For the fifth consecutive year, Novo Nordisk is publishing an integrated annual report covering both financial and non-financial performance. Following the first four annual reports, we have engaged in a different process for evaluation of and feedback from our stakeholders on the annual reports. 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. 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 Reporting 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 inclusivity, materiality, completeness and responsiveness. The material non-financial performance is defined through a number of activities in Novo Nordisk:
- Engagement with external stakeholders
- Engagement with employees
- Feedback from the Board of Directors and Executive Management
- Internal and independent reviews of Novo Nordisk’s Annual Report 2007
- 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.
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 2008 reporting cycle.
The outcome of the research, stakeholder engagement and internal materiality discussions was presented as a proposal for the annual reporting 2008 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 independent Assurance Report on Non-financial Reporting 2008. 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.
Test 1: Policy-related performance
Areas in which a company has agreed policy statements of a strategic nature, irrespective of short-term financial consequences:
Test 2: Short-term financial impacts
Test 3: Peer-based norms:
Issues and aspects of performance that peers deem to be of material importance:
Test 4: Stakeholder behaviour & concerns
Practical definition of relevance to stakeholders in terms of reasonable evidence of likely impact on their decisions and behaviour:
Test 5: Societal norms
The consideration of societal norms by the company, whether they are regulatory or non-regulatory:
Supplementary information online
Some stakeholders may find that the Annual Report does not provide the full answers to their questions about Novo Nordisk’s activities and performance during the year. To accommodate such information needs, the annualreport2008.novonordisk.com website provides supplementary information and data about Novo Nordisk’s activities and performance during the year