Economic footprint
Novo Nordisk's business strategy aims to contribute to society in those areas where the company has outstanding knowledge and expertise. Access to health, ethical business practice, supply chain management and environmental management at production sites are important for the institutional framework within which the markets work.
The 'economic footprint model' helps to bring about a better understanding of how Novo Nordisk contributes to society, locally and globally. It illustrates Novo Nordisk, its economic stakeholders and the interactions that drive economic growth in well-developed societies.
The number of people who receive diabetes care is an indicator of the indirect economic impacts of Novo Nordisk's products and services. In 2006 Novo Nordisk provided insulin for 13-15 million people with diabetes worldwide. Of these, 7 million live in Europe, the US, Canada, Japan and Oceania, the remaining 6-8 million people live in the International Operations region. The range is due to the fact that, in the developing world, two or three persons may share a daily dose of insulin.
Novo Nordisk's access to health programmes are estimated to reach out to at least 31 million people worldwide through awareness-raising, education, diagnosis or treatment.
As a business, Novo Nordisk impacts society through sustainable business practices, investments and employment. As a pharmaceutical company, Novo Nordisk offers knowledge, R&D and healthcare products. This illustrates that successful development requires interplay of various economic processes.
The cash-value distribution provides an overview of Novo Nordisk's economic interactions with stakeholders at corporate level: sales of products and services, payments to suppliers, remuneration of employees, dividend and interest to investors and funders, taxes paid to the public sector and profits generated for future growth of the company.
In reports from the major production sites (published every third year) the company's contribution to socio-economic growth at the local level is assessed and quantified. This includes job creation, local and national taxes and local purchases.
Performance 2006
Novo Nordisk uses a variety of indicators to measure its economic impact, which shows the company’s continued contribution to economies in 2006 through its financial performance, cash-value distribution, payments to suppliers and employees, capital providers, taxes paid and community investments. See below.
In 2006 Novo Nordisk gave support to a health survey in Kerala, India, being conducted by a project called 'Healthy Action by People' that tracks the level of diabetes care among more than 120,000 people (covering 43,000 households) in rural areas. The project uses microfinance to help address the growing diabetes epidemic in India. There are multiple economic benefits to the initiative that can help break the cycle of poverty that hinders the economic growth of developing countries. Read more about the health survey in Kerala in the section below: Supporting microfinance in India.
Making an impact in developing countries
Novo Nordisk seeks to contribute to society in those areas where the company has outstanding knowledge and expertise. One of the key questions in relation to socio-economic development is how private companies and responsible business practice can make a difference in the market economies of the developing world.
Health and education are acknowledged to be key elements in development. The pharmaceutical industry is increasingly active in the developing world, offering products and, in some cases, a cure for events that were previously regarded as inevitably mortal. However, offering health products is not enough; products must be affordable and income must be generated in the local economies to generate funds for a sustainable healthcare system.
Economic growth and trade combined with foreign investments that create employment are well-known factors in building economic growth and generating funding for societal infrastructure. By creating jobs or buying materials from suppliers in the developing world and offering healthcare products, Novo Nordisk can contribute to economic growth and social development. See a discussion of Novo Nordisk's globalisation strategies.
Escaping the poverty trap
Why then is poverty so difficult to address? Health and education are acknowledged to be key elements in development. But offering health products and education is not enough; it must be affordable, income must be generated and knowledge transferred to the local economies to fund societal infrastructure. The poverty trap model illustrates the relationship between drivers or barriers to economic activity in the local economy - the Catch 22 for developing societies stuck between traditional cultures and modern poverty.
Market failure, inadequate information and education, and lack of societal institutions impede the workings of the economy. Poor health and poverty are reinforced and in some cases crime and unstable environments are the results. It is difficult to distinguish cause from effect of underdevelopment, and what triggers development in specific cultures. Investors and businesspeople tend to invest in well-known areas or countries where other entrepreneurs are present and infrastructure already emerging. It is risky and sometimes expensive to be the first movers in a scenario, and thus the lack of investment into developing countries puts poor traditional societies without modern institutions and economic infrastructure at a competitive disadvantage.
Supporting microfinance in India
How can societies make the transition from the poverty trap model to the economic stakeholders and the interactions that drive economic growth in well-developed societies
Escaping the Catch 22 of the poverty trap and jump-starting growth is not a problem due to lack of a local market or customers that have needs to be satisfied. Rather, the problem is the lack of suppliers that can profit from selling low-cost products and services. It is not profitable for the majority of existing suppliers of products to sell in low-income communities. Many suppliers that could make a living from supplying goods and services to low-income markets do not have the capital to get started.
Microfinance can play a decisive role in bridging this gap. Microfinance consists of making small loans to individuals, usually women, to establish or expand a small, self-sustaining business. The Grameen Foundation, along with its founder Muhammad Yunus, won the 2006 Nobel Peace Prize for demonstrating that microfinance can be a powerful poverty-fighting tool.
Novo Nordisk, using its expertise and knowledge of diabetes, is supporting the use of microfinance to help address the growing diabetes epidemic in India. Novo Nordisk is supporting a health survey in Kerala, India, being conducted by a project called 'Health Action by People' that tracks the level of diabetes care among more than 120,000 people (covering 43,000 households) in rural areas.
Read more in the article about socio-economics, or download the article 'Reaching across the global health divide' from the printed 2006 Annual Report (PDF).
Apart from the goal of improving the health of rural Indians, the project also demonstrates how an affordable market can be created on the basis of low-cost healthcare supplies to meet the needs of the poor, with a distribution and delivery system based on inexpensive technology in combination with wise use of human resources. Novo Nordisk will use the results of the survey in its socio-economic studies to better understand how we can change diabetes care in the developing world.
Start-up engine for growth
The project includes a number of elements that are essential for economic development. Most important, of course, is provision of low-cost healthcare in rural areas, benefitting not only those with diabetes but those with other diseases and conditions. One of the largest problems in access to health is that transport is expensive and time-consuming. In addition, the project uses these other enabling factors for escaping the poverty trap:
1. Micro finance in combination with application of new and inexpensive technology
2. Education in rural areas, particularly of women
3. Using locals to ensure knowledge of conditions in the local community
4. Creating jobs in rural areas
5. Creating a population registry
6. Cooperation with the hospital systems to create a referral system for people who need more advanced treatment.
In this way, the project addresses obstacles to economic development, such as lack of investors and suppliers, low income, poor infrastructure and low levels of education, as healthcare services are delivered in the local area, satisfying local customer needs through local suppliers who receive support from locally available investors (microfinance). The business is profitable and competitive in the local setting and represents the missing link for the start-up engine for local economic growth.
'Health Action for People' is about meeting the needs of the 4 billion people living on less than 2 dollars a day, the bottom of the (economic) pyramid, as explored by the economist C.K. Prahalad .
Novo Nordisk believes that projects like this are a way for private companies in the developed world to create a sustainable business approach to meeting the needs of this market, based on the specific expertise we can contribute to addressing the fundamental disparities between the needs of poor customers and the need for companies to find competitive opportunities. During this transition, a combination of social responsibility, partnerships and support of small-scale, locally based entrepreneurship can play an important role in eradicating poverty.
Measuring contributions to society
By its very presence, Novo Nordisk can contribute to building well-functioning societies through the application of company policies and standards. See the current picture of direct and indirect economic impacts.
Novo Nordisk’s approach
The responsibility of companies as corporate citizens cannot be limited to investments, job creation, tax contributions and products.
Novo Nordisk believes that responsible business practices in conjunction with government regulation may be a way to ensure social equity and that the market economy works for everyone. By setting rules, norms and standards, the company can contribute to achieving common goals such as the Millennium Development Goals. Responsible business practices have the potential to alleviate the consequences of the absence of a legal and regulatory framework and infrastructure. Novo Nordisk does this by contributing to the building of health infrastructure, such as offering assistance in building national diabetes strategies and educating healthcare professionals and people with diabetes.
Customer, employee and environmental protection may also be absent. Being responsible implies not taking advantage of that. The policies described in the Novo Nordisk Way of Management guide employees' behaviour. Novo Nordisk actively supports the UN Universal Declaration on Human Rights and the principles of the Global Compact such as protection of human rights, freedom of association and the right to collective bargaining, and elimination of discrimination and forced labour.
All social and people policies in Novo Nordisk apply throughout Novo Nordisk's global operations. Social responsibility and environmental management are implemented at all production sites and all affiliates inform their key suppliers of the scope of the company's social and environmental policies.
All of these policies directly impact the workings of the market economy and individuals' ability to influence and improve their economic situation.
Financial performance in 2006
2006 was another year of solid double-digit growth for Novo Nordisk. In economic terms, the year's performance is accounted for as part of the consolidated non-financial statements. This includes a report on the company's net employment creation and average turnover at corporate level.
Summary table Global impacts (rounded) | 2006 | 2005 | 2004 | 2003 | 2002 | 2001 |
Total Job creation | 82.700 | 78.000 | 73.100 | 67.900 | 65.100 | 58.700 |
Novo Nordisk employees (FTE) | 23.613 | 22.007 | 20.285 | 18.756 | 18.005 | 16.141 |
Jobs at suppliers | 43.000 | 41.200 | 39.000 | 36.500 | 34.800 | 31.500 |
Employees respending | 16.100 | 14.900 | 13.800 | 12.700 | 12.300 | 11.100 |
Total indirect job | 59.100 | 56.100 | 52.800 | 49.200 | 47.100 | 42.600 |
OECD countries | 71.100 | 68.100 | 65.500 | 61.900 | 59.900 | 55.100 |
See the reporting on economic performance.
Reported sales were 38,743 million Danish kroner, which correspond to a sales growth of 15% compared to 2005. Sales growth was realised both within diabetes care and biopharmaceuticals – primarily driven by the portfolio of insulin analogues as well as NovoSeven®. Sales of growth hormone therapy products also contributed to growth. Sales growth was realised in all regions. The main growth driver was North America, constituting 32% of total sales, followed by International Operations with 18% of total sales.
Market shares
In 2006 Novo Nordisk's share of the world market for insulin was 52%. Broken down by regions, the company's market share in the US was 41%, in Japan it was 74 %, in Europe 57% and in Canada, New Zealand and Australia 64% (IMS market share data, average 2006 per Q3 2006).
In the diabetes care segment, which accounts for approx 72% of sales, Novo Nordisk reports sales on a regional basis: Europe, North America, International Operations, and Japan & Oceania.
In the biopharmaceuticals sector, which accounts for the remaining approx 28% of sales, sales figures are consolidated and reported at global level.
Novo Nordisk does not report national market shares. There are no countries in which Novo Nordisk's sales represent more than 5% of GDP.
Cash value distribution 2006
Novo Nordisk markets its products in 179 countries across the world. The company's tangible assets, production and a small majority of employees are still primarily located in Denmark, but an increasing proportion of the investments in production are made outside Denmark and outside the developed world.
The growth in employees outside Denmark reflects this trend. Of the 23,613 full-time positions in Novo Nordisk, 47% are outside Denmark.
Payments to suppliers
Payments to suppliers are accounted for in the Annual Report. In 2006 total payments amounted to 16,690 million Danish kroner.
In 2006, on average 87% of payments were paid on time based on monthly records at corporate headquarters. This figure include payment of invoices made on 'net payment terms', in which case payment within just a few days of receipt would be recorded as 'not paid on time'.
To improve efficiency of payments, the invoice capture system has been adopted as a global standard. For a geographical breakdown of Novo Nordisk's suppliers and more information about the company's Responsible Sourcing Programme, please click here.
Payments to employees
Wage costs are accounted for in the Annual Report. In 2006 total employee costs were 12,776 million Danish kroner. This figure includes total payroll and benefits (including wages, pension and other benefits and compensation payments). Novo Nordisk does not report breakdown of such payments by country or region.
Payments to capital providers
In 2006 dividend payments to Novo Nordisk shareholders amounted to 7.00 Danish Kroner per share. Interest payments are reported in the consolidated balance sheet.
Retained earnings
In 2006 retained earnings amounted to 28,810 million Danish kroner. Details are provided in the consolidated income statements.
Taxes paid
In 2006 Novo Nordisk paid a total of 3,514 million Danish kroner in taxes worldwide, corresponding to an effective tax rate of 29,6%. Novo Nordisk's contribution to the national economy in Denmark accounted for 2,4% as a share of Danish GDP, compared to 2.2% in 2005. Novo Nordisk does not report on all types of tax paid broken down by country.
Community investments
Through its presence and activities, Novo Nordisk invests in the local communities in which it does business. This relates in particular to investments in communities around Novo Nordisk's production sites in Denmark (Bagsværd, Gentofte, Hillerød, Hjørring, Kalundborg, Køge and Måløv), France (Chartres), the US (Clayton, North Carolina), China (Tianjin) and Brazil (Montes Claros).
Economic contributions at locations where Novo Nordisk has major production sites are accounted for in a three-year cycle. See the most recent local economic footprint accounts from 2004.
Novo Nordisk does not report on any subsidies received broken down by country or region.
Community investments may take the form of investments in infrastructure and donations to community, civil society and other groups.
Novo Nordisk does not account for the total spend on non-core business infrastructure development in the consolidated financial statements.
Novo Nordisk collects information on donations paid from its sales affiliates and reports on such cash payments, although not broken down by type of group to whom they are paid. In-kind donations are not included in the figures. See also the reporting on community engagement.
In addition to economic impacts through the company's local presence, Novo Nordisk recognises the indirect economic impacts of its products and services. These impacts can be measured in terms of life and life expectancy for people who receive medical treatment, as well as in terms of their productivity, and the direct and indirect costs to patients, their families and carers and the healthcare providers. To read more about Novo Nordisk’s approach to socio-economics, please click here.
This page has been assessed by PricewaterhouseCoopers as part of its assessment of Novo Nordisk’s statement that it reports ‘in accordance’ with GRI. Please refer to Audit and assurance for a full description of the nature of assurance offered.
