DNA of Sustainability

The seeds of Sustainability were sown right at the beginning, at the very inception of Dr. Reddy’s. The Company’s inbred altruistic nature manifested itself by serving unmet medical needs and offering access to affordable and innovative medicines for society at large.

The Sustainability DNA is not only a management trait, but is active and evolving in every person in Dr. Reddy’s orbit. The manifestation of this will continue to gain the Company goodwill and trust from its stakeholders, ensuring its place at the forefront of the industry for all time to come.

Sustainability has a positive effect on each one of us – and goes beyond, to involve not just the organization, but the immediate community in which we function, and all of society. At Dr. Reddy’s, we believe that we need to be the change we want to see. This is why we emphasize that Sustainability is not just the domain of Senior Management or the Sustainability Department, but it requires the active support and unbridled enthusiasm of each and every stakeholder.

In order to arrive at a robust Sustainability Framework, we followed the following process:

1. Identification of our stakeholders
2. Stakeholder Engagement to understand their concerns and perspectives
3. Carried out a “Materiality Assessment” in consultation with the Management Council to identify issues that are of importance to the Company as well as to our stakeholders
4. Developed our Sustainability Framework comprising 6 key focus areas

Our Sustainability Framework
After identifying the focus areas, we are now working towards improving the Sustainability quotient across all the following areas, through a series of strategic initiatives:

1. Providing affordable and innovative medicines
2. Product Responsibility
3. Being an Employer of Choice
4. Environmental Management and Climate Change
5. Sustainable Sourcing
6. Caring for Communities
   

Providing affordable and innovative medicines
Through our Global Generics segment, we offer lower-cost alternatives to highly-priced innovator brands, both directly and through key partnerships. Today, we have a strong presence in highly regulated markets, such as the United States, United Kingdom and Germany, and also in emerging markets, including India, Russia, Venezuela, Romania, and certain countries of the former Soviet Union (Belarus, Ukraine and Kazakhstan). Our diverse product portfolio and pipeline in key geographies supports our agenda of improving affordability and access to innovative medicines.

Through our Pharmaceutical Services and Active Ingredients (PSAI) segment, which consists of our API business and our Custom Pharmaceutical Services (CPS) business, we offer intellectual property advantages, rapid product development and cost-effective manufacturing services to our customers – both generic companies and innovators. This allows us to help make medicines available to more people around the world. Our Proprietary Products segment consists of new chemical entity (NCE) research, Biologics and the Differentiated Formulations business. In each of these areas, we are building world-class capabilities and partnerships to accelerate the discovery and development of new and improved therapies.

Product Responsibility
The industry in which we function requires the stringent regulation of quality and safety systems. Hence, Dr. Reddy’s adheres to quality control and quality assurance systems, as specified by regulatory requirements wherever the Company operates. We have independent teams who ensure multi-stage quality compliance, while our various systems ensure that the safety, efficacy and quality of products are maintained. Where product and service labeling is concerned, the Company has meticulous procedures and checks to ensure the quality, accuracy and user-friendliness of the packaging.

Being an Employer of Choice
Several programs are in place to ensure that employee satisfaction levels are kept high. Various initiatives have been taken in terms of hiring, learning & development and evaluation, to ensure our people are constantly motivated, encouraged and rewarded for their efforts. Through the Learning Academy, Leadership Summit and 360 degrees Feedback, people are learning to maintain higher standards at work and are bonding better. The Company also takes care of its people through equal opportunity employment and special allowances for new mothers and differently-abled . By giving people the freedom to innovate, the right work culture is incorporated at Dr. Reddy’s.

Our commitment to establish a proactive and safe culture, with respect for every individual is at the core of our health & safety management system which also contributes to making us an employer of choice. Various processes have been initiated with regard to organizational documentation, Emergency preparedness, Health surveillance, Safety training, Material Safety datasheet compliance and Corporate Safety Audits.

Environmental Management and Climate Change
Dr. Reddy’s first forays into embedding Sustainability were focused on the environment, through various eco-friendly initiatives, both within and outside the organization. This stems from the direction given by the management that “Every new product should have a sensible footprint.”

Green Chemistry is an initiative which further promotes our commitment to environment management. Resource conservation is another key focus of environmental management at Dr. Reddy’s, and we constantly endeavour to reduce the residual environmental impact of our processes. Some of our efforts towards our environment management goals include water harvesting and conservation, commissioning of the fifth Zero Liquid Discharge plant, Energy Audits and GHG accounting, persistent efforts to find alternative environmentally friendly ways to dispose of organic residue and installation of a state of the art Solvent Recovery System.

Another key concern area for the management is Climate Change. Through various media, employees have been sensitized to the issue, and the drive for energy conservation has been gathering momentum across all facilities.

Sustainable Sourcing
At Dr. Reddy’s we keep in mind that we are responsible for the environmental, social and economic impacts of our entire vaue chain. We are also conscious that we can contribute to resource conservation through improved Supply Chain processes and by purchasing environmentally friendly products and services. A modest beginning has been made in this regard by reaching out to influence a few of our vendors and through streamlining of certain internal sourcing processes.

Caring for Communities
Various engagement initiatives have been introduced via Dr. Reddy’s Foundation (DRF) and through direct community development around manufacturing locations and geographies in which we are present. This is not just for enabling short-term gains, but keeps an eye on scalability – to enhance and improve the livelihood of youth constrained by low income levels and inadequate skills.

A prime example of this is Livelihood Advancement Business Schools (LABS), developed and implemented by DRF, which imparts short-term vocational training courses in various industrial and service sectors, to youth from economically deprived communities. DRF believes in providing the appropriate environment, to help individuals discover their vocation, and get the right motivation and opportunities to progress. DRF launches innovative concepts, keeping in mind their scalability, in order to benefit a larger number of underprivileged people. Through robust government and corporate partnerships, LABS provides training and education to empower communities who have no access to this.

Stakeholder Interaction | DRFHE | Investor Relations | Employee Engagement

We regularly engage with key stakeholders such as customers, partners, vendors, retailers and wholesalers in the course of our business. We rely on existing channels to exchange feedback about matters related to Sustainability.

Our commitment to engage with stakeholders such as patients and physicians is delivered by Dr. Reddy’s Foundation for Health Education (DRFHE). DRFHE develops and implements a spectrum of programs that enable and empower doctors, patients and their families, as well as the medical fraternity. We have been able to address the unmet needs of healthcare professionals through regular interactions and focus groups hosted by DRFHE. Soon, we will be establishing more channels of communication and service for the community in our neighbourhoods, as well as those that can be served by our unique social interventions.

A recent intervention for Dr. Reddy’s alumni, ‘Friends Forever’ is helping us communicate with our ex-employees. This facility is available on our Company website and is increasingly popular with our alumni.

Similarly, regular forums for investors also double up as channels for discussion about Sustainability related matters and achievements, where we share details of our progress with environmental improvements; success achieved with proactive people practices and regulatory compliance aspects, addressing product quality and facility certifications.

Stakeholder Interaction | DRFHE | Investor Relations | Employee Engagement

Stakeholder Interaction

As part of stakeholder engagement, we focus on the following:

• To present our views, progress and achievements
• To establish an environment of openness and transparency
• To identify stakeholder needs through their feedback on our work
• To encourage positive dialogue to identify focus areas and develop key result areas

We implement the above on the basis of the following Engagement mechanisms, which are established directly by us or in partnership with other organizations:

Stakeholders	Engagement Mechanism
Employees	Communication meets
	360 degree feedback
	Celebrations
	Women's survey
	In-house communication
	∙ Around Dr. Reddy's
	∙ Elixir
	∙ Intranet
	∙ Communique
	∙ Quarterly communication from CEO, COO
	SHE infosite
	Safety Training Programs
	Sustainability report
	Sustainability focussed interviews and focus groups
Investors	Analyst Meets
	Annual report
Customers and Partners
Healthcare Professionals	Through programs established by DRFHE. PGHDM
	Case Manager's program for cancer counselling
	Inner Circle - Relationship building programs
	Abhilasha - Nursing Efficiency program
	Sarathi - Doctor's Assistant Program
Patients	Mobile Medical Van - Life at your doorstep
	Living Well programs in association with Art of Living
	Sparsh
Business Partners-Vendors	Vendor meet, Strategic business partner training and development
Customers	Customer satisfaction survey, Regular business meetings
Society	DRF

Stakeholder Interaction | DRFHE | Investor Relations | Employee Engagement

Employee Engagement

In the following section, we report on our Employee Engagement initiatives, as well as the programs offered by DRFHE – our channel to engage with patients, doctors and investors. Feedback from other stakeholders has been featured in other sections in this report. Employee Engagement

In last year’s Sustainability Report, we had stated our commitment to conducting a stakeholder engagement exercise, to understand critical issues related to Sustainability and address them constructively.

To get a holistic view of Sustainability as a concept and to assess the extent to which Sustainability has become a Company-wide phenomenon, employees’ feedback was sought in the Sustainability reporting cycle.

Employees’ Overview of Sustainability
Employee feedback was sought across two levels:

1. Interview with function heads – Senior management (20)
2. Focus groups consisting of 6-8 employees across different locations (3)

Three focus groups were conducted. Each group, comprising 6-8 employees at three different locations – Corporate Office, CTO and FTO, were surveyed over a 60-90 minutes period. These employees were selected on a random basis across functions, and to encourage honest feedback, no immediate senior was present in any group.

The exercises commenced with introductions, along with an explanation of the process and the Company’s focus areas. Individual feedback was solicited on Dr. Reddy’s Sustainability initiatives, followed by in-depth discussions on these initiatives within Dr. Reddy’s including the participants’ perspectives on the same. Finally, suggestions were invited on areas that needed attention, and concluding remarks were captured.

Key Observations
Various levels of awareness were observed regarding the concept of Sustainability, ranging from basic “Environment preservation” to “Sustainability is about long term human and social improvement, which also benefits the system”.

All participants strongly believed that Dr Reddy’s, being in the business of pharmaceuticals, is always contributing to society by the very nature of its operations. As a consequence, each felt that they too were doing their bit for society while doing their day to day job.

LABS, Naandi, DRF, Power of Ten payroll giving and Sparsh were top of mind, and special mentions were made of the “Inconvenient Truth” film, Zero Liquid Discharge, health awareness camps, employment of differently-abled people and ‘Celebrations’ – the annual event to uphold the “Spirit of Excellence” becoming more eco-friendly, with the usage of CNG vehicles and Tree Plantation.

Participants also pointed out their contribution by way of safety training, programs for street children, free supply of medicines, vocational centre for spouses, among other initiatives. On a personal level, all mentioned their attempts to save energy and water.

It was pointed out that the Company certainly does a lot for women, through benefits like extended leave post maternity, shorter working hours, Parichay referral scheme and crèche facility.

Open communication channels
People in the groups were highly appreciative of Elixir – in which they or people they knew would feature. It was read at leisure and shared with their families too. They were well aware of Around Dr. Reddy's (the in-house circular) and the intranet portal – mydrreddys.com, and kept up with the emails on Sustainability from the CEO and the Corporate Communications Team.

However, they felt the Sustainability Report was too long and suggested that it be changed to a quarterly, Elixir format.

Employee Mapping
Extensive interviewing of key employees belonging to different functions provided an opportunity to make an in-depth assessment of Sustainability awareness levels, and the actual level of engagement and involvement in the Sustainability initiatives of Dr. Reddy’s.

Indepth interviews were conducted among the senior managers across the following functions:

• Pharmacovigilance
• Human Resources
• Supply Chain Management
• Marketing
• Environment, Occupational Health and Safety
• Quality
• Manufacturing
• Compliance

Interviews amongst these managers revealed their emphasis on driving Sustainability, across their own function, by improving processes and innovating on an individual, team and function basis.

Quotes from senior leaders:
"Dr. Reddy’s spans the entire value chain of the pharmaceuticals business. We are the second largest supplier of active ingredients in the world. We have 350 ingredients which we supply not only for our own generic business, but also to other generic companies. Basically that is one link for access to medicines.”

“The ability, and an environment in which one is free to innovate is what we encourage. One can easily get into new projects, explore new projects, foster new ideas, new thinking, enabling us to be an employer of choice."

"A recent development at Dr. Reddy’s of setting up Focus Teams – who do only one job at a time rather than the earlier system of multi-tasking – has resulted in Prioritising during the development stage, reducing scope of errors and improved outcomes for product quality.” "Viable Vision is enabling inventory management in the pull based system. Now we supply, based on demand arising from consumption at each node. Even production and supply happens based on the pull system."

Impact of Dr. Reddy’s Sustainability initiatives
Most employees at Dr. Reddy’s believe that doing their job most efficiently can be considered their contribution to Sustainability. Some employees voiced that they were personally inspired to contribute to Sustainability in their own way. Some of these ways were:

"My husband and I are getting involved with an NGO for underprivileged children."

"I try and recycle paper and not use plastic bags."

"I’m trying to get colleagues to travel with me in my car – indirect car pooling."

"At our unit level, we have provided notebooks to school children.”

Corporate volunteering
There exists a very strong sentiment for corporate volunteering. The employees want to get more involved in the activities that the Company undertakes in this area. They would like to have more formal, structured volunteering program communication.

Concept Mapping
Key concepts which emerged during the focus group discussions have been mapped on the basis of these two parameters:

• Level of awareness – concept appreciation and understanding
• Extent of involvement – level of engagement

Providing access to affordable and innovative medicines is integral to each employee’s role and function. Employees in turn believe that it is their primary contribution to Sustainability. Diversity as a conscious policy has percolated thoroughly, into the system. Employees are well aware of community development activities such as LABS, and feel proud of their Power of 10 employee giving program, as it is a direct correlation between individual contribution and Sustainability. Awareness of specific initiatives such as Sparsh in the oncology area can be improved among employees.

Information exchange
During the discussion, the efficacy of current information exchange media was captured. It has been presented here by the media as per:

1. Frequency of the medium – How often the Company uses this medium to communicate
2. Acceptance – How this medium finds favour with the employees
3. Relevance – Employees’ feedback on the content delivered through this medium
4. Sustainability coverage - Extent of content specific to sustainability issues

Communication	Frequency	Acceptance	Relevance	Sustainability coverage
Elixir	Quarterly	Very good	Medium	High
Around Dr. Reddy’s	Monthly	Good	High	Medium
Communique - CEO emails	Ad hoc	Very good	Very high	Very high
Corporate Communication Emails	Ad hoc	Good	Average	Average
Intranet	Through the year	Acceptable	Average	Medium
Annual report	Once a year	Very good	Medium	Medium
CEO, COO communication	Quarterly	Excellent	Very high	High
Sustainability Report	Once a year	Good	Average	Very high

Most of the communication facilitated by the Company for its stakeholders (employees, specifically) is well received. There seems to be a preference for physical forms of communication (print or in person). Also, honest feedback was received regarding the length of communication being a deterrent for involvement, as time available for browsing is limited.

Areas needing attention
A number of suggestions were proposed on Sustainability issues requiring prompt action. These included social projects in partnership with governments, swine flu awareness and spreading awareness about diseases within the Company, especially lifestyle ones.

Employees went on to mention village adoption, educating children about Sustainability, rain water harvesting, road safety, and promoting Sparsh in hospitals, among others. A few felt that paternity leave needs to be introduced, while some wanted more action on corporate volunteering programs.

The Company has also appreciated the employees’ feedback on the length of the Sustainability report. This year onwards, the effort is to be much more concise. Besides, there will be no printed copy of the detailed report. The report highlights are available through leaflets for extensive circulation among employees and other interested stakeholders. The entire report is posted on the website.

Beyond Employees: ‘Friends Forever’ with Alumni
A need was felt at Dr. Reddy’s, for a platform through which we could keep in touch with our alumni. It was launched in February 2008 and called “Friends Forever”. Since then, there has been no looking back, and it currently has around 350 ex-employees as its registered members. They work across geographies and industries, but still have a fond nostalgia for Dr. Reddy’s.

This network application aims at keeping all the alumni connected to Dr. Reddy’s with periodic updates on key Company events, news and messages. Recently, when the Company turned 25, the network received more than 200 congratulatory messages from ex-employees, with interesting anecdotes of their stints at Dr. Reddy’s. Another interesting development is that this network serves as a medium for ex-employees to open a dialogue with the Company to explore the possibility of returning to the organization.

We now present an overview of the activities and programs run by the Dr. Reddy’s Foundation for Health Education, to engage with healthcare professionals and patients alike.

Stakeholder Interaction | DRFHE | Investor Relations | Employee Engagement

DRFHE

Engaging with Healthcare Professionals & Patients: Dr. Reddy’s Foundation for Health Education (DRFHE) DRFHE was launched in 2002 to specifically look after the healthcare domain and it focuses on the following:

• To make health education more accessible
• To provide healthcare professionals the tools and skills they need to function more effectively in their practice
• To improve patient knowledge and understanding of disease

Key Programs

• Education Initiatives
• Patient Educators
• Case Managers

• Training Initiatives
  • Inner Circle
  • Abhilasha
  • Sarathi

• Patient Initiatives
  • Life at your Doorstep
  • Living Well

Education Initiatives
PGDHM: This one year Post Graduate Certification Course in Healthcare Management produces patient educators who interface between doctors and patients. They counsel patients and give them information they need, thus value-adding to the doctor’s service. The program is targeted at graduates from biosciences and pharmacy, and six batches have rolled out till date. So far, 223 students have benefited.

Case Managers: The Case Manager is a professionally trained Patient Educator specializing in Cancer Counselling. Case Managers are trained on the special requirements of cancer patients, and how they can be helped to manage their condition. They assist cancer physicians in providing total healthcare solutions; by answering patient queries and helping them understand the significance of complying with medications. DRFHE offers a course in Case Management. In FY 2008-09, around 15 Case Managers who graduated from DRFHE, began associating with renowned cancer institutes and cancer specialists.

Training Initiatives for Healthcare Professionals
Inner Circle: This Program helps budding doctors develop soft skills, to enhance their competence and strengthen doctor-patient relationships. Last year, 59 Programs were conducted, benefiting 2069 participants.

Abhilasha: A special program for nurses was introduced in 2006, which focused on soft skills development rather than professional expertise, enhancing nursing efficiency and confidence. So far, 73 Programs have been held, benefiting 2736 participants, receiving warm appreciation from participants and doctors for the novel initiative and impact.

Sarathi: This Program was introduced to provide the doctor’s assistant with a more meaningful role – enhancing skills, confidence and motivation, in order to complement doctors’ efforts in offering better patient care. Forty eight Programs have been rolled out, benefiting 1422 participants.

Patient Initiatives
Life at your doorstep: ‘Life at your doorstep’ is a unique program based on the principles of home care aspects of Palliative care. The program endeavours to improve the quality of life of terminally ill patients by weaving together physical, psychological, emotional, social and spiritual support in a culturally appropriate manner.

A well equipped Medical Van with a team consisting of a doctor, nurse and patient counsellor visits the patient’s home to provide the home care service. This palliative care program is designed as much for the patient’s family as for the patients, helping them to understand and cope with the illness. The unique aspect of this program comes from the synergy of home care and healthcare, which is critical in the recoup of the terminally ill.

In FY 2008-09, when the program was launched, 581 terminally ill cancer patients were provided with the service.

Living Well: DRFHE formally signed up with the ‘Art of Living’ to conduct the Living Well Programs. These Programs will be held across India for the benefit of chronically ill patients suffering from diabetes and blood pressure.

Feedback from Doctors
We believe in regular collaboration with our stakeholders and doctors in particular. We encourage them to visit our facilities and share their perspectives with us. Here is some feedback from this stakeholder group, captured recently during a detailed Q&A session after they had visited our facilities.

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Dr B.S. Ajai Kumar returned to India in 2002 after 25 years in the US with the dream of making high quality cancer treatment accessible across the country. He founded the highly respected Bangalore Institute of Oncology (BIO) in 1986, and then decided that it was time to expand. Today, his institution, HCG Enterprises Ltd, comprises 11 comprehensive cancer centers, including BIO, and there are plans to set up another four this year.

He visited our Biologics facility in March with CV Surgeon Dr. Ganesh Nayak, and this is what he had to say: “Manufacturing is of the highest quality and meets all the international standards. I visited the Biologics centre, and it was phenomenal. We got to see the high standards of the research facility which meets international criteria and sometimes does better than that. The people factor is also very impressive. I was impressed with the work they were doing and the care with which it is being done.” To read more, click here.

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Dr. Ram Sasisekharan, Ph.D, Underwood-Prescott Professor of Biological Engineering & Health Sciences & Technology at Massachusetts Institute of Technology, visited Dr. Reddy’s in October. An eminent scientist who is also affiliated with the Harvard-MIT Division of Health Sciences & Technology, Dr. Sasisekharan has done groundbreaking research on complex polysaccharides with a goal of developing novel therapeutic approaches to diseases. He toured our Innovation Plaza and Biologics centre and met with many of our employees. Here’s what he had to say:

“Impressive! Dr. Reddy’s strategy became clear to me when I saw all the facilities and the way things have been structured. What caught my attention is the very academic spirit of the research centre. It is important to have a good balance – being able to do good science, but at the same time have a mechanism to translate that. The cross-functional team approach is quite strategic and it is my impression that it will do Dr. Reddy’s good. Finally – people. I was most impressed by the quality of the people I saw and hence, the work they were undertaking.” To read more, click here.

Following are details about our interactions with our investors and the communication we share with them.

Stakeholder Interaction | DRFHE | Investor Relations | Employee Engagement

Investor Relations

We are amongst the Top 3 Indian pharmaceutical companies by market capitalization, and in view of that, we attract significant attention from focused investors and analysts.

In most of the dialogues with Company management, the investors primarily enquire about the sustainability of our base business performance.

Whilst they appreciate the benefits accruing from one-time opportunities due to limited competition, the lack of predictability of such events is always a concern. Companies which are able to demonstrate a consistent, predictable and sustainable base business performance attract relatively higher valuation on the stock exchanges.

One of the businesses of Dr. Reddy’s in which investors are highly interested is Biologics. Biologics will be a differentiating factor for us in the next few years, with respect to our peers. The development of pipeline products is on track and we expect to launch two products in India in Fiscal 2010 and at least one product every year thereafter. We would continue our efforts to expand our presence for our Biologics in other emerging markets while we develop our approach for the regulated markets.

Our communication to investors at various forums begins with an emphasis on our Purpose, of ‘Providing affordable and innovative medicines for healthier lives’. While communication with investors is primarily in terms of financial performance and, more specifically, with respect to profitability and share price returns, they are also curious to know about our environmental, social and risk management practices. In the light of a perceived higher activity by US FDA, they are keen to know the adequacy of our quality assurance and regulatory compliance practices. Usually, we provide our investors an overview of key risks facing the Company, through our annual Form 20F filing made to the US SEC.

An extended discussion of the key risks facing our organization and possible implication on the future business, financial and sustainability performance can be found in the Form 20F for Fiscal 2009 at the Company Filings section on the US SEC website of www.sec.gov or the Investors section of our website http://www.drreddys.com/investors/sec_filings.html.

Dr. Reddy’s has four important stakeholder groups:

• Employees – our employees and their families, as well as alumni of Dr. Reddy’s
• Investors – our shareholders
• Customers & Partners – Patients, Distribution Channels, Physicians, Insurers, Vendors, Suppliers and Regulators
• Society – Community, Environment and the Public

The engagement process assists us in identifying stakeholder concerns which we compare with potential for business impact and arrive at key areas where we must develop proactive policies, plans and actions.


Based on the various inputs we received in consultation with the Management Council, employee feedback and feedback shared by other key stakeholder groups, six key areas have been identified as elements of our Sustainability framework.