Materiality

For the second year, Novo Nordisk has published an integrated annual report covering both financial and non-financial performance. This has had implications for how Novo Nordisk defines materiality.

Novo Nordisk seeks to ensure compliance with the materiality criteria in AccountAbility’s AA1000 Assurance Standard. Its purpose is to help assess, attest and strengthen the credibility and quality of an organisation’s sustainability reporting and the underlying processes, systems and competences.

Towards integrated reporting

Seeking to better describe and understand the interaction between Novo Nordisk’s financial and non-financial performance, Novo Nordisk now publishes one inclusive annual report, plus an annual review with extracted pages from the annual report. The annual review provides an overview of the business, but does not include the detailed financial and non-financial performance data and commentary.

The aim is to improve the quality of information provided to the many and diverse audiences who use Novo Nordisk’s annual reports as a key source of information on the company’s performance and potential.

In combining the accounts for the company’s financial and non-financial assets, the objective is to enhance stakeholders’ evaluation of the company.

A Triple Bottom Line approach to business

Novo Nordisk strives to conduct its activities in a financially, environmentally and socially responsible way. This business principle is stated in the company’s objectives in the Articles of Association. The annual reporting should reflect this as ‘our way of doing business’.

Redefining materiality criteria

Redefining the reporting format also involves a review of the materiality criteria. As the legal document, the Annual Report provides all financial information in accordance with International Financial Reportig Standards, the Danish Financial Statements Act and additional Danish reporting requirements as well as information pertaining to Novo Nordisk’s non-financial performance. This includes our commitment to sustainability and stakeholder engagement embodied in the principles of materiality, completeness and responsiveness. The material non-financial performance is defined through a number of activities in Novo Nordisk:

• Engagement with stakeholders
• Engagement with employees
• Feedback from Board of Directors and Executive Management
• Internal and independent reviews of Novo Nordisk’s Annual Report 2005
• Internal benchmarks of best practice sustainability reporting
• Queries, reviews and assessments from investors and rating agencies
• Trendspotting of issues of relevance to Novo Nordisk’s business
• Review of media coverage of Novo Nordisk and public agenda issues.

Accounting for strategic objectives

The information provided in the feature articles of the Annual Report 2005 is structured by headings that reflect the company’s vision and strategic objectives:

• Business results
• Diabetes care
• Biopharmaceuticals
• Challenging workplace
• Values in action.

The materiality test

In redefining the materiality criteria, AccountAbility’s Five-Part Materiality Test can be applied. This method is compatible with Novo Nordisk’s own method for defining what should be included in the Annual Report and on which grounds other topics should be excluded. The test was used for the planning of the 2005 reporting cycle.

The outcome of the reseach, stakeholder engagement and internal materiality discussions was presented as a proposal for the annual reporting 2005 to Executive Management and the Board of Directors, and subsequently approved. Moreover, Novo Nordisk’s external assurance providers were requested to assure whether the non-financial performance included was to be considered material. Their conclusion is available in the Assurance Report on Non-financial Reporting 2005. As part of the assurance, the assurance provider’s findings are presented to the Board of Directors, Executive Management and the Audit Committee.

The Five-Part Materiality Test

Below are listed examples of Novo Nordisk’s material non-financial performance within the five parts of the Five-Part Materiality Test developed by AccountAbility.

Test 1: Policy-related performance

Areas in which a company has agreed policy statements of strategic nature, irrespective of short-term financial consequences:

• Bioethics 
• Business ethics 
• Corporate governance
• Diabetes prevention
• Environment 
• Risk management
• Novo Nordisk Way of Management 
• People Strategy

Test 2: Short-term financial impacts

• Novo Nordisk CO2 strategy
• Pricing of pharmaceuticals 
• Contributions to society 

Test 3: Peer-based norms

Issues and aspects of performance that peers deem to be of material importance:

• Access to health
• Gene technology 
• Stem cell research 

Test 4: Stakeholder behaviour & concerns

Practical definition of relevance to stakeholders in terms of reasonable evidence of likely impact on their decisions and behaviour:

• Access to health
• NovoSeven® 

Test 5: Societal norms

The consideration of societal norms by the company, whether they are regulatory or non-regulatory:

• WHO priorities
• CO2 quotas 

Supplementary information online

Some stakeholders may find that the Annual Report does not provide the full answers to what they would like to know about Novo Nordisk’s activities and performance during the year. Nor does the Annual Report in itself fully meet the ‘in accordance’ requirements of the Global Reporting Initiative’s 2002 Sustainability Reporting Guidelines. To accommodate such information needs, this online version of the report provides supplementary information and data about ‘how we perform’, ‘how we work’ and ‘how we are accountable’.

Feedback

Novo Nordisk values stakeholders’ reviews of the reporting and welcomes any questions or comments concerning the report or the company’s performance. Send an email or get in touch.

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.