Addressing Global Climate Change

Climate change is among the most pressing challenges of our time. It affects the patients and communities we serve, as well as our business. We are committed to playing our part in tackling this global issue, which is also vital to the long–term health of our company.

Energy Use and Greenhouse Gas Emissions

Reducing our greenhouse gas (GHG) emissions is part of our corporate-wide commitment to improving the environment and increasing the efficiency of our operations. While energy use within our sector is relatively small compared to other industries, Abbott is committed to leadership in energy efficiency and greenhouse gas reduction. We have set aggressive targets to reduce our own greenhouse gas emissions and are committed to working with others to achieve wider progress.

Our approach has four pillars:

• Setting aggressive reduction targets for energy use and greenhouse gas emissions in our manufacturing operations;
• Pursuing carbon neutrality for our sales vehicle fleet;
• Revising product features and designs to limit the environmental impacts; and
• Working with employees, suppliers and distributors to achieve further reductions.

Manufacturing Operations

The primary measure Abbott uses in tracking its progress is the quantity of carbon dioxide (CO₂) emitted from our energy consumption in manufacturing, normalized by sales. In 2008, Abbott set a new target to reduce CO₂ from manufacturing operations by 30 percent in 2011, compared to 2006 levels. We made solid progress toward this goal last year by achieving a 15 percent reduction in CO₂ emissions from 2007. We are achieving these reductions in a variety of ways, including cogeneration projects, alternative energy installations and system upgrades. In 2008, for example, we upgraded the cogeneration installation at our plant in Campoverde, Italy, enabling the production of chilled water in addition to steam and electricity generation, further enhancing energy efficiencies. Similar improvements are under way at our plant in Tlalpan, Mexico, to enable on-site power generation.

Chicago Climate Exchange

Abbott is a member of the Chicago Climate Exchange (CCX), which provides independent assurance of our U.S. greenhouse gas emissions inventories. CCX is the world's second largest carbon market and the only one that allows trading in all six greenhouse gases. All CCX members commit to a six percent absolute GHG reduction over four years from a calendar year 2000 baseline. Members can achieve their commitment by either reducing emissions or purchasing offsets on the CCX market. We continue to project that our reductions will exceed the six percent program commitment. During 2008, Abbott settled its carbon neutral fleet commitment for 2007 and 2008 by purchasing verified carbon credits on the exchange.

Climate Responsible Energy Policy

Abbott made a number of major advances in managing its energy usage during the year, beginning with issuance of a detailed Climate Responsible Energy Policy, which provides guidance and goals to manage energy use and related emissions.

The Global Energy Management (GEM) team works with Abbott to monitor, evaluate and conserve total energy consumption globally while negotiating best-in-class price and delivery contracts and promoting the installation of financially beneficial energy conservation and alternative energy projects.

Through our myriad energy initiatives, we:

• Politically lobby for industrial energy initiatives;
• Negotiate competitive energy contracts;
• Implement financial hedges to reduce volatility;
• Perform energy audits to identify opportunities;
• Transfer best-in-class energy practices;
• Communicate energy knowledge;
• Identify and implement financially responsible energy capital projects; and
• Enhance global citizenship reputation through environmentally beneficial energy projects and practices.

Climate Responsible Energy Policy

Energy Management Projects

Energy consumption remains a top priority for California, the nation's most populous state – home to one of every eight Americans. In an effort to increase its use of renewable energy there, Abbott is installing a large, 500-kilowatt hour solar power system to produce electricity for parts of the company's vascular plant in the southern part of the state. This marks the company's first solar panel installation in the United States.

Other key recent accomplishments in the area of energy management and use include:

• Installation of a cogeneration plant at a new manufacturing site in Tlalpan, Mexico, that will yield lower GHG emissions and produce electricity and thermal energy from the same fuel source.
• Partnering with the U.S. Department of Energy (DOE) and Sustainable Energy Ireland (SEI) to conduct manufacturing energy assessments.
• Expanding monthly Web-based worldwide energy data collection.
• Implementing worldwide energy efficiency, conservation and alternative-energy projects, and converted from fuel oil to cleaner-burning natural gas.
• Installation of a solar energy system at our diagnostics plant in Delkenheim, Germany, that will generate 21,000 kilowatts of electricity and reduce CO₂ emissions by 19 metric tons per year.
• Reduction of electricity costs by $1 million per year at our headquarters in Abbott Park, Illinois.
• Development of plans to install cogeneration capacity in a manufacturing facility in Mexico.
• Undertaking a new cogeneration project at one of our manufacturing facilities in Pakistan.

Moving forward, our global energy efforts will focus on:

• Executing a worldwide energy communication process.
• Optimizing fuel oil purchasing and replacement options at our manufacturing facility in Puerto Rico.
• Identifying and implementing worldwide alternative-energy projects.

Abbott is increasing efforts to integrate green engineering technologies and concepts into our regularly scheduled projects, such as reroofing and other renovations, as well as new building design. As part of this effort, we are pursuing waste reduction initiatives that may have a significant positive impact. Some of these projects involve new and emerging technologies that, if proven successful at one plant, may improve our global environmental performance at other locations.

Green Fleet Initiative

We are the first and only Fortune 500 company to commit to going "carbon neutral" with our entire U.S. sales fleet of vehicles. Our 6,500-vehicle fleet represents approximately five percent of our overall global GHG emissions (12 percent of our U.S. GHG emissions). This commitment is equivalent to removing 12,000 cars from U.S. roadways.

In 2008 we made steady progress toward this goal, offering a variety of fuel-efficient hybrid vehicles as options for our sales and district managers and giving them financial incentives to choose more environmentally friendly options. As a result of this new program, the average domestic vehicle fuel efficiency has been enhanced by nearly 20 percent over 2006, reducing gasoline usage by more than 400,000 gallons/year. We also focused on our international fleet, installing new systems that capture more fleet data from our 70+ affiliates around the world. This will help us set a reliable baseline against which we can set reduction and offset goals. In 2009 there will also be emphasis placed on identifying options for centralizing leased vehicle management in the Latin America region where significant improvements can yet be achieved.

We also partnered with Environmental Defense, a leading environmental advocacy group, and PHH Arval, our fleet leasing provider, to offer many Abbott employees greener vehicle options when it comes to selecting a company car. We were the first client to participate in the pilot program, which helps companies identify the most cost-effective methods of lowering CO₂ emissions in their fleet operations.

Corporate fleet vehicles are driven an average of 25,000 miles per year – nearly double the mileage, fuel consumption and emissions of personal vehicles. As a result, fleet vehicles are major consumers of oil and gasoline and sources of air pollution. Abbott's fleet accounts for approximately 12 percent of our emissions.

To make the new green fleet vehicles as appealing to drivers as possible, we offered upgrade incentives such as satellite radio and sunroofs, and clearly communicated with drivers about the environmental impact of their choices. As a result, approximately 20 percent of our eligible drivers (nearly 200 employees) selected more fuel-efficient vehicles. While data are still preliminary, Abbott's fleet miles-per-gallon has improved by 4.3 percent; greenhouse gas emissions have been reduced by 4.2 percent; and overall cost is down 4.1 percent. Data includes vehicles acquired through the fall 2006 buy cycle, compared to the fall 2005 buy cycle.

Each new vehicle buying cycle offers the opportunity to re-evaluate our fleet and expand driver incentives to encourage greater participation in the program.

Abbott used the Chicago Climate Exchange (CCX) to purchase the supplemental credits necessary to fully offset our annual domestic fleet-vehicle emissions, achieving the “carbon neutral” status.

Going Solar

We completed planning for a cogeneration plant at a new manufacturing site in Tlalpan, Mexico. If approved, this project will likely yield lower GHG emissions. We also facilitated a European Energy Workshop to communicate to our employees our Climate Responsible Energy Policy, as well as set objectives to achieve short- and long-term goals.

We will also:

• Partner with the U.S. Department of Energy (DOE) and Sustainable Energy Ireland (SEI) to conduct manufacturing energy assessments.
• Expand monthly Web-based worldwide energy data collection.
• Implement worldwide energy efficiency, conservation and alternative-energy projects, and convert from fuel oil to cleaner burning natural gas.

LEED at Abbott

We are committed to using LEED guidelines when planning or evaluating each construction project, whether it involves a new building or renovations to an existing building. A dedicated task force meets regularly to brainstorm potential projects and new processes aligned with the LEED system and other green building practices.

Climate Leaders

Abbott participates in the Environmental Protection Agency's (EPA) Climate Leaders program, a voluntary industry-government partnership. Climate Leaders works with companies to develop long-term comprehensive climate change strategies. Partners are required to set an aggressive, company-wide greenhouse gas reduction goal to be achieved over five to 10 years. The EPA individually evaluates each proposed reduction goal against the projected performance of the partner's sector, and continuously tracks partner progress through a variety of means, including internal inventory tracking, reporting and goal tracking spreadsheets. Climate Leaders partners represent a variety of sectors, from heavy manufacturing to banking and retail.

Carbon Disclosure Project

We respond annually to the Carbon Disclosure Project, publishing our GHG emissions data and information on the business risks and opportunities presented by climate change. We also participate in the U.S. EPA Climate Leaders program and the Business Roundtable Climate Resolve initiative.

Green Purchasing

During 2008, we began using only paper certified by the Forest Stewardship Council (FSC) in our U.S. office copiers and worked to eliminate paper catalogs for office supplies. We also offer green products as alternatives within the office supply category. We estimate that these initiatives have helped us to avoid 100,000 pounds of CO₂ emissions.

During the year, our pharmaceutical division converted more than 1,000 tons of promotional paper supply to FSC or Sustainable Forestry Initiative-certified sources. In addition, the division is working with its printing suppliers to reduce paper use by 30 percent, saving nearly 30,000 trees and reducing seven million pounds of CO₂ emissions over five years.

We are now developing a green procurement policy to formalize our approach. This policy will provide guidance on incorporating sustainable sourcing principles into the purchasing process.

Training

In 2008, Abbott Corporate Purchasing trained more than 19,000 employees in various aspects of supply chain management, including the use of diverse suppliers, the Abbott Code of Conduct and Abbott Supplier Guidelines.