Audited by PwC

Sustainability performance

Novozymes’ performance within sustainability improved overall in 2008. The quantifiable targets for managing resource consumption, optimizing waste recycling, and minimizing environmental impact were all met. Novozymes’ strategy for energy consumption and reduction of CO 2 emissions has been reviewed in conjunction with the targets. Three of the five targets on occupational health and safety were not met.

Consumption of water and energy
While growing its business, Novozymes strives for the increase in resource consumption to be less than sales growth in relative terms. Consumption of water and energy are key indicators, and the target in 2008 for both resources was that consumption should not increase by more than 1% less than sales growth. Sales grew 13% in local currencies, whereas water and energy consumption decreased by 2.2% and increased by 0.2% respectively, achieving the targets set.

More from less

High raw material and energy prices are a challenge for most companies, Novozymes included. But they also create opportunities for the business: When everyone needs to make the most of their scarce raw materials, Novozymes’ technology can help. Enzymes can get more out of raw materials and make production processes more efficient, thereby saving energy. Enzymes can replace traditional ingredients such as petrochemicals, which are dependent upon fossil oil.

Novozymes’ earnings, like other companies’, are negatively affected by high input prices, but the company’s technology enables it to minimize this effect in a number of ways, including continuous productivity optimization and raw material substitution.

Novozymes has a flexible production system that is not dependent on the use of a single type of input, for example one type of starch, which is one of the primary raw materials. This enables Novozymes to substitute its input depending on what is most feasible at a given time. Continuous optimization in production also ensures increases in the amount of enzyme produced per unit of raw material or production unit, keeping the costs and/or use of raw materials down.

Greenhouse gas emissions and energy efficiency
It is important for Novozymes to be able to position enzyme technology as part of the solution in a climate change context. Accordingly, one target for 2008 was to estimate the total effects on climate change of all Novozymes’ products sold in 2007. Results show that approximately 25 million tons of CO2 emissions were avoided in 2007 (see box).

Tons of CO2 emissions avoided

Product lifecycle assessments (LCAs) of Novozymes’ products conducted over the past five years show there are major environmental advantages in using enzymes in industrial production.

CO 2 emissions of around 28 million tons were avoided due to the application of enzymes sold by Novozymes in 2008. In other words: Greenhouse gas emissions in enzyme production are compensated for by the much larger reduction in greenhouse gases achieved by customers using the enzymes.

A study was conducted at screening level, which means that the results of the study only indicate scales. The study takes into account all significant greenhouse gases (CO 2 , CH 4 , N 2 O, and CO) and all significant processes in the product chain from raw material extraction through production and use, and covers around 80% of Novozymes’ sales in 2007. This study is the base for the 2008 estimate.

Reductions in CO 2 emissions are driven by a broad range of Novozymes’ products, some of the most important being: detergent enzymes because they help reduce laundry wash temperature; fuel ethanol enzymes because they help save fossil fuels; feed enzymes because they help save animal feed; and starch, textile, and brewing enzymes because they help save energy and raw materials in industrial production. The only exception in the LCAs was in production of a sugar called fructose, which contributed negatively to the overall result.

In 2008 new lifecycle assessment (LCA) procedures were introduced to streamline project portfolio management. This will ensure that potential CO2 reductions are part of the decision-making process when developing new products.

Novozymes’ energy and climate strategy was revised in 2008 and now has a broader scope. Looking at “the big picture” it spans the whole product lifecycle. This reflects the fact that the greatest potential for efficiency gains and reductions in greenhouse gas emissions using Novozymes’ technology lies outside Novozymes’ own production.

Recycling of waste
In 2008 Novozymes achieved 45% recycling of waste at its factories, thus achieving the target of maintaining a high recycling percentage (more than 40%).

Emissions of ozone-depleting substances
Emissions of HCFCs were 1,725 kg in 2008, and the target of keeping emissions below 2,000 kg was met.

Compliance and complaints
In 2008, 19 breaches of regulatory limits were registered (see also “Update on environmental cases” below). These breaches were mainly wastewater related (15 out of 19), while three were caused by odor and one by noise.

Novozymes received 38 complaints from neighbors in 2008. Neighbors living close to factories can be troubled in some locations, mainly by odors and noise. By way of comparison, in 2007 there were 31 complaints. Novozymes does what it can to avoid noncompliance and complaints.

Novozymes has a target of avoiding significant spills (including the release of chemicals and oil into water, air, or soil). There were no significant spills in 2008.

Update on environmental cases
In 2003, high nitrate levels were found in the groundwater around Novozymes’ site in Franklinton, North Carolina, USA (see The Novozymes Report 2003). Novozymes submitted a comprehensive report to the authorities in 2006. Additional measurements were taken in 2007 and 2008 and submitted to the authorities in early 2008. Novozymes expects to receive further guidance from the authorities in 2009.

In 2005, there was a discharge of products and raw materials at Novozymes Biologicals Inc. in Salem, Virginia, USA. This resulted in contamination of a nearby creek. Novozymes Biologicals Inc. was subsequently investigated by the U.S. Department of Justice and has been working with the authorities to ensure satisfactory closure of this issue. On December 18, 2008, the case was settled between Novozymes and the Department of Justice. The main terms of the settlement are that Novozymes has agreed to plead guilty, pay a fine of USD 275,000, and make a payment of USD 250,000 for an environmental service project in the Roanoke area.

Employee turnover
Competition for employees in 2008 has been intense, and companies generally experienced high employee turnover. Novozymes’ target for 2008 was a turnover rate of less than 12% (equivalent to 9%, excluding the effect of the closure of Streptococcus-based hyaluronic acid (sHA) production in China in January 2008). The 2008 target was achieved, the actual figure being 11.3%.

Absence
The target for 2008 was an absence rate of no more than 3%. With absence of 2.2%, this target was achieved. Each percentage point is equivalent to around 50 employees not working for a whole year, so keeping absence as low as possible is a priority.

Occupational health and safety
The frequency of occupational accidents in 2008 was 4.9 per million working hours. As the target was to keep the frequency below 4.5, the target was not met. Compared to 2007 the frequency rose by 0.1 percentage point from 4.8. The target of avoiding life-threatening or serious occupational accidents was met in 2008. A third target was to completely avoid fatal occupational accidents, and this was also achieved.

Employee satisfaction
In 2008 Novozymes again conducted the employee survey "People’s Opinion," which runs annually. All employees were asked to answer 66 questions on subjects such as job satisfaction, development opportunities, workload, management, teamwork, and remuneration. The survey showed that employees were generally satisfied and rated Novozymes’ reputation and top management relatively highly.

In the 2008 survey, the average score for “Satisfaction & Motivation” was index 70, while the result for “Opportunities for professional and personal development” was index 68. In both cases, the results are significantly above relevant benchmarks. However, as the targets for 2008 were index 71 and index 69 respectively, these ambitious targets were not met.

Cooperation with suppliers
Developing a step-by-step procedure for how and when to further engage with suppliers on sustainability issues has been ongoing for a couple of years. Novozymes has developed a new method for responsible purchasing that considers the risks and opportunities in its supply chain. The target for 2008 was to carry out a pilot test of this new model in all regions with the aim of implementing it in 2009, and the pilot testing has been completed.

Incentive programs
Novozymes achieved all the financial targets defined for the employee stock option program in 2008, and most of the nonfinancial targets were met. Management has therefore approved a pro rata allocation of 99% of the year’s stock options to employees and 97% to managers.

Incentive program for Executive Management
Where Executive Management’s incentive program is concerned, most of the nonfinancial targets were met, and the targets for economic profit in 2008 were achieved 100%, triggering a pro rata allocation of 97%. The general guidelines for Executive Management’s incentive program can be found at www.novozymes.com. The guidelines were approved at the Annual Shareholders’ Meeting in March 2008. Further details can be found in Note 24.

Corporate responsibility reporting
On December 16, 2008, the Danish parliament passed a law making it mandatory for large companies in Denmark to report on corporate responsibility from 2009. Novozymes has reported on corporate responsibility for many years, and the company's reporting already fulfills the requirements of the new law.

Events occurring after the end of the year
No significant events have occurred after December 31, 2008.

Global Diversity Management Program
Being very much aware that competent employees matter, Novozymes implemented a global diversity management program from 2005 to 2008. The aim was to raise awareness among managers about the benefits of diversity and build an understanding of the leadership skills and behaviors that foster respect and inclusion. The project was introduced by a training program focusing on diversity and equal opportunities before, during, and after hiring, and followed up by means of various tools as well as courses. The diversity management program is now reflected in the relevant Novozymes positions, standards, and policies.

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