Materiality Determination

As a global healthcare company, our key contribution is to discover and develop innovative biological medicines and make them accessible to patients throughout the world.

We aim to lead in all disease areas in which we are active. In our annual report we account for the value created through our business activities, achievements and challenges.

Sustainable business

Novo Nordisk’s ambition is to be a sustainable business. By this we mean:

creating long-term value for patients, employees, partners and shareholders by developing innovative and competitive solutions to patients’ unmet needs

  • doing business in a financially, environmentally and socially responsible way
  • anticipating, adapting to and creating new business opportunities from changes in our business environment.

Material issues

The three most material factors that can impact Novo Nordisk’s ability to create value over time are defined by management as:

  • product quality and patient safety
  • progress in the R&D pipeline and regulatory approval
  • pricing and market access environment in the US

Any failures in managing each of these are important to key stakeholders – notably the patients we serve – and could substantively affect value creation. As a result, there are robust governance processes in place and board oversight to ensure that associated risks are managed and opportunities realised.

Other material issues relate to dimensions of performance in regards to the Triple Bottom Line principle to do business in a financially, environmentally and socially responsible way:

Process of determination

Material issues are determined and reassessed on an annual basis by management. For reporting purposes, this process is anchored with the Disclosure Committee, chaired by the CFO.

Materiality determination is informed by insights from stakeholder feedback such as analyst reports and investor queries, patient panels, independent assurance, reputation surveys, and internal surveys among employees. Material issues are linked to the annual strategic planning process, and material issues are reflected in the remuneration of the Executive Management and the long-term share-based incentive programme.

The materiality determination process is further validated by data-driven insights delivered by independent providers, which include assessments of sector specific issues,

legal requirements, media coverage and social media conversations. The list total approximately 25 material issues across financial, environmental and social dimensions.

The filter criteria for materiality determination are based on sector-specific guidance provided by the Sustainability Accounting Standards Board (SASB) and the Future Fit Business Benchmark.

Disclosure on material issues

Novo Nordisk leans on the International Integrated Reporting Council’s definition of materiality. Beyond the most material issues, all information deemed material for providers of financial capital in their decision-making is included in the Annual Report, ie of such relevance and importance that it could substantively influence their assessments of Novo Nordisk’s ability to create value over the short, medium and long term.

Disclosures in the annual report must meet regulatory requirements and reflect issues of strategic importance to Novo Nordisk. Key issues are identified through ongoing stakeholder engagement and trendspotting, informed by data-driven analysis and addressed by programmes or action plans with clear and measurable targets.

Material social and environmental issues are selected using a Disclosure Assessment Model developed by Novo Nordisk. To assess identified issues, a scoring system is in place. This scoring system is made up of 12 dimensions of impact, within which each issue is given a score between 0 to 3. All 12 scores are totalled and those issues which score above 16 are included in the annual report.

The high level of data quality of the disclosures is ensured by applying a framework developed by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The COSO Framework, supported by a top-down risk based approach as stated in Audit Standard no. 5, ensures an efficient and effective control environment.

Material issues in the social and environmental statements

The consolidated social and environmental statements in the Annual Report are a result of assessing legal requirements and disclosure commitments applicable to Novo Nordisk. It is further assessed whether information is tied directly or indirectly to Novo Nordisk’s ability to create value over the short, medium and long term.

When assessing if a disclosure is material to include in the consolidated social or environmental statements, Executive Management consider whether the matter could substantively affect the company’s strategy, business model, ability to access required resources or key stakeholders. The disclosures included the statements are approved by the Audit Committee.

The conclusion from the external assurance provider is available in the Independent assurance report.