Merck's  materiality assessment process is conducted by its Corporate Responsibility Council – a cross-functional group of more than 20 senior Merck executives with responsibility for the governance of the Company’s CR. Council members gather input from within their respective functional units, divisions and regions. We also provide employees at our various sites with information about our CR efforts and opportunities to share their input.

In 2008, Merck conducted a materiality assessment based, in part, on standards for sustainability reporting¹ and discussions with both internal and external stakeholders to identify those environmental, social and governance (ESG) issues of greatest significance to multiple stakeholders and to Merck's future success.

To  identify the Company's key material ESG issues, we first compiled information on economic, environmental, governance and social issues that were relevant to Merck’s business and stakeholders. To this end, we reviewed numerous sources, including:

• Merck corporate plans, objectives and strategies
• Company policies and initiatives related to Company policies
• Employee surveys and other inputs from employees
• Customer feedback obtained through focus groups and other methods
• Shareholder resolutions and other feedback received through ongoing dialogue with shareholders
• Input from investors and investor groups committed to sustainable investing
• Partners, nongovernmental organizations, suppliers and other stakeholders
• Media coverage
• Stakeholder feedback on prior CR reporting
• Industry benchmarking
• The Global Reporting Initiative (GRI), Access To Medicines Index, the UN Global Compact principles and other guidelines

These issues were assessed by Merck’s CR Council based on three parameters that we used to define and determine materiality for the purpose of CR reporting: 1) the impact on Merck’s ability to achieve our business strategy 2) level of concern to external stakeholders; and 3) the degree to which Merck can control and influence the topic or issue. Merck recognizes the importance of issues that may not be within the Company's immediate or total control such as climate change, global poverty and access to medicines, particularly in the developing world. In these areas, we believe that we can, however, influence how progress is made in addressing these issues, particularly through public policy and advocacy or through partnerships with others.

From this exercise we identified five broad issue areas that are both of greatest significance to Merck stakeholders and pose the greatest risks and opportunities to Merck's business:

In  2009 the CR Council reaffirmed these five issue areas as the Company's ongoing priority ESG issues, and reaffirmed their support for a systematic process to identify specific goals, targets and key performance indicators (KPIs) with which to measure Merck's performance in each of these areas. These goals are reviewed annually with Merck's Executive Committee and Board of Directors Committee on Public Policy and Social Responsibility. Merck is also committed to disclosing this information through our annual CR Report. In addition to the five key material issues, Merck recognizes that many other ESG issues are of interest to stakeholders. For this reason, Merck will continue to report and communicate on additional ESG issues on our CR website and through dialogue with individual stakeholders.

In  2009, a similar process was used to determine specific reporting issues within each key ESG issue area. According to their respective areas of expertise, CR Council members identified priorities based on continuing and emerging issues of employee and stakeholder concern, their impact on Merck's business, and Merck's ability to influence them, and where applicable determined corresponding performance targets for inclusion in Merck's 2008 Corporate Responsibility Report. 

Our materiality approach is illustrated in the chart below. We weighted issues raised based on their position in the chart and combined this assessment with weighted analyses of media coverage, shareholder questions and the presence of the issues in the GRI and other relevant indices. The topics that fell in the top right-hand quadrant for this reporting year were considered to be the most material for Merck at this time, to be included in our print report and executive summary.

Merck  has received positive feedback from external stakeholders on our materiality assessment process as it was introduced in our 2006-2007 Corporate Responsibility Report. We will continue to use this process and to seek additional feedback in order to further refine our key corporate responsibility issues in future reports, and anticipate that our process will evolve as we learn from experience and our dialogue with our stakeholders.