Sustainability Report 2012 Lek d.d.

Sustainability Report 2012 – Lek d.d. Suppliers 54 78 GRI Indicator EC6 Supplier selection is based on predetermined selection crite- ria. In this process, priority is given to suppliers having the best quality - price - service triangle. In certain categories of items where delivery date is one of the key elements, we stri- ve to obtain local suppliers. Among individual countries, Slovenia maintains the largest share in the purchasing structure. In terms of value, the le- vel of deliveries to the Slovenian market increased in 2012, amounting to USD 45 million (16% of total purchasing costs). Since the value of total purchases increased by 36%, the sha- re of the domestic market slightly dropped over the year befo- re (18% in 2011). On the domestic market, we mainly pucha- se merchandise of domestic production. We mainly purchase packaging and raw materials of the Slovene chemical industry and merchandise from domestic distributors. 6. Suppliers We perform systematic control over the purchasing process for goods and services in every aspect that has a potential to affect the company's ethical and business interests and fi- nancial outcomes. At all levels, employees of the purchasing department are committed to following the purchasing pro- cedures laid down by the Sandoz guidelines, international agreements and local regulations. Sandoz Group associates are not allowed to use the business relations between the Group and its suppliers for private purposes. In the 2010 – 2012 period, the purchasing processes un- derwent no modifications. 6.1.1 Purchasing system According to the internal rules regulating the purchasing sy- stem, the Purchasing Head is the person fully responsible for the implementation of and adherence to the guidelines, laws and internal procedures determining the purchasing proces- ses. Purchasing managers have to familiarize employees with the guidelines and their obligations and responsibilities, and monitor compliance. Roles and responsibilities within purchasing activities (customer need identification, supplier selection, conclusion of agreements, and purchase orders) are clearly defined. The strategic purchasing function is a separate organizational unit specialized for direct and indi- rect purchasing. Restrained global economic growth and recession in the EU strongly affected the purchasing result in 2012. Purchasing conditions in the pharmaceutical industry were worsened by f luctuating and unpredictable trends in the markets of raw materials, and by tighter pharmaceutical standards, which resulted in a shrinking selection of suppliers. In 2012, we further increased the scope of active risk management acti- vities. In these times of uncertain trends, our association with Sandoz' and Novartis' global function was even more impor- tant in the process of negotiating competitive prices and a more reliable supply chain. Our leading purchasing markets include Slovenia, Switzer- land, China, Germany, India, Austria and Belgium. 6.1.2 Supplier audit procedures Supplier audits are performed in accordance with the San- doz and Novartis quality standards and guidelines. Selection criteria are documented. Uniform selection criteria include prices, quality, delivery deadlines, reliability, compliance with regulatory requirements and Sandoz' guidelines, as well as suppliers’ social responsibility policies. Sandoz gives priority to third parties who share its societal and environmental values, and who undertake to implement the supply agreement in strict compliance with all applicable HSE laws and regulations, Fair Labor Practices and unlawful discrimination. Before the actual purchasing takes place, written compa- rable offers must be obtained from various suppliers. This applies to both new purchasing projects and to regular pur- chases with fixed annual purchasing quantities. 6.1 Purchasing policy 6.2 Policy, practices, and proportion of spending on locally-based suppliers at significant locations of operation 78