In This Report
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Marc Gunther weighs in on the 2012 leader in clean capitalism.
Don’t ask Novo Nordisk for the company’s corporate responsibility report. The Danish pharmaceutical firm, which had revenues of DKK 60.7 billion (US$10.5 billion) in 2010, doesn’t publish one. Instead, Novo Nordisk reports on its environmental and social performance – including water and energy consumption, waste reduction, employee turnover, the diversity of its management team, new patent filings and charitable donations – alongside its financial performance in a single annual report.
This integrated approach to reporting reflects the way business is done at Novo Nordisk, the world leader in diabetes care and the No. 1 firm on the 2012 list of Corporate Knights Global 100 Most Sustainable Corporations. Novo Nordisk has pursued a triple bottom line of financial, social and environmental gains since the 1990s, when the phrase was coined by writer John Elkington, and it incorporated the concept into the company’s legal structure nearly a decade ago.
“The main foundation for Novo Nordisk is the triple bottom line because that is what’s protecting our license to operate,” says Lars Rebien Sorensen, the firm’s president and CEO. “That begs and obliges everybody in the company not only to see that we become a good business – that’s the financial bottom line – but that we do so in a way that is socially and environmentally responsible.”
Lise Kingo, who has worked on sustainability issues since joining Novo Nordisk in 1988, says the company’s business case for corporate responsibility goes well beyond protecting its license to operate. Today, she says, the firm envisions sustainability as a way to drive innovation, and finds that engaging with stakeholders helps spot business opportunities as well as avert trouble. One sign of the value that the company places on sustainability is the fact that Kingo, 50, has been part of Novo Nordisk’s five-person executive management team since 2002.
How, though, does the pursuit of the triple bottom line affect Novo Nordisk? Here are three ways:
Climate and energy: Manufacturing insulin, which is core to Novo Nordisk, is an energy intensive process. But after joining the Climate Savers Program of the World Wildlife Fund (WWF), Novo Nordisk pledged in 2004 to reduce CO2 emissions from global production by 10 per cent in absolute terms by 2014. Because the company expected to grow, this was the equivalent of reducing emissions by 68 per cent per unit of production. Adding to the difficulty of the task was a promise to WWF to not rely on carbon offsets or buy power from existing renewable sources. “It was a very ambitious target,” Kingo says. “We knew it would require innovation.”
Novo Nordisk invested US$20 million in a global energy-efficiency campaign that required all sites to appoint energy stewards and conduct energy screenings every three years.
Then the company turned for help to DONG Energy, Denmark’s biggest utility, which had begun to expand in offshore wind turbines. DONG helped Novo Nordisk identify further efficiencies, and in return Novo Nordisk signed what was then an unprecedented 20-year contract to buy electricity from a wind farm then under development in the North Sea. The power purchase agreement gave DONG the financial wherewithal to go forward with the project. “We created a new energy model for Denmark,” Kingo says. Since then, about 100 other companies have signedsimilar agreements, driving the growth of renewable power. In 2010, Novo Nordisk announced that it had met its carbon reduction target five years ahead of schedule, despite 30 consecutive quarters of double-digit growth.
Drug pricing: The company says access to essential medicines is a human right, and it sells human insulin (the most basic kind) to 33 of the world’s poorest countries at no more than 20 per cent of the average price in the western world. “We see it as a social investment in these countries,” explains Kingo. The company is building trust, relationships and its reputation to prepare for the day, however distant, when countries like Bangladesh and Tanzania become more profitable markets. But when the Greek government sought in 2010 to cut the prices it paid for Novo Nordisk’s modern insulin (a more advanced form) by up to 27 per cent, the company pulled the drug out of Greece even though it could have continued to profit at the lower price. Novo Nordisk said it needed to charge full price to finance research into new diabetes treatments. Says Kingo: “We felt we had to put our foot down.”
A China strategy: Novo Nordisk began selling diabetes drugs in China a half-century ago and stepped up its involvement (and investments) in the mid-1990s – opening a production plant in Tianjin, supporting the training of an estimated 55,000 doctors and financing education on diabetes prevention and treatment. The payback took time, but today the company has 63 per cent of the market share for insulin in China. It says it has directly or indirectly created 14,600 jobs and saved 140,000 “life years” as of 2010, providing social as well as financial value.
Each example reflects the company’s willingness to take a broad and long-term view of its business. Peder Michael Pruzan Jorgensen, managing director of Business for Social Responsibility’s Europe, Middle East and Africa regions, says Novo Nordisk has managed to imbue a strong sense of purpose into its business. He’s impressed by the way the company tracks its social and environmental impact, using an internal corps of values auditors who measure adherence to the triple bottom line.
That sends a strong message, he says. “They have embedded sustainability thinking and ethics and values throughout the business for a long time.”
To view a PDF of our special 2012 Davos Global 100 report, click here.