Defining materiality
In 2004, for the first time, Novo Nordisk publishes one report, covering both financial and non-financial performance; the Annual Report 2004. This has had implications for defining 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 competencies.
From three publications to one
In previous years, Novo Nordisk prepared three annual publications:
- The Annual Financial Report, which is the legal document accounting for the company’s financial performance, in accordance with the Danish Financial Statements Act, Danish Accounting Standards and the financial reporting requirements of the Copenhagen Stock Exchange.
- The Sustainability Report, which provides supplementary information about the company’s non-financial performance, in accordance with the GRI 2002 Sustainability Reporting Guidelines and assured according to the AA1000 Assurance Standard.
- The Annual Review, a summary overview with performance highlights.
Towards integrated reporting
Seeking to better describe the interaction between Novo Nordisk’s financial and non-financial performance, from this year, Novo Nordisk will publish 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 about the company’s performance and its potential.
In combining the accounts for the company’s financial and non-financial assets, the objective is to enhance stakeholders’ valuation of the company, be it financially or in terms of reputation and trust.
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’.
Redefing materiality criteria
Redefining the reporting format also included 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 Statement Act and additional Danish reporting requirements as well as information pertaining to Novo Nordisk’s non-financial performance. This includes the company’s 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 Direrectors and Executive Management
- Internal and independent reviews of Novo Nordisk’s Sustainability Report 2003
- 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 2004 is structured by headings that reflect the company’s vision and strategic objectives:
- Defeating diabetes
- Innovative in other areas
- Competitive business results
- 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 made as a desk review. It will be used for the planning of the 2005 reporting cycle together with AccountAbility’s other three proposals.
The outcome of the reseach, stakeholder engagement and internal materiality discussions was presented as a proposal for the annual reporting 2004 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 Assurance Report on non-financial reporting 2004. 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: Direct short-term financial impacts
Short-term financial impacts resulting from aspects of social and environmental performance:
Test 2: Policy-related performance
Areas in which a company has agreed policy statements of strategic nature, irrespective of short-term financial consequences:
More information under each heading is available online.
Test 3: Business peer-based norms
Issues and aspects of performance that peers deem to be of material importance:
Test 4: Stakeholder behaviour and 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 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 GRI. 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’ review of the reporting and welcomes any questions or comments concerning the report or the company’s performance. Send an email or get in touch.
