Financial and sustainability discussion

    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.

    Key performance

      Realized 2013 Realized 2012 2014 outlook*
    Sales, DKKm 11,746 11,234
    Sales growth, DKK 5% 7% 4-7%
    Sales growth, LCY 8% 3% 6-9%
    Sales growth, organic 7% 4% 6-9%
    EBIT, DKKm 2,901 2,745
    EBIT growth 6% 17% 6-9%
    EBIT margin 24.7% 24.4% 25-26%
    Net profit, DKKm 2,201 2,016
    Net profit growth 9% 10% 6-9%
    Net investments excl. acquisitions, DKKm  783 1,177 900-1,100
    Free cash flow before acquisitions, DKKm 1,816 1,581 3,200-3,300
    ROIC incl. goodwill 20.0% 19.9% ~21%
    Avg. USD/DKK 562 579 550
    EPS (diluted), DKK 6.93 6.33
    SUPPLIERS      
    Supplier adherence to supplier program 97%  97.5% 
    NOVOZYMES      
    Water efficiency improvement (compared with 2005) 33% 32% 34%
    Energy efficiency improvement (compared with 2005) 40% 38% 42%
    CO2 efficiency improvement (compared with 2005) 54% 55% 50%
    "Satisfaction and motivation" score in employee survey 77  78  75 
    "Opportunities for professional and personal development" score in employee survey 74  75  75 
    Frequency of occupational accidents (per million working hours) 2.4  3.0  <3.0 
    New leaders appointed who are women 26%  37%  ≥30% 
    New leaders appointed of a nationality other than Danish 44%  51%  ≥55% 
    Employee absence 1.8%  1.9%  <3% 
    Employee turnover 7.5%  8.1%  4-9% 
    RobecoSAM class rating Gold  Gold  Medal Class 
    CUSTOMERS      
    Estimated reductions in CO2 emissions through our customers’ application of our products, million tons 52 48 56
    SOCIETY      
    Advancing Sustainable Energy for All (SE4All) HII**  HIO*** 
       
    * Assumes exchange rates for the company’s key currencies remain at the closing rates on January 20 for the rest of 2014.  
    ** High Impact Initiative of sustainable biofuel.  
    ***High Impact Opportunity – inclusion of biofuels.  

    Sales

    Total sales in 2013 were DKK 11,746 million, an increase of 5% compared with 2012. Exchange rates had a significant negative impact on sales, and sales in LCY were up by 8%. Acquisitions contributed approximately 1 percentage point to sales growth and, organically, sales grew by 7%.

    Costs, Other operating income and EBIT

    ###GRAF - Sales and growth### 

    Total costs

    Total costs excluding net financials and tax were DKK 8,858 million, an increase of 3% on 2012. The increase was due to a higher cost of goods sold, which was up by 5% from 2012 to DKK 5,030 million. Production costs increased as a result of higher sales, a higher cost base from acquisitions and higher costs related to the new enzyme plant in Nebraska, U.S.

    Gross profit

    Gross profit was up by 5%, and the gross margin was 57.2%, on par with 2012. Continued productivity improvements and favorable product mix changes had a positive impact on the gross margin and offset a negative impact from acquisitions and currencies.

    Other operating costs

    ###Graf - Gross profit and gross margin###

    Other operating costs increased by only 2% to DKK 3,828 million. The ratio of other operating costs to sales was 33%, on par with 2012. 

    • Sales and distribution costs increased by 4%, representing 13% of sales
    • R&D costs were flat, representing 13% of sales 
    • Administrative costs increased by 2%, representing 7% of sales

    Other operating income

    Other operating income was DKK 13 million, down from DKK 78 million in 2012 due to lower milestone payments within Technical & Pharma.

    Depreciation and amortization

    Depreciation and amortization totaled DKK 738 million, compared with DKK 703 million in 2012. 

    ###GRAF - EBIT and EBIT margin###

    EBIT

    EBIT grew by 6% to DKK 2,901 million, up from DKK 2,745 million in 2012.

    The EBIT margin was 24.7%, an increase of 0.3 percentage point from 24.4% last year. The EBIT margin increased as a result of continued productivity improvements, favorable product mix changes and the relatively low increase in other operating costs, which more than offset lower other operating income and a negative contribution from currencies and acquisitions.

    Net financials and net profit

    Net financial costs

    ###GRAF - R&D###

    Net financial costs decreased by DKK 19 million to DKK 142 million in 2013, down from DKK 161 million in 2012. The decrease was mainly a result of a lower loss on net currency hedging/revaluation of DKK 61 million, which was partly offset by higher other financial costs. Other financial costs increased by DKK 42 million due to higher costs associated with employee stock appreciation rights (SARs) and revaluation of balance sheet items. Net interest expenses were on par with 2012.

    Profit before tax

    Profit before tax was DKK 2,759 million, an increase of 7% from 2012.

    The effective tax rate in 2013 was 20.2%, against 22.0% in 2012. The effective tax rate benefited from utilization of the U.S. Advanced Energy Manufacturing tax credit relating to the new plant in Nebraska and from a deferred tax effect following the enactment of new lower corporate tax rates in Denmark.

    Net profit

    Net profit increased by 9% to DKK 2,201 million, up from DKK 2,016 in 2012, due to the higher EBIT, lower effective tax rate and lower net financial costs.

    Cash flow and Balance sheet

    ###GRAF - Five-year cash flow and acquisitions###

    Cash flow

    Cash flow from operating activities was DKK 2,599 million in 2013, down 6% from DKK 2,758 million in 2012. The lower operating cash flow was mainly a result of lower trade payables and other liabilities, and higher corporation tax paid.

    Net investments excluding acquisitions totaled DKK 783 million, down from DKK 1,177 million in 2012.

    Free cash flow before acquisitions was DKK 1,816 million, up by 15% compared with 2012. Lower net investments excluding acquisitions were the main driver of the higher free cash flow, which was partly offset by the lower operating cash flow.

    Balance sheet

    Shareholders’ equity increased by 16% to DKK 11,066 million at December 31, 2013, up from DKK 9,568 million at year-end 2012. Shareholders’ equity was increased by comprehensive income and sales of treasury stock, partly offset by dividend payments. ###GRAF - Net interest-bearing debt###

    Shareholders’ equity represented 67% of the balance sheet total, up from 63% at year-end 2012.

    Net interest-bearing debt was DKK 805 million at December 31, 2013, down from DKK 1,430 million at December 31, 2012. Cash flow from operating activities and sales of treasury stock impacted net debt positively, whereas dividend payouts of DKK 692 million, acquisitions totaling DKK 640 million and net investments of DKK 783 million had a negative impact on net interest-bearing debt.

    Net debt-to-equity was 7% at year-end 2013, down from 15% at December 31, 2012.

    Return on invested capital (ROIC), including goodwill, was 20.0%, up from 19.9% in  2012. The improved ROIC was a result of the higher net profit, which more than offset the increase in invested capital, which was due to higher acquisitions.

    ###GRAF - Net investments###

    Treasury stock

    At December 31, 2013, the holding of treasury stock was 5.5 million B shares, equivalent to 1.7% of the common stock.

    Incentive program for Executive Leadership 2011-2013

    The incentive program for the period 2011-2013, announced in Company announcement No. 10 of March 2, 2011, has come to an end. The accumulated economic profit for the three years was DKK 3,818 million, thereby exceeding the target of DKK 3,750 million. As a result, on January 21, 2014, the full number of shares associated with the program has been released to the Executive Leadership Team as follows:

    Recipient

    No. of shares

    Peder Holk Nielsen  125,075
    Benny D. Loft  111,177
    Thomas Videbæk  111,177
    Per Falholt  111,177
    Thomas Nagy  111,177
    Andrew Fordyce  27,794
    Total number of shares released to the Executive Leadership Team 597,577
    Steen Riisgaard  125,074
    Total number of shares granted in the program  722,651

    New incentive program for Executive Leadership

    A new three-year incentive program for the Executive Leadership Team has been established. This program complies with the remuneration guidelines approved by the 2011 Annual Shareholders' Meeting and replaces the programs that expired at the end of 2013.

    The new program is an equal stock and stock option program. Awards will depend on economic profit, based on sales growth, EBIT margin and return on invested capital. In the new program, the Executive Leadership Team will be awarded stock options annually, whereas the allotted number of B shares awarded under the program will be allocated in January 2017, once the aggregated economic profit is known. The awarded stock options have a vesting period of three years, after which there is an exercise period of five years. The stock program has a three-year qualifying period starting on January 1, 2014, after which the stock will be transferred to the recipient.

    If the economic profit for the period is DKK 5 billion, 80% of the stock and options will be awarded. The DKK 5 billion target is ambitious and requires the company to deliver on its long-term financial targets in 2015 and 2016 following a ramp-up from 2014. If an economic profit of DKK 5.5 billion or more is generated, 100% of the stock and options will be awarded; if economic profit is DKK 2.5 billion or less, no stock or options will be awarded. Between these three points, a proportional number of stock and options will be granted. The BioAg Alliance agreement with Monsanto is included in the economic profit calculation, whereas other potential acquisitions or extraordinary BioAg investments may result in an adjustment of the economic profit realized.

    For the Executive Leadership Team, the value of the three-year program is approximately DKK 134 million as of January 1, 2014. The value of the program corresponds to the aggregated annual remuneration of the Executive Leadership Team in 2014-2016 (basic salary, maximum cash bonus and pension contributions). Like the previous incentive program, the new program contains a maximum-value clause. If the intrinsic value of the program for the Executive Leadership Team rises to more than DKK 268 million on the date on which the Annual Report for 2016 is approved in January 2017, the Board of Directors may choose to limit the award of stocks and options to a value of approximately DKK 268 million.

    The stock price used in calculating the number of shares in the program is based on the average of the closing rates on Nasdaq OMX Copenhagen for the five trading days following the publication of the 2013 Annual Report. The stock price used to calculate the intrinsic value of the program will be the average of the closing rates on Nasdaq OMX Copenhagen for the five trading days leading up to the approval of the 2016 Annual Report. The WACC used to calculate the economic profit is fixed at 7.0%.

    Furthermore, a three-year program has been established for senior leadership below executive level (approximately 180 vice presidents and directors). To a large degree, the program follows the same mechanisms as the program for the Executive Leadership Team. The value of this three-year program is approximately DKK 150 million as of January 1, 2014, and the maximum-value clause is approximately DKK 300 million.

    Update on financial support to M&G Chemicals

    In Company announcement No. 27 of November 27, 2013, Novozymes announced that in order to support M&G Chemicals’ vision for producing biomass-based plastics, it would provide financial support of USD 35 million by way of a cornerstone investment in M&G Chemicals’ initial public offering (IPO). Novozymes has been informed that the IPO will not proceed for the time being, and as a result Novozymes has been released from its cornerstone investment. M&G Chemicals has informed Novozymes that it is still committed to growing its business in China and will continue to do so irrespective of the decision to postpone the IPO. As previously announced, Novozymes remains the exclusive supplier of enzyme technology to the planned M&G Chemicals biorefinery in Anhui province, China. The biorefinery remains contingent upon successful financing. Novozymes remains committed to providing M&G Chemicals with financial support of USD 35 million, the exact form and details of which have yet to be determined.

    Regional solutions for strong growth in Household Care

    The Household Care business, which boasts a broad product portfolio, is Novozymes’ largest industry with a 36% share of Novozymes’ sales, a global market share of more than 60% and around 300 customers worldwide. Retaining this leadership position and maintaining growth require a continuous increase in enzyme penetration in both existing and new markets. In recent years, Novozymes has deepened focus on regional solutions – for example by developing special products for emerging markets such as India. At the same time, the company aims to have enzymes replace chemical ingredients in detergents by an ever greater factor.

    Breakthrough in India

    Novozymes sees great potential in emerging markets where penetration of enzymes is currently low. India, for instance, is an ambitious and realistic market for Novozymes given its huge consumer base. Novozymes’ strategy of tailoring solutions to this market is starting to pay off; in 2013, the company secured contracts from two leading detergent manufacturers in India.

    Getting these important customers on board has required patience and mutual trust, as well as many trials and tests and a constant, open, fact-based dialogue. It is a remarkable development given that, until a few years ago, Novozymes’ Household Care sales in India were in decline.

    Learning from emerging markets

    Emerging markets defy a one-size-fits-all approach. Novozymes seeks to understand consumer requirements in these regions so as to develop suitably targeted enzyme innovations. Novozymes’ researchers are constantly learning about the raw materials used in detergent production in different regions, and how to optimize its enzyme solutions to suit these local formulations. At the same time, Novozymes’ partners in this segment – local and global manufacturers – are becoming more open to letting Novozymes get closer to their manufacturing process and thereby develop products that meet specific market needs.

    Such close collaboration with a multinational manufacturer enabled Novozymes to come up with the first enzymatic laundry soap bar for the Brazilian market in mid-2013, helping consumers save on soap, water and time. Other countries in Latin America, notably Mexico, are in line for similar solutions within this industry.

    Meanwhile, Novozymes continues to provide targeted innovation in mature markets. In Japan, for example, where the market share of liquid detergents is growing due to strong demand for compaction, the company helped a key customer deliver an alternative: a super-compact powder detergent that also uses fewer surfactants. This enabled the manufacturer to save on the raw materials needed in product formulation and packaging, thereby also lowering transportation costs. Consumers received an efficient detergent requiring just one rinse cycle per wash, thereby saving on water and electricity bills. Novozymes continues to work with liquid-detergent manufacturers in Japan to produce more compact and efficient formulations.

    Partnerships and innovation for growth

    Novozymes’ partnership-based approach to global soap manufacturers is enabling the company to maintain a strong position to innovate in line with market needs. For example, the biennial Household Care Sustainability Summit in Copenhagen, Denmark, hosted by Novozymes, is where the industry’s top business and sustainability minds – including representatives of global brands such as P&G, Henkel and Unilever – gather to share experience and pragmatic ideas for achieving true, systematic sustainability. Novozymes’ efforts to replace chemicals with enzymes in formulations used by detergent manufacturers in both mature and emerging markets also remain a key success factor.

    Part of Novozymes’ strategy in Household Care is to focus on R&D efforts to deliver more sustainable and regionalized solutions in order to stay competitive. Novozymes believes it can continue its strong performance by investing in innovation, product development and partnerships.

    Resource utilization

    With the world’s natural resources under escalating pressure, Novozymes is dedicated to improving its own resource efficiency year on year.

    Energy, water and CO2 efficiency

    ###GRAF - Five-year estimated energy cost savings###

    Energy efficiency

    In 2013, energy efficiency improved by 2 percentage points from 38% in 2012, which corresponds to an additional 130,000 GJ of energy saved and estimated cost savings of approximately DKK 15 million in 2013. The energy efficiency improvement was 40% compared with 2005, which means that we did not meet our target of 42%. Despite the successful implementation of all planned energy-saving projects, we were unable to meet the target, primarily as a result of lower global capacity utilization following the inclusion of the American site in Blair, Nebraska, in global supply operations.  

    CO2 efficiency

    Although Novozymes’ CO2 efficiency improvement declined slightly from 55% in 2012 to 54% in 2013, Novozymes exceeded the target of 50% compared with 2005. This improvement in efficiency was achieved mainly as a result of the use of wind power in Denmark. The inauguration of the Blair facility is the main reason for the decline in CO2 efficiency compared with 2012, because the energy utilized in Blair is mainly based on coal-fired power plants.

    In 2013, Novozymes and Novo Nordisk joined forces to install a high-performance biogas reactor in Kalundborg, Denmark. The new reactor utilizes wastewater from both Novo Nordisk's and Novozymes’ large-scale production plants in Kalundborg for the efficient production of biogas. The biogas reactor enables Novozymes and Novo Nordisk to reduce CO2 emissions by approximately 10,000 tons annually when operating at full capacity. Furthermore, the reactor is an investment in lower energy costs and thereby an important step in making Novozymes’ production in Denmark even more competitive. The biogas plant had some operational start-up problems in its first year of operations and is therefore not yet producing biogas at full capacity. The biogas reactor should be operating at two-thirds capacity in 2014.

    Water efficiency

    Water efficiency improved by 33% compared with 2005, a 1% increase from 32% in 2012. However, we did not meet our target of 35%. Water efficiency was impacted by lower global capacity utilization following the inclusion of the Blair site in global supply operations, leakage from underground pipes at one of our facilities in China and product mix changes. When the leakage was discovered, investigations of the cause were initiated, resulting in the leaking pipes being replaced. In order to improve water efficiency and close the gap on our target of 40% by 2015, we have initiated additional water-saving projects, which can be expected to positively impact water efficiency in 2015 and thereby also reduce production costs. We have also started up task forces to analyze water consumption patterns and propose improvements across our facilities.

    Waste

    The total volume of waste in 2013 was approximately 18% lower than in 2012. The reduction was mainly a result of a different approach to biomass registration at the new production site in Blair. During the startup of this plant in 2012, the waste biomass from production was registered as industrial waste, but in 2013 it was registered as biomass. The total amount of waste from all other sites was 3% lower than in 2012, and recycled waste increased from 33.6% to 38.6%.

    “In 2013, Novozymes and Novo Nordisk joined forces to install a high-performance biogas reactor in Kalundborg, Denmark.”

    Transportation and distribution

    CO2 emissions from the transport of goods to the first point of delivery to the customer and from transport between sites were estimated at 22,000 tons in 2013, which is an increase from 19,000 tons in 2012.

    Animal testing

    The use of experimental animals more than doubled from 1,240 animals in 2012 to 2,665 in 2013, primarily as a result of increased activities in our Agriculture & Feed business area. The use of experimental animals at Novozymes is continuously supervised by a Scientific Ethics Committee (SEC), and all studies involving experimental animals must be reviewed and approved by the SEC.

    Environmental compliance and complaints

    Novozymes aims to comply with all regulations and strives to minimize the number of complaints. In 2013, 36 breaches of regulatory limits were registered worldwide, compared with 15 in 2012. Out of these, 13 breaches were related to compliance issues with wastewater quality at one of our facilities in Denmark. In order to resolve this, a new project has been initiated to ensure that wastewater treatment is improved. We received 11 complaints from neighbors, the same as in 2012. The majority of complaints were made by private residents and related to odor and noise disturbance from nearby factories.

    Novozymes has a pending case in the U.S., after elevated nitrate levels were found in the groundwater around the 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. There were no significant spills in 2013.

    Big feet small footprint

    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 52 million tons in 2013.

    Climate change impact

    Novozymes’ enzyme technology is part of the solution to climate change as it offers higher quality, lower costs and improved environmental performance for customers. We provide CO2 data for products to customers and partners, and advise them on the environmental benefits of changing their product mix and shifting to more concentrated products. In 2013, we achieved an estimated 52 million tons of CO2 reductions through our customers’ application of our products, or the equivalent of taking approximately 20 million cars off the road. This is an increase of 4 million tons compared with 2012, thereby exceeding our target of 50 million tons in 2013. The improvement was driven primarily by increased sales and performance of Bioenergy and Household Care enzymes.

    “In 2013, we achieved an estimated 52 million tons of CO2 reductions through our customers’ application of our products.”

    Novozymes continues to conduct peer-reviewed environmental life cycle assessments (LCAs) in order to document its products’ impact and provide customers with validated claims. In 2013, we published life cycle assessments in the Household Care and textile industries. The LCA for the textile industry documents the environmental benefits of Novozymes’ Cellusoft® Combi enzyme, which combines three steps in the textile industry into one. The concept has the potential for broad application in the textile industry, with an estimated global annual savings potential of 5 million tons of fabric, 65 million m3 of water and 1.5 million tons of CO2. The water savings correspond to the freshwater consumption of 1.7 million people, and the CO2 savings correspond to taking 600,000 cars off the road.

    Workplace development

    Novozymes’ success is dependent on its employees’ satisfaction and motivation in their daily work. Therefore, we have set several targets related to the well-being, rights and development of our employees.

    Employee turnover

    In 2013, employee turnover was 7.5%, meeting the target of between 4% and 9%. This target is a key measure of Novozymes’ aim of retaining and attracting skilled employees.

    ###GRAF - Employee satisfaction###

    Satisfaction, motivation and Novozymes' values

    To keep track of Novozymes’ aspiration to remain an attractive workplace, all employees are encouraged to take part in an annual People’s Opinion survey measuring, amongst other indicators, employee satisfaction and motivation.

    In 2013, employee satisfaction scored 77 out of 100 in the survey. We are proud that we were able to exceed our target of 75 in a year with substantial organizational changes providing both new opportunities and new challenges.

    With a score of 74 in the employee survey on opportunities for professional and personal development, we were slightly off the targeted 75. As an innovation company, we value the importance of continuous learning, which is why one of our strategic focus areas launched in 2013 is to cultivate great leaders and develop people.

    “Novozymes encourages all employees to take part in an annual People’s Opinion survey measuring, amongst other indicators, employee satisfaction and motivation.”

    In 2014, Novozymes will put extra focus on competency development for all its employees. Novozymes believes that high-impact competency development comes from combining different learning disciplines according to a 70-20-10 model: on-the-job experience (70%), coaching and feedback (20%), and courses and training (10%). In 2014, all employees will be encouraged to reflect on the type of learning from which they can benefit the most, both professionally and personally.

    Novozymes will additionally introduce a program for senior leadership development to support leaders in living the Novozymes’ value Dare to Lead, developing both the leaders’ own competencies and their ability to support the development of their employees.

    ###GRAF - Headcount by region###

    Diversity and equal opportunities

    Employment and promotions are based on merit without any discrimination, exclusion or preference. In order to encourage a diverse workforce at managerial level, in 2013 Novozymes introduced targets for new leaders in relation to nationality and gender.

    With 26% of new leaders being female in 2013, we missed our target of ensuring that at least 30% of new leaders appointed were women. We are not satisfied with this performance and will maintain it as a focus area in 2014.

    With 44% of new leaders in 2013 being of a nationality other than Danish, we did not meet our target of at least 55% of new leaders appointed being of a nationality other than Danish. The percentage is lower than last year’s, which is partly the effect of substantial reorganizations within Novozymes in 2013.

    Novozymes will maintain both diversity targets in 2014 to ensure continued focus on diversity without compromising our policy of hiring and promoting employees based on merit.

    Occupational health and safety

    Novozymes is determined to offer a safe working environment. The frequency of occupational accidents was historically low in 2012 at 3.0 per million working hours, and in 2013 we set a new record low of 2.4 accidents per million working hours. This improvement can partly be seen as a result of Novozymes' safety campaigns “Dare to Care” and “Stop and Think,” which remind employees to be cautious in potentially risky situations.

    As Novozymes continuously seeks improvement opportunities within safety, a global safety assessment was carried out by an American consultancy company in 2013. The assessment was designed to review Novozymes’ global setup and performance regarding occupational health and safety, and to identify potential areas for improvement. The assessment resulted in a report discussing each site in detail and providing recommendations for improvement. Approximately 25% of the recommendations were related to global or managerial practices, and the remainder were site-specific. Novozymes is currently developing action plans for integrating the recommendations in 2014.

    “Novozymes' safety campaigns ’Dare to Care’ and ’Stop and Think’ remind employees to be cautious in potentially risky situations."

    Novozymes encourages and helps employees to embrace a healthy lifestyle, because improved well-being and low absence benefit 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 1.8% in 2013, the target of less than 3% was met.

    Compliance with human rights and labor standards

    In 2013, Novozymes continued the aim of integrating the UN Guiding Principles on Business and Human Rights into its business. Our annual human rights due diligence process is led by the global People & Organization department and has the purpose of creating awareness and assessing compliance with Novozymes’ minimum standards on labor and human rights in all regions.

    Socio-economic impact

    At Novozymes, our ambition is to change the world together with our customers. Consequently, we measure our socio-economic impact at different levels.

    Total tax contribution

    In 2013, taxes incurred as corporate income taxes, other taxes and duties came to approximately DKK 1,125 million, equal to 9% returned to the community (see chart Distribution of generated value). In addition, Novozymes collected and withheld tax contributions on dividends and wages totaling approximately DKK 1,025 million. Hence, Novozymes’ total tax contribution amounted to approximately DKK 2,150 million, compared with approximately DKK 1,850 million in 2012. Novozymes’ overall tax strategy and transfer pricing policy support a positive tax contribution to society and governments in the countries in which Novozymes operates. See also Novozymes’ position on tax at www.novozymes.com.

    Distribution-of-generated-value.png

    Suppliers

    For the past five years, Novozymes has systematically assessed its suppliers from both a risk and an opportunity perspective. To strengthen the sustainability impact of its supplier engagement, in 2013 Novozymes introduced a target of 100% adherence to the supplier program for commercial, quality and sustainability performance for suppliers in 2015. With 97% supplier adherence in 2013, Novozymes met the 2013 target of 95%. To steer suppliers toward 100% adherence in 2015, Novozymes has set a target of 97.5% for 2014.

    “In 2013 Novozymes focused to improve the knowledge and usability of its grievance mechanisms for employees and external stakeholders.”

    In 2013, Novozymes maintained its success in innovating in partnership with suppliers. At the Supplier Innovation Day 2013, the overall theme was packaging, and current and prospective suppliers were invited to discuss how to improve Novozymes’ current packaging and filling equipment solutions. Several ideas materialized at the workshop and will continue as collaborative projects in 2014.

    Business integrity

    In 2013, we conducted business integrity training for employees and achieved a 79% completion rate, compared with 79% in 2012 and 71% in 2011.

    A focus area in 2013 was to improve the knowledge and usability of our grievance mechanisms for employees and external stakeholders. This was done by making the filing process in Novozymes’ Whistleblower Hotline more informative for the user, and by including questions related to Novozymes’ grievance mechanisms in the internal business integrity training module.

    As part of the organizational changes, the Ombudsperson function was relaunched in 2013 in a new global network with a local Ombudsperson in each of the five major regions: China, India, Europe, South America and North America. Having local Ombudspersons who speak the local language ensures that the institution is easily accessible throughout Novozymes.

    Sustainable energy

    In 2013, Novozymes set a new target for its societal impact related to the U.N.-led Sustainable Energy for All (SE4All) initiative. The target for 2013 was to establish a sustainable biofuel initiative within SE4All, championed by Novozymes. The aim of the SE4All initiative is threefold: to provide universal access to sustainable energy, to double the rate of improvement in energy efficiency and to double the share of renewables in the global energy mix by 2030.

    In 2013, SE4All included Sustainable Bioenergy as a focus area and gave Novozymes the mandate to begin forming a so-called High Impact Opportunity by engaging with key public and private partners and establishing subordinate High Impact Initiatives. These initiatives will enable the deployment of new and innovative projects, such as advanced biofuels made from agricultural waste. With the formation of one specific High Impact Initiative, Novozymes reached its target in 2013. ###GRAF - Citizymes Learners reached###As substantial progress was made with SE4All in 2013, Novozymes has decided to accelerate its ambitions for the initiative. As a result, the target initially set for 2015 of championing the inclusion of biofuels as a High Impact Opportunity has been brought forward as one of the corporate targets for 2014.

    Read more about the initiative and Novozymes’ role in the article on SE4All.

    Corporate citizenship efforts

    Through our corporate citizenship program, we continued to share our knowledge of science and environmental responsibility with local communities in the regions where we operate. We reached approximately 36,000 learners, up from approximately 26,000 in 2012. The increase in learners was primarily a result of our involvement with the Canadian organization Agriculture in the Classroom in Saskatoon, Saskatchewan, teaching about plant growth and food production.

    Sustainability leadership

    It is Novozymes’ ambition to be considered a sustainability leader and be transparent about its practices. Therefore, we participate in third-party rankings and benchmarks and engage with various stakeholders at both local and global level.

    Third-party recognitions

    Novozymes participates in the most recognized and relevant sustainability ratings to benchmark its performance against peers and competitors. The Dow Jones Sustainability Index, including the underlying evaluation by RobecoSAM, and the Carbon Disclosure Project are a particular priority for Novozymes.

    In 2013, Novozymes maintained its position as industry leader in the biotechnology sector in the Dow Jones Sustainability Index. Based on our 2012 performance, Novozymes received Gold Class in the RobecoSAM Sustainability Yearbook 2013 and thereby reached the target of a Gold Class rating.

    Novozymes ranked third in the Nordic Carbon Disclosure Leadership Index, moving up two places from 2012, with a score of 99. This improvement is a result of our ability to reduce CO2 emissions from both our own processes and from our customers’. It also reflects our ability to document and communicate the importance of sustainability within our value chain.

    Global and regional engagements

    In 2013, Novozymes engaged in a series of advocacy activities. Some of the highlights included our engagements with the World Business Council on Sustainable Development (WBCSD), the UN Global Compact (UNGC) Leaders Summit 2013 and the U.N.-led Sustainable Energy for All (SE4All) initiative.

    “In 2013, Novozymes maintained its position as industry leader in the biotechnology sector in the Dow Jones Sustainability Index and received Gold Class in the RobecoSAM Sustainability Yearbook 2013.”

    Under WBCSD’s Vision 2050 project, Novozymes has been working along with other member companies to develop a vision for a world in 2050 with an increased population and limited resources. In 2013, Novozymes worked as part of a core group to further this vision through an initiative called Action 2020, which aims to provide a framework for action, specifically within the areas of food, feed and fuel.

    Novozymes also participated in the UNGC Leaders Summit 2013, particularly by sharing insights on stage in areas such as raw material and energy efficiency in the food and sustainable energy industries. We also continued to participate actively in the local UNGC networks in China, Denmark, India and Brazil.

    Novozymes continued to work alongside The Sustainability Consortium (TSC) – a Walmart-initiated organization with the aim of promoting sustainable products and supply chains. We shared our insight into the role of enzyme technology in manufacturing processes, provided life cycle assessments for consumer products and supported the efforts of TSC to expand into China.

    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. 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.

    Making the case for global, sustainable bioenergy

    Global businesses and international institutions can make a palpable difference to lives and livelihoods by cooperating to implement sustainability measures on a large scale. In 2014, for instance, Novozymes will champion the inclusion of biofuels as a High Impact Opportunity (HIO) within the Sustainable Energy for All (SE4All) initiative led by the U.N. and the World Bank. SE4All aims to ensure universal access to modern energy services, double the rate of improvement in energy efficiency and double the share of renewables in the global energy mix by 2030. As of 2013, nearly 80 countries have opted into SE4All, and governments, development banks, businesses and investors have committed more than $50 billion toward its three objectives.

    Finding opportunities

    By improving access to renewable energy, SE4All hopes to spark economic growth in poor and marginalized regions and communities, and to do so in a socially and environmentally responsible way.

    It also seeks to generate opportunities for business development led by the private and public sectors, and is looking to draw investment and relevant policy toward deliverable projects. Efforts are focused around HIOs where the private sector can contribute to, and demonstrate action in, areas such as a global alliance for clean cook stoves and gas-flaring reduction.

    Novozymes’ expertise within renewable fuels makes it particularly attractive to SE4All, especially in the scale-up and rollout of projects in sustainable bioenergy, where energy and fuels are derived from renewable resources. Therefore, Novozymes is leading the HIO on Sustainable Bioenergy as a priority in 2013-2015 and has gathered a multi-stakeholder coalition committed to developing sustainable bioenergy solutions worldwide. Alongside Novozymes, the coalition currently comprises Beta Renewables, Bloomberg New Energy Finance, the International Union for Conservation of Nature and the New Partnership for Africa’s Development.

    Securing investment

    But if sustainable bioenergy is to succeed, it must be backed by investment and action at regional and national levels. Currently, Novozymes is working to secure agreements, in the form of High Impact Initiatives (HIIs), with various regional development banks to commit funds for developing SE4All projects and solutions in several regions, including Latin America and the Caribbean, sub-Saharan Africa and Asia. The aim is to provide the scope to involve national governments, industry, banks and civil society in financing, building and driving sustainable bioenergy projects.

    Such agreements are expected to send a clear signal that sustainable bioenergy is a viable, attractive industry, and mark a big step in opening up business opportunities in bioenergy markets. They also show Novozymes’ commitment to providing a platform that could benefit a number of bioenergy solution providers on a collaborative basis.

    Targeting success

    Bioenergy, including liquid biofuels, has shown a viable path to reducing dependence on fossil fuels, cutting greenhouse gas emissions and promoting rural economic growth.

    But bioenergy has also raised some concerns that it may have a negative impact on food and water security if pursued in an unsustainable way. Today, however, there is expertise and experience to demonstrate how bioenergy can be harnessed from agricultural and household waste and energy crops. Despite the gradual commercialization of the advanced biofuel industry, the widespread scale-up and rollout of sustainable bioenergy is being held back by inadequate investment and by regulatory and political uncertainty.

    Novozymes is hopeful and excited about its engagement with SE4All and expects the initiative to build the consensus and momentum needed to get sustainable bioenergy projects off the ground. In 2014, Novozymes will continue to champion the inclusion of biofuels within a new sustainable bioenergy HIO for SE4All.