Story:
How Novo Nordisk's Corporate DNA – "to act responsibly" – Drives Innovation

Since the 1920s, Novo Nordisk has been a purpose driven company. We were founded with the sole purpose to offer life-saving treatment for people with diabetes, and today we frame this as a promise to change diabetes. Today, we engage thousands across the world with the passion, the skills, and the commitment to continue this journey to prevent, detect, treat, and ultimately cure diabetes.

 Our guiding principles:

• Our ambition is to strengthen our leadership in diabetes.
• We aspire to change outcomes in haemophilia and other serious chronic conditions where we can make a difference.
• Our key contribution is to discover and develop innovative biological medicines and make them accessible to patients throughout the world.
• Growing our business and delivering competitive financial results is what allows us to help patients live better lives, offer an attractive return to our shareholders and contribute to our communities.
• Our business philosophy is one of balancing financial, social and environmental considerations – we call it the Triple Bottom Line.
• We are open and honest, ambitious and accountable, and treat everyone with respect.
• We offer opportunities for our people to realize their potential.
• We never compromise on quality and business ethics.

This is the ‘Novo Nordisk Way’. It frames and guides every strategic decision we make. It is rooted in the basic belief that we must “act responsibly” as managers, employees and as a business. Every day we make difficult choices, always keeping in mind what is best for patients, employees and shareholders in the long run. We know that the right choice is not always apparent. We have guidelines and mandatory training on ethical behavior. 99% of relevant employees partake in e-learning, supplemented by face-to-face workshops, designed to help them make the right decisions when faced with an ethical dilemma.

In terms of how we express our values to the market, we believe that access to essential medicines is a human right. We sell human insulin (the most basic kind) to 36 of the world’s poorest countries, as designated by the UN, at no more than 20 percent of the average price in the western world.  And we estimate that 24 million people all over the world are being treated with Novo Nordisk injectable products, of these more than 40% live in Asia, Latin America and Africa. We advocate for more public awareness of the socio-economic burden of diabetes and the costs of inaction. And, we educate doctors and nurses to better diagnose and treat diabetes; in China, for example, we have educated more than 50,000 doctors. These are examples of our principles in play.

The Novo Nordisk Way has been central to innovations related to corporate structure, our communications and our financial reporting. Here’s how:

1. Corporate Structure

Novo Nordisk is majority owned by a foundation. Although the company trades on the NYSE, the foundation controls the lion’s share of voting rights. This means that Novo Nordisk management is largely shielded from the short term performance pressure wrought by  traditional investors. The company has more latitude to make decisions that might trade-off short term returns for a longer term or non-financial gain.

The impetus to ‘act responsibly’ is directly linked to our roots and the foundation ownership structure; both better enable us to “act responsibly,” weighing long-term benefits and considering how to best make balanced decisions.

In 2004 our Board of Directors updated the company’s Articles of Association, the bylaws, and specified in the objectives that ‘the company seeks to conduct its business in a way that is financially, environmentally and socially responsible’. This is unique, and a clear signal to investors, employees and business partners that this is how we do business.

Novo Nordisk’s mission plays out in a number of unusual ways for a corporation. Our commitment to establish the World Diabetes Foundation is a good example.  We presented the idea at our annual meeting, and requested shareholder supported, even though the Foundation votes would have been sufficient. The shareholders applauded the proposition.

2. Communications and stakeholder engagement

We take a different approach to many partnership and communications efforts. We do not just work to singularly advance the Novo Nordisk brand. We take a holistic look at the communities in which we operate, and we consider our opportunities to benefit not just our business, but society at a local and global level.

The company believes our outreach efforts build trust, provide a basis for establishing common ground on tough issues, and help inform executives about emerging trends with the potential to affect the business. Our stakeholder engagement process is not static. Difficult issues, such as how to ensure equal access to health or how to approach stem cell research, are presented as interactive challenges on the company’s website.

One of our regional managers commented that Novo Nordisk is more likely to pick up early signals about market opportunities or how products are doing because of our involvement: “…when we are with [stakeholders] on a regular basis, working on projects, discussing all kinds of things .. if anything comes up in discussion, we will know about it...”

In April 2010, Novo Nordisk launched “The Blueprint for Change Program.” The intent was to facilitate stakeholder engagement and demonstrate how the company delivers value to business and society. So far three cases have been made: one on the Climate change challenge, one on changing diabetes in China, and one on creating shared value in the US. Built on the same methodology, they assess the business case for the company’s Triple Bottom Line approach and document with numbers and facts how this way of doing business also benefits society. (Reference the ‘Blueprint for Change’ document in the Materials section.)

Our emphasis on Triple Bottom Line is reflected in consistently high employee engagement, reputation and physician satisfaction. We believe that maximizing shared value requires investing in societal issues that are aligned with our business strategy; the right capabilities enabling success; and leveraging the Triple Bottom Line principle as a competitive advantage. And we firmly believe that our emphasis on Triple Bottom Line is reflected in our strong company growth.

Importantly, when we reviewed our progress on these initiatives, we looked back at the value it was creating for Novo Nordisk and the value it was creating for society. For example, in assessing climate change challenge, the benefits to Novo Nordisk were largely energy savings and risk reduction. For society, the benefits included not only CO2 reductions, but also the long-term impact of helping kick-start a massive wind energy investment that would supply power to businesses and households.

I was asked to explain the rationale for the climate change blueprint and the blueprint series as a whole. This is more than a communications effort. Fundamentally, it is a way for us to hone and describe our triple bottom line approach to doing business and how it’s benefiting both Novo Nordisk and society. It is an example of how acting responsibly can drive new and better approaches to our diabetes work, our operational productivity, and our communications with partners, customers, and communities.

3. Reporting

In 1994, Novo Nordisk became the first company in Denmark, and one of the first in the world, to publish an environmental report. Five years later, we published our first social report. In 2004, Novo Nordisk became the third company to publish an integrated financial, environmental, and social report.

Reporting is another example of how our values drive an innovative approach to managing our business. It compels us to reevaluate and restructure our process and metrics to reflect human, social, and environmental impacts. We’ve often had to pioneer and invent these new reporting structures. In turn, the new reporting structure better enables us to convey how we deliver long-term returns, and apply responsible business practices.

Our former CFO, Kurt Nielsen explains the business case for linking our values to our reporting:

“We have never ever said that we are conducting our business in accordance with the triple bottom line for other reasons than good business reasons. What does “good business reasons” mean? It means to preserve your license to operate. We want to make sure that customers value our products and continue to buy them. We want to make sure neighbors will not close down our factories, that society will not say no to the development of new products, and so on. We think we can best do that by being open and honest, and explaining what we’re doing. That’s the best way we can develop new products.”

Our focus on multiple impacts has been good for our business. We are trusted and respected. We can recruit and retain top talent. It strengthens our ability to expand our presence in current markets and build new ones.

Our practices are increasingly recognized by industry. We top sustainability indices across a broad array of categories - energy, carbon and water productivity; employee innovation capacity; leadership diversity; worker safety; fair remuneration standards; employee turnover.

More importantly, we propose criteria that are not yet part of these indices – such as the linkage between CEO compensation and compensation. We do this because it’s relevant, and we think it can positively influence the way business is done. Take the remarks of this analyst last month:

“Novo Nordisk excels not just in the parameters that landed it in 1st place, but also in the ones that are not included. The company scored top quartile performance in [the given indices]. It is also the only pharmaceutical company in the Global 1000 linking CEO remuneration to corporate performance in sustainability measures.”

- Raz Gozelnik of Eco-Libris.

Timeline

1923 Company founded in Denmark

1989 Novo Nordisk formed: Merger of Novo Industri A/S and Nordisk Gentofte A/S

1994 Novo Nordisk publishes first environment report

1999 Novo Nordisk publishes first social report

2004 Novo Nordisk published first integrated annual report

2005 Company takes lead position in the U.S. insulin market

2009 Named as an ethical leader of international business by think-tank Ethisphere.

2010 Blueprint for Change Program

2012 Ranked #1 on the Global 100 Most Sustainable Corporations in the World index by Corporate Knights