Novozymes believes that solving global challenges can unlock new market value. In 2017, we made good progress against our long-term sustainability targets and decided to explore new and improved ways of guiding and measuring our environmental impact in the future.
2017 highlighted why companies can no longer afford to ignore sustainability. In the face of devastating storms, choking pollution, distressing human rights abuses, rising inequality and stagnating economic growth, the call to action has never been more urgent. And yet growing polarization in our societies makes it more difficult for leaders to agree and uphold the global consensus on climate change and sustainable development. This volatility could significantly impair business growth.
At the same time, opportunities for companies to develop solutions to these global challenges have never been more varied, and the business case has never been more compelling. In its flagship Better Business Better World report , the Business and Sustainable Development Commission estimates that achieving the UNSustainable Development Goals (SDGs)The UN Sustainable Development Goals (SDGs) are an intergovernmental set of 17 aspirational goals with 169 targets. The goals were officially implemented on September 25, 2015, at the United Nations Headquarters in New York, US. “could unlock up to 60 market ‘hot spots’ worth an estimated USD 12 trillion by 2030 in business savings and revenue.”
At Novozymes, we understand this. We were one of the pioneers in integrating the SDGs into our purpose and strategy. Our commitment to the UN Global CompactAn international UN initiative with the intention of bringing companies together with UN agencies, labor and civil society to support ten principles in the areas of human rights, labor standards, the environment and anticorruption. See www.unglobalcompact.org. and its Ten Principles as well as to the 2030 Agenda for Sustainable Development has never been stronger.
Finding sustainable solutions together
In September 2017 at the UN General Assembly in New York, I had the privilege of presenting Novozymes’ Partnering for Impact strategy to the Business and Sustainable Development Commission. I am happy to report that the Commission was impressed by our approach to creating a better world through innovation and partnerships, and is keen to see what we do next.
One of our key focus areas is related to water (SDG 6). Having access to clean water and sanitation is one of the most pressing challenges our society faces, and it is the key to unlocking progress in several other SDGs. Our solutions have the potential to make a real difference, especially in water treatment. Therefore, we introduced water as a new program in our innovation pipeline in 2017. To support our research, we are also working to establish strong partnerships. We launched the HelloScience open innovation platform, which aims to foster and deliver solutions related to the SDGs. UNICEF has joined our platform and issued a specific call for solutions to detect contamination in drinking water.
We will also continue to focus on the global challenge of mitigating climate change by ensuring access to clean and affordable energy for a growing world (SDGs 7 and 13). In 2017, we worked closely with global and regional partners to support the decarbonization of the transportation sector and the deployment of low-carbon fuels. In Brazil, our work supported the adoption of RenovaBio, a groundbreaking new regulatory framework which sets targets for cutting carbon emissions for fuel distributors, in line with national commitments to the Paris Agreement.
Sustainable growth is a balancing act
Novozymes’ growth comes from delivering biological solutions that provide our customers with significant resource efficiency benefits and typically have a net positive CO2 impact. In 2017, we helped our customers avoid an estimated 76 million tons of CO2 emissions through the application of our products.
To sustain our growth in the long term, we must also consider the environmental footprint of our operations. Novozymes is committed to decoupling business performance from its environmental impact. Our three long-term targets measure resource efficiency relative to gross profitA company’s total revenue (equivalent to total sales) minus the cost of goods sold.. Due to a higher utilization rate than expected, we were unable to meet some of our targets in 2017. We now understand that this way of measuring progress is not optimal, as short term changes in gross profit, caused by e.g. currency movements and product mix, distort the picture of the actual sustainability performance. Therefore, we have decided to cancel the three targets and explore better ways of measuring our performance in the future. Meanwhile, we will introduce new annual targets for water and energy consumption and CO2 emissions.
With good momentum in the business and strong progress on our long-term targets, I am confident that we will continue to prioritize and promote the global sustainable development agenda. In 2018, we will work on refining our approach to sustainable innovation. I strongly believe that our future growth depends on our ability to deliver transformative innovations to support the SDGs, especially in emerging marketsMarkets that are progressing toward becoming more advanced, usually by means of rapid growth and industrialization., and catalyze partnerships for wider and lasting impact. As we deepen our understanding of the global challenges we face, I am excited to harness the power of biology to create a better world.
Peder Holk Nielsen
President & CEO
Peder Holk Nielsen
President & CEO
Sustainability is at the core of our business. We are committed to doing business in a responsible and transparent way.
Novozymes’ purpose, strategy and long-term targets integrate sustainability into the very core of its business. Sustainability is a key component of our business strategies and management processes. For a description of how we manage sustainability, please visit Sustainability governance on Novozymes.com.
We also believe in sharing our sustainability performance in the most transparent and responsible way. Our sustainability leadership has been acknowledged by various indices and awards. We value such third-party recognition as this gives credibility to our efforts.
RobecoSAM Sustainability Yearbook
Each year, Novozymes participates in RobecoSAM's Corporate Sustainability Assessment (CSA), a comprehensive survey which includes economic, environmental and social factors. The results determine which companies will be included in the Dow Jones Sustainability Index (DJSI) and the Sustainability YearbookPrepared by RobecoSAM, the Sustainability Yearbook represents the top 15% of companies in terms of sustainability performance from each industry. Yearbook Members are also classified into three categories – Gold, Silver and Bronze Medal Class..
In 2017, our score dropped to 81, compared with 90 in 2016. This means that even though we remain a member of the Yearbook and the DJSI, we were unable to meet our annual target of achieving a Medal Class rating. This decrease was due to our performance relative to our peers and the inclusion of new criteria in the CSA. We are committed to our long-term target of achieving a Gold Medal rating in 2020, and will continue to work toward improving our performance.
Recognition of UN-related disclosures
In 2017, Novozymes was recognized for its exemplary reporting on its contributions to the UN Sustainable Development Goals (SDGs)The UN Sustainable Development Goals (SDGs) are an intergovernmental set of 17 aspirational goals with 169 targets. The goals were officially implemented on September 25, 2015, at the United Nations Headquarters in New York, US. by FSR – Danish Auditors and Her Royal Highness Crown Princess Mary of Denmark.
In addition, we engaged in a peer-review session of our UN Global Compact Communication on Progress with our peers from the UNGC Nordic Network: A.P. Møller - Mærsk, Novo Nordisk and ØrstedDong Energy changed its name to Ørsted as of November 6, 2016, after the Danish scientist H.C. Ørsted.. The group shared best practices and challenges related to SDG reporting and provided valuable feedback on Novozymes' materialityThe materiality assessment process identifies key topics that pose both risks and opportunities for Novozymes’ business strategy. It is based on a systematic analysis of internal and external stakeholder perspectives. Material topics merit inclusion in our report, as they reflect our economic, environmental and social impacts or because they might influence stakeholder decisions. disclosure and business model. Moving forward, Novozymes will continue to work with its peers to improve its reporting practices.
Read more about our sustainability disclosure and recognitions on Novozymes.com.
Our integrated annual report is guided by materiality. Innovation, profitable growth and partnerships and customer engagement are the most material issues for Novozymes.
Solid capital structure refers to Novozymes' ability to finance its overall operations and growth using different sources of funds.
Profitable growth refers to organic sales growth that increases the company's operating profit.
Climate change & energy refers to Novozymes' commitment to climate action and its activities to address climate change risks and opportunities, reduce GHG emissions, invest in energy efficiency ans support the production and uptake of renewable energy.
Water is a key natural resource for Novozymes and needs to be managed locally in all operating regions. Water scarcity has become a global challange, and innovative activities are needed to optimize water consumption, reduce wastewater discharge and increase water recycling and reuse opportunities.
Bioethics & biodiversity describes how Novozymes supports the adoption of ethical, science-based regulation for processes and products involving gene technology. It also includes our responsibilities with regard to biodiversity rights, sharing benefits and engaging stakeholders on the role of bioinnovation for society.
Product stewardship is the practice of designing and managing products to minimize adverse environmental, health and safety impacts across the product life cycle.
Occupational health & safety describes all of Novozymes' policies and initiatives to ensure a safe, incident-free and healthy work environment.
Labor practices & human rights refers to the system of policies and processes to promote equal rights, diversity and talent development for all employees, and to ensure decent working conditions and respect for human rights across the value chain.
Community engagement & social investment refers to Novozymes' initiatives to engage with the communities in which it operates and invest in programs that create value for society.
Corporate governance describes the system of policies and processes that determine how Novozymes is directed and overseen by its Executive Leadership Team and Board of Directors.
Business ethics refers to Novozymes' commitment to doing business in a responsible way, which is essential to attract and retain investors, employees and customers. It includes all measures to work against corruption, anticompetitive practices, fraud and unethical policy advocacy.
Compliance refers to Novozymes' commitment to comply with relevant financial, governance, environmental and social regulations in all operating regions.
Responsible sourcing is the practice of considering social and environmental aspects, in addition to quality and economic aspects, when managing relationships with suppliers to promote sustainable supply chains.
Innovation refers to the process of developing novel products and optimizing processes to meet global challenges.
Partnerships & customer engagement refers to Novozymes' focus on building partnerships with stakeholders from the private sector, governments, civil society, etc. for business growth and sustainable impact. It also includes specific processes to retain existing customers and engage new customers.
Novozymes' annual report is based on the concept of materialityThe materiality assessment process identifies key topics that pose both risks and opportunities for Novozymes’ business strategy. It is based on a systematic analysis of internal and external stakeholder perspectives. Material topics merit inclusion in our report, as they reflect our economic, environmental and social impacts or because they might influence stakeholder decisions. to ensure that the content is significant and relevant to readers.
Our materiality assessment is a systematic and rigorous process that compiles diverse inside-out and outside-in perspectives from external stakeholders, trend analyses and internal engagement with relevant departments. This process results in two outputs: 1) disclosures on key trends and 2) disclosures on material ESG issues.
The key trends are disclosed as a list, while the material themes are illustrated through a materiality matrix. The matrix highlights the 15 most material financial and nonfinancial themes and acts as a guide for determining the topics we include in our annual disclosure. The illustration is a snapshot of the upper-right quadrant of Novozymes's materiality matrix and only represents issues in the high material category. A full list of all material topics can be found in the following pages.
The materiality matrix includes some new issues and other changes compared with 2016. The new issues included as highly material are Solid capital structure and Community engagement & social investment. Two new issues were also added in the medium material category - Animal testing and Data security.
We have consolidated a few issues from 2016, such as “Sales” and “Earnings” into “Profitable growth,” and “Partnerships” and “Customer relationship management” into “Partnerships & customer engagement.” In 2017, three issues became significantly more important than they were in 2016: “Occupational health & safety,” “Water” and “Labor practices & human rights.”
The cadence is as follows. Once every 2-3 years, we conduct a comprehensive assessment. This comprises a review of the assessment methodology, detailed desktop research, and active and extensive stakeholder engagement. In the intermediate period, we conduct an annual materiality refresh, which is based on evidence-based research and analysis of stakeholder opinion through proxy sources.
In 2017, Novozymes conducted a materiality refresh, building on its extensive assessment in 2016. This process comprised the following activities:
In 2017, we revisited the UN Sustainable Development Goals (SDGs)The UN Sustainable Development Goals (SDGs) are an intergovernmental set of 17 aspirational goals with 169 targets. The goals were officially implemented on September 25, 2015, at the United Nations Headquarters in New York, US., expert reports on global trends for 2017 (e.g. Global Risk Report by the World Economic Forum, State of Green Business by Greenbiz), investor and customer questionnaires, and peer analyses to identify global trends and ESG issues. Novozymes’ enterprise risk management (ERM) process provided significant internal insights.
We engaged in dialogues with relevant internal stakeholders from Corporate Sustainability, Regional Sustainability representatives from Asia PacificAustralia, Bangladesh, Cambodia, Hong Kong, India, Indonesia, Iran, Japan, Kazakhstan, Kyrgyzstan, Laos, Malaysia, Myanmar, Nepal, New Zealand, P.R. China, Pakistan, Philippines, Singapore, South Korea, Sri Lanka, Taiwan, Thailand, Turkmenistan, Uzbekistan, Vietnam., Latin America and North America, Global Public Affairs and Risk Management to prioritize trends and ESG issues and understand how they evolved in 2017.
We compared the top trends and ESG issues identified with priority themes highlighted by key ESG rating agencies and recalibrated our assessment together with internal stakeholders from Corporate Finance and Investor Relations.
Novozymes discloses the top five macro trends that shape and influence its business (see Business model) and the emerging risks posed by these risks (see Risk management). We also disclose our performance against key material issues (see Basis of reporting) in The Novozymes Report 2017. The primary audience for these assessments and disclosures is Novozymes’ investors, customers and employees.
Novozymes will continue to review global macro trends and material issues on an ongoing basis to proactively understand emerging trends and developments.
See Materiality in detail for an explanation of all the changes made to the materiality matrix in 2017.
Meeting stakeholder expectations is a priority for Novozymes. We spoke to some of our key partners to understand their needs better.
What matters most?
See Note 8.5 Customer engagement
Read more about our new Detergent Design Center in Bangalore, India, that will serve as platform for engaging customers in emerging markets.
See our interview with Hu Zhengyu, Chief Engineer of the NICE Group, to learn more about how we support their sustainability journey.
What matters most?
See Note 8.1 Labor practices & human rights
GOVERNMENTS & INTERNATIONAL ORGANIZATIONS
What matters most?
See Region-specific engagement
What matters most?
See our interview with Lee Qian, Investment Manager of Baillie Gifford's Positive Change Fund, about the importance of sustainable business to the investment community.
(Community, academia, NGOs)
What matters most?
See Strategic social investment
What matters most?
See Note 8.6 Responsible sourcing
Read more about how Novozymes partnered with one of its energy suppliers, Ørsted to phase out the use of coal in Denmark.