In creating a competitive return Novo Nordisk strives to reach the following long-term financial objectives:

• An annual growth in operating income of at least 15%
• An operating margin of at least 20%
• A return on non-financial assets of at least 20%
• A positive free cash flow

Status on 1997-99 target: Develop and refine financial accounting systems for our environmental performance and extend them to encompass the entire Novo Nordisk Group.

Progress has been made with regard to developing our statement of environmental costs, income and investments, thus bringing us one step closer to our aim of linking environmental performance with financial performance. We are now able to present data on the remediation costs of polluted sites in Denmark and we have furthermore extended the statement to the entire Novo Nordisk Group.

Defining environmental costs and investments
All monetary figures in the statement reflect respectively costs, investments and income forming part of our Annual Report 1997. They comprise costs incurred to manage the environmental impacts of our operations, as well as other activities relating to our environmental strategy and our aim to be an environmentally responsible corporate citizen.* In addition, energy and other environmental taxes are included.

There are, however, costs that are not included in the statement, even though they qualify for the definition. This is due to the fact that they are either not clearly discernible from non-environmental costs or that they are not readily available from our accounting systems. Not included are for example costs for salaries to or training of employees outside the environmental departments who are involved part-time in environmental projects such as developing environmental management systems, working on projects in relation to the Environment & Bioethics Groups or the International Environmental Network (see organization chart).

In our statement we have included only investments that are end-of-pipe pollution abatement measures and measures to avoid spills and leakage. Depreciations on environmental investments are not included.

Linking environmental and financial performance
The integration of environmental considerations in business decisions at all levels of the organization - from research and development to purchasing and transport - demonstrates the importance Novo Nordisk attaches to linking environmental performance to our current and future financial performance.

A major part of investments in building new plants, and optimizing existing plants, as well as in resource-saving projects, is focused on financial objectives but are also directed at improving our environmental performance.

At present the figures that can illustrate the link between environmental and financial performance are the eco-productivity indices presented on the page Monitoring resource efficiency and the figures on waste management costs and energy taxes shown in the statement. The EPIs on water and energy consumption and the ensuing emissions reflect for example our performance related to some significant environmental aspects. The trend for these indicators over a period of time will also give an indication of developments in financial efficiency.

Discussion of performance figures
In 1997, total environmental costs were DKK 230.4 million for the Group and investments (capitalized costs) were valued at DKK 146.4 million.

Whilst 90% of liquid waste management expenditure was incurred at Danish sites, the corresponding figure for water consumption was only 74%. The main reason for this discrepancy is the higher cost per unit of waste water in Denmark compared to Brazil and the USA.

Development in Denmark
Environmental costs as a percentage of turnover decreased by 0.1 percentage points in 1997 from 1.8% to 1.7% compared to 1996 levels. The environmental costs for 1997 in Denmark totalled DKK 205.9 million, representing an increase of DKK 19 mil-lion or 10.3% compared to 1996 (not including remediation of polluted sites). The most important changes are:

• Expenditure on waste water treatment at municipal plants rose by DKK 11.2 million, or 54%. Approximately DKK 0.8 million is attributable to an increase in tax charges which are beyond our control.
• Taxes on energy rose by DKK 9.3 million, or 46%. The increase was primarily due to an increase in gas tax for room heating (DKK 3.3 million) and an increase in CO₂ tax (DKK 4.6 million). Approximately 52% of the total increase is due to an increase in the tax rates charged, which are beyond our control.

Expenses for remediation of polluted sites are mainly due to consultant assistance and remedial pumping at Bagsværd (Building 4C) and closure of 40 underground storage tanks at the Copenhagen site.

Environmental investments
Environmental investments in Denmark were DKK 85,3 million, or almost three times higher than in 1996. This is due to an expansion of our biological waste water treatment plant at Kalundborg (DKK 76 million) in order to manage increased quantities of waste water. As a consequence of new legislative requirements, the spreading of liquid NovoGro^® - our spent biomass used as agricultural fertilizer - has been limited and we have therefore developed a process by which NovoGro^® is dewatered into a solid product. This new process has lead to a consider-able increase in waste water volume.

The total environmental investments of sites outside Denmark amounted to DKK 61.1 million, of which DKK 44 million was spent on the construction of the biomass and waste water treatment facilities at our new plant in Tianjin in China. Furthermore, DKK 16,2 milllion was invested in an additional storage tank for spent biomass, as well as additional waste water treatment cap-acity in support of the expansion of the recovery plant at our enzyme plant in Franklinton, USA.

Perspective
We consider it likely that the performance indicators and issues addressed in this section will become even more significant to our financial and environmental performance in future years.

The continued incorporation of environmental considerations into the business decision-making process will further facilitate the development of measures that will assist us in improving both our environmental and our financial performance.

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