Environmental and social discussion

Water and energy
The 2007 target was to disassociate growth in water and energy consumption from business growth. The consumption should not increase more than 1% below sales growth percentage. Sales grew 14% in local currencies, whereas water and energy consumption rose by 12% and 13.3%, respectively. The water consumption target was achieved, but the energy consumption target was not. This can be explained by the heavy pressure on production capacity in 2007 due to soaring sales. We will retain the disassociation target in 2008 and onwards.

Greenhouse gas emissions and energy efficiency
Global climate change and related challenges facing society will necessitate ambitious business targets for reducing greenhouse gas emissions. For years, Novozymes has worked hard to ensure energy is used efficiently, and has indirectly addressed CO₂ emissions from its own production, while developing a more wide-ranging approach to the problem. Using resources efficiently and reducing CO₂ emissions from its own production are vital for Novozymes’ long-term competitiveness and will remain in focus, as described in Water and energy above.

In recent years, we have analyzed the company’s contribution to reducing CO₂ emissions seen from a product lifecycle perspective (see also www.novozymes.com). Novozymes can make a significant difference in this area through innovation and modern biotechnology. One target for 2007 was to continue developing a method for illustrating the potential of enzyme products for reducing greenhouse gas emissions. Our targets for 2008 will boost efforts in this area and will take our 2007 target a step further. A second target for 2007 involved reducing greenhouse gases by more than 35,000 tons based on growth in selected industries – a reduction resulting from our customers’ use of enzyme technology. This target was not met, but a reduction of 21,000 tons of CO₂ was realized.

Recycling of waste
From 2006 to 2007, we continued our efforts to recycle waste at our factories. Altogether, 43.4% was recycled, which meant we achieved our target of maintaining a high percentage of recycling.

Emissions of ozone-depleting substances
The target for reducing emissions of ozone-depleting substances (HCFCs) has been gradually increased in recent years. As a result, we are focusing more on control and replacing old refrigeration units. These measures reduced emissions of HCFCs to 1,059 kg in 2007, and we therefore met our target of reducing emissions to 2,300 kg in 2007. Our target for 2008 is to limit emissions to less than 2,000 kg.

Compliance with regulatory limits, complaints from neighbors and significant spills
Novozymes monitors concentrations of nitrate in groundwater close to the factory in Franklinton, North Carolina, USA. In 2007, 21 breaches of regulatory limits were registered (see also Update on environmental cases below). Furthermore, 17 breaches of regulatory limits were registered for Novozymes in general. These breaches related mainly to wastewater. The 17 breaches are twice as many as in 2006. A considerable part of those related to acquisitions and enlargements of factories during 2007. As a follow-up, new wastewater treatment plants have been established at those locations.

Novozymes received 31 complaints from neighbors, who can be troubled in some locations mainly by odors and noise from our factories. In 2006, there were 14 complaints and the increase in 2007 was caused mainly by construction work. Naturally, observing limits and reducing inconvenience to a bare minimum are part of our everyday operations.

Novozymes has a target of completely avoiding significant spills (including the release of chemicals and oil into water, air or soil). In 2007, there were no significant spills.

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

In 2005, there was a discharge of products and raw materials at Novozymes Biologicals Inc., in Salem, Virginia, USA. This resulted in the contamination of a nearby creek. Novozymes has been working with the authorities to ensure satisfactory closure of this issue. The matter is still open.

Exploitation of genetic resources
Novozymes and the Kenyan authorities (Kenya Wildlife Service) entered into an agreement in 2007 permitting the commercial exploitation of Kenya’s microbiological diversity. This cooperation agreement involves characterization of the biodiversity at specific locations in Kenya, and includes the transfer of technology and know-how to Kenya. Novozymes will have the right to commercially exploit Kenya’s microbial diversity in return for financial compensation. We have signed several similar agreements based on principles of fair exploitation of biological resources stated in the United Nations’ Convention on Biological Diversity with countries in various parts of the world.

Animal testing
A total of 5,575 laboratory animals were used in testing in 2007, a rise of 28% from 2006. This increase should be seen in the light of the general growth and wider scope of Novozymes’ business. Animal testing is required for the continuing development of new products, especially products for the biopharmaceutical industry. Fish, mice and rats constituted about 97% of the animals. Fish, which accounted for about half of this figure, are used in the analysis of the environmental impact of certain products. Novozymes strives constantly to minimize the number of laboratory animals used – fewer animals per product – and to ensure that the animals used are treated responsibly (see also Novozymes’ position on animal testing at www.novozymes.com).

Employee turnover
Demand is increasing and competition for employees is intense in several of the countries where Novozymes operates, especially in Denmark and the USA, where many of our employees are based. Currently, companies in these countries are generally experiencing increasing employee turnover. It has therefore been necessary to adapt Novozymes’ target to the new circumstances. Novozymes’ target for 2007 was an employee turnover of less than 8%. This was not achieved – the actual figure was 9%. The target for 2008 is 12%. This is equivalent to 9%, excluding the closure of the hyaluronic acid production facilities in China in January 2008, which resulted in the loss of 132 employees. This is still an ambitious target, and with supplementary targets for satisfaction and motivation and opportunities for professional and personal development, we are now focusing even more on ensuring that Novozymes is an attractive workplace.

Absence
The target for 2007 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 45 employees not working for a whole year. Keeping absence as low as possible is therefore a priority.

Occupational health and safety
The frequency of occupational accidents fell significantly from 2004 to 2006. From 2006 to 2007, the frequency rose from 3.7 to 4.8 occupational accidents per million working hours. As the target for 2007 was to keep the frequency under 4.5, the target was not met. Unfortunately, despite the target of avoiding life-threatening or serious occupational accidents, one employee was involved in such an accident in 2007. The third of our occupational health and safety targets was to completely avoid fatal occupational accidents, and this was achieved.

Diversity
Novozymes has focused on diversity management in recent years with a view to targeting diversity at work as a business asset. It is a matter of respecting differences and exploiting the potential inherent in being different.

In this area, Novozymes reports only data on the distribution of men and women in the organization (see the figure).
 

Employee satisfaction
For many years, we have run comprehensive employee surveys every two years. In 2007, for the first time, we conducted a new kind of employee survey, called People’s Opinion that will be run annually in cooperation with Ennova, an analysis and consulting company.

This year, all our 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 are generally satisfied and rated Novozymes’ reputation and top management relatively high.

The survey is based on:

• Standard questions developed by Ennova that facilitate benchmarking responses with other companies
• Supplementary questions specifically relevant to Novozymes that improve our ability to follow up on in-house initiatives and focus areas on a yearly basis

We have used standard questions and related indexes from Ennova to develop new targets for 2008 – "Satisfaction & Motivation" and "Opportunities for professional and personal development". We have also looked at various benchmarks to put our performance into perspective. In Novozymes’ 2007 survey, the average "Satisfaction & Motivation" was index 70 while the result for "Opportunities for professional and personal development" was index 68. In both cases, the results are above relevant comparative benchmarks. The ambition, however, is that our efforts for developing and maintaining Novozymes as an attractive workplace should be reflected in next year's results. The targets for 2008 are to increase "Satisfaction & Motivation" to index 71 and "Opportunities for professional and personal development" to index 69.

Cooperation with suppliers
The target for 2007 was to develop a step-by-step procedure for how and when to further develop cooperation with suppliers on issues of sustainability. In line with this target, we developed a new method in 2007 for responsible purchasing that considers the risks and opportunities in our supply chain. Our target for 2008 is to carry out a pilot test of this new responsible purchasing model in all regions with the aim of implementing it in 2009.