Financial and sustainability discussion

Key performance (DKK)

 

Realized 2012

Realized 2011

2013 outlook*

Sales, DKKm 11,234 10,510
Sales growth, DKK 7% 8% 4-7%
Sales growth, LCY 3% 10% 5-8%
Sales growth, organic 4% 7% 5-8%
EBIT, DKKm 2,745 2,340
EBIT growth 17% 11% 4-7%
EBIT margin 24.4% 22.3% ~ 24%
Net profit, DKKm 2,016 1,828
Net profit growth 10% 13% 6-9%
Net investments excl. acquisitions, DKKm  1,177 1,316 ~ 1,100
Free cash flow before acquisitions, DKKm 1,581 1,393 ~ 1,650
ROIC incl. goodwill 19.9% 21.3% ~ 20%
Avg. USD/DKK 579 536 560
EPS (diluted), DKK 6.33 5.71
Water efficiency improvement (compared with 2005) 32% 30% 35%
Energy efficiency improvement (compared with 2005) 38% 34% 42%
CO2 efficiency improvement (compared with 2005) 55% 47% 50%
Estimated reductions in CO2 emissions through our customers' application of our products, million tons 48 45 50
* Assumes exchange rates for the company’s key currencies remain at the closing rates on January 18 for the rest of 2013.

The following section presents realized financial, environmental and social data for the year. Data and key figures can be found under Accounts & Data, while an overview of reporting in accordance with the Global Reporting Initiative (GRI) guidelines can be found under Supplementary. Our Communication on Progress with respect to the UN Global Compact can also be found under Supplementary.

Sales

Total sales in 2012 were DKK 11,234 million, an increase of 7% compared with 2011. Exchange rates impacted sales positively, and sales in LCY were up by 3%. Acquisitions and divestments had a minor negative net impact on sales growth, and sales grew by 4% organically.

Costs, Other operating income and EBIT

Total costs

Total costs excluding net financials and tax were DKK 8,567 million, an increase of 4% compared with 2011. 

Gross profit

Gross profit increased by 9% compared with 2011, and the gross margin was 57.2%, up 1 percentage point on the gross margin in 2011 and up 0.4 percentage point when adjusted for the acquisition impact in 2011. Continued productivity improvements, favorable product mix changes and the absence of the IFRS adjustment of acquired inventories at EMD/Merck Crop BioScience more than offset the higher cost of raw materials and costs related to the new hyaluronic acid facility in China and the new enzyme plant in Nebraska, USA.

The gross margin for Enzyme Business was 58.2%, down 0.5 percentage point compared with 2011. Higher raw material prices and costs related to the new enzyme plant in Nebraska, USA, were the main reasons for the lower gross margin, whereas continued productivity improvements and favorable product mix changes partly offset the higher cost of goods sold.

The gross margin for BioBusiness was 47.7%, up from 33.3% in 2011 and up from ~44% when adjusted for the IFRS adjustment relating to the acquisition of EMD/Merck Crop BioScience in 2011.

Other operating costs

Other operating costs increased by 4% compared with 2011 to DKK 3,756 million. The ratio of other operating costs to sales was 33%, a decrease of 1 percentage point compared with 2011. A cost-conscious approach continued to benefit operations. 

  • Sales and distribution costs, including business development, increased by 3%, representing 13% of sales
  • R&D costs increased by 4%, representing 14% of sales
  • Administrative costs increased by 4%, representing 7% of sales

Other operating income

Other operating income increased to DKK 78 million in 2012, compared with DKK 50 million in 2011. Milestone payments in BioBusiness were the main reason for the increase.

Depreciation and amortization

Depreciation and amortization totaled DKK 703 million in 2012, compared with DKK 786 million in 2011. The decrease in depreciation and amortization is mainly due to lower depreciation in Biopharma, caused by the absence of depreciation and write-downs related to the divestment in 2011. Excluding these factors, depreciation and amortization increased slightly.

EBIT

EBIT grew by 17% to DKK 2,745 million, up from DKK 2,340 million in 2011.

The EBIT margin was 24.4% in 2012, an increase of 2.1 percentage points compared with 2011 and an increase of ~1.8 percentage points adjusted for the acquisition impact in 2011. The EBIT margin was positively affected by higher sales and a favorable development in operating costs and currency exchange rates.

SALES AND GROWTH
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GROSS PROFIT AND GROSS MARGIN
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R&D
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R&D costs (% of sales)
R&D costs

Net financials and Net profit

Net financial costs

Net financial costs totaled DKK 161 million in 2012, an increase of DKK 236 million compared with net financial income of DKK 75 million in 2011. The increase was primarily caused by net currency hedging/revaluation losses of DKK 83 million in 2012, compared with a gain of DKK 190 million in 2011. Compared with 2011, net interest expenses were DKK 15 million lower at DKK 61 million.

Profit before tax

Profit before tax increased by 7% to DKK 2,584 million, up from DKK 2,415 million in 2011.

The effective tax rate in 2012 was 22.0%, against 24.3% in 2011. The effective tax rate for 2012 benefited from utilization of the U.S. Advanced Energy Manufacturing tax credit, obtained in 2010, relating to the new plant in Nebraska.

Net profit

Net profit was DKK 2,016 million, an increase of 10% compared with 2011. The higher EBIT and lower tax rate had a positive impact on net profit, whereas the increased net financial costs impacted net profit negatively.

EBIT AND EBIT MARGIN
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EBIT
EBIT margin

Cash flow and Balance sheet

Cash flow

Cash flow from operating activities came in at DKK 2,758 million for 2012, compared with DKK 2,709 million in 2011. The higher operating cash flow was primarily the result of higher net profit.

Net investments excluding acquisitions totaled DKK 1,177 million, against DKK 1,316 million in 2011.

Free cash flow before acquisitions for the period was DKK 1,581 million, up from DKK 1,393 million in 2011. The increase was the result of the higher operating cash flow.

Balance sheet

Shareholders’ equity was DKK 9,568 million at December 31, 2012, up 8% from DKK 8,824 million at year-end 2011. Shareholders’ equity was increased by net profit, but this was partly offset, mainly by dividend payments and purchase of stock under the share buyback program. Shareholders’ equity represented 63% of the balance sheet total, down from 64% at year-end 2011.

Net interest-bearing debt was DKK 1,430 million at December 31, 2012, compared with DKK 1,019 million at December 31, 2011. The increase was mainly a result of the dividend payout of DKK 600 million to Novozymes' shareholders in March 2012, the DKK 832 million share buyback carried out during 2012 and the strategic partnership with and acquisition of an equity position in Beta Renewables.

Net debt-to-equity was 15% at December 31, 2012, up from 12% at December 31, 2011.

Return on invested capital (ROIC), including goodwill, was 19.9%, compared with 21.3% in 2011. The lower ROIC was mainly due to the higher level of invested capital, primarily as a result of the acquisition of EMD/Merck Crop BioScience in 2011 and the strategic partnership with and acquisition of an equity position in Beta Renewables in 2012.

Treasury stock

On December 31, 2012, the holding of treasury stock was 12.77 million B shares, equivalent to 3.9% of the share capital.

Between January 20 and October 29, 2012, Novozymes repurchased 5,247,588 shares worth approximately DKK 832 million within the DKK 2 billion two-year share buyback program that was initiated on January 20, 2012. The buyback program was terminated on October 29, 2012, in connection with the announcement of the strategic partnership with and acquisition of an equity position in Beta Renewables.

The B common stock is expected to be reduced by DKK 10,600,000 from DKK 542,512,800 to DKK 531,912,800 by canceling part of the holding of treasury B stock. The cancellation of shares is subject to approval at the Annual Shareholders’ Meeting on February 28, 2013.

Supply chain management – Getting closer to customers

Novozymes puts the customer at the heart of supply chain management, which includes activities such as sourcing, transport and logistics, and coordination with customers. To help maximize operational efficiency and sustainability, we are stepping up dialogue with customers to assess their needs better and bring production closer to them, leading to cost savings and a smaller carbon footprint.

Our global supply chain operates on the proximity principle: We manufacture products as geographically close to our customers as possible. This typically allows for cheaper goods transport and makes it possible to tailor finished goods to customer needs at a late stage.

Lower transport volumes
We have expanded supply chain operations in locations such as Suzhou, near Shanghai, China, and Blair, Nebraska, USA, to increase delivery flexibility while minimizing transport costs. In turn, this helps us save on CO2 emissions, as we reduce distances traveled by products.

Novozymes expects to reduce internal transport between Suzhou and Blair by 37% in 2012-2013, corresponding to approximately 300 tons of CO2. In 2013, we expect a reduction in transport volume between our plants of up to 8%.

We are also working on more efficient transport of globally sourced raw materials, with a trial project in Denmark seeing us switch transport from trucks to ships. Ships carrying raw materials for Novozymes’ production now sail directly to Kalundborg, rather than docking in Copenhagen and transferring the goods to trucks. This initiative will help Novozymes reduce the number of trucks on the road between Copenhagen and Kalundborg by 800, thereby cutting CO2 emissions by an estimated 148 tons a year.

Reducing complexity through dialogue
Another key objective is reducing complexity in service offerings, which means better assessing customer needs through increased dialogue. In May 2012, we launched a new three-year plan to highlight customer relationships and complexity management, which will help us meet global market requirements and address business challenges.

Specifically, we developed 12 initiatives to engage with customers and improve operational efficiency through programs such as late customization, make-to-order lines, smaller inventories, and planning the location of potential production facilities.

One practical outcome is how we review order patterns with established customers, where we discuss how best to plan long-term and repeat orders. Based on patterns found, we aim to reduce the number of partially filled pallets, which lower the overall volume transported in a single delivery. Instead, we seek to merge smaller orders and move more goods with the same energy utilization, thereby achieving cost efficiencies and lower CO2 emissions. At the same time, we retain the flexibility to provide just-in-time and small deliveries to customers who need them.

Going forward
In a 2012 survey of our customers, respondents’ top priority was reliable deliveries, followed by quality products and documentation. Overall, 75% saw the benefit of a partnership-oriented approach to supply chain management. Novozymes therefore remains committed to mitigating delivery risk and increasing reliability, optimizing the supply chain together with customers and thereby building customer loyalty.

Better engagement with suppliers also delivers higher operational efficiency. Over the past three years, we have implemented a supplier performance management system where performance is evaluated on the basis of commerciality, quality and sustainability, aiming to identify and mitigate risks in the global supply base. Our target for 2015 is 100% supplier adherence to the supplier program for commercial, quality and sustainability performance for all our suppliers with 12 months rolling spend above 1 million DKK.

We will also continue to optimize production and administration systems, including a smoother order-to-invoice flow, while supporting the company’s strategy and growth targets.

FIVE-YEAR CASH FLOW AND ACQUISITIONS OVERVIEW
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Free cash flow before acquisitions
Acquisitions
Free cash flow before acquisitions (% of sales)
NET INTEREST-BEARING DEBT (NIBD) AND EQUITY RATIO
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NET INVESTMENTS*
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Net investments (% of sales)
* Excluding acquisitions

Delivering to the stock market

Novozymes’ Chief Financial Officer takes stakeholders through the company’s key financial figures, results and deals of 2012, and the forecast for growth in 2013 and beyond.

VIEW MORE

Resource utilization

In the following, we report on our efficiency targets for energy, water and CO2 as well as other performance related to resource utilization:

Energy, water and CO2 efficiency

Energy efficiency

The realized improvement in energy efficiency in 2012 was 38% compared with 2005 and thereby met the target of 38%. The improvement can be credited to implementation of numerous energy-saving projects with a focus on replacing equipment and optimizing energy use. Energy efficiency improved by 4 percentage points from 34% in 2011, which corresponds to an additional 250,000 GJ of energy saved and estimated cost savings of approx. DKK 30 million in 2012.

Water efficiency

Water efficiency improved by 32% in 2012 compared with 2005, falling just short of the target of 33%. We were unable to reduce water consumption further due to a shift toward products requiring more process water and a delay in some water-saving projects. Water efficiency nevertheless increased by 2 percentage points from 30% in 2011, leading to water savings of approximately 200,000 m3 (reducing total consumption to 6,446,000 m3) and estimated cost savings of DKK 2 million.

With a view to notably improving water efficiency and progressing toward our 2015 target of 40%, we have initiated more water-saving projects with a longer payback period.

CO2 efficiency

Novozymes improved its CO2 efficiency by 55% in 2012 compared with 2005 and thereby exceeded the long-term target of 50% in 2015. This achievement was largely made possible by the strategic decision in 2011 to significantly increase purchases of CO2-neutral electricity from wind power. In Denmark, we now source all electricity from wind turbines, which accounts for approximately one-third of our CO2 efficiency gains. We have also identified and implemented energy-saving projects throughout the organization, and the cost savings have all been earmarked for purchases of CO2-neutral energy.

Waste

The registered volume of waste rose to 14,241 tons in 2012, up from 11,704 tons in 2011. The increase resulted from biomass generated at our new factory in Blair, Nebraska, which could not be distributed as fertilizer products, such as NovoGro®. This also resulted in a decline in the percentage of waste recycled to approx. 34% in 2012, down from approx. 41% in 2011.

Transportation and distribution

In 2012, CO2 emissions from the transport of goods to the first point of delivery at the customer and from transport between sites were estimated at 19,000 tons, a reduction of approx. 14% from 22,000 tons in 2011.

Animal testing

The use of experimental animals grew by approx. 10% from 1,119 animals in 2011 to 1,240 in 2012. This was mainly a result of increased toxicology testing in Enzyme Business.

Environmental compliance and complaints

Novozymes aims to comply with all regulations and strives to minimize the number of complaints. In 2012, 15 breaches of regulatory limits were registered worldwide, compared with 21 in 2011.

We received 11 complaints from neighbors, down from 18 in 2011. The majority of complaints were made by private residents and related to odor and noise disturbance from nearby factories.

We always seek to avoid spills, such as the release of chemicals into watercourses or soil, and there were no significant spills in 2012.

Novozymes has a pending case in the U.S., after elevated nitrate levels were found in the groundwater around our site in Franklinton, North Carolina, a number of years ago. Subsequent measurements were submitted to the authorities in early 2008, but no conclusion has been reached as the data are still under review by the authorities.

ESTIMATED ENERGY COST SAVINGS
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Saved energy cost compared to 2005 efficiency
Actual energy cost

In Denmark, we now source all electricity from wind turbines, which accounts for approximately one-third of our CO2 efficiency gains.

BIG FEET, SMALL FOOTPRINT

Our commitment to sustainability throughout the value chain has seen us minimize the environmental footprint of our operations, as well as that of our customers. By applying Novozymes’ biosolutions, customers reduced their CO2 emissions by an estimated 48 million tons in 2012.

Climate change impact

It is a priority for Novozymes to position enzyme technology as part of the solution to climate change. Through customers’ application of our products, we achieved an estimated reduction in CO2 emissions of 48 million tons in 2012, or roughly three-quarters of Denmark’s annual CO2 emissions. This was an increase of 3 million tons compared with 2011 and surpassed our target of 47 million tons. The improvement can partly be accredited to the increase in sales of household care enzymes

To measure our impact and provide our customers with validated claims, Novozymes works continuously on developing peer-reviewed environmental life cycle assessments. In 2012, we completed assessments in the textile and aquaculture industries and authored an article reviewing environmental assessments of enzyme use in industry over the last 15 years. Additionally, we provided CO2 data on selected enzymes to customers and partners, and we advised them on changing their product mix and on the benefits of shifting to more concentrated products with lower environmental impact.

BIG FEET, SMALL FOOTPRINT

Our commitment to sustainability throughout the value chain has seen us minimize the environmental footprint of our operations, as well as that of our customers. By applying Novozymes’ biosolutions, customers reduced their CO2 emissions by an estimated 48 million tons in 2012.

Workplace development

Here we report on targets and performance related to employees and the workplace.

Employee turnover

The 2012 target for employee turnover was a rate between 4% and 9%, reflecting the present job market and Novozymes’ aim to attract and retain employees. With a realized employee turnover rate of 8.1%, this target was met.

Satisfaction, motivation and Novozymes' values

Employee satisfaction and motivation, employees’ assessment of development opportunities, and our ability to live our values are important indicators of both employee well-being and our ability to retain and attract talent. Every year, Novozymes’ employees worldwide are invited to express their opinions in the annual People’s Opinion survey. Employee satisfaction and motivation, as measured by the survey, scored an all-time high of 78 in 2012, exceeding our target of 75. For Nordic-based companies with at least 2,000 employees, and with employees based in at least two countries outside the Nordic region, an employee satisfaction score of 75 and above is considered Top in Class in a benchmark developed by Ennova, our service provider.

When it came to opportunities for professional and personal development, our score was 75 in 2012, exceeding our target of 74. To further support employee development, Novozymes initiated new leadership and talent development programs in 2012 with further implementation to come in 2013. With regard to our corporate values, the survey showed that employees strongly trust their colleagues and managers to live Novozymes’ values, surpassing our target of 80 with a score of 83.

Diversity and equal opportunities

Employment at Novozymes is based on merit and is offered without any distinction, exclusion or preference. We are committed to developing a diverse workforce, fostering innovation and an inclusive working culture.

In 2012, we continued our efforts to ensure that we utilize the full potential of our global talent pool in our succession planning. In order to further increase diversity among managers to better reflect the composition of our recruitment base, we have also set specific targets for gender and nationality distribution for new managers recruited in 2013. Read more about this in the Outlook section.

Focus on safety

Novozymes aims to offer a safe working environment. The frequency of occupational accidents was historically low in 2012 at 3.0 per million working hours, well within the target of 4.0. However, the year was sadly marked by a fatal accident at one of our production sites in Denmark. Following the accident, we immediately initiated an investigation into the cause and provided grief counseling for relatives and co-workers.

Such a tragic accident calls for extra attention to safety. As a result, all departments have identified processes and equipment that can potentially cause personal injury so that the risk of future tragic accidents is as low as possible. Furthermore, Novozymes launched a new campaign, “Stop and Think,” reminding employees to think twice in potentially risky work situations. Finally, Novozymes has hired external consultants to review its global setup and performance regarding occupational health and safety and identify potential areas for improvement.

Health, well-being and absence rate

Novozymes aims to help employees make healthy choices by providing conditions, information and facilities in the workplace that promote healthy lifestyle habits and wellness opportunities. Improved well-being and low absence benefit our employees not only by reducing the discomfort associated with illness but also by limiting unnecessary stress and extra work for colleagues. The company also benefits, as low absence improves work flows and saves costs. With an absence rate of 1.9% in 2012, the target of under 3% for the year was met.

Compliance with human rights and labor standards

In 2012, Novozymes conducted a human rights impact assessment as part of a project using the U.N.’s Guiding Principles on Business and Human Rights as a benchmark. The outcome of this project has been improvements in our practices, such as a clearer anchoring of responsibility across the organization for Novozymes’ Minimum Standards on Labor and Human Rights and a better understanding of regional differences in human rights topics.

Furthermore, we have updated our commitment to human rights and incorporated this into business activities, such as merger and acquisition processes. These improvements should enable us to more systematically detect and prevent human rights risks across all sites. In 2013, we will conduct internal training in how to use our Ethics Hotline, thus ensuring that all employees know how to report any breaches of human rights.

EMPLOYEE SATISFACTION AND DEVELOPMENT OVERVIEW
Score

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Employee satisfaction score
Development opportunities score
FREQUENCY OF ACCIDENTS

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Frequency of accidents (per million working hours)

DISTRIBUTION OF GENERATED VALUE

GROWING TOGETHER

Novozymes connects with diverse stakeholders in the global community to innovate and invest in tomorrow’s biobased, renewable society. The more we learn from each other, the faster we get there.

The project develops sustainable agriculture to increase food production and provide raw materials for producing ethanol-based cooking fuel for urban households.

CITIZYMES: LEARNERS REACHED BY REGION
Learners

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Asia Pacific
North America
Latin America
Europe/MEA

Novozymes is partnering with Bangladesh University of Textiles to introduce concepts of biotechnology and sustainability to future textile mill managers.

Socio-economic impact

Here we report on performance related to value distribution, including tax contributions and interaction with suppliers. The status of our business integrity program, our food-energy venture in Mozambique and our corporate citizenship program is also covered. 

In 2012, 88% of Novozymes’ generated value was returned to society through the purchase of goods and services from suppliers, wages and pensions to our 6,041 employees, different types of taxes and duties to the community, and dividends and financial costs to our capital providers. The remaining 12% was retained by Novozymes to develop the company and ensure competitiveness and future value generation for distribution among key stakeholders.

Total tax contribution

In 2012, taxes incurred as corporate income taxes, other taxes and duties came to approx. DKK 875 million, equal to the 8% returned to the community (see chart Distribution of generated value). In addition to the incurred taxes, Novozymes collected and withheld tax contributions on dividends and wages for an amount of approx. DKK 975 million. Hence, Novozymes’ total tax contribution amounted to approx. DKK 1,850 million, compared with approx. DKK 1,900 million in 2011. Novozymes’ overall tax strategy and transfer pricing policy support a positive tax contribution to society and governments in the countries in which it operates. See also Novozymes’ position on tax at www.novozymes.com

Suppliers

Novozymes continuously assesses risks and identifies opportunities through the responsible purchasing program implemented in 2009. In 2012, our coverage of total spend was 93%. We finalized 11 action plans for noncompliant suppliers involving either dialogue or discontinuation.

Novozymes has set a new target of 100% adherence to the supplier program for commercial, quality and sustainability performance for suppliers where our annual spend is above DKK 1 million. See also the Outlook section. Large suppliers with which we have regular transactions are more readily influenced. However, we continue assessing smaller suppliers and mitigating the associated risks.

In 2012, Novozymes included an extended version of its Supplier Requirements in supplier contracts worldwide. Through collaboration with suppliers, we managed to redesign packaging, contributing to safer handling of selected products. More environmentally friendly alternatives to raw materials such as titanium in our enzyme production were identified. Finally, Novozymes hosted a supplier innovation day with the aim of creating closer partnerships with strategic suppliers. See also our 2012 Communication on Progress with respect to the UN Global Compact in the Supplementary section of the report.

Business integrity

We have continued our dedicated communication and training efforts to ensure business integrity always remains high on the radar for employees and business partners. On a global scale, workforce training in business integrity through e-learning reached 79%, compared with 71% in 2011. We also conducted local seminars in our major facilities in cooperation with regional finance departments.

Following our acquisition of EMD/Merck Crop BioScience in 2011, part of the post-merger integration process in 2012 was to develop a Spanish version of our booklet on business integrity, Bribery – No thanks!, to ensure our new colleagues from EMD/Merck Crop BioScience in Argentina and business partners also understand and comply with our six principles. The booklet is also available externally in Chinese, Danish, English and Portuguese.

Food-energy venture in Africa

Novozymes has invested in a project in Mozambique via a joint venture, CleanStar Mozambique (CSM). The purpose is to develop sustainable agriculture to increase food production and provide raw materials for the production of ethanol to replace charcoal as a cooking fuel in urban households. CSM is helping smallholder farmers in the Sofala province implement an environmentally restorative agroforestry system to provide a diverse mix of agricultural produce. In 2012, CSM opened its first cooking fuel facility in Sofala, where some of the agricultural produce is processed into an ethanol-based cooking fuel and then sold locally.

Toward the end of 2012, CSM had more than 1,200 smallholder farmers involved in the venture, employed more than 150 employees, had commenced domestic production of ethanol-based cooking fuel and had sold more than 3,000 stoves to urban households. The venture also contributes broadly to the U.N. Millennium Development Goals (MDGs). For example, it helps: 

  • Eradicate extreme poverty by moving 1,200 farmers and 150 employees and their families from subsistence to commercial incomes (MDG#1)
  • Improve maternal health (MDG#5) and reduce child mortality (MDG#4) in about 3,000 homes through reduced indoor pollution
  • Ensure environmental sustainability (MDG#7) by shifting away from deforestation-based charcoal

Corporate citizenship efforts

We continued in 2012 to share our knowledge of science and environmental responsibility with local communities through our corporate citizenship program, Citizymes. With these efforts, we contribute to the improvement of education in our local communities (MDG#2) and the improvement of environmental sustainability (MDG#7). We reached approx. 26,000 learners in 2012, up from approx. 9,800 in 2011 when the project was launched. The increase was primarily a result of our involvement in Saskatoon, Saskatchewan, with the Canadian organization Agriculture in the Classroom, reaching out to approx. 10,000 children in its teaching of plant growth and food production.

In total, around one-third of all learners reached were from Latin America and Asia Pacific, where companies are increasingly expected to contribute to educational activity, for example by showing how theory works in practice. An example of a new project is Novozymes’ partnering with the Bangladesh University of Textiles to introduce the concepts of biotechnology and sustainability to future textile mill managers as part of the university’s MBA program. Read more about the program and other examples of our citizenship projects at www.novozymes.com.

Socio-economic impact assessment

In 2012, Novozymes published its first socio-economic impact assessment estimating the socio-economic impact in the U.S. of introducing Meat Protein Extracts (MPE) as an alternative to sodium in processed meat. The results showed that the benefits for consumers and society are substantial and that MPE could be part of the solution to the problem of excessive sodium intake in the U.S. With this study, Novozymes developed a new methodology for assessing socio-economic impacts and documenting customer claims as a supplement to its existing expertise in environmental life cycle assessments.

DISTRIBUTION OF GENERATED VALUE

GROWING TOGETHER

Novozymes connects with diverse stakeholders in the global community to innovate and invest in tomorrow’s biobased, renewable society. The more we learn from each other, the faster we get there.

The project develops sustainable agriculture to increase food production and provide raw materials for producing ethanol-based cooking fuel for urban households.

CITIZYMES: LEARNERS REACHED BY REGION
Learners

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Asia Pacific
North America
Latin America
Europe/MEA

Novozymes is partnering with Bangladesh University of Textiles to introduce concepts of biotechnology and sustainability to future textile mill managers.

Novozymes reconfirmed its position as a biotechnology sector leader in the Dow Jones Sustainability Indexes based on the rating of its 2012 performance.

Novozymes targets inclusion of biofuels as a "high-impact opportunity" in the U.N. Sustainable Energy for All initiative in 2015.

Sustainability leadership

Here we report on the benchmarking of our sustainability performance and our performance in relation to our global and regional engagements.

Analysts and rating agencies continuously assess companies’ overall sustainability performance, and we use the most relevant ratings to benchmark ourselves against sustainability leaders. In particular, the rating from Dow Jones Sustainability Indexes and the underlying evaluation completed by Sustainability Asset Management (SAM) are the yardsticks for our target of obtaining a Gold Class rating from SAM in its Sustainability Yearbook. Based on our 2011 performance, Novozymes obtained a Gold Class rating in the 2012 Sustainability Yearbook and thereby achieved its target.

Moreover, we reconfirmed our position as a biotechnology sector leader in the Dow Jones Sustainability Indexes based on the rating of our 2012 performance.

Novozymes also improved its position in the Nordic Carbon Disclosure Leadership Index, jumping from #10 in 2011 to #5 in 2012 with a score of 94. The improvement was due partly to substantial investments in reducing the carbon footprint/energy consumption of our own production facilities and partly to our offerings helping customers further reduce their CO2 emissions.

Global and regional engagements

In 2012, Novozymes engaged in a series of advocacy activities, most notably the U.N. Conference on Sustainable Development (Rio+20). With a strong emphasis on providing practical business input and solutions, and engaging in dialogue with interested stakeholders, Novozymes was able to:

  • Actively participate in the Business Action for Sustainable Development (BASD) and the Rio+20 Business Day
  • Provide inputs to policy documentation such as the ICC’s Green Economy Roadmap and the WBCSD’s Vision 2050 and Changing Pace report
  • Support the UN Global Compact Task Force on Sustainable Energy for All, including the SEFA (Sustainable Energy for All) initiative
  • Increase information and knowledge about our vision of a biobased economy

The SEFA initiative, launched by the U.N. Secretary-General, is of particular interest to Novozymes. It aims to make sustainable energy for all a reality by 2030 and has encouraged private, public and non-governmental actors to join. This initiative is a major opportunity for Novozymes to position bioenergy technologies as part of the solution, and has led Novozymes to set a target for the inclusion of biofuels as a “high-impact opportunity” in the SEFA initiative in 2015. See also the Outlook section.
 
We also stepped up our involvement in the local Global Compact networks in the U.S., Brazil, China and India. Together with A.P. Møller - Mærsk, Novo Nordisk, Business for Social Responsibility (BSR) and the UN Global Compact, we contributed to the report New Geographies of Corporate Sustainability, focusing on the local sustainability agendas in China, Brazil and India. The project enhanced our knowledge of sustainability differences within the regions that need to be taken into account in future activities.

Fulfilling sustainability reporting requirements

Under Section 99a of the Danish Financial Statements Act, it is mandatory for large companies to report on corporate responsibility. As a member of the UN Global Compact, Novozymes prepares a Communication on Progress, which can be found under Supplementary reporting. Together with the integrated financial, environmental and social reporting, the Communication on Progress meets both the requirements for reporting on corporate responsibility and the UN Global Compact’s advanced reporting criteria. Furthermore, we report on our sustainability activities and update our sustainability materiality overview annually at www.novozymes.com.

The biobased economy and the global stage

We may be a relatively small company but we have big plans – we want to change the world together with our customers. Our technology holds the key to an economy based on renewable resources. Novozymes is dedicated to building a biobased economy, not only through the products and solutions the company develops, but also by participating in the political processes that will shape the world of tomorrow.

The successful development of the global economy hinges on the ability of government bodies and private companies to work together to drive innovation and growth. As a result, knowledge- and innovation-rich companies such as Novozymes are gaining the ear of government. Novozymes is using this opportunity to further drive change by engaging in dialogue with policymakers and advocating for a biobased society, by sharing its biotechnology know-how and presenting its innovative solutions.

Creating opportunities
As part of this global advocacy effort, we strategically select and participate in global forums and events, such as Rio+20 and B20 meetings, not only to engage with politicians and industry opinion leaders, but also to meet with customers and partners to find possible synergies.

Our agenda in 2012 was to positively influence and drive necessary change in the following areas:

  • Ending fossil fuel subsidies
  • Free trade in sustainable solutions
  • Robust carbon pricing
  • Support for deployment of low-carbon solutions
  • Private investment in green infrastructure

The United Nations Conference on Sustainable Development (Rio+20) in June 2012 was the biggest sustainability event of the past two decades. More than 55,000 people from 193 countries and over 1,500 companies participated and directly contributed to the debate. Novozymes was represented in the processes and the event, where the final agreement focused on several key areas for both the company and the future of the biobased economy. We presented our solutions to heads of state, journalists and global opinion leaders, and we connected with a large number of current and potential customers to explore future projects.

Listening to mitigate risk
By participating in such global events and engaging with stakeholders around the world, Novozymes also gains vital insights that can be integrated into the business and the solutions offered to customers. Learning how policymakers, opinion leaders and NGOs view our industries enables us to better understand the business value chain, anticipate future requirements and safeguard our business by developing new solutions to meet changing market needs.

A long-term commitment
It takes time to influence political decisions, and we recognize, of course, that political support for building a biobased economy requires a long-term effort. In 2013, we will continue to advocate our solutions and policies that promote sustainable long-term growth. Focus areas will include establishing solid sustainability agendas with the new leadership in China and the U.S. administration, with particular emphasis on priorities for renewable energy. One of our long-term targets aims to secure biofuels as a "high-impact opportunity" on the Global Action Agenda of the U.N.’s Sustainable Energy for All initiative in 2015.

Novozymes reconfirmed its position as a biotechnology sector leader in the Dow Jones Sustainability Indexes based on the rating of its 2012 performance.

Novozymes targets inclusion of biofuels as a "high-impact opportunity" in the U.N. Sustainable Energy for All initiative in 2015.

Boosting green growth in Mozambique

Thomas Nagy explains how a Novozymes-supported venture to produce and market bioethanol-based cooking fuel is already transforming the local economy.

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