Medartis : Sustainability Report 2022

Formal requirements and regulatory frameworks for environ­ mental and social reporting are increasing, especially for listed companies that operate internationally. This is no longer limited to large companies in high-impact industries. The year 2022 has shown in an exemplary way that the globalised world is highly interconnected; geopolitically, socially as well as environmentally. Events in one place in the world can quickly start a conflagration and impact demand, supply and inflation, even though Medartis' business model is largely based on trauma surgery and is therefore more resilient than other businesses.

At Medartis, the goal has always been to work closely with surgeons to develop highly accurate and innovative products that make a positive contribution to patient outcomes and quality of life. At the same time, Medartis strives to make a positive contribution to society by ensuring that the benefits of its actions exceed the resources it consumes. Since its inception 25 years ago, Medartis has always been on the lookout for ways to reduce its regional footprint and make improvements for its employees and other stakeholders. In order to increase transparency and make the measures accessible to external stakeholders, Medartis has now published this special ESG chapter for the second time. Each year it becomes more comprehensive and detailed. In 2022 it comprises energy figures of Scope 1 and 2 and material consumption of all Medartis sites worldwide (previously only Switzerland) and the CO2 balance was calculated based on recognised scientific standards.

Medartis favours a system that relies on accountability and self- initiative. Medartis will therefore continue to drive its own transparency and monitoring over the coming years. In 2023, Medartis will also review its processes to assure broad alignment with the United Nations Global Compact (UNGC) and identify any opportunities for improvement. Aligning its existing initiatives with the United Nations Sustainable Development Goals (SDGs) is the obvious next step. In addition, Medartis will engage in dialogue with its stakeholder partners and upstream suppliers to achieve systematic improvements throughout the entire value chain. To meet the increasing requirements in a timely manner, Medartis created a Sustainability Supervisory Board and an ESG Committee in January 2023. This Board is led by Medartis' Board of Directors under the direction of Nadia Tarolli Schmidt and the

Committee consists of three EMB members. Chief Operating Officer Mario Della Casa heads up the new processes while the senior and middle management team is involved in different areas. The table below shows the allocation of sustainability responsibilities at Board, management and functional levels.

Material sustainability aspects are reviewed regularly by the Finance and Audit Committee of the Board (FAC). In 2023, Medartis will also introduce a more formal reporting process based on the internationally recognised GRI sustainability reporting standard. GRI is a non-profit,multi-stakeholder organisation that provides companies with a systematic basis for informing stakeholders on corporate responsibility in a concise and comparable manner.

Relevance and sustainability analysis

The key topics identified in the 2022 assessment are displayed in the illustration on the next page. By addressing and reviewing these topics regularly, the company ensures long-term performance, identifies high-level risks and opportunities, and strengthens relationships with its stakeholders. The relevance and sustainability overview is based on a top-down assessment of key decision makers within the company. In future, Medartis also wants to include an outside-in perspective by integrating

external stakeholders and selected managers into the discussion. To reduce its environmental impact, Medartis has identified the following footprint areas, which mainly relate to a responsible production and supply chain:

- Energy efficiency and substitution of carbon energy - Reduction of scrap rates

- Traceability and eco-friendly products

-  Recycling of used raw materials and reduction of auxiliary materials

-  Smart design and packaging

For these areas, it will measure its impact in terms of carbon, volume, circularity and other environmental indicators. In 2023 the company will refine the process by including the following stakeholder categories:

-  Customers

-  Employees

-  Academia and opinion leaders -  Shareholders / owners-  Patients-  Suppliers / partners

To understand their specific needs, Medartis fosters interactive dialogue and a feedback culture on many levels and through various channels. Here are two examples of how stakeholder demands can change and evolve.

A)  A few years ago, portfolio managers were mainly interested in share price development, payout, ROIC and good business practice, while ESG criteria were only used as a means of exclusion in the event of serious violations. Today, ESG topics have become an integral factor for most investors. ESG analysis is often delegated from portfolio managers to dedicated rating agencies, which assess companies according to standardised criteria.

B)  With the advent of international hospital networks and outpatient treatment centres, reproducible, reliable and more affordable treatment options have become more important. These networks, many of which belong to large, international companies, are increasingly focused on sustainability, and ethical supply chains are gaining in importance.

As for the environment, the company has also identified activities and initiatives that focus on enhancing the positive impact on employees, customers and society:

-  Staff engagement/corporate culture -  Diversity

-  Customer satisfaction and responsiveness -  Employee health

-  Attracting and retaining talent and top performers -  Corporate governance

-  Fair pay and gender equality

Production and Supply Chain

As a responsible company, Medartis wants to regularly monitor and optimise its environmental performance to understand the impact from its operations and to also identify opportunities to reduce its footprint. Climate protection is a global task that calls on all companies and countries to act. Global warming, emissions from production resources, and economical use of non- renewable resources are global issues that need to be tackled collectively. Medartis is keen to do its bit in bringing about such improvements. This means tackling key issues such as:

-  reducing our carbon footprint

-  using renewable energy along our value chain -  reducing waste

-  optimising our packaging (reusable or recyclable)

-  use of titanium as our main raw material from reliable sources (US, Japan) only

Surgical plates, screws, surgical guides and jig instruments are the principal products of Medartis. They are produced from titanium derivative rods or metal blocks on CNC milling and turning machines. In the manufacturing process, water-based emulsions and cutting oil are used as cooling agents during the fabrication process, followed by cleaning, packaging and sterilisation. CNC machines and sterilisation are powered mainly by electricity. Other indirect production activities relate to metal instruments and surgical containers for use in surgical procedures in hospitals or other inbound treatment centres.

Medartis currently manufactures its standard portfolio of plates and screws centrally at a single site in Switzerland, which meets high Swiss production standards. With the acquisition of Nextremity Solutions Inc. in May 2022, a second production site in the USA (Warsaw, Indiana) was added. Medartis now also produces drilling aids, jigs and implants for foot and ankle surgery. In order to optimise the distribution of its production volumes and also to optimise its global production footprint, From 2024, Medartis will also manufacture some of its traditional plates and screws in the US.

Compared to manufacturing companies in other industries, the footprint in terms of energy consumtion, material use and emissions is relatively modest. Its core activities in metal processing are highly automated, efficient and run 24/7. Medartis also does not source critical raw materials, alloys or auxiliary materials consisting of tin, tungsten, tantalum or gold as defined in the "Ordinance on Due Diligence and Transparency in relation to Minerals and Metals from Conflict-Affected Areas and Child Labour" (DDTrO). In the case of alloys or derivatives, the limits set by this ordinance are not reached by Medartis. With regard to child labour, Medatis assesses the risk as very low. Medartis does not source its raw materials from countries classified by the UN, ILO or Unicef as high-risk countries in the relevant area (non- agricultural sectors). The company also requires its suppliers to ensure that sources are traceable and that child labour is prevented along the value chain. This survey and the company's own assessment are repeated regularly.

Medartis upholds its commitment to operate in an environmentally responsible manner. It achieves this by focusing on the areas where actions and measures will have the greatest impact. Since Medartis wants to gain more clarity about the cost-benefit balance of individual measures, especially abroad in its sales subsidiaries, the implant maker has not yet set itself any official volume targets. For the time being, the key priorities remain resource efficiency, energy, water consumption, and waste management. Medartis' biggest environmental impact (Scope 1 and 2) occurs during the production of final or semi-finished products.

Dr Paulina Witt is a consultant hand surgeon working at the NHS Royal Devon & Exeter in the UK. She was one of the study leaders of a global survey under the patronage of FESSH (European Societies for Hand Surgery) on the emerging topic of ESG and "green surgery".

How much greenhouse gas is emitted on average during a hand operation?

This is a question that is really difficult to answer, we are still at the beginning of understanding and hand surgery itself is a very diverse field. It ranges from very complex reconstructions or replanting of limbs to simple carpal tunnel decompression. Literature suggests that a surgery is estimated to produce 150 to 270 kilograms of carbon dioxide equivalent (CO2-eq). That equates to drive from London to Edinburgh in a petrol car versus estimates from another study that say carpal tunnel decom­ pression would generate on average approx.60 kilograms CO2- eq. In this case it appears to be dominated by processing and facilities related factors.

Some surgeons and hospitals are promoting local rather than general anaesthesia. Where do you see the role for the often cited WALANT approach (Wide Awake Local Anaesthesia No Tourniquet), where the patient is awake under local anaesthesia?

Hand surgery is in the unique position of only requiring an isolated body part as the surgical field. Avoiding the need of volatile anaesthetic gases significantly cuts down on the carbon footprint due to their large greenhouse effect. Anaesthetic gases are estimated to represent 5% of the carbon footprint of the NHS, so that's quite substantial and a single inhalation anaesthesia appears to be equivalent to 22 kg of CO2-eq. Due to the COVID-19 pandemic, we've actually seen a significant surge in these non-drug general anaesthesia approaches to surgery, especially in the hand surgery and a trend away from main theatres. So there is very open horizon to what will be possible with regards to surgical procedures under WALANT regional and blocks.