Why biotech innovator Novozymes uses the SDGs as a catalyst for growth
And it compensates top managers accordingly.
Novozymes president and CEO Peder Holk Nielsen is optimistic that the world has the willingness and the technology to tackle climate change.
But he worries that too many well-intentioned companies are wasting time taking action because they’re looking for perfect solutions for the long term rather than embracing good ones that have the potential to make a smaller impact more quickly.
"You can get into the mood where this is such an overwhelming task that you can’t make a difference and therefore you go on doing the same thing as you’ve always done," Nielsen told me during a chat last week. "Or you can tell yourself, ‘Let’s concentrate on where I can make a difference, and then let’s make a difference.’ I would put to you that if every company did that, then we could actually solve most of these problems. It’s no harder than doing that."
Nielsen’s own company, Danish biotech firm Novozymes — which develops enzymes used for bioenergy, food and agricultural applications, household care products and production processes — has taken that sentiment to heart. And then some.
Since 2015, the company’s business strategy has been explicitly aligned around catalyzing technologies that will play a role that exploit the "inventory of business opportunities" embedded into the U.N. Sustainable Development Goals (SDGs) into reality. Using the SDGs as a talking point helps Novozymes put it strategies into context for national governments, cities, investors and other key stakeholders, such as its roughly 6,200 employees.
Indeed, a "significant" portion of the compensation for Novozymes’ top 200 executives is tied to the company’s ability to grow revenue related to catalyzing a low-carbon future, while meeting its own corporate sustainability targets, Nielsen said.
"Sustainability is not a corporate department in Novozymes; it’s a part of what we do, it’s the strategy," he said. "I think that’s an important distinction to make."
To be clear, the company isn’t trying to tackle all 17 SDGs. It has honed its focus to five that explicitly play into its business:
- No. 2 – Zero Hunger
- No. 4 – Quality Education
- No. 6 – Clean Water and Sanitation
- No. 13 – Climate Action
- No. 17 – Partnerships for the Goals
"I would advise executives to concentrate only on those where they think they can make a positive impact and try not to mess up on the others," Nielsen said.
Novozymes is the global leader in industrial enzymes, controlling an estimated 48 percent of the market and holding more than 6,500 granted and pending patents, according to the company’s annual report. The organic revenue growth for its bioenergy business was 11 percent in 2017, while its food and beverage business grew 9 percent. Right now, about 65 percent of its business companies from developed economies, and Nielsen views the SDGs as a way of starting more serious dialogues in emerging nations.
One example of how the SDG lens shapes Novozymes’s strategy is its partnership with the NICE Group, one of China’s largest detergent companies — and one of the biotech company’s biggest customers. In 2017, two companies began collaborating on a research and development project to help NICE create far more concentrated formulas of its products.
"If we can encourage half the market to switch from conventional to concentrated detergents, we will save huge amounts of energy in terms of transportation and packaging," said Hu Zhengyu, chief engineer of NICE, in Novozymes’s latest sustainability report. "That will be a leap forward for sustainable development."
Another example of how Novozymes uses the SDGs for guidance on investment decisions is its BioAg Alliance with Monsanto, an initiative focused on developing new pesticides and herbicides that are made from naturally occurring microbes. The products are already being used on more than 80 million acres of farm land; the goal is to reach 250 to 500 million acres worldwide by 2025.
"We have great new products on the market that will help farmers produce more crops in a sustainable way," said Colin Bletsky, Novozymes’ vice president for BioAg, in a statement about the initiative last year. "We continue to increase our understanding of how plants and microbes interact, and this is reflected in our strong pipeline. It will help propel biological solutions from agricultural niche to industry mainstream over the coming decade."