly packaging materials and we’re optimizing packaging, transportation and logistics operations to remove elements that create unnecessary waste, emissions or spending.

Sustainable packaging section of the 2023 ESG Report

Reduced customer emissions

• Farm animals are associated with GHG emissions and represent a major customer segment for Elanco.
• Elanco could see a potential reduction in revenue and demand for our products if consumers reduce meat and dairy consumption due to associated emissions.
• Pressure on livestock producers to reduce their environmental footprint — as well as producers’ desire to identify incremental revenue streams — can potentially result in increased demand for Elanco innovations that help monitor and decrease producer emissions.

Elanco’s holistic approach to sustainability includes support for our customers as they seek to maximize productivity, reduce their environmental footprint and identify new revenue streams. Our products and services can help customers reduce feed inputs per animal, increase beef and dairy yield from the same size herd and operate more sustainably with reduced overall methane or ammonia emissions. Elanco data and management platforms can help customers better understand their baseline emissions and key drivers of their operation’s carbon footprint, and quantify reduction of GHG emissions from use of Elanco products. Elanco’s third-party partnerships can also help customers monetize realized emissions reductions through the sale of verified carbon credits.

Supporting producer emissions reduction section of the 2023 ESG Report

Strategic Focus

Descriptions of Impacts, Ricks and/or Opportunities

Elanco's Approach

Additional Resources

Inclusion, Diversity, Equity and Accessibility

• Elanco relies on a robust and diverse talent pool to run our operations; employee diversity enhances our business daily.
• Elanco could be exposed to potential financial risks associated with employee turnover and the inability to attract and retain talent if Elanco is not perceived as a diverse and inclusive workplace — or should our corporate IDEA and/or anti-harassment programs fall short of regulatory requirements.
• Implementing robust IDEA programs could result in decreased operational costs from reduced employee turnover. Reputationally, Elanco could benefit from increased interest as an employer supportive of strong IDEA values.
• Elanco also has an opportunity to realize increased revenue by capitalizing on innovations developed by a diverse workforce.

Elanco relies on our employees to effectively execute our business model. We operate across a diverse range of communities and countries around the globe. Our employee-led and leadership-supported Global IDEA Council serves as an internal business consultant and champion to build IDEA-related programs and partnerships across the company. Our comprehensive IDEA strategy includes recruitment efforts focused on attracting high quality talent from diverse sources, as well as learning, mentoring and development opportunities for all employees. We also acknowledge the continued needs of our diverse workforce through the evolution of our benefits, including paid time off and parental leave.

Human Capital Management and IDEA Issue Brief

Inclusion, diversity, equity and accessibility section of the 2023 ESG Report

Employee training and development

• Elanco relies on a highly skilled workforce to develop, test, manufacture and sell our products. Should Elanco be faced with a shortage of skilled workers, we may experience financial risks associated with decreased productivity and/or revenue, as well as potential regulatory non-compliance. This could result in reduced ability to execute our strategy — including the development, manufacturing and sale of high-quality, safe products.
• Elanco investments in employee training and development can result in positive impacts for employees, including career development and job security. Such investments may also result in financial benefits for Elanco, including decreased hiring costs due to reduced employee turnover, as well as increased revenue resulting from increased employee engagement and innovation.

Creating specialized animal care products and services requires a highly skilled workforce to develop, test, manufacture and sell such products. Employee development is a key part of Elanco’s global talent management strategy. Elanco employees start each year by outlining goals and expectations with their supervisor, which are reviewed during the year. In addition, Elanco provides role- and location-specific training, opportunities for special projects, as well as internal and external development groups and learning resources.

Human Capital Management and IDEA Issue Brief

Employee training and development section of the 2023 ESG Report

Employee health, safety and well-being

• Our employees are involved in a range of activities — some of which carry a higher risk of injury or other health impacts if exposed to work-related hazards.
• If not managed appropriately, health and safety incidents resulting from Elanco’s operations may expose the company to potential financial risks including increased operating costs resulting from regulatory fines and/or a potential decrease in revenue resulting from reputational damage, facility shutdowns and/or decrease in customer or investor confidence.

Elanco believes promoting a healthy environment, maintaining a safe workplace and operating in a responsible and environmentally sound manner are linked to the success of our business. Elanco’s global HSE organization oversees all facets of employee health and safety, including maintaining our HSE Management System — which aligns with internationally recognized standards such as ISO45001, ISO 14001, the Chemistry Council Responsible Care Management System and the U.S. Occupational Safety and Health Administration Voluntary Protection Program.

Elanco is dedicated to enhancing global employee health, safety and well-being by integrating benefits and talent management. We promote well-being awareness through robust communication campaigns across internal platforms and have expanded our Mental Health First Aid program to all employees. Our Employee Assistance Program offers support in over 30 languages, aligning well-being efforts with business objectives and promoting a culture of self-care.

Employee Health, Safety and Well-being Issue Brief

Employee health, safety and well-being section of the 2023 ESG Report

Strategic Focus

Descriptions of Impacts, Ricks and/or Opportunities

Elanco's Approach

Additional Resources

Employee engagement volunteerism and giving

• Elanco’s employee engagement programs can positively impact employees by promoting strong employee morale and well-being, and promoting employee development.
• Elanco’s employee volunteering and giving programs provide potential positive impacts to the community through volunteered time, financial contributions and civic engagement — along with potential positive emotional impacts to participating employees.
• Should our employee engagement programs fall short of employee expectations, Elanco may be exposed to increased hiring costs resulting from employee turnover, as well as a reduced ability to attract and retain talent.

Colleagues around the globe provide employee engagement feedback through regular surveys and supervisor interactions. In addition, Elanco empowers employees to support organizations of personal interest through generous paid time off volunteerism policies, opportunities to financially support charitable or community organizations, as well as matching fund programs for both employee giving and volunteerism.

Human Capital Management and IDEA Issue Brief

Employee engagement and Employee volunteerism and giving sections of the 2023 ESG Report

Human rights

• Elanco has a vast, global supply chain and relies on contract labor for defined projects as well as internal resource augmentation. Isolated sectors and geographies in Elanco’s supply chain may be associated with increased risk of human rights abuses, including modern slavery.
• If not managed appropriately, instances of human rights violations within Elanco’s own operations and across our value chain could expose the company to potential financial risks — including increased operating costs and/or decreased income resulting from regulatory fines, reputational damage, facility shutdowns and potential loss of customer and/or investor confidence.

Elanco is a participant in the UN Global Compact and maintains a Business Partner Code of Conduct (Code) that provides suppliers and third parties working on Elanco’s behalf with expectations for conducting Elanco-related business. Compliance with the Code and applicable laws is the minimum standard of conduct. Elanco has also established a formal human rights program, including a global human rights policy, an executive oversight committee and a core program team comprised of representatives from organizations such as ESG and sustainability, legal, ethics and compliance, HSE, human resources, procurement and supply chain.

Human Rights and Responsible Supply Chain Issue Brief

Physical climate risk

• Elanco’s operations and supply chain depends on functioning facilities and the ability to get goods and people into, out of, and between facilities globally.
• Facility operations may be disrupted by extreme weather and other climate-related physical risks. These challenges potentially cause increased operating costs for Elanco and our suppliers — including more frequent repairs due to temperature-related stress on equipment, higher insurance premiums due to increasing severe weather-related facility impacts, increased demand on heating and cooling systems, and/or changes in asset value due to physical location.
• Elanco’s employees and workers in our value chain have the potential to be impacted by the physical risks of climate change — including the inability to get to work, damages to their place of residence or other personal property, and displacement/evacuation from their home or community.

In 2023, Elanco completed a comprehensive climate risk and opportunities assessment and scenario analysis aligned with Task Force for Climate-related Financial Disclosures guidelines — reviewing physical impacts to owned and operated facilities, as well as strategic third-party manufacturing sites. On an ongoing basis, Elanco is working to identify and prioritize risk management strategies that align with our leading climate-related physical and transitional risks — including risk avoidance, transfer and mitigation, as well as the pursuit of climate-related opportunities for our products and services.

TCFD Report

ESG and sustainability governance section of the 2023 ESG Report

Ethical conduct

Any actions that contradict Elanco’s Code of Conduct or other operational policies could result in increased operating costs resulting from potential litigation and/or regulatory compliance expenses — as well as potential decreases in revenue resulting from reputational damage and potential loss of customer and/or investor confidence

The perception of Elanco’s ethical standards and the expectation that we operate in an ethical way is critical to our success as an organization. Elanco’s operations are governed by a robust Code of Conduct and other operational policies that guide our actions. We commit to acting legally and ethically while following all applicable laws and regulatory requirements. Any individual, internal or external to Elanco, can raise a concern through CaseIQ. The service is available 24/7 for anonymous reporting, where allowed by law.

Human Rights and Responsible Supply Chain Issue Brief

Elanco 2024 Proxy Statement, pgs. 30, 39-40

Intellectual property (IP) protection, information security and data privacy

• We rely on intellectual property rights and must exchange sensitive data with others to operate our business and produce innovative products.
• If not managed effectively, information breaches could expose us to financial risks, such as increased operating costs associated with non-compliance fines, legal expenses, and/or enhancing IT surveillance and systems. We could also face potential revenue impacts from stolen IP, negatively impacting sales of current and/or future products. Employee, customer and business partner data privacy also requires similar, extensive protection measures, considering the extensive risk of personal data exposure.
• As more information is readily available, including the accessibility of AI technology, Elanco could benefit from increased revenue through enhanced research, development and innovation activities.

Elanco seeks patent protection for our product portfolio and currently holds more than 6,500 patents and applications filed in over 90 countries. We maintain confidentiality agreements for employees, consultants, advisors and business partners.

Elanco adheres to all privacy laws such as the General Data Protection Regulation (GDPR) in the EU, as well as other global data protection laws ensuring that personal data is processed lawfully and transparently. Additionally, Elanco's IT information security and privacy efforts are focused on safeguarding the confidentiality, integrity, and availability of personal and sensitive information across our digital infrastructure. We employ a comprehensive set of security measures that include advanced encryption, access controls, network security protocols, and regular security assessments to mitigate risks and prevent unauthorized data access.

Innovation and Intellectual Property Issue Brief

Elanco 2024 Proxy Statement, pg. 30

Elanco 2023 Annual Report, pgs. 26, 36

Product quality and safety

• All Elanco products go through rigorous quality and safety testing. If product quality and safety is not managed effectively, Elanco’s customers could experience adverse health outcomes for the animals who consume our products and/or adverse financial impact for purchasing and administering such products.
• If Elanco products don’t meet our strict quality and safety standards, don’t align with applicable product quality and safety regulations, or include misleading/false marketing, we may be exposed to financial risks including increased operating costs resulting from regulatory penalties or litigation.

Elanco’s customers require reliable and safe products to effectively treat animals. As such, product quality and safety are imperative to Elanco’s business model and reputation as an animal pharmaceutical manufacturer. Our rigorous quality assurance process includes prioritizing quality and safety throughout our manufacturing and quality organization, regular audits from our Global Quality Assurance team, maintaining and governing robust quality standards with Elanco’s Quality Management system and constantly monitoring data for safety signals related to products on the market through our pharmacovigilance organization. Elanco’s quality assurance process mandates root cause analysis and evaluation for all incidents — ensuring appropriate mitigating, corrective and preventative actions are implemented accordingly. In addition, we collaborate with government entities, law enforcement agencies, trade associations and other global cross-industry to fight counterfeiting and help ensure consumers receive only genuine Elanco products.

Product Quality and Safety Issue Brief