Protecting the environment is a growing challenge and a priority for our company. Beyond initiatives deployed at the subsidiary level, our ambition lies in our proactive efforts to reduce the environmental footprint of all our activities and products.

 GOVERNANCE AND GROUP ENVIRONMENTAL POLICY

At the organizational level, our global EHS department, attached to the Group executive committee, supports this trajectory. One of these initiatives involves reframing scope and reporting methods, a precondition for gaining an overall perspective of exposure to environmental damage risks at the Group level. We have also committed to developing a training and awareness segment dedicated to environmental themes for both existing employees and for the new hires. External stakeholders were also involved in the effort, with the inclusion of environmental clauses in supplier assessment questionnaires. These initiatives, in conjunction with the rollout of audits throughout an expanded range of subsidiaries (Mexico, Taiwan, United States, Australia, New Zealand, Uruguay, Vietnam and Chile), demonstrate our desire for consistency in the deployment of a Group-driven strategy.

In the context of optimization of the resources we employ, we seek to control the consumption of energy, water and materials used in our manufacturing processes.

OUR KEY OBJECTIVES

Reduce energy consumption by 5% by 2025. Control water intake. Reduce the overall share of materials, including all packaging placed on the market.

OUR ACTION PLANS

Energy

For several years, we have been working to reduce energy consumption by carrying out equipment replacement actions for better efficiency, thermal insulation and air conditioning optimization. We have also established consumption indicators that are as close as possible to end users for better control of energy expenses. At all of our industrial sites around the world, we strive to address energy consumption by using the Best available techniques (BATs) applicable to our activity, whether for choosing new equipment or through ongoing monitoring.

Examples of achievements in 2022.

Virbac in France

In addition to the work carried out in 2021 on all air conditioning and heating systems of all offices located in our manufacturing units of Carros, roof insulation work was carried out this year.

Virbac in Vietnam

Variable-speed drives were installed on all refrigeration systems in the storage buildings. In compliance with our pharmaceutical regulatory obligations, air conditioning set point temperatures were also raised.

Virbac in Mexico

By switching furnaces to standby on weekends and holidays, the Guadalajara site in Mexico reduced its gas usage by 2%.

Reducing the energy intensity of our activities and our products is clearly a competitiveness lever, placing Virbac on a virtuous path, which will subsequently help reduce our overall CO_² emissions. At our French sites (which account for more than 50% of the Group's production), electricity and gas intensities have fallen by 48.9% and 31.7%, respectively, over the past fifteen years.

Water

We are also striving to lower water consumption at equivalent activity volumes by setting up recycling or production facilities for various BAT-compliant grades of water. The reduction in water consumption intensity at the French sites (which account for more than 50% of the Group's production) reached 31% over the same period.

We integrate the environmental context of the areas in which we operate into our analyses. With the exception of the South African site, which is located in a water stress area according to the Food and agriculture organization (FAO) and the Water risk filter (WRF) criteria, no other Group production site is located in a water stress area identified as such.

Raw materials and packaging

Again with a view to the sustainable use of resources, we are committed to fine-tuning our consumption of active ingredients, excipients and packaging items as much as possible in order to avoid product wastage or packaging proliferation.

With the help of our strategic suppliers, we have also given a new impetus to innovation that can reduce wrapping and packaging. This requires optimized supply management to limit warehousing and internal transfers. We are also progressing on optimizing flows and speed of shipments. Finally, we launched a project to minimize waste at all stages of the industrial process.

Primary packaging that comes in contact with medicines is subject to strict pharmaceutical industry quality standards that limit the use of materials originating from recycling channels. However, a cross-functional think tank was put in place at the end of 2021 with the first concrete action being to take into account these concepts, in particular that of recyclability, as a criterion of choice in all current and future projects. 

For companion animal products that do not require a Marketing authorization, we integrate eco-design principles early in the creation process. These same principles are implemented for secondary or tertiary packaging, from the research and development stage, in partnership with our suppliers. 

In 2022, this mobilization allowed us to:

• launch several new products in Europe and the United States with recyclable and recycled plastic packaging for a hygiene product and a food supplement; 
• incorporate sustainably grown ingredients into a new product launched in France for mobility.

Our other actions for the year focused on preparatory work aimed at:

• strengthening the presence of natural ingredients in our products for companion animals;
• raising awareness of the biodegradability of our hygiene and treatment shampoos;
• increasing the proportion of recycled or recyclable materials in the packaging of our products for companion animals.

OUR RESULTS

Performance indicators	2020	2021	2022
Gas consumed (MWh)	32,338	30,437	30,071
Electricity consumed (MWh)	46,161	44,732	53,175
Energy intensity	603	538	528
Water sampled by source (m3)	226,608	226,323	313,840
Volume of packaging released to market (in metric tons)	4,267	4,769	4,832

^{Energy intensity is the ratio between energy consumption (gas and electricity) and the value added in thousands of Euros at the Group level (direct labor costs + indirect production costs).}

In 2022 at constant scope (excluding Chile), our gas consumption was slightly down (-1.3%) while electricity consumption rose slightly by +5.6%. At constant scope (excluding Chile) and relative to activity, total energy consumption fell by -4.2%. At the same scope, our water consumption at the Group level rose slightly by +2.5%.

As part of our veterinary medicine manufacturing business, we use substances that present health, fire and/or explosion, emission and discharge risks during the various phases of development and marketing, from R&D and manufacturing to storage and shipping.

To limit these risks, which could cause harm to people, property and the environment, we comply with the safety measures prescribed by the laws and regulations in force, implement current Good manufacturing practices and Good laboratory practices, and provide training to our employees. Our manufacturing sites and research and development facilities are also regularly inspected by regulatory authorities.

Due to the nature of our pharmaceutical manufacturing activity (especially confining technologies), we do not generate any visual, noise or olfactory pollution. Therefore, we are focusing on the real impacts of our activity, atmospheric emissions, effluents or hazardous waste resulting from our activities or products by increasingly investing in environmental compliance: taking into account EHS impacts in the management of industrial projects, improvements in the environmental performance of existing facilities, etc.

Furthermore, the Group’s environmental principles are adapted to countries according to different local regulations. Here again, the objective is to identify good practices at the subsidiary level to be consolidated within the Group context.

OUR KEY OBJECTIVES

Limit the volume of water discharged and its Chemical oxygen demand (COD) content. Reduce the total amount of waste generated by 5% by 2025.

OUR ACTION PLANS

Effluents

For effluents as well as other environmental releases, our goal is to facilitate across the Group the consolidation of the various initiatives carried out locally and subject to specific regulatory frameworks, in particular on the optimization of the frequency at which our facilities are cleaned. In this sense, our vigilance translates into conservative guidelines. For example, many sites must recover and treat a large portion of manufacturing water discharges in accordance with related standards for hazardous waste. 

Following work completion, the new treatment plant (subsidized by the Rhône, Mediterranean and Corsica water agency) at Virbac's historical site in Carros, France, was commissioned in the first half of 2022, meeting our discharge quality objectives. 

Hazardous waste

In addition to the constant search to control the volumes generated and improve collection for maximum treatment and recycling, we ensure traceability of all our hazardous waste up to the point of disposal: soiled packaging; laboratory, production, medicinal or infectious wastes; and chemical effluents (mostly incinerated and therefore thermally treated or recycled for solvent recovery).

Controlling waste volumes also begins at the research and development stage by considering treatment application methods so as to limit wastage and residues that could harm the environment (targeting/optimizing sprays, for example).

OUR RESULTS

Performance indicators	2020	2021	2022
COD (metric tons)	81	113	100
Volume of hazardous industrial waste (metric tons)	2,254	2,153	2,118
Volume of ordinary industrial waste (metric tons)	2,751	2,646	3,262
Intensity of ordinary and hazardous industrial waste	38	34	34

^{The intensity of industrial waste is the ratio between the waste generated (ordinary and hazardous) and the added value in thousands of euros at the Group level (direct labor costs + indirect production costs).}

The sharp decreases at the highest COD-generating sites, Carros in France and St. Louis in the United States, explain the 30% reduction at constant scope (excluding Chile). This is due to the installation of a new water treatment plant at the historic Carros site in France and to a return to normal at the St. Louis site. At constant scope (excluding Chile), the total amount of waste generated remains stable (-0.5%). However, this tonnage decreased significantly by -8.7% for hazardous waste but rose by +6.3% for ordinary waste. For hazardous industrial waste, this decrease is particularly significant at our Australian site (-27%) and to a lesser extent in France (-3%). For ordinary industrial waste, the most significant increases are at our France sites (+9%) and in the United States (+5%), an increase partially offset by the Mexican site (-20%). At constant scope (excluding Chile) and in relation to activity, the decrease is significant with a decline of -7.2%. 

The risks related to the effects of climate change encouraged us to contribute to the reduction in greenhouse gas emissions. In our company, the direct and indirect emissions of greenhouse gases (scopes 1 and 2, as defined in the greenhouse gas [GHG] protocol) represent emissions linked to the consumption of various forms of energy (in this case, gas and electricity) at all industrial sites worldwide, as well as the greenhouse gas emissions related to refrigerants. Other indirect greenhouse gas emissions (scope 3, downstream) reflect emissions linked to the shipping of finished products from all sites to the end customer.

OUR KEY OBJECTIVES

Reduce scopes 1 and 2 greenhouse gas emissions by 10% by 2025.

OUR ACTION PLANS

Scope 1 & 2 greenhouse gas emissions

Actions on direct and indirect emissions (industrial site consumption and GHGs related to refrigerant fluids):

• optimization of energy consumption: thermal insulation of installations, energy recovery system on the wastewater treatment station for biological production units (Carros), solar boiler for industrial hot water (Mexico), generalization of plans to replace lighting with LED at almost all industrial sites;
• emissions related to refrigerant gases: reinforcement of maintenance plans at industrial sites in Australia and France, but also a program to replace the most polluting fluids with fluids with low CO₂ emissions.

Scope 3 greenhouse gas emissions

Actions on emissions resulting from transportation of finished products:

• the new calculation method implemented since 2018 has enabled us to increase the reliability of subsidiary data based on emissions coefficients given by the French environment and energy management agency (Ademe), see www.bilans-ges.ademe.fr);
• shipping of finished products: destination grouping;
• transportation of employees: inter-site shuttles, external shuttles, incentive policies to limit the carbon impact of company vehicles, carpooling, etc.

In addition to these initiatives, at all our Carros sites in France, more than 50 electric charging stations were installed in 2022 and made available to all our employees who own electric vehicles or rechargeable hybrids. The Guadalajara site renewed its reforestation campaign in August 2022, planting more than 150 trees thanks to the involvement of employees and their families.

OUR RESULTS

Performance indicators	2020	2021	2022
GHG scope 1 & 2 (metric tons of CO2 equivalent)	21,007	21,814	23,727
GHG scope 3 downstream (metric tons of CO2 equivalent)	11,401	11,093	13,560
GHG intensity scope 1, 2 & 3	249	229	237

^{The emission factors used for calculating emissions of the various scopes are from the French site of the Ademe https://bilans-ges.ademe.fr/. The intensity of greenhouse gases is the ratio between the GHGs emitted (scopes 1, 2 & 3) and the added value in thousands of Euros at the Group level (direct labor costs + indirect production costs).}

At constant scope (excluding Chile), our scope 1 and 2 emissions increased very slightly by +1.2% due to the increase in electricity consumption, but partially offset by a sharp decrease (-26.2%) in refrigerant gas emissions. At the same scope, and related to activity, scopes 1 and 2 greenhouse gas emissions fell by -5.7% to an intensity of 141, far below our target of 164. Still at the same scope, our scope 3 emissions increased substantially (+18.9%). This sharp increase is due to the increase in transportation from the French sites : +17% on route, +57% on air and +11% on sea, respectively. However, at constant scope (excluding Chile) and related to activity, greenhouse gas emissions remained stable (-0.1%) compared to 2021.

EUROPEAN GREEN TAXONOMY - ELIGIBILITY/ALIGNMENT

As a result of the sustainable finance action plan launched in 2018 by the European commission, European regulation 2020/852 of June 18, 2020, establishes a framework to promote “sustainable” investments in the European Union, called the “European green taxonomy.” In accordance with this regulation, starting with the fiscal year ended December 31, 2021, we are required to release the share of our taxonomy-eligible activity (revenue, capital expenditures [Capex] and operational expenditures [Opex]) on the first two environmental objectives related to climate change. 

For financial statements for the year ending December 31, 2022, the requirement has been extended and now calls for an alignment analysis for the three financial indicators (revenue, Capex and Opex.) To be considered sustainable, an activity must contribute substantially to one of the six environmental objectives listed below, not hinder the other five according to the Do no significant harm (DNSH) principle and comply with minimum safeguards. The taxonomy regulation is supplemented by two delegated acts: the first published in April 2021 specifying the technical environmental criteria for the first two objectives, the second published in July 2021 specifying the expected taxonomy reporting methods. It should be noted that to date, the indicators that we are publishing concern only the first two objectives.

The taxonomy’s six environmental objectives are:

• climate change mitigation (2021);
• climate change adaptation (2021);
• transition to a circular economy;
• pollution prevention and reduction;
• sustainable use and protection of aquatic and marine resources;
• biodiversity and ecosystem protection and restoration.

The eligibility and alignment assessment was conducted on the basis of a detailed analysis of the Group’s activities, based on the processes, existing reporting systems and assumptions made with management and business experts in France and in our main subsidiaries. The following departments contributed to the reflection:

• Group Consolidation department for financial data; 
• Financial Affairs department of the subsidiaries in scope; 
• facilities management, industrial management for buildings and maintenance; 
• fleet managers; 
• Legal, Insurance and EHS departments for the assessment of climate DNSH;
• Compliance, HR, Legal and Tax departments for the analysis of minimum safeguards;
• CSR department.

The whole consists of a methodology whose significant elements (assumptions, interpretations, clarifications and methodological limitations) are described below. The Group will revise this method and the figures resulting in light of regulatory developments, in particular with the implementation of the Corporate sustainability reporting directive (CSRD) from 2024 onwards.

Do no significant harm (DNSH) criterion
All Do no significant harm criteria were assessed at the Virbac group level only. The Group did not evaluate the Do no significant harm criteria at the value chain level.

The DNSHs (circular economy, pollution, aquatic and marine resources and climate) were studied activity by activity to assess their alignment.

Climate change adaptation
The Group conducted a preliminary analysis of the exposure and vulnerability of its activities to physical climate risks, as defined in section II of appendix A of the European regulation. This analysis was conducted by management on the basis of the reports of our insurers on the prevention of natural and climatic risks at our industrial sites, and on the basis of internal knowledge at our main sites. The Group aims to enhance this approach by simulating global warming scenarios, based on Intergovernmental panel on climate change (IPCC) assumptions, which will confirm the risks identified and their severity, and to complete our action plans to reduce and prevent these risks.

Minimum safeguards
In accordance with the guiding principles for minimum safeguards described in article 4 of the taxonomy regulation, economic activities that substantially contribute to one of the climate objectives and meet the relevant generic and specific DNSHs must also demonstrate compliance with the minimum safeguards. Compliance with the minimum safeguards was assessed at the Virbac group level only. In all our activities, we take into account the OECD guidelines for multinational enterprises and the UN guiding principles on business and human rights, including the principles and rights set out in the ILO declaration on fundamental principles and rights at work and the International bill of human rights.
The Group used the report on the minimum safeguards of the platform on sustainable finance to ensure compliance with the principles set forth in the preamble to the statement of non-financial performance, in the paragraph entitled “A corporate responsibility policy based on a strong ethical commitment,” starting on page 16, and in particular the body of measures put in place by the Group:

• the code of conduct and the Group code of ethics, page 17;
• the Human rights, in the Respect for human rights paragraph, page 18;
• prevention of corruption, in the Prevention of corruption and influence peddling paragraph, page 17-18 & 107;
• responsible taxation, in the paragraph Responsible tax policy, page 20;
• fair competition, paragraph 17.

Taxonomy revenue

As defined by the regulation, an activity is deemed taxonomy-eligible if it is on the list of sectors covered by the climate change mitigation and adaptation objectives. The selection of covered sectors is based on two areas of consideration: sectors with high emission rates¹ and sectors where economic activities have the potential to allow substantial reductions in GHG emissions in other sectors.

As a pharmaceutical group, Virbac does not belong to sectors with a high carbon impact, such as the energy, construction and transport sectors. Furthermore, as the products offered by the Group do not contribute to reducing the emissions of other sectors, the Group does not have activities that are taxonomy-eligible.

Over the 2022 fiscal year, the consolidated net revenue is therefore zero for climate change adaptation and mitigation objectives. Virbac could nevertheless be eligible for the other four objectives as listed in the preamble.

^{1quantitative data on GHG emissions by Statistical classification of economic activities in the European Union}

Capex taxonomy

As defined by article 8 (2) (b) of regulation (EU) 2020/852, the denominator of the Capex taxonomy corresponds to the acquisitions of tangible assets (International accounting standards [IAS] 16) and intangible assets (IAS 38), the acquisition of rights of use (in accordance with International financial reporting standards [IFRS] 16). In addition, assets acquired through business combinations (IFRS 3), excluding goodwill, are included in the lines of the table below. It should be noted that the Virbac group has no investment treated according to the Investment property (IAS 40) and agriculture (IAS 41) standards.

In 2022, the Capex taxonomy denominator totaled €64.9 million.

Eligible Capex is mainly found in the list of the following Capex (the reference in parentheses corresponds to the classification by activity as defined by the taxonomy):

• transport by motorcycles, private cars and light utility vehicles (6.5);
• renovation of existing buildings (7.2);
• installation, maintenance and repair of energy efficiency equipment (7.3);
• installation, maintenance and repair of charging stations for electric vehicles in buildings and parking spaces attached to buildings (7.4);
• installation, maintenance and repair of instruments and devices for the measurement, regulation and control of the energy performance of buildings (7.5);
• installation, maintenance and repair of renewable energy technologies (7.6);
• acquisition and ownership of buildings (7.7);
• data-based solutions for reducing GHG emissions (8.2).

For the 2022 fiscal year, the total of eligible Capex amounts to €9.3 million, i.e., 14% of the total (versus 21% in 2021, a decrease explained by the decrease in Capex recorded in IFRS 16). They mainly concern vehicle rentals, long-term leases and property acquisitions, building renovations and, to a lesser extent, electric vehicle charging station equipment installations, equipment that helps reduce our energy consumption, as well as renewable energy installations.

The aligned Capex amounts to €1.1 million, or 2% of the total. It mainly concerns electric and hybrid vehicles with emissions below the regulatory thresholds (gradual replacement of the internal combustion vehicle fleet with electric vehicles, which contribute to reducing the Group's carbon footprint), the installation of charging stations for electric vehicles, equipment that contributes to reducing our energy consumption, building renovations that meet the sustainability criteria of the regulations and installations related to renewable energy.

The analysis was carried out over the entire scope from the consolidated accounting data, for each asset category, thus avoiding the risks of double counting.

Opex taxonomy

In 2022, the amount of the Opex denominator as defined by the taxonomy regulation amounts to €58.7 million, or 5.8% of the Group’s operating expenses. Thus, the Opex denominator represents less than 10% of the Group’s total operating expenses. In view of this insignificant amount, which relates to expenses that do not constitute the core of our activity, the work carried out concludes that this indicator is not material for Virbac. In accordance with the regulation, the analysis of Opex eligibility has therefore not been carried out.

^{Methodological note
This assessment was conducted on the basis of a detailed analysis of the Group’s activities, based on the processes, existing reporting systems and assumptions made with management. The whole consists of a methodology whose significant elements (assumptions, interpretations, clarifications and methodological limitations) are described above.}

^{Capex
In accordance with the definition in the appendix to article 8 of the delegated act, the Group’s eligible share of Capex within the meaning of the taxonomy is calculated by determining the ratio of the following financial aggregates:
– for the denominator: the sum of the increases in the gross value of intangible and tangible assets on the balance sheet and increases in the gross value of the right of use of long-term rental assets recognized under IFRS 16 (see notes A2, A4 and A5 in the consolidated accounts pages 159, 163, and 164 of the annual report). The analysis was carried out over the entire scope from the consolidated accounting data, for each asset category, thus avoiding the risks of double counting;
– for the numerator: the sum of Capex identified in the denominator as being linked to taxonomy-eligible activities according to the list described above.}

^{Opex
The value of Opex (operating expenditure) in the denominator was calculated in accordance with the definition in the appendix to article 8 of the delegated act. The total costs of external research and development studies, building renovation, short-term rental and maintenance and repair of the Group’s assets represented less than 10% of the total of the Group’s Opex as of December 31, 2022, which was not considered representative of its business model.}