Economic footprint
Novo Nordisk's business strategy aims to contribute to society in those areas where the company has outstanding knowledge and expertise. Superior products, 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 and constitute the building stones of Novo Nordisk economic footprint.
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 2007 Novo Nordisk provided insulin for 13.8-17.5 million people with diabetes worldwide. Of these, 7.8 million live in Europe, the US, Canada, Japan and Oceania, the remaining 6.0-9.7 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.
As a pharmaceutical company, Novo Nordisk offers knowledge, research and development and healthcare products. Novo Nordisk's access to health programmes are estimated to reach out to at least 58 million people worldwide through awareness-raising, education, diagnosis or treatment. As a business, Novo Nordisk impacts society through superior products that meet fundamental patient needs but are also produced and delivered in sustainable business practices, through investments decisions and employment. This illustrates that successful development requires interplay of various economic processes.
The cash-value distribution (table showing dynamics 2001-2007) 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.
Performance 2007
Novo Nordisk uses a variety of indicators to measure its economic impact, which shows the company’s continued contribution to economies in 2007 through its financial performance, cash-value distribution, payments to suppliers and employees, capital providers, taxes paid and community investments. See table below.
In 2007 Novo Nordisk continues support of two health surveys in India, in Kerala, and Chennai respectively. The project in Kerala is 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 in Chennai conduct by the Kidney Health Trust has over the past eight years collected valuable data regarding the incidence and prevalence of diabetes and hypertension, their complications, and the pattern of drug regularity and the response of patients to these regimens including mortality.
Both projects are targeting poor rural communities but use two different models to deal with low affordability. The Chennai project is based on the Tulsi Trust health care programme and provides free care while the Kerala 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 micro finance and screening 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. For Novo Nordisk it is important to contribute to ending the poverty trap at the “base of the economic pyramid” by supporting viable sustainable business models in poor communities.
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 business people 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 new location, 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 projects that use 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.
Apart from the goal of improving the health of rural Indians, the Health Action by People 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 2007
2007 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.
Novo Nordisk does not break down the average employee turnover by region or country, but the turnover for all our production sites can be viewed in the interactive charts.
See the reporting on economic performance.
Cash value distribution 2007
Novo Nordisk markets its products in 179 countries across the world. The company's tangible assets, production and just under half of the employees are located in Denmark. 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 25,516 full-time positions in Novo Nordisk, 51% are outside Denmark.
See cash value distribution (dynamic from 2001-2007).
This page has been reviewed by PricewaterhouseCoopers as part of its assurance of Novo Nordisk’s non-financial reporting. Please refer to Audit and assurance for a full description of the conclusions and the nature of assurance offered.
