Annual Report (ESEF) • Feb 1, 2022
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Download Source FileUntitled The Novozymes Report 2021 Novozymes A/S CVR-nr.: 10007127 Krogshøjvej 36, DK-2880 Bagsværd Novozymes Annual Report 2021 19Page Page Other reports Remuneration Report Corporate Governance Report Explore the highlights of The Novozymes Report 2021 – at report2021.novozymes.com “Throughout 2021, we made important moves to better position Novozymes, and our employees showed an impressive ability to bring new innovations to market and keep our production run- ning and delivering on time.” 15 Contents 4 Novozymes – The world’s leading biotech powerhouse 5 2021 in brief 13 Economic contribution 14 Five-year summary 15 Message from the Chair and the CEO 19 Strategy 27 Targets & outlook for 2022 35 Corporate governance 40 Board of Directors 43 Executive Leadership Team 45 Risk Management 51 Summary of the Remuneration report 55 The Novozymes stock 58 66 Performance and consolidated environmental data 68 Performance and consolidated social and governance data 70 Notes 143 Statements 148 Financial statements for Novozymes A/S 162 Glossary 163 About the report The big picture Our business Governance Accounts and performance Message from the Chair and the CEO Strategy Our strategy, Unlocking growth – powered by biotech, will guide the way towards 2025 Accounts and performance Governance Our business The big picture Contents 2Novozymes A/S The world needs a future built on biotech – and we intend to catalyze the change The big picture 4 Novozymes – The world’s l eading biotech powerhouse 5 2021 in brief 13 Economic contribution 14 Five-year summary 15 Message from the Chair and the CEO Accounts and performance Governance Our business Accounts and performance Governance Our business The big picture Novozymes A/S Welcome to the world's leading biotech powerhouse ...we use the power of biotech... ...to solve global needs Grounded in our strong purpose... O ur growing world is faced with pressing needs, emphasizing the necessity for solutions that can ensure the health of the planet and its population. At Novozymes, we believe biotech is at the core of connecting those societal needs with the challenges and opportunities our customers face. Novozymes is the global market leader in biological solutions, producing a wide range of enzymes, microorganisms, technical and digital solutions which help our customers, amongst other things, add new features to their products and produce more from less. What if Then World-class bioengineering toolbox High-quality scale-up and manufacturing Mastery of real-world applications 10% of the world’s animal protein was replaced with alternative protein... ...900,000 km of agricultural land would be saved Detergents were biobased... ...5 million tonnes of fossil-based chemicals would be avoided 3% of all liquid transportation fuels were biobased... ...300 million tonnes of CO would be avoided 10% of chemical pesticides were replaced with biologicals... ...250 million tonnes of chemicals would be avoided from entering our ecosystems The world’s leading biotech powerhouse To read more about our business model, go to Novozymes.com The big picture The world’s leading biotech powerhouse 4Novozymes A/S Accounts and performance Governance Our business 100 In brief Performance highlights Financial 6% Organic sales growth 19.3% ROIC incl. goodwill 26.8% EBIT margin 2.9 DKKbn before acquisitions Electricity sources Gender diversity in senior management Renewable Female Non-renewable Male 68% 34% 32% 100 Waste destination Recovered Not recovered 98% 2% 66% Outlook outlook outlook Realized Sales performance, organic % EBIT margin % ROIC (including goodwill) % 19 to 20 acquisitions DKKbn Outlook 2022 See more details on performance in Accounts and performance The big picture In brief 5Novozymes A/S Accounts and performance Governance Our business 3% 31%2% 10% Sales by geography Full-year organic sales grew 2% compared to the previous year with a strong performance in Food, Beverages & Human Health while Household Care, Agriculture and Animal Health & Full-year organic sales in North America increased by 3% organically in 2021 compared to 2020. Bioenergy and Grain & Tech Processing were the main growth drivers while particularly Agriculture, Animal Health & Nutrition declined. Full-year organic sales increased by 10% in 2021 compared to 2020 with all - tively. Growth was especially strong in Food, Beverages & Human Health and Grain & Tech Processing. Sales in Latin America increased by 31% organically in 2021 with broad- based growth across all business areas. Performance was especially strong for Agriculture, Animal Health & Nutrition, Bioenergy, and Grain & Tech Processing. Of sales Of salesOf sales Of sales Organic sales growth Organic sales growthOrganic sales growth Organic sales growth 31% 11%38% 20% North America Europe, the Middle East & Africa Latin America Asia The big picture In brief 6Novozymes A/S Accounts and performance Governance Our business * Organic sales growth T business areas grew in 2021. Food, Beverages & Human health, Agriculture, Grain & Tech Processing and Bioenergy all contributed with double-digit growth while Household Care and Agriculture, Animal Health & Nutrition performed much as expected. Sales by business area Performance Household Care 32% of total sales 2020: 35% Bioenergy 18% of total sales 2020: 18% Agriculture, Animal Health & Nutrition 12% of total sales 2020: 13% Food, Beverages & Human Health 23% of total sales 2020: 19% Grain & Tech Processing 15% of total sales 2020: 14% -1% 0% 14% 11% 13% The big picture In brief 7Novozymes A/S Accounts and performance Governance Our business SDG impact Key trends • Consumers increasingly demand solutions that enable deeper, hygienic cleaning of laundry and hard surfaces. • Transition away from bulkier pow- der and liquids to compact unit doses supported by growing con- sumer focus on convenience, reduction of plastic use and increased online sales. • Industry focus on bio-based and green detergents is strong, with renewable and biodegradable enzymes supporting environmen- tally friendly formulations. Did you know? Household Care Most ingredients in laundry detergents are fossil-based. Less than 15% of detergent raw materials are the renewable and biodegradable solutions that Novozymes develops. We want to change that and move the industry towards fully biodegradable solutions. I - cant opportunity to drive greener, better cleaning performance for clean- ing clothes, dishes, and surfaces. Our solutions are used by more than half of the world’s population, and our powerful portfolio of enzymes and microbes ensure a strong cleaning per- formance while reducing the consump- tion of water, energy, and use of chemicals. 2021 performance In 2021, Household Care sales declined 1% organically and 2% in reported DKK compared to last year. against a strong 2020 performance that grew at 5% organically. Emerging markets performed well, supported by investments to increase our commer- cial footprint and tailored solutions. The performance in developed mar- kets was subdued and sales declined, mainly due to reduced European con- sumer demand and certain private-label customers experiencing performed well and in line with expec- tations. It was made available across several countries in Europe, with the broad market solution successfully launched in the third quarter. Product launches in 2021 • — a phosphodiesterase enzyme (PDE) that breaks down the sources of malodor and discol- oration in fabrics. It can be applied to all detergent formats and is fully biodegradable, which makes it perfect for formulating natural detergents. Consumers increasingly demand solutions that enable deeper, hygienic cleaning of laundry and hard surfaces. The big picture In brief 8Novozymes A/S Accounts and performance Governance Our business SDG impact Did you know? Food, Beverages & Human Health Plant-based food and beverages is one of the fastest growing retail categories in the U.S. We support the adoption of plant- based products in global diets to ensure better use of the available arable land, and we do this with solutions that reduce the need for sugar and salt, improve the taste and the texture of protein and eliminate additives. This does good for our planet while ensuring the health of consumers. I n Food, Beverages & Human Health, environmental footprint of food con- sumption and enable consumers to live healthier lives. Our solutions improve the quality, taste, texture and freshness of foods and beverages, thereby reducing food waste and the need for additives and unwanted com- pounds and making plant-based meat and dairy alternatives more palatable. Our solutions in Human Health con- enzymes, and we continue to innovate for the one-in-a-trillion biology-based solutions that can be proven to solve profound consumer health challenges. 2021 performance Sales in Food, Beverages & Human Health grew 14% organically and 25% in reported DKK compared to last year. Sales growth was supported by the two Human Health-related acquisi- tions, PrecisionBiotics Group and - cantly impacted by the Synergia trans- action that closed mid-December. Full-year growth was broad-based, with all subareas growing organically in the double digits. Growth in Food was mainly driven by market penetra- tion and was particularly strong for health-focused solutions such as acryl- amide reduction in baking, sugar reduction in dairy and solutions for plant-based protein extraction. Additionally, in baking in particular, raw material optimization and ingredi- from a recovery in global brewing vol- umes following last year’s COVID-19 lockdown measures whereas growth in Human Health was strong and driven by cross-selling of in-house and acquired solutions as well as geo- graphical expansion. Product launches in 2021 • — a probiotic supplement that supports the human immune system. Key trends • Growing consumer focus on pre- ventative solutions in health and nutrition. • Concerns around environmental issues and a desire for healthier lifestyles is driving interest in plant-based alternatives. • Consumers and food producers increasingly commit to reducing food waste. • Requirements for quality, taste, texture and freshkeeping in foods and beverages continue to push the need for innovative biological solutions. The big picture In brief 9Novozymes A/S Accounts and performance Governance Our business SDG impact Did you know? Bioenergy Today’s transport sector is a key area for reducing carbon emissions, as it accounts for about 25% of global energy- related CO emissions. Our solutions for technologies play an important role in the pursuit of a carbon-neutral world. The ethanol production enabled by Novozymes’ biosolutions results in the displacement of 8 billion gallons of gasoline. This corresponds to taking 25 I ways to respond to the increasing global demand for green energy solu- tions and other corn-derived materi- als. Our solutions support the production of biofuels by helping our customers get the most value out of corn, for example. Enzymatic and microbial solutions play an important role in the production of bioethanol, corn oil, feed protein, as well as bio- diesel, by turning oil seeds and corn into valuable fuel for transportation. 2021 performance Sales in Bioenergy grew 11% organi- cally and 7% in reported DKK in 2021. U.S ethanol production gradually recovered following last year’s severe disruption of gasoline and, subse- quently, ethanol demand caused by COVID-19 restrictions. Yet, U.S. etha- nol production in 2021 still ended below the 2019-level. The main fac- tors behind the strong performance in Bioenergy were the recovery of the U.S. ethanol industry in combination with growth from innovation, capacity expansion of corn-based ethanol pro- duction in Latin America, and market penetration with enzymatic solutions for biodiesel production. Product launches in 2021 • — a yeast for ethanol plants seeking the highest level of starch and glucose conver- sion for their fermentation pro- cess. • — an enzymatic extract and convert the cellulose found in corn kernels. Key trends • Increasing global demand for cleaner fuels opening the door for alternatives such as renewable die- sel, biodiesel, and carbon capture. • Growing demand for biofuel in emerging markets. • Producers are diversifying into value streams beyond ethanol, such as feed protein, corn oil, renewable diesel, and biogas. The big picture In brief 10Novozymes A/S Accounts and performance Governance Our business SDG impact Did you know? Grain & Tech Processing milling can help reduce greenhouse gas (GHG) emissions, energy, water, helps customers cut 9 kilograms of CO equivalents per metric tonne of corn, while still generating higher yields. Together with our customers, we continue to push for a world where good business and a better environment go hand in hand. I n Grain & Tech Processing, we sup- port a range of industries such as grain processing, wastewater treat- ment, pulp & paper, leather, textile production, and ingredients for the production of bio-pharmaceuticals. These industries focus on process optimization, reducing environmental footprints and increasing yields, which makes the world’s resources go fur- ther. Our portfolio of solutions improve yields and save energy as well as reducing chemicals, water usage, steam, and electricity. 2021 performance Full-year sales in Grain & Tech Processing grew 13% organically and 11% in reported DKK. Sales in both Grain and Tech grew by double digits with strong performances across sub- areas. Growth in Grain was mainly driven by increased market penetra- tion with solutions for vegetable oil processing, innovation in starch and particularly in grain milling, as well as increased end-market demand for starch-derived products, especially in emerging markets. Growth in Tech was primarily the result of a recovering global textile industry following last year´s severe COVID-19-related dis- ruption complemented by good per- formance in areas such as pulp & paper, diagnostics, and leather. Key trends • Producers focus on cost reduc- tions, process optimization and yield enhancement. solutions to address waste han- dling, water pollution, emissions, and excessive chemical use. • The textile industry is slowly responding to changing consumer demand for clothes and fabrics with a lower environmental foot- print, with renewed interest in bio- logical alternatives to the chemicals currently being used in the textile industry. Sales in both Grain and Tech grew by double-digits with strong performances across subareas. The big picture In brief 11Novozymes A/S Accounts and performance Governance Our business SDG impact Did you know? Synthetic fertilizers that are currently used in agriculture can be replaced by biological alternatives that are non-pollutant to water quality and marine wildlife. We are developing biological solutions that boost natural nitrogen absorption, allowing replacement of 50-60lbs of fertilizer per corn-acre per year. If all corn in the U.S. were produced this way, we could potentially save more than 2 million tonnes of chemical fertilizer annually. We engage deeply in sustainable agriculture to transform food systems and help feed and nourish a growing world. T he world is growing and, to feed it, we need to ensure we get the best yield out of crops and farm animals — while maintaining the health of both. Our solutions improve yields in agriculture by improving plants’ absorption of nutrients in the soil, while reducing the need for chemical insecticides and pesticides. They also improve animals’ intake of energy, pro- teins, and minerals in their feed. The result is better use of arable land for food and feed production, reduced use of chemicals, and reduced emis- sions to the environment from manure in livestock production. 2021 performance Sales in Agriculture, Animal Health & Nutrition declined 3% in reported - cally compared to 2020. This was the former BioAg setup that positively impacted the second quarter of 2020. Sales performance in Animal Health & Nutrition was primarily driven by inno- 360™, while sales in Agriculture declined due to the aforementioned led by strong growth in Latin America. Product launches in 2021 • ProAct 360™ — protease solution helping poultry producers to production by improving animals’ intake of nutrients. • — liquid inoculant - sibility to soil nutrients and water absorption in soybean plants, thereby reducing the need for fertilizer. • — a family of inoculants that enhance nitrate, phosphate, and potassium availability for corn, sorghum, canola, all cereal crops, mustard, barley, and pulse crops, also reducing fertilizer-usage. • — broad-spectrum, foliar fungicide for fruit and vege- table crops that works as a pesti- cide replacement and protects against powdery mildew and botrytis, among other things, to maximize yields. Key trends • Farmers increasingly need to enhance crop performance and sup- port healthier animals through more efficient production. • Tightened regulations for use of pes- ticides, insecticides, and antibiotics, combined with an increased focus on chemical replacement and organic farming, create opportunities for bio- logical solutions. • As the world population grows and demand for protein increases, so does the need for higher performing animals and better animal welfare to ensure responsible and profitable production. Agriculture, Animal Health & Nutrition The big picture In brief 12Novozymes A/S Accounts and performance Governance Our business 15,313 million DKK We returned 89% of the economic value generated to society Economic contribution Economic contribution I n 2021, Novozymes returned 11% of the value gen- erated to our capital providers. This consisted mainly of our dividend payment of DKK 1,466 million. In addition to the 11%, Novozymes bought back stock worth 1,500 million in 2021. At the end of 2021, the Novo Nordisk Foundation owned — through Novo Holdings A/S — 25.5% of the share in Novozymes (see The Novozymes Stock). - and the Foundation contributes to communities in large scale through donations and impact invest- ments, to which we indirectly contribute through our dividend payments. In 2021, Novozymes generated economic value of DKK 15,313 million, and we returned 89% of it to society. The remaining 11% was reinvested in Novozymes to develop the company, build competitive strength and ensure future value generation for distribution among key stakeholders. Suppliers 44% used to purchase goods and services from our suppliers Community 8% returned to the community by paying corporation tax, other taxes and duties Employees 26% used for employee wages, pensions, etc. Reinvested in Novozymes 11% reinvested in Novozymes for future value generation DKK Capital providers 11% in dividends and capital providers Sales 98% Financial & other income 2% A responsible approach to tax Novozymes’ tax policy supports a responsible and positive tax contribution to society. We continuously - ate. In 2021, Novozymes incurred corporate income taxes and other taxes and duties of approximately DKK 1,200 million. Tax is a key component of corporate responsibility and governance in Novozymes. We are committed to being open and transparent about our tax policy and Novozymes.com as well as other information on tax. The big picture Economic contribution 13Novozymes A/S Accounts and performance Governance Our business Five-year summary DKK million Income statement Revenue EBITDA Financial items, net Balance sheet Total assets Equity Invested capital Net interest-bearing debt Purchases of property, plant and equipment Net investments excluding acquisitions Business acquisitions, divestments Key ratios Revenue growth, DKK % Revenue growth, organic % R&D costs (% of revenue) % Gross margin % EBITDA margin % Key ratios (continued) EBIT margin % % Equity ratio % NIBD/EBITDA x Return on equity % ROIC including goodwill % Earnings per share (EPS), diluted DKK Dividend per share (2021 proposed) DKK Key ratios have been prepared in accordance with The Danish Finance Society’s “Recommendations & as described in the Glossary. 2018 have not been restated. Total number of employees No. Rate of employee turnover % Frequency of occupational million working hours Women in senior management % CO emissions from operations (scope 1+2) Tonnes Renewable Electricity share % m Biomass recovered % Environmental, social and governance data The big picture Five-year summary 14Novozymes A/S Accounts and performance Governance Our business Message from the Chair and the CEO A brighter future with biotech 2021 was a year of many things – overcoming, inspiring, investing, delivering, and learning. Despite continuing uncertainties throughout the year, our employees showed resilience, commitment, and adaptability, helping Novozymes to achieve even greater impact and strong results for the year. The big picture Novozymes A/S Accounts and performance Governance Our business Message from the Chair and the CEO 15 Message from the Chair and the CEO W lessened in 2021, changes in consumer behav- Beverages & Human Health delivered strong dou- ble-digit growth supported by good market condi- tions. Bioenergy's double-digit sales growth was supported by recovering U.S. ethanol production and expansion of starch-based ethanol production in Latin America, while double-digit sales growth in Grain & Tech Processing came from strong demand for ag-processing solutions and a recovery in textile. Household Care and Agriculture, Animal Health & Nutrition performed much as expected. Our organic sales growth came in at 6% for the year, and the reported EBIT margin was at a solid 26.8%. before acquisitions and excellent returns to our shareholders. These strong results have enabled us to make important strategic moves, such as growing our capabilities in BioHealth, and we have much to be proud of when we look back on 2021. A strong foundation for future growth Now is the time for businesses with a sustainability platform to be focused and agile, while staying true to their purpose. At Novozymes, we live through our better lives in a growing world. And it’s the power of that purpose that gives us the right to dream — to imagine a better world with the help of biotechnol- ogy. But for those dreams to become reality and have the biggest possible impact, we must be bold in our ambitions and continue to invest to unleash our growth potential. In an everchanging world, we need to combine a clear direction with a level of agility that can keep pace with change. That’s how we generate value for our shareholders, but it’s also how we best contribute to the world. In September, we launched Unlocking growth – pow- ered by biotech, to meet our growth ambitions and unleash Novozymes’ full potential. With this refreshed strategy, we now have a roadmap to ensure our solutions will have maximum impact, by guiding us in how we invest, how we innovate and how we interact with our customers and partners. But a world of opportunity requires attentive prioriti- of and where we intend to invest less to ensure our resources are spent where they matter most. Ultimately, our expertise reaches far beyond enzymes. We have a world-class biotech toolbox, from enzymes to proteins and microorganisms, one- of-a-kind scale-up ability, and a global presence in more than 130 countries. We are a biotech power- house, and it is on this solid foundation that we are now building our future. Delivering despite uncertainty Throughout 2021, we made important moves to bet- ter position Novozymes, and our employees showed an impressive ability to bring new innovations to mar- ket and keep our production running and delivering on time. Novozymes is a growth company, and we made signif- icant investments and progress during the year to ensure future growth. We strengthened our commitment to alternative pro- teins with the announcement of a DKK 2 billion investment in a new state-of-the-art production line for advanced protein solutions in Blair, Nebraska. With this investment, we tap into the growing market need for alternative sources of protein. Meanwhile, in BioHealth, we accelerated our capabilities by acquir- and vitamin K2-7. This followed our acquisition ear- lier in the year of Microbiome Labs and our purchase of the Biota technology asset, which further added to our microbe innovation capability. In emerging mar- kets, we increased our reach and achieved strong growth, for example with our yeast platform in Latin America. Our new Global Powder Center based in India will also help us to support our customers in - gent formulation. We made numerous exciting product launches, such odor in fabrics, answering consumer calls for clothes that smell and feel fresh for longer. For poultry pro- ducers, our new protease solution ProAct 360™, launched through the DSM – Novozymes Alliance, - duction by improving animals’ intake of nutrients and ensuring greater retention of nitrogen in the metabo- lism of the animals, lowering nitrogen emissions to the environment. And for our customers in bioenergy, we not only expanded our yeast platform with also enabled them to make the most of new revenue use of the cellulose found in corn kernels, so it can be used not only for animal feed but also for extract- ing corn oil and cellulosic ethanol. Over the next few years, we will continue to strengthen our understanding of our customers’ needs, for example by making key investments in cus- tomer co-creation centers in food and health. These centers will allow us to immerse ourselves in the world of our nutrition customers and better under- stand their needs. We will also further develop our The big picture Message from the Chair and the CEO 16Novozymes A/S Accounts and performance Governance Our business Throughout 2021, we made important moves to better position Novozymes, and our employees showed an impressive ability to bring new innovations to market and keep our production running and delivering on time. - - ers with their fresh-keeping dosage trials by providing quick and easy access to the right enzymes digital program which provides ethanol producers with live data and real-time analytics to help dose corn and enzymes in their production processes, ensuring they can achieve higher production yields with the right support throughout the process. Working together for change As a global leader and a responsible corporate citizen, we encourage and drive change across our entire value chain, including the societies in which we operate. Our solutions play an important role in helping our custom- ers contribute to a healthier planet, but we can’t stop there; we must look beyond our solutions. We do this by setting ambitious targets, and by working together with others to drive a sustainability agenda. In shaping our strategy, we took an honest look at our operational targets and asked ourselves how we could best embrace our leadership position in sus- tainability. We are proud of what we have accom- plished, with a 42% reduction in CO emissions (scope 1 and 2), relative to our 2018 baseline, and we know we can do more to set the tone in the markets in which we operate. The result is that we now aim to reduce absolute greenhouse gas (GHG) emissions by Scope 3, taking stock of our entire supply chain when measuring our impact. In addition, we commit to maximize the percentage of our sales that enables a better world, and we will report the percentage of our sales that contributes to accelerating a car- bon-neutral world, transforming food systems, and enabling healthier lives respectively. This year also marked 20 years of our collaboration with the U.N. Global Compact, the world's largest corporate sustainability initiative. We were again chosen by the U.N. Global Compact as one of the few global companies to achieve LEAD status, thanks to our commitment to sustainability and our leadership support the U.N. Global Compact in its work on cli- mate change, such as by working with the Science Based Targets initiative, and Business Ambition for 1.5 Degrees. At COP26, Novozymes was awarded the Terra Carta Seal by His Royal Highness the Prince of Wales, thus being recognized along with other inter- national corporations that have made serious and action-oriented commitments towards a better future. To ensure we can all live within the boundar- ies of a healthy planet, we must work together, as the will continue to actively advocate for change by working with organizations like the UN Global Compact, the World Economic Forum, the International Chamber of Commerce, The B Team, the UN Foundation, Business Fights Poverty, and many other wonderful organizations. Solving some of the world’s most pressing challenges also means we need to attract the brightest minds and retain the most talented people. As an innova- tion company seeking to catalyze change for the planet and people, we can only achieve our aim if dif- ferent perspectives have a seat at the table and if their voice is heard. Therefore, we have set ourselves clear targets to drive an inclusive and diverse work- force where employees stay safe, thrive and grow, while also having the opportunity to pledge 1% of their time to community outreach. Moving forward The uncertainties experienced in 2021, whether it be from supply chain issues, rising price of raw materials or COVID-19, is something our employees have han- dled with an incredible spirit and determination. It’s thanks to their diligence, planning and care for each other that we can look back on a year in which Novozymes delivered such strong results and kept the trust of our customers. We speak on behalf of the whole Board and Executive Leadership Team when we say that this makes us extremely proud and thankful. In 2022, we have set an organic sales growth expec- - tinued uncertainty related to the pandemic situation and volatile market conditions. Going forward, we will continue to build on a founda- tion for growth and we will continue to invest in inno- vation and new ventures, our people, our partnerships, and our communities to ensure we live up to our purpose every day. We thank our employees, customers and partners for the progress we made together in 2021 and we look forward to taking the next steps on our strategic Jørgen Buhl Rasmussen Chair Ester Baiget CEO The uncertainties experienced this year, whether it be from supply chain issues, rising price of raw materials or COVID-19, is something our employees have handled with an incredible spirit and determination. The big picture Message from the Chair and the CEO 17Novozymes A/S Accounts and performance Governance Our business Unlocking growth – powered by biotech We accelerate towards a climate-neutral society, we transform food systems and enable healthier lives Our business 19 Strategy 27 Targets & outlook for 2022 Accounts and performance Governance Our business The big picture Novozymes A/S * The total adds up to more than 100% as many of our solutions contribute to more than one commitment Strategy At Novozymes, we have made important strategic moves in recent years to better reach our full potential. In 2021, we T he purpose of our strategy has always been to steer the organization in a direction that better enables us to live up to our purpose “Together we world – Let’s rethink tomorrow”, while staying true to our values. In recent years, we have focused our pipeline and resources on growth areas, built new strategic opportunity areas and formed a more cus- tomer-centric organizational structure with a strong emerging markets presence. And we have remained as committed as ever to society, the environment, and our employees; Zymers. Based on the resulting solid foundation for growth along with valuable learnings gained over the years, we announced a refreshed strategy in 2021. We call this strategy Unlocking growth – powered by biotech. Our strategy, Unlocking growth – powered by biotech, will guide the way towards 2025 and will also act as a foundation for our 2030 ambition Accelerate towards a climate-neutral society Transform food systems Enable healthier lives Revenue share of 2030 commitments of our revenue came from products enabling our food production systems to produce more from less and improve nutrition and quality of our revenue came from products that enable better health in people's daily lives 77% 35% 5% of our revenue came from products that contribute to reduction in CO fossil-based energy and chemicals Accounts and performance Governance Our business The big picture Strategy 19Novozymes A/S Strategy At Novozymes, we believe that by focusing on where we have the greatest impact on the world, we will also achieve our growth potential. The process of refreshing our strategy therefore began by looking at the challenges and opportunities in a world where climate change, technology, and wellbeing are top of mind for customers, consumers and in societies in general. Our strategy, Unlocking growth – powered by bio- tech, will guide the way towards 2025 and will also act as a foundation for our 2030 ambition of dou- bling our sales while accelerating towards a cli- mate-neutral society, transforming food systems, and enabling healthier lives. From 2022 onwards, we will continue to evaluate our progress towards these commitments through a set of milestones for our workforce, our impact on the societies we operate in, the impact of our operations on the world and our - orities that give us greater and better access to the market potential for biotech. We have unparalleled capabilities within enzymes, microbes, and advanced proteins, and we leverage our position as a leader in biotech to excite customers, consumers, and societ- ies through biological solutions for a better climate and improved health and nutrition. By succeeding with our strategy, we will provide our shareholders with short-term growth and unparalleled strategic platforms for future value creation. Ensuring our impact in the future Business OperationsZymers & society Organic sales CAGR 5% or higher until 2025 EBIT margin 26% or higher by 2025 ROIC incl. goodwill 20% or higher by 2025 Include An inclusive and diverse workforce Achieve gender balance across all professionals and in senior leadership by 2030 Thrive A workplace where Zymers stay safe, thrive and grow Take action and monitor progress to ensure organizational wellbeing Inspire A culture of change makers Pledge 1% of our time to community outreach Climate 50% reduction in absolute CO 2 emissions from operations and supply chain by 2030 and net zero by 2050 100% renewable electricity by 2030 Water 100% of sites to manage water in balance with local conditions by 2030 Circular Zero waste from operations by 2030 Targets for Unlocking growth – powered by biotech * All targets assume constant currencies, no additional acquisitions, no divestments, no special items, a gradual normalization of the global economy and supply chain post-COVID, and no new severe disruptions of the global economy ** From a 2018 baseline R&D labs, etc. Accounts and performance Governance Our business The big picture Strategy 20Novozymes A/S Explore new options for growth Evolve Our core business Expand BioHealth & Human Nutrition At the center of Unlocking growth – powered by biotech, we find the growth pillars that will take us to where we aim to be. They are: Evolve our core business - rently see most of our sales, such as detergents and opportunities which we will tap into via innovation, commercial excellence, digitalization, and production optimization. Expand BioHealth & Human Nutrition In the areas of BioHealth and Human Nutrition, we have solutions that provide natural answers to a growing focus in society on healthy people, healthy animals, and a healthy planet. We expect strong growth here and we intend to invest in these areas to ensure we can be close to our customers and have the capabilities to meet demand and capture attrac- tive growth opportunities. Explore new options for growth In our Explore pillar, we aim to be bold and ambitious in our pursuit of new opportunities. Through a ven- ture mindset, we will explore opportunities, such as carbon capture, fertilizer replacement and plastic degradation, which come with very high potential but also increased risk. An agile approach will ensure that we can quickly test out the viability of any opportunity and only move ahead with the ones that have the strongest potential. – powered by biotech, please go to our online strategy tool Accounts and performance Governance Our business The big picture Strategy 21Novozymes A/S Consumers are embracing plant-based products, including plant-based meat. In order to address how we meet the increas- ing demand for proteins with lower environ- mental footprint, we are investing in a new state-of-the-art production line at our site in Blair, Nebraska, strengthening our com- mitment to the strategic opportunity area of Advanced Protein Solutions. This DKK 2 billion investment follows an agreement to enter into a long-term con- tract with an anchor customer and key player in the plant-based industry. The new plant at Blair will enable Novozymes to cap- italize on decades of experience with fer- mented catalytic proteins while also taking us closer to realizing our commitments for 2030. in Synergia Life Sciences Pvt. Ltd., a leading vitamin K2-7, thereby accelerating our posi- tion in human health and functional foods. Since mid-2020, we have made two other with PrecisionBiotics Group, then Microbiome Labs and, in March of 2021, we strengthened our data science approach to our Novozymes OneHealth business with the purchase of the Biota technology asset. These additions are helping to leverage our combine microbes – pre- and probiotics – with enzymes and other biological solutions - cally-proven solutions that improve human health in a growing world. There is increasing pressure on the agricul- tural industry to replace chemical pesti- cides with biological solutions. In 2021, we entered a strategic collaboration with FMC, a leading global agricultural sciences com- pany, to research, co-develop, and commer- cialize novel enzyme-based crop protection solutions for farmers around the world. The new collaboration with FMC, alongside our existing toolbox of bioyield and biocontrol solutions, cements our position as a pio- neer and enabler of a biological transforma- tion in agriculture. The feed industry is also experiencing an accelerated customer focus on sustainability and we have solutions that respond to these needs. Together with DSM, we launched ProAct 360™ which helps feed producers be of protein, ensuring greater retention of nitrogen in the metabolism and therefore lower nitrogen emissions to the environ- ment. In China, Novozymes’ key feed enzymes were approved, enabling access to a key strategic market. Our enzymes, yeast, and technical service platforms allow ethanol producers to gener- ate the highest levels of ethanol, diversify, better use of the planet’s resources. In 2021, we added a new solution to our - components, such as cellulosic ethanol and solution, providing ethanol producers with live data and real-time analytics to help dose corn and enzymes correctly, every time. Strengthening and accelerating our BioHealth business Setting new standards production Advancing biological solutions for agriculture and livestock 2021 strategic highlights Investing in Advanced Protein Solutions Accounts and performance Governance Our business The big picture Strategy 22Novozymes A/S Novozymes has long been at the forefront removal. With the launch of our new laun- to more customers. body grime and releases dirt and odor that might be trapped in fabrics, tackling the root cause of consumer challenges with hygiene, malodors, and color dullness in become hygienically clean and are less prone to yellowing and decolorization, they last longer and need not be discarded as fast, which helps to tackle the challenges of overconsumption and waste in a growing world. We recently announced our collaboration with Saipem, an advanced technological and engineering platform for complex infra- structure and plants, for the development of innovative solutions for enzymatic car- bon capture. Enzymatic carbon capture is a cleaner and - ture compared to traditional CO capture processes, as enzymes enable lower tem- perature input and more moderate use of chemicals. As part of the agreement, Saipem - which owns an enzyme-based CO capture tech- nology - will be responsible for providing process, mechanical and equipment design, while Novozymes will provide enzymes in addition to further optimizing the process through enzymes innovation. Enzymatic carbon capture is a cleaner and more cost-eective method of carbon capture compared to traditional CO capture processes Addressing consumer laundry challenges Smarter solutions for lowering GHG emissions In 2021, Novozymes was also present at COP26, to engage and help turn talk into action, so the global community can move action on limiting the global temperature increase. We support plans that ensure a economy. At COP26, we were also one of the international corporations awarded the Terra Carta Seal by His Royal Highness the Prince of Wales for our commitment to a sustainable future. Our presence at COP26 ties in with the work we already do every day with various policy frameworks. We have close partner- ships and collaborations with the World Economic Forum, the International Chamber of Commerce, The B Team, the UN Foundation, Business Fights Poverty and many more. Our position as a leader in safer and more environmentally friendly solutions was also reinforced when we were chosen as a 2021 Safer Choice Partner of the Year by the U.S. Environmental Protection Agency (EPA). Working together for a better world Accounts and performance Governance Our business The big picture Strategy 23Novozymes A/S We encourage and drive change across our entire value chain We help our customers contribute to a healthier planet We actively seek to reduce the environmental footprint Working with the SDGs As a leader in biotech solutions, Novozymes holds many answers to overcoming some of the world’s biggest challenges. Our solutions contribute to several of the United Nations Sustainable Development Goals (SDGs), directly or indirectly. The SDGs represent both responsibilities and opportunities for Novozymes. They have been an integral part of how we drive our business, innovate, run our operations, and work with our employees and the communities we are part of. to have a fully integrated triple bottom line report. In 2012, when the SDGs creation process started, we were actively engaged in developing the set of goals for the global community as it - answers for better lives in a growing world – Let’s rethink tomorrow, and we have contributed With our refreshed strategy Unlocking growth – powered by biotech, we will strengthen our contributions to making the SDGs a reality by delivering on three new commitments to a healthy planet. We are committing to accelerate towards a climate-neutral society, transform food systems, and enable healthier lives. Through strong collaborations, we encourage and drive change across our entire value chain, including our employees and the societies in which we operate. Our solutions help our customers emissions and the use of water, energy, or chemicals. Our solutions also address modern human health challenges and food system sustainability. We actively seek to reduce the environmental footprint of our operations and supply chain, and we continue to invest in our employees as part of building an inclusive, thriving, and inspiring workforce. For an overview of our contributions to the SDGs, read more on Novozymes.com Our solutions contribute to several of the Sustainable Development Goals (SDGs), directly or indirectly. Our business Strategy 24Novozymes A/S Accounts and performance Governance The big picture Spotlight story Today Future CO2 CO2 Atmospheric air with 80% nitrogen, N2 Natural gas N2 N2 NH3 Synthetic nitrogen fertilizer (e.g. NO3) spread on the soil surface Nitrogen fertilizer (ammonia, NH3) released by microorganisms in the soil, next to the crops’ roots Innovating for a climate-neutral society T he report from the Intergovernmental Panel on Climate Change (IPCC) published in 2021 is a clear call to the world to accelerate the decarboniza- shown — that our biological solutions can contribute - tions reduce the carbon intensity of the processes where they are applied. We can already see that the low-carbon transition is creating demand for new goods and services across all sectors. This demand is driven by favorable policy developments and changing consumer needs alike. For example, in 2020, the EU Commission proposed a plan which includes a target of reducing the use of pesticides by 50% over the next decade. Likewise, consumers are increasingly making conscious choices when purchasing products. For example, consumers are seeking better and healthier protein solutions, and are ready to pay for it. Novozymes fully recognizes the potential to grow our business while innovating transformative solutions for the climate. We have therefore decided to invest in strategic opportunity areas, including biological alternatives to synthetic fertilizers, carbon capture and advanced protein solutions. Biological solutions supporting climate smart agriculture Decarbonizing the industrial agriculture production CO savings from higher yields, resulting from the application of biological solutions for agriculture. For example, if Novozymes’ inoculants were to be used on all corn grown in the U.S., it could potentially reduce greenhouse gas (GHG) emissions by 3.9 mil- lion tonnes of CO. There is also a great opportunity to reduce environ- mental impact by using biological alternatives to the synthetic fertilizers that are currently used in agriculture to ensure plant growth. We are develop- ing biological solutions that boost natural nitrogen absorption and enable the replacement of 50-60lbs of fertilizer per corn-acre per year. If all corn in the U.S. were produced this way, we could potentially save more than 2 million tonnes of chemical fertilizer annually. At the same time, our solutions are non-pol- lutant to water quality and marine wildlife. Assessing life cycle impacts from changes in agricultural practices of crop production - Methodological description and case study of microbial Accounts and performance Governance Our business The big picture Innovating for a climate-neutral society 25Novozymes A/S Innovating for a climate-neutral society Industrial gas emissions Other gasses Captured CO2 CO2 utilization • Fuels (2px) • Chemicals • Crops • Algae • Fertilizer • Beverages • Building materials • Enhanced oil recovery CO2 storage Recycling Solvent CO2 absorbed CO2 desorbed Enzymatic carbon capture To limit global warming to 1.5°C, the world needs to capture carbon from the generating source directly. In the energy sector, current technologies and capac- widely adopted. The International Energy Agency (IEA) states that carbon capture and storage technol- ogies can cover 12% of the reductions in GHG emis- sions needed by 2050 for the sector to achieve net zero emissions by 2070. And we believe enzymes can help make this process less energy intensive and more environmentally friendly. Traditional carbon capture methods that extract CO capital-intensive assets, creating products that can harm people and the environment. By using enzymes (carbonic anhydrase) instead of conventional chemi- cals, we can enable a more reliable carbon capture process that requires less energy and produces no toxic waste, aerosols, or contaminants. In addition, carbon captured this way can then be used as feed- stock or sent to storage. Novozymes is investing in developing such solutions for enzymatic carbon cap- ture, for example through our collaboration agree- ment with Saipem, an advanced technology and engineering company. Advanced protein solutions The climate crisis, along with population and income healthier food alternatives, all leave our society with within the boundaries of what our planet can pro- vide. Advances in biotechnology for precision fer- mentation, for example, are enabling tailor-made enzymes which maximize the extraction of protein, enhancing taste and texture, as well as advanced proteins ultimately resulting in desirable, cost-com- petitive, plant-based and animal-free nutrients. Novozymes can play a key role in enabling a transi- - tive proteins. This includes enzymes that enable the next generation of plant-based alternatives, as well as high-value fermentation-based proteins. Novozymes will invest in technologies focused on improving the nutritional, functional and sensorial attributes of advanced protein solutions to drive and Accounts and performance Governance Our business The big picture Innovating for a climate-neutral society 26Novozymes A/S Targets & 2022 outlook To live our purpose and drive our business, we business and employees and for society and our operations. We evaluate and report transparently on our performance against those targets. N ovozymes’ purpose is rooted in sustainability and we are committed to creating a healthier planet. We hold - Development Goals (SDGs). These targets seek to maximize the positive impact of our solutions and to minimize the environmental impact of our operations while being a com- passionate employer and responsible corporate citizen. In 2019, we set targets for 2022 focusing on our business, our employees, our operations, and the world. We reported in detail on our progress against those targets in our 2019 and 2020 annual reports. With our 2021 refreshed strategy, Unlocking growth – pow- ered by biotech, we made new long-term commitments. Our - - Learn more: Sales outlook & Financial outlook We need to ensure a healthy and growing business, as the very nature of our solutions Business Sales: In the period to 2025, we strive to grow our sales organically by a compounded annual growth rate (CAGR) of 5% or higher In 2021, we saw organic sales growth of 6%. Food, Beverages & Human health, Agriculture, Grain & Tech Processing and Bioenergy all contributed with double-digit growth while Household Care and Agriculture, Animal Health & Nutrition performed much as expected. Outlook 2022: On track By 2025, we aim to have an EBIT margin of 26% or higher, and not below 25% in any individual year. For ROIC including goodwill we aim to reach 20% or higher by 2025 higher gross margin and increased other operating income. Return on invested capital (ROIC) including goodwill was 19.3% for the full year. The improvement in ROIC including goodwill was due to the higher net operating Group, Microbiome Labs and Synergia Life Sciences acquisitions. Outlook 2022: On track Long-term commitment - ness – in people, innovation, and capacity – to protect and generate value from our core. We also continue to look at M&A sales by 2030 vs 2020. Milestones * All targets assume constant currencies, no additional acquisitions, no divestments, no special items, a gradual normalization of the global economy and supply chain post-COVID, and no new severe disruptions of the global economy Accounts and performance Governance Our business The big picture Targets & 2022 outlook 27Novozymes A/S Targets & 2022 outlook Zymers & Society Nurture diversity: Achieve a score of at least 86 on our diversity index by 2022 We achieved 85 on our diversity index and our senior management was 34% female and 66% male. Outlook 2022: On track Include Long-term commitment We strive for an inclusive and diverse organization. We aim to achieve that by nurturing a culture of inclusion and belonging, where Zymers can be themselves, and by fostering equity in all aspects of employment. We seek to achieve gender balance and mirror the societies in which we operate. We are committed to continue to help our employees, also called Zymers, develop in a thriving, diverse and inclusive community. Milestone Ensure safety and wellbeing: Our 2019-2021 average was 1.2 compared with 1.5 in 2020. We launched a mandatory safety e-learning module for all employees, focused on current safety challenges across Novozymes. The COVID-19 pandemic continued to pose challenges to Novozymes around the world, but teams have handled changes related to COVID-19 well, achieving a score of 91 out of 100 on our employee survey. Outlook 2022: On track Excite employees: Achieve a score of at least 81 on our Zymer Spirit index by 2022 We achieved a score of 82 points on our Zymer spirit index, showing our employees to be engaged and committed to our purpose and strategy. Throughout the year, we regularly host virtual and physical townhalls to explore strategic topics and allow employees to gain a better understanding of their role in Novozymes’ success today and in the future. Outlook 2022: On track Thrive Long-term commitment We take pride in a workplace where Zymers can stay safe, thrive, and grow. We achieve that by ensuring Zymers’ safety, promoting mental and physical wellbeing, supporting our Zymers skills development. Milestones Learn more: Inclusion & Diversity note * Gender balance means that, at a minimum, we will have 45% women and 45% men across all professionals and in senior management Accounts and performance Governance Our business The big picture Targets & 2022 outlook 28Novozymes A/S Inspire the world: Pledge 1% of our time to local outreach activities by 2022 We supported those of our communities that were disrupted by the COVID-19 pandemic, for example by funding two community oxygen centers in India and donating 500 oxime- ters in Brazil. In Denmark, about 50 school girls spent a day with our inspiring female scientists as part of ‘Girls Day in Science’, promoting STEM education amongst women. deliver COVID-19 vaccines to low- and middle-income countries. The campaign was con- ducted with the Novo family, and together we raised DKK 23 million — enough to fully vaccinate 800,000 people. Outlook 2022: On track Inspire Long-term commitment We pride ourselves on having a culture of changemakers. We do that by continuing to pledge 1% of our time to community outreach, helping educate the next generation and enabling Zymers to live more sustainably. Milestone Enable learning: Achieve a score of at least 80 on learning in our annual employee survey by 2022 We achieved a score of 79 points on Enable learning. We launched an online learning platform to help employees build skills and competencies needed for success in existing - tent from a wide range of internal and external sources like LinkedIn Learning. Outlook 2022: On track Learn more: Climate change & Energy notes Operations Emissions in Operations: By 2022, reduce absolute CO emissions from Novozymes’ operations by 40% (scope 1+2) compressor installed at our Hongda site in China, which will produce energy savings of approximately 31,000 GJ per year. During 2021 we engaged with key suppliers to better understand our supply chain emissions and our suppliers' climate maturity. Outlook 2022: On track Climate Long-term commitment We continue our commitment to Science Based Targets (SBT) and to achieving Net Zero by 2050. With the new SBT guidance in 2021, we raised our ambition to 50% reduction in absolute emissions from operations & supply chain (Scopes 1+2+3) by 2030, previously 50% from operations and 15% from purchased goods and services. We continue our commitment to purchase 100% renewable electricity by 2030. We are committed to high standards and ambitious actions to improve our footprint on climate, water, and circular waste management. Milestone * From a 2018 baseline Learn more: Employee safety & wellbeing note Learn more: Community engagement note Accounts and performance Governance Our business The big picture Targets & 2022 outlook 29Novozymes A/S Learn more: Climate Change & Energy notes Water programs: By 2022, develop context-based water management programs at 100% of Novozymes’ sites At the end of the year, 11 out of our 15 production sites had programs with actions to help us address local water challenges. We continued our partnership with the World Wide Fund for Nature (WWF) for developing our contextual water programs. We have Outlook 2022: On track Water Long-term commitment We remain committed to having 100% of our sites manage water in balance with local conditions by 2030. We are also working to pioneer a science-based approach to water stewardship. We will focus on what matters locally and help our communities. Milestone Learn more: Waste note Biomass: By 2022, achieve 100% circular management of our biomass 99% of our biomass was managed in a circular manner and utilized as raw material in fertilizer production for agriculture with or without prior biogas production. Outlook 2022: On track Packaging: Develop plans for circular management of 100% of key packaging materials We are progressing as planned in the development of circular plans to make our key packaging recyclable, reusable or compostable. Outlook 2022: On track Zero Waste programs: Develop programs to reach zero waste by 2030 at 100% of our sites 10 of our 15 production sites had developed Zero waste plans. In 2021, the recycling rate of non-biomass waste was 62% compared with 48% in 2020. Outlook 2022: On track Circular Long-term commitment We are committed to ensuring that zero waste from our operations is sent Milestones Accounts and performance Governance Our business The big picture Targets & 2022 outlook 30Novozymes A/S World targets Climate: Save 60 million tonnes of CO by enabling low-carbon fuels in the transport sector in 2022 Novozymes solutions in bioenergy helped the transport sector save 60 million tonnes of CO in 2021 by enabling the production of low carbon fuels. Outlook 2022: On track Water: Reach >4 billion people by providing laundry solutions in 2022 that replace chemicals We reached 4.1 billion people with our laundry solutions. This was mainly driven by the increased enzymatic detergent penetration in emerging markets. Outlook 2022: On track Production & consumption: farm to table in 2022 solutions in grain and vegetable oil processing, by unlocking additional starch, protein and oils from feedstocks. Outlook 2022: More to do Long-term commitment Our strategy, Unlocking growth – powered by biotech, starts with our long-term 2030 commit- ments to a healthy planet. We seek to deliver solutions that help accelerate towards a cli- mate-neutral society, transform food systems, and enable healthier lives. Our 2022 World - ments. In the Strategy section, we disclose our contribution by revenue to each of them. lives in a growing world, we grow our business. Milestones Accounts and performance Governance Our business The big picture Targets & 2022 outlook 31Novozymes A/S N ovozymes expects to grow sales organi- cally by 3% to 7% in 2022 and the year is supported by innovation and increased mar- ket penetration, especially in emerging mar- kets. The full-year indications per business area are well aligned with the mid-term 2025 outlook presented at the Capital Markets Day in September 2021. Food, Beverages & Human Health and Agriculture, Animal Health & Nutrition are expected to be the main growth drivers, while Household Care, Bioenergy and Grain & Tech Processing are expected to grow at or below the group average. The indicated ranges per business area are broader for the agriculturally-exposed areas due in part to higher end-market volatility. Sales in reported are forecasted to be roughly 3 percentage points higher relative to the 3% to 7% organic sales growth range. Household Care Organic sales growth is expected to be driven by increased penetration in emerging markets and the continued roll- out of the Freshness technology. Areas outside of laundry, such as enzymes and microbes used in professional & medical cleaning as well as dishwash are also expected to contribute to growth. The was successfully launched in 2021, mark- - tribute more to growth as the year progresses and in the years to come. The full-year indication for organic sales in Household Care is to grow by 2% to 4%. Food, Beverages & Human Health Organic sales growth is expected to be driven by continued strong performance in Food and Human Health while Beverages is expected to grow slightly. Growth in Food is expected to be broad based and driven primarily by our health-focused solutions, including strong performance in baking and food & material optimization and other ingredi- ent substitutions. Human Health is esti- mated to grow organically in the solid double-digits and the Synergia acquisition that closed on December 10, 2021, is expected to contribute to growth. Organic sales in Food, Beverages & Human Health is expected to grow by a high-single digit rate. Bioenergy Organic sales growth is expected to be driven by the continued recovery of U.S. ethanol production, market penetration enabled by innovation, capacity expan- sion of corn-based ethanol production in Latin America, and market penetration with enzymatic solutions for biodiesel grow in the low-to-mid-single-digits. Uncertainties related to the pandemic and volatile market conditions are the main reasons for the relatively broad range. The mid-point of the range assumes moderate growth in U.S. etha- nol production with full-year volumes still slightly below 2019 production levels. Grain & Tech Processing Organic sales are expected to develop more moderately following a very strong performance in 2021. Performance is expected to be driven by growth in Grain mainly led by market penetration in vege- table oil processing and innovation in starch, such as solutions for grain milling. The sales development in Grain & Tech to low-single-digit growth. Uncertainties related to the pandemic and volatile mar- ket conditions are the main reasons for the sales growth range. Agriculture, Animal Health & Nutrition Organic sales growth will be led by dou- ble-digit growth in Agriculture. Good - tainability pull are expected to drive higher usage of inoculants supporting increased market penetration of both bioyield and biocontrol solutions that will also be enabled through innovation and a more direct go-to-market model. Growth in Animal Health & Nutrition will primarily be driven by innovation as well as end-market-driven volume growth. The indication for Agriculture, Animal Health & Nutrition is to grow at a rate in the high-single-digits to low-teens. Uncertainty related to the pandemic and volatile market conditions are the main reasons for the relatively broad range. Sales outlook Accounts and performance Governance Our business The big picture Targets & 2022 outlook 32Novozymes A/S We will develop our roadmap further towards net zero emissions by 2050 and implement employee programs focused on inclusion F or 2022, Novozymes expects a solid EBIT 26.8%). Compared to 2021, the EBIT margin - ity improvements, targeted price increases, as investments in the business and lower other operating income are expected to have a neg- ative impact. Due to the aforementioned increase in input costs, the gross margin is expected to decline by 1.5 to 2 percentage points. Return on invested capital (ROIC), including goodwill, is expected at from 16% to 17% higher invested capital, mainly from acquisi- tions. expected to be between DKK 1.7 and 2.1 bil- by higher net investments to support long- term growth ambitions. For modeling purposes, the following is provided: mainly driven by higher hedging costs, primar- ily related to USD forward contracts, and somewhat higher interest expenses. Net investments in 2022 are expected to be - zation and expansion investments, also in new food and health-related customer co-cre- ation centers, as well as roughly DKK 1 billion related to the investment in a new state of the art production line for Advanced Protein Solutions in Blair, Nebraska. A stock buyback program of up to DKK 0.5 billion is approved for 2022. Financial outlook Sustainability outlook W ith our refreshed 2021 strategy, ‘Unlocking growth – powered by bio- tech’, we introduced a new set of long-term commitments to a healthy planet. The com- mitments will help accelerate towards a cli- mate-neutral society, transform food systems, and enable healthier lives. We also recognize the urgent need for action and are raising our commitment on climate change to include all emissions from our supply chain as well, and we will now strive for a 50% reduction in absolute emissions from operations & supply chain across Scope 1, 2 and 3 by 2030. This is in line with the climate guidance from the 2021. We are also committed to continue to ensuring that our employees develop in a thriving, diverse and inclusive community. For the post-2022 period, we will communicate term commitments. In 2022, we will continue to work towards our long-term commitments by investing in the development of solutions that contribute to a healthy planet, that improve our climate, water and waste footprints as well as promot- ing an inclusive and diverse workplace where employees can stay safe, thrive and grow. We will develop our roadmap further towards net zero emissions by 2050 and implement employee programs focused on inclusion. Furthermore, we will continue to work together with partners to drive the global sus- tainability agenda, such as the U.N. Global Compact, World Wide Fund for Nature, World Economic Forum, The B-team and the Science-Based Targets Initiative. outlook Sales performance, organic % EBIT margin % 25 to 26 ROIC (including goodwill) % 16 to 17 acquisitions DKKbn For modeling purposes: % ~22 DKKm ~250 Net investments DKKbn 2.5 to 2.8 Stock buyback program DKKbn 0.5 * Assumes constant currencies from the time of this announcement and for the remainder of the year. Accounts and performance Governance Our business The big picture Targets & 2022 outlook 33Novozymes A/S Corporate Citizenship We promote responsible business behavior and long-term value creation. Governance 35 Corporate governance 40 Board of Directors 43 Executive Leadership Team 45 Risk Management 51 Summary of the Remuneration report 55 The Novozymes stock Targets & 2022 outlook 34Novozymes A/S Accounts and performance Governance Our business The big picture Corporate governance We drive a proactive and transparent corporate governance structure to ensure responsible business conduct and long-term value creation. In 2021, several initia- tives, such as adopting a data ethics policy and new competency targets for the Board of Directors, further strengthened our commitment to responsible governance. B oard composition and responsibilities In accordance with Danish legislation, Novozymes has a two-tier management system com- prising the Board of Directors and the Executive Leadership Team, with no individual being a member of both. The division of responsibilities between the Board of Directors and the Executive Leadership Team is clearly outlined and described in the Rules of Procedure for the Board of Directors and the Rules of Procedure for the Executive Leadership Team. Both of these rule sets are available at Novozymes.com Novozymes’ Articles of Association require the Board of Directors to have from four to eight members, who are elected at the Annual Shareholders’ Meeting. The Board of Directors currently has seven shareholder-elected members, elected for terms of one year. Nominations are based on an evaluation of factors such as competen- cies, diversity, independence, and performance. In accordance with Danish law, the Board of Directors also has a number of employee-elected members, corresponding to half of the number of directors elected by the shareholders, who serve four-year terms. In 2021, the number of employee-elected members increased from three to four. The Board of Directors is accountable to the company’s shareholders for the management of the company. The composition of the Board of Directors must therefore ensure that the combined competen- cies of the Board enable it to inspire, guide and over- see Novozymes’ development, and diligently address and resolve the issues and challenges facing Novozymes at any given time. The individual competencies of the members of the Board of Directors are shown in the presentation of the Board. Novozymes' statutory report on diversity pursuant to section 107d of the Danish Financial Statements Act is available on our website. Governance structure In accordance with the Articles of Association and the Rules of Procedure for the Board of Directors, the Board has a Chairmanship consisting of two members – the Chair and the Vice Chair – who are responsible for assisting the Board in matters con- cerning the Executive Leadership Team’s operational management and for reporting back to the Board. The Chairmanship is also responsible for planning and preparing the meetings of the Board. The Board of Directors' main responsibilities are to: • Ensure the right management and organizational structure. governance performance, and the Executive Leadership Team’s operational management of Novozymes. • Supervise the overall management and strategic development of Novozymes. • Ensure succession planning at Board and management level. 2021 with the Board of Directors Governance Corporate governance 35Novozymes A/S Accounts and performance The big picture Our business Extraordinary board meetings Board meetings Monthly reports Annual Shareholders' Meeting Strategy work Review of financial performance Evaluation of collaboration between the Board of Directors and the Executive Leadership Team Organizational performance review and succession planning Next year's budget January February March April May JuneJuly August September October November December Corporate governance The Nomination and Remuneration Committee assists the Board of Directors in nominating candidates for the Board of Directors, board committees and the Executive Management, as well as proposing the remuneration of members of the Executive Management, the board members and board com- mittee members. The Nomination and Remuneration Committee meets when necessary, but always at least twice a year. The committee held 5 meetings in 2021 with an overall attendance rate of 100%. Members of the committee in 2021 were Jørgen Buhl Rasmussen (Chair), Cees de Jong, Kim Stratton and Kasim Kutay. are reviewed regularly according to the committee’s annual More information can be found in the Charter of the Nomination and Remuneration Committee. - sity targets and new competency requirements aligned with the refreshed strategy Unlocking growth – powered by biotech, nomination of a new board member, Morten Sommer, to replace Mathias Uhlén in 2022, adoption of a company diver- sity policy, and an improved process for succession manage- ment. The Audit Committee assists the Board in overseeing aspects relating to accounting, auditing, risks, internal controls and Audit Committee meets as necessary, but always at least four times a year. The committee held four meetings in 2021, all with a 100% attendance rate. Members of the Audit Committee in 2021 were Heine Dalsgaard (Chair), Jørgen Buhl Rasmussen and Cees de Jong. information on members, quali- found in the Charter of the Audit Committee. review of the impact of COVID-19, accounting for acquisitions and follow up on M&A learnings over the years, review of the revised Danish Corporate Governance recommendations, the new EU whistleblower directive, new EU taxonomy reporting, reporting, review of tax and of treasury, climate risk manage- ment and the selection process for the appointment of new independent auditors in due time. Novozymes' Audit Committee reviews all reports from a global corporate whistleblower system for reporting of suspected ille- gal or unethical misconduct within the Novozymes Group. See Note 8.4 for more. The Innovation Committee assists the Board with the review of Novozymes’ overall capabilities and strategic direction when it comes to technology, science and innovation. The Innovation Committee meets as necessary, but always at least twice a year. The committee held four meetings in 2021, all with a 100% attendance rate. Members of the Innovation Committee in 2021 were Sharon James (Chair), Kim Stratton and Mathias - ment, and recurring tasks, etc. can be found in the Charter of the Innovation Committee. In 2021, the Innovation Committee covered, amongst other topics, R&D implications of the refreshed strategy Unlocking growth – powered by biotech, R&D Pipeline Strategy and Progression, Operating / Innovation models for R&D and Regulatory and Technology Strategy. The Nomination and Remuneration Committee The Audit Committee The Innovation Committee The Board of Directors has three committees: The Nomination and Remuneration Committee, the Audit Committee, and the Innovation Committee. Governance Corporate governance 36Novozymes A/S Accounts and performance The big picture Our business Adoption of new diversity targets in the Diversity is important to Novozymes, including in respect of the Board of Directors’ composition in order to ensure the right mix of skills and competen- cies to address the challenges of a large global com- been updated with new and additional targets, and required on the Board. First, there is a new target for board tenure to strike a balance between renewal and continuity. Consequently, a person should not be nominated for election or re-election if such board member has served on the Novozymes board for 12 years. Another new target is that the Board of Directors must consist of at least one member that has lived and worked outside the Nordic countries for a sub- stantial period of time. Thirdly, it is now a target that the Board of Directors consists of at least two share- holder-elected Board members of Nordic nationality and at least two shareholder-elected Board members of a nationality other than Nordic. Lastly, the target for board gender diversity has been revised to the board members must be female and 40% or more must be male no later than by the annual sharehold- ers meeting to be held in 2023. All targets were met or on track by the end of 2021, except for the target to have no board members with a tenure of more than 12 years. With Mathias Uhlén not seeking re-election in 2022, the Board will again The composition of the Board of Directors meets the gender diversity requirements set out in Danish legislation. Reporting on gender diversity at other management levels can be found in Note 8.2 Inclusion & Diversity in the Social and gov- ernance data section. The competencies and targets Diversity targets for board members elected by shareholders * 40% or more of the shareholder-elected board members must be female and 40% or more must be male no later than by the annual shareholders meeting to be held in 2023 Governance Corporate governance 37Novozymes A/S Accounts and performance The big picture Our business Nationality Non-nordic Nordic 4 3 2 Target achieved: Number of mandates in listed companies incl. NZ Target achieved: 100% ≤ 5 mandates Gender Men Women 71% 40% Target on track 29% Has substantial international experience Target achieved: Board members 86% 40% Board governance structure 57% 43% Non-independent Independent 50% Target achieved: Lived and worked outside the Nordic countries Target achieved: No Yes 6 1 1 Tenure < 12 years Target achieved: 100% 86% Executive position Target achieved: No Yes 29% 71% 33% Achieved Not achieved Actual Target the requirements for personal characteristics, skills, and experience. Charters and recommendations When laying down the management principles for Novozymes, the Board of Directors followed the Recommendations on Corporate Governance that form part of the disclosure requirements applicable to companies listed on Nasdaq Copenhagen. A detailed review of Novozymes’ position on each of the recommendations, and a description of the inter- nal control and risk management system relating to statutory report on corporate governance prepared pursuant to section 107b of the Danish Financial Statements Act. These recommendations require companies to comply or explain any deviations. The recommenda- 2021. The changes have been implemented and Novozymes continues to follow 39 of the 40 recom- • Due to the limitations imposed by the Novo Nordisk Foundation’s Articles of Association and Novozymes’ ownership structure, the Board of Directors reserves the right in certain circum- shareholders. (Recommendation 1.3.1). In addition, under the Danish Financial Statements Act (sections 99a and 99b), it is mandatory for large companies to report on corporate social responsibil- Novozymes is committed to the ten principles of the UN Global Compact (UNGC) and as a continuing member of the UNGC we prepare an annual Communication on Progress (CoP). The Novozymes Report together with 'Novozymes & the UNGC 2021' serves as our CoP and meets the requirements of sections 99a and 99b of the Danish Financial Statements Act. In 2021, Novozymes adopted a data ethics policy. This policy sets the overall principles for the ethical management of data by Novozymes and supplements our commitment to integrity and compliance. The - ment to ethical data management are universal prin- ciples relevant for all categories of data processed in and by Novozymes. The statutory report on Novozymes’ policy for, and work with, data ethics pursuant to section 99d of the Danish Financial Statements Act can be found on our website. Other Board-related information The Board of Directors held 12 meetings in 2021, with an overall attendance rate of 97%. Any amendments to the Articles of Association require that shareholders representing at least two thirds of the total number of votes in the company are represented at a shareholders’ meeting, and that at least two thirds of the votes, as well as two thirds of the voting capital represented at the meeting, are cast in favor of the proposal to amend the Articles of Association. The Board of Directors has been authorized by the shareholders to allow the company to acquire trea- sury stock on an ongoing basis, provided the nominal value of the company’s total holding of treasury stock does not exceed 10% of its share capital at any time, cf. section 198 of the Danish Companies Act. The purchase price must not deviate by more than 10% from the price quoted on Nasdaq Copenhagen at the date of acquisition. This authorization applies until April 1, 2022. In addition, the Board of Directors is authorized to reduce the share capital. Each year, one of the responsibilities of the Board of Directors is to assess whether the capital and share structure of Novozymes is optimal. The Board of Directors believes that the share structure with A and B common stock continues to be the best way in 2021 to safeguard Novozymes’ long-term strategy shareholders and other stakeholders. Regarding its capital structure, Novozymes will continue to favor a rather modestly leveraged balance sheet, as around 1x EBITDA. Thus, the capital structure is in line with the target. Novozymes is party to several partnership contracts that can be terminated by the other party in the - trol of Novozymes. A few of these contracts contain provisions that restrict Novozymes’ licenses to use Evaluation of the Board of Directors For 2021, the Board of Directors commissioned an external third party to conduct the evaluation, con- sistent with the recommendations of the Danish Committee on Corporate Governance that compa- every third year. The evaluation was based on the input of eleven board members and eight executives and relied on in-depth personal interviews, online questionnaires, analysis of how time was spent during board meetings, board composition mapping and board composition benchmarking. As part of the evaluation, the board members and the executives were provided with feedback on their individual per- formance regarding how they add value to the Board of Directors. The result of the general board evalua- The Board of Directors held 12 meetings in 2021, with an overall attendance rate of 97%. Governance Corporate governance 38Novozymes A/S Accounts and performance The big picture Our business 97% Board member Audit Committee member Nomination and Remuneration Committee member Innovation Committee member Nationality Board meetings attended Board tenure Election period Share trading in 2021 Number of shares end of 2021 Jørgen Buhl Rasmussen 1,2 Yes Yes (chair) Danish - Cees de Jong 1,2 Yes Yes Dutch - Heine Dalsgaard 1 Yes (chair) Danish - Sharon James 1,2 Yes (chair) British - - Kasim Kutay 1 Yes British Kim Stratton 1,2 Yes Yes Australian - - Mathias Uhlén 1 Yes Swedish - Anders Hentze Knudsen 3 Danish - - Lena Bech 3,4 Danish Lars Bo Køppler 3,4 Danish Anne Breum 3,5 Danish Preben Nielsen 3,5 Yes Danish - Jens Øbro 3,5 Danish The Board of Directors was deemed to be a well-functioning board that had worked exceptionally well together. The operational board processes were in place and the overall tone of the Board of Directors was positive, encouraging, and construc- tive. The Board of Directors and Management per- ceived themselves as a team with shared goals and the executives perceived the Board to be knowledge- able and highly engaged. The conclusion was that the Board of Directors was well composed compared to other relevant boards and had become more diverse While the Board of Directors was perceived to be focus areas to improve their performance during 2022, including strategy discussions and implemen- tation, the balance between full board meetings and committee work and the balance between virtual and physical meetings. Statutory report on corporate governance https://investors.novozymes.com/investors/corporate-governance/articles-of-association-and-reports-on-corporate-governance/ Statutory report on diversity https://investors.novozymes.com/investors/corporate-governance/articles-of-association-and-reports-on-corporate-governance/ Statutory report on data ethics https://investors.novozymes.com/investors/corporate-governance/articles-of-association-and-reports-on-corporate-governance/ Novozymes & the UNGC 2021 https://www.novozymes.com/en/about-us/sustainability/transparency-accountability 1. Elected at the Shareholders' Meeting 2. Independent 3. Employee representative 4. Resigned from the Board on March 11, 2021 5. New member of the Board from March 11, 2021 Attended Not attended Governance Corporate governance 39Novozymes A/S Accounts and performance The big picture Our business Jørgen Buhl Rasmussen Born 1955. Danish. Chair of the Board since 2017. Copenhagen Business School. Member of the Audit Committee and Chair of the Nomination and Remuneration Committee. Member of the Board since 2011. Elected for a term of one year. Board positions Chair: F. Uhrenholt Holding A/S and advisory board of Blazar Capital Member: Special competencies Extensive international business and management - ing expertise across many businesses, sectors, and geographies. Cees de Jong Born 1961. Dutch. Vice Chair of the Board since 2020. Former CEO of Chr. Hansen. Member of the Audit Committee and the Nomination and Remuneration Committee. Member of the Board since 2020. Elected for a term of one year. Board positions Chair: Oterra A/S, Mediq B.V., Meatable B.V. and A-Mansia Biotech S.A. Special competencies Extensive international business and management experience from a range of industries, such as the food, food ingredient, and industrial biotech indus- Heine Dalsgaard Born 1971. Danish. CFO of Carlsberg A/S. Chair of the Audit Committee. Member of the Board since 2020. Elected for a term of one year. Board positions Chair: Carlsberg Global Business Services A/S Member: Pandora A/S, Carlsberg Breweries A/S, Carlsberg Byen Komplementar ApS and Carlsberg Byen P/S Special competencies accounting expertise, as well as extensive experi- ence in driving strategic results for international * This board member is not regarded as independent Recommendations on Corporate Governance that apply to Danish listed companies. Sharon James Born 1961. British. Former Senior Vice President, Global R&D, Bayer Consumer Health. Chair of the Innovation Committee. Member of the Board since 2020. Elected for a term of one year. Board positions Member: Mölnlycke Health Care Special competencies Broad international experience in commercial research and innovation pipeline management in the consumer goods and consumer products sector. Novozymes’ Board of Directors has seven members, who are elected at the Annual Shareholders’ Meeting and four employee-elected members. The Board represents many years of international management experience, and the members’ competencies combine to ensure expert management of the company. Board of Directors Governance Board of Directors 40Novozymes A/S Accounts and performance The big picture Our business Board of Directors Kasim Kutay Born 1965. British. CEO of Novo Holdings A/S. Member of the Nomination and Remuneration Committee. Member of the Board since 2017. Elected for a term of one year. Board positions Member: Novo Nordisk A/S and Evotec AB Special competencies Broad experience within biotechnology, strategy, business development, mergers and acquisitions, * This board member is not regarded as independent Recommendations on Corporate Governance that apply to Danish listed companies. Kim Stratton Born 1962. Australian. Interim CEO of Centogene ApS. Member of the Nomination and Remuneration Committee and the Innovation Committee. Member of the Board since 2017. Elected for a term of one year. Board positions Member: Vifor Pharma AG, Recordati S.p.A. Special competencies Broad global commercial experience, including emerging markets, innovation pipeline management Mathias Uhlén Born 1954. Swedish. Professor at the Royal Institute of Technology (Sweden), Karolinska Institutet (Sweden) and the Technical University of Denmark (DTU). Member of the Innovation Committee. Member of the Board since 2007. Elected for a term of one year. Board positions Chair: Antibodypedia AB, ScandiBio Therapeutics AB and ScandiEdge Therapeutics Vice Chair: Member: Atlas Antibodies AB Special competencies Broad experience in research and biotechnology. His research interests cover antibody engineering, proteomics and precision medicine. * This board member is not regarded as independent Recommendations on Corporate Governance that apply to Danish listed companies. Mathias Uhlén will not seek re-election in 2022 and the Board of Directors has proposed the election of Morten Sommer as a new member of the Board Governance Board of Directors 41Novozymes A/S Accounts and performance The big picture Our business Board of Directors Anne Breum Born 1961. Danish. Laboratory technician. Employee representative. Member of the Board since 2021. Elected for a term of four years. Anders Hentze Knudsen Born 1959. Danish. Senior Operator. Employee Member of the Board since 2013. Elected for a term of four years. Preben Nielsen Born 1966. Danish. Science manager. Employee representative. Member of the Board since 2021. Elected for a term of four years. Member of the Innovation Committee. Jens Øbro Born 1977. Danish. Senior Professional. Employee representative. Member of the Board since 2021. Elected for a term of four years. * In accordance with Danish law, the Board of Directors includes four employee-elected members, who serve four-year terms. Governance Board of Directors 42Novozymes A/S Accounts and performance The big picture Our business Board of Directors Our eight-member Executive Leadership Team comprises broad and international management experience, comprehensive biotechnology expertise and in-depth knowledge of Novozymes’ business. Executive Leadership Team Ester Baiget Education Holds a chemical engineering degree and an MBA from the Rovira i Virgili University, Spain. Special competencies Ester Baiget is an experienced international leader with a strong business and technical background. With more than 25 years of international experi- ence as a technical and commercial business leader, Ester has driven transformational change and businesses. Through her leadership, she develops a culture of inclusion, engagement, commitment to results. Lars Green Born 1967. Danish. CFO and Executive Vice Education Holds an M.Sc. in Business Administration from Board positions Member of trustees of the LEO Foundation and LEO Holding Special competencies Lars Green is responsible for the Finance, IT & legal functions. Lars has in-depth knowledge of the Novo Group’s business, international experience from managing global biotechnology and biopharma companies, creation across the company. Amy Byrick Born 1974. Canadian. Executive Vice President, Strategy & Business Transformation Education BScE in Chemical Engineering from Queen’s University, Canada, and an MBA from INSEAD, France. Special competencies Amy Byrick is responsible for strategy, commercial excellence, digital transformation, and for building new businesses in Strategic Opportunity Areas and ventures. Nutrition & Biosciences, where she led the Global Food & Beverage business. She brings years of international experience driving strategic transfor- mation with a focus on post-merger integration, commercial excellence, and on building an inclusive, high energy, growth- and results-oriented organiza- tional culture. Tina Sejersgård Fanø Born 1969. Danish. Executive Vice President, Agriculture & Industrial Biosolutions Education Holds an M.Sc. in Chemical Engineering from the Technical University of Denmark (DTU) and a diploma degree in Innovation, Strategy and Marketing in the Food & Beverage industry from Board positions Chair (until March 1, 2022): Danish Innovation Fund Member: Special competencies research, technical service, sales and marketing in Agriculture & Industrial Biosolutions. managing global partnerships and has been instru- for Novozymes over the years. She has strong bio- tech insights spanning R&D, marketing, and sales. Governance Executive Leadership Team 43Novozymes A/S Accounts and performance The big picture Our business Executive Leadership Team Claus Crone Fuglsang Born 1968. Danish. CSO and Executive Vice Education Holds an M.Sc. in Biochemistry from the University of Copenhagen and an MBA from Heriot-Watt University, Edinburgh Business School, Scotland, supplemented with courses at MIT, Boston and IMD, Lausanne. Board positions Member: Microbiogen Ltd., Biobased Industries Consortium, Erhvervspræsidiet for TekTanken and the Danish governmental panel on bio-economy Special competencies Claus Crone Fuglsang is responsible for Enzyme and Microbe Research, Product & Process Safety, Intellectual Property & Licensing and R&D Claus has strong leadership experience within R&D functions along with driving and leading partner- international research and business experience. Anders Lund Born 1973. Danish. Executive Vice President, Consumer Biosolutions Education Holds an M.Sc. in Economics from Aarhus Special competencies Anders Lund is responsible for application research, technical service, sales and marketing in Consumer Biosolutions including Household Care and Food & Beverages. Anders has a strong commercial and strategic back- and executing Novozymes’ strategies over the last two decades. He also has extensive experience in building customer relationships in several of Novozymes’ business areas. Graziela Chaluppe dos Santos Malucelli Born 1973. Brazilian. COO and Executive Vice Education Catholic University of Paraná, Brazil. Special competencies Graziela Chaluppe dos Santos Malucelli is globally responsible for Production, Supply Chain, Planning & Product coordination, Engineering, Facility Services, Sourcing, Quality, Environment & Safety. She is also responsible for managing environemntal - tions and supply chain. Graziela has extensive experience from leadership roles in Brazil, the U.S., China, India, Denmark and has been developing key operational functions across the company. For more than 20 years, she has been driving continuous productivity and sup- ply of solutions with a strong customer focus. Morten Enggaard Rasmussen Born 1976. Danish. Executive Vice President, People, Sustainability & Brand Education Master of Science degree from the Aarhus School of Business. Special competencies Morten Enggaard Rasmussen is responsible for Novozymes’ people agenda, sustainability leader- ship and brand. He is also responsible for managing Society. where he was Vice President of People & Culture, in track record of building and developing high perfor- mance teams across the globe with a particular focus on responsible business. He has managed has operated as a trusted business partner across various functions and geographies. Executive Leadership Team Governance Executive Leadership Team 44Novozymes A/S Accounts and performance The big picture Our business Potential impact Probability Volatility of agriculture- related business Competition and market consolidation Cyberattacks Global political and economic instability Risk assessment heat map Climate change related risk global and diverse nature of the industries we operate in. Within an evolving risk management framework, we identify and mitigate key risks to secure our business and our impact now and in the future. Risk management O ur risk management process ensures that we identify, assess and mitigate key business risks that may impact our ability to grow our business, be our customers and the communities we operate in. In addition to addressing key enterprise risks which could potentially materialize in the short term i.e. within the next three years, we also monitor lon- ger-term threats and trends, like climate change and technology development. We seek to have an inte- grated and holistic approach of assessing and priori- terms. To manage businesses responsibly and have an impact, climate-related risks, such as supply disrup- tions owing to extreme weather events, should be addressed in a structured way. Hence, in 2021, we focused on further integrating and developing cli- mate change risk management as part of our risk management framework, which was presented to and discussed by the Board of Directors and the Audit Committee, in alignment with our commitment to TCFD (Taskforce on Climate-related Financial Disclosures). In 2022, we will continue to work on how to further strengthen our management of ESG risks to our business, including climate-related risks, and explore how best to address such risks in a lon- ger-term perspective. In shaping our refreshed strategy Unlocking growth part of our assessment of climate-related risks pro- vided the foundation for our 2030 commitments. Our solutions could be key in addressing many of the cli- mate-related risks facing the world today. The COVID-19 pandemic continues to impact supply chains and societies around the globe, leading to uncertainties in 2022 and beyond. To safeguard our people, operations, and communities, the Executive Leadership Team monitors and addresses potential business risks arising from the pandemic, e.g., changed consumer behaviors and declining GDP growth. Risk management framework The Board of Directors has the overall responsibility for overseeing risks and for maintaining a robust risk management and internal control system. Novozymes operates an Enterprise Risk Management (ERM) pro- - organization. Each key risk is assigned to a risk owner from the Executive Leadership Team and a Risk Responsible, usually a Vice President, in charge of mitigating all risks relevant to their respective areas. The Risk Management & Controls department is responsible for ensuring that senior management promotes risk awareness, engagement, and owner- ship across the organization. Risks are assessed based on a two-dimensional heat map rating system that estimates the potential impact of a given risk on risk materializing. assessed by the Executive Leadership Team and the Board of Directors. risk factors and risk management Governance Risk management 45Novozymes A/S Accounts and performance The big picture Our business Risk management Competition and market consolidation Description of risk Novozymes is the market leader in the global enzymes market, which remains highly competi- tive. We could face increased competition from other enzyme - tions or from new players with technology platforms that are broader than ours. The recent instability of global supply chains has the potential to favor local suppliers and we continue to see a risk of competitors operating under less regulated market con- ditions. Although consolidation can make the market more stable, it could also increase a competitor’s power. Mitigating actions In 2021, we enhanced our go-to-market strate- gies, accelerating regionally relevant innova- tions and upgrades, and strengthening customer relationships. We also acquired new businesses, entered into strategic partnerships and launched new innovations. Despite pres- sure on supply chains, we managed to deliver our orders to customers throughout 2021, with- out compromising on our fast response and dedicated service, thereby further improving the customer experience. As part of our refreshed strategy, we will form regional cus- tomer co-creation centers to work with local customers and cater to their needs. In 2022, we will continue to improve our go-to market strategies, invest in consumer insights, accelerate regional innovations to strengthen our position in selected markets, and build on our strong relationships with key customers and partners. We will also further strengthen our ability to deliver the broader biotech solutions that set us apart from the competition. Volatility of agriculture-related business Description of risk Our agriculture-related business - ous elements, such as weather conditions, commodity prices, political mandates for ethanol blends, etc. However, many of our businesses may potentially be issues, as can be seen from the supply issues in the agriculture value chain. In the U.S., the new infrastructure bill currently in progress may end up challenging our ability to grow in the bioenergy market if the bill favors electric vehicles over other alternatives to gasoline. With the growing impact of — towards — climate-related over the coming years. Mitigating actions In 2021, we continued to work with ethanol cus- tomers to explore alternative value streams - biobased derivatives) with the help of our We continue to nurture and invest in our valu- able partnerships in the agriculture industry. In 2021, the DSM - Novozymes Alliance launched - tease technology to reduce even further the environmental footprint of poultry production and deliver greater cost savings to customers. We also announced a strategic partnership with FMC, a leading global agricultural sciences com- pany, to research, co-develop, and commercial- ize enzyme-based crop protection solutions. In 2022, we remain focused on leveraging our - tions to agricultural challenges and diversify their revenue streams, as well as optimizing our internal commercial competences, including technical sales support and digital tools for pro- duction optimization. Key enterprise risks for 2022 Climate change related risk Governance Risk management 46Novozymes A/S Accounts and performance The big picture Our business Cyberattacks Description of risk The threat of cyberattacks to our business operations continues to be a material risk. Preserving business continuity and safe- guarding sensitive business data and critical assets against this global threat is extremely import- ant. Accelerating digitalization continuously exposes Novozymes to such threats and cybercrime could have a negative impact on our productivity if systems are inaccessible for an extended period of time. Our business could also be adversely impacted if information about our unique technologies or production strains is disclosed. Mitigating actions This threat continues to intensify but so has our ability to identify, protect, detect, and respond to cyberattacks. In 2021, we implemented and tested initiatives on IT emergency response and will continue to improve on these regularly. We have also increased our focus on measuring our actual security level and obtaining better trans- parency in infrastructure and system manage- ment. To protect our business opportunities from the our more than 7,000 granted or pending pat- ents. In 2022, we will continue to improve and develop our many IT security initiatives, includ- ing our OT (Operational Technology i.e. produc- tion systems) Cyber Security Strategy. A thorough understanding of OT risks is the foun- dation for making the right decisions on how to protect our production facilities to ensure they stay operational at all times. Global political and economic instability Description of risk Novozymes’ global footprint exposes our business to the con- sequences of global political and instability persists in the global economy and trade conditions but as the risk of a hostile trade environment has not ramped up, we have assessed the short-term likelihood of this risk to have reduced relative to 2020. Still, political uncertainty and low growth remain in many regions, compounded by the uncertainties of the COVID-19 pandemic. Mitigating actions In 2021, Novozymes closely monitored political and economic developments with an agile mind- set to ensure fast action could be taken when needed. We also employed global versus local considerations in short- and long-term capacity planning, to ensure we could continue to deliver orders to customers even in challenging condi- tions. - ization and a shared commitment to sustainabil- ity on the global stage, such as at COP26 in Glasgow. And we work collaboratively with many valuable partners to drive a responsible business agenda, such as the World Economic Forum, the International Chamber of Commerce, The B Team, the UN Foundation and Business Fights Poverty. settled to ensure political stability and free trade. With the help of improved data analysis, general monitoring and the commitment and drive of our employees, we will improve the monitoring of these events as well as our speed of response. Governance Risk management 47Novozymes A/S Accounts and performance The big picture Our business Emerging risks Concerns regarding new and emerging technologies Description of risk Industrial biotechnology is a key enabling technology for the deliv- ery of natural, low-carbon and bio- based solutions. Over the coming years, we expect to see further sig- - ing the use of gene editing, which could be met with increasing gov- ernment and NGO scrutiny. This can limit or slow the application of biotechnology. Novozymes’ research and business are based on bio-innovation and through and innovative answers to some of the planet’s most pressing chal- lenges, such as carbon capture, sustainable food systems or replac- ing chemicals with biodegradable solutions. Mitigating actions We apply and promote safe and responsible use of biotech- nology. We are committed to sharing our knowledge about the potential of biology and industrial biotechnology with external stakeholders. Through proactive engagement with of the potential of technology, paving the way for future solu- tions to pressing challenges. Through our growing cooperation with the Novo Nordisk Foundation, we are exploring ways to provide new documen- tation and insights into biotechnology. Together, we engage with the World Economic Forum’s community to promote bio- solutions, while advocating for science-based and innova- tion-friendly policy frameworks for the introduction of solutions based on new gene technologies. We also drive the innovation agenda through business and industry organiza- tions. Learn more in Note 7.6 and our position statement on industrial biotechnology. Water-constrained future Description of risk Increased long-term pressure on our water resources is a key chronic risk driven by climate change. We rely on water to maintain our production capacity. Many of our raw materi- als are agricultural and water intensive to pro- duce. A severe drought or reduced water supply could impact our pro- duction and limit our ability to meet customer demand by directly impacting our own oper- ations or our supply chain. Mitigating actions To continue addressing this long-term risk, we are developing context-based water pro- grams for our production sites and piloting - ology for water. We support our water stew- ardship agenda further with external engagements including the UN Global Compact, the CEO Water Mandate, the World Wide Fund for Nature (WWF) and the Science Based Targets Network (SBTN). Our solutions in laundry, technical indus- tries and agriculture also enable reduced aquatic pollution by reducing the load on wastewater treatment in these industries. We disclose more details annually in CDP's Climate Change and Water Security ques- tionnaires. Learn more in Notes 7.1 and 7.3. In addition to the key enterprise risks, Novozymes also closely monitors emerging risks that have the potential to impact our business in the long-term (3+ Via our integrated sustainability trendspotting exercise, we identify long-term risks and through our enterprise risk management process. We engage with relevant stakeholders in a timely manner to develop strategies and ensure that we are prepared to take adequate action and respond to those key emerging risks. The following continue to Climate change related risk Governance Risk management 48Novozymes A/S Accounts and performance The big picture Our business Novozymes’ climate-related At Novozymes, we are fully committed to doing our part to help society in the net-zero transition. We actively invest in lowering our own carbon footprint and delivering low-carbon solutions. In alignment with the recommendations of the Taskforce on Climate-related Financial Disclosures (TCFD), we include climate-related disclosures throughout this report. For ease of reference, these are summarized below around the four themes from TCFD recommendations. In the coming years, we aim to integrate more detailed climate-related disclo- sures. Governance Directors and Executive Management take into con- sideration in managing the company. Novozymes has Board-level oversight of its management of cli- mate-related issues, as a part of its responsibility to - ernance (ESG) performance. The Board of Directors our climate strategy and targets and has overall responsibility for overseeing risk management and control, including climate-related risks. To ensure the integration of sustainability into Novozymes’ business strategies and innovation pipe- line and, consequently, our ability to deliver solutions that meet the needs of society and drive sales growth, we have established a Corporate Sustainability Committee, comprising of various executive and senior leaders. The committee is also responsible for setting Novozymes’ strategic direc- tion, ambitious sustainability targets, and securing a strong internal foundation of responsible business practices. Strategy support the transition to a low-carbon economy, and climate change action forms an integral part of our business strategy. In 2021, as part of our refreshed strategy, we invested to develop solutions for cli- mate-related opportunities in Advanced proteins and Carbon Capture. Spotlight story: Innovating for a climate-neutral society Governance Novozymes’ TCFD disclosures 49Novozymes A/S Accounts and performance The big picture Our business Novozymes’ CDP Climate Change and Water Security response at www.cdp.net. ‘Risk Management’, ‘Targets’, ‘Strategy’, Note 7.1 'Climate change’ and Note 7.2 'Energy’ Novozymes’ position paper on Climate Change at Novozymes.com For more information, go to: Novozymes’ TCFD disclosures Alongside these opportunities, issues associated with climate change (regulatory action, physical or reputational damage, etc.) also pose multiple risks to our supply chain and operations. We recognize the value of using climate scenario analysis to understand the implications of climate change on our business, in guiding our overall strat- egy and in preparing for the future. Currently, we are risks in our agricultural value chain and the potential and operations. While we presently use scenario analysis for qualitative assessments, we also expect to conduct quantitative assessments using relevant numerical models in the coming years. Risk management Climate change is an important factor when we look at the risks to our business. Our production pro- cesses are water-intensive and many of the raw mate- rials sourced are agriculture-based and more frequent extreme weather conditions and other climate-related impacts. A severe drought could impact our production and limit our ability to meet customer demand by directly impacting our own operations or our supply chain. As part of our risk management process, climate-re- a systematic risk mapping process that includes risks and regulatory changes. We also conduct periodic - cant production sites, with third parties being engaged to conduct periodic risk assessments and reviews. We will continue to work on how to further strengthen our management of ESG risks in our busi- ness, including climate-related risks. Metrics and targets Novozymes is committed to the Science-Based Targets Initiative and to our long-term goal of achiev- ing net zero across operations and value chain by 2050, a goal we set in 2019. Intergovernmental Panel on Climate Change (IPCC) • a 50% reduction in absolute CO emissions from our operations (Scopes 1 & 2) and supply chain (Scope 3) by 2030. • source 100% renewable electricity by 2030. * From a 2018 baseline Reporting on the EU Sustainable Finance Taxonomy The EU Taxonomy Regulation requires listed compa- nies to disclose the share of their turnover, capital and operational expenditure associated with environ- mentally sustainable economic activities. Despite the positive environmental impact from our biological solutions and our focus on minimizing our environ- mental footprint, Novozymes’ activities do not fall within the scope of the EU Taxonomy Regulation and we have no activities eligible for this reporting requirement. Governance Novozymes’ TCFD disclosures 50Novozymes A/S Accounts and performance The big picture Our business Summary of the remuneration report In 2021, Novozymes delivered a highly satisfactory performance and solid set Each year Novozymes issues the Novozymes Remuneration Report as a separate report. The con- tent of the remuneration report has been prepared to meet the requirements of section 139b of the Danish Companies Act and holds information and details on the remuneration of the Board of Directors and the Executive Management. The Novozymes Remuneration Report 2021 will be presented for an advisory vote at the Annual General Meeting to be held in 2022. The Novozymes Remuneration Report 2020 was approved at the Annual General Meeting held in March 2021 without any comments. All remuneration of the Board of Directors and the Executive Management in 2021 has been in line with the scope of the approved remuneration policy. The following is a summary of the Novozymes Remuneration Report 2021. General remuneration policy Novozymes’ remuneration policy for managers and other employees is designed to both encourage strong individual performance and support Novozymes’ overall value creation. Remuneration consists of a base salary, pension contributions, a cash bonus and stock-based incentive programs. These components are linked to employees' individ- ual performance and to the level of achievement of - gets. The remuneration policy aims to provide man- agers and other employees with a competitive external benchmarks. The Novozymes Remuneration Report 2020 was approved at the Annual General Meeting held in March 2021 without any comments. Governance Summary of the remuneration report 51Novozymes A/S Accounts and performance The big picture Our business Summary of the remuneration report The individual board members' fees and their shareholdings can be found in the Novozymes Remuneration Report 2021. Remuneration of the Board of Directors The remuneration of the Board of Directors comprises that the Board of Directors safeguards the company’s long-term interests without taking into consideration what this may mean in terms of the value of incen- tive-based remuneration. The Board of Directors’ fee the complexity of the Novozymes Group, the scope of the work, and the number of Board meetings held. since 2015. The Chair receives a fee that is three times the base fee and the Vice Chair a fee that is two times the base fee. For committee work, the committee Chair and other committee members receive a further base fee and half a base fee respectively. However, the Chair and the Vice Chair of the Board of Directors do not receive such additional fee if appointed to the Nomination and Remuneration Committee. The size of the Board of Directors increased from 10 to 11 members in 2021, now consisting of seven shareholder-elected members and four employ- ee-elected members. The total remuneration paid to the Board of Directors in 2021 amounted to DKK 9.8 million compared to DKK 8.2 million in 2020. The increase is a result of the full-year impact of the Innovation Committee that was established in August 2020, the increase in the number of employee representatives from three to four and the The individual board members' fees and their share- holdings can be found in the Novozymes Remuneration Report 2021. Remuneration of the Executive Management As per December 31, 2021, the Executive (CEO) • Lars Green, Executive Vice President & Chief Thomas Videbæk, former Executive Vice President & The total remuneration to members of the Executive • A base salary plus pension, a company car and • A short-term incentive program (cash bonus) - STIP • A long-term incentive program (stock-based program) - LTIP In 2021, the members of the Executive Management received a 2.3% increase in their base salary. Ester Baiget and Lars Green will in addition to their regular remuneration receive compensation for lost incentives from their previous employers. The com- period 2020-2023, Ester Baiget may receive up to a total of DKK 9.6 million in extraordinary sign-on com- pensation for lost incentives from her previous employer, of which DKK 4.2 million was paid out in 2020 and DKK 1.4 million was paid out in 2021. Over the period 2020-2023, Lars Green may receive up to a total of DKK 14.5 million in extraordinary sign-on compensation for lost incentives from his previous employer, of which DKK 0.7 million was paid out in 2020 and DKK 4.3 million was paid out in 2021. 2021. His severance package, totaling DKK 35 mil- lion, was fully expensed in 2020. Severance pay of DKK 9 million was paid out in 2020, while the remain- ing DKK 26 million was paid out in 2021. The targets for the short-term incentive program (STIP) are typically set by the Board of Directors in connection with the review of the business plan for the year. Good performance will result in target pay- out (65%) while the maximum payout is only achieved for delivering extraordinary performance. Maximum payout equals 9.5 months’ salary. In 2021 the targets for the STIP were split on the - gets for the individual executives at 40% weight. target beeing exceeded. The payout related to these targets was 100% and 77%, respectively. The level of achievement of individual performance targets and thus the size of remuneration payment to the individual executive is determined by the Board of Directors based on recommendations from the Nomination and Remuneration Committee. Based on its assessment, the Board determined that the pay-out based on individual targets would be 95% for Ester Baiget and 85% for Lars Green. Governance Summary of the remuneration report 52Novozymes A/S Accounts and performance The big picture Our business Remuneration to individual members of the Executive Management Fixed Variable DKK million Salary Contribution based pension Other (% of total remuneration) Cash bonus (STIP) Incentive programs (LTIP) Total variable (% of total remuneration) Total remuneration Compensation for lost incentives Total remuneration Severance package Ester Baiget, CEO (from 1/2-2020) - Lars Green, CFO - Former executives Thomas Videbæk (to 30/04-2021) - - Peder Holk Nielsen (to 31/01-2020) Remuneration incentive programs are expensed over the four-year vesting period. The long-term incentive included in the above table is the cost of the 2021 program measured at market value at the grant date. * Thomas Videbæk’s severance package was fully expensed in 2020. The severance package consisted of salary, pension and bonuses during the notice period as well as termination compensation and compensation for not being part of the stock-based incentive program in 2021. Short-term incentive program – Target achivement Weight Target % / (index) Ester Baiget, CEO Lars Green, CFO 45% EBIT % of maximum / (index compared to target performance) 100 15% 77 40% Individual targets 95 Total, % of max 95 91 Total, DKK million Governance Summary of the remuneration report 53Novozymes A/S Accounts and performance The big picture Our business Since 2020, the Board of Directors has issued annual long-term incentive program (LTIP) grants with over- lapping three-year performance periods. This allows the Board of Directors to re-assess targets for each - ciently demanding, incentivizing and aligned with the strategy. The new LTIP for the Executive Management cover- 2021. The LTIP consists of 50% shares and 50% share options. Like the previous LTIP, the targets of organic sales growth, 40% weight on the target on - refreshed strategy and the measures of business suc- cess for the period 2021-2023. The annual LTIP cannot exceed 19 months’ base sal- ary. Further, the program includes a maximum-value clause allowing the Board of Directors to choose to limit the total allocation of stock options and stock if the intrinsic value exceeds twice the full annual con- ditional grant. The members of the Executive Management have contracts of employment containing standard - panies, including the periods of notice that both par- ties are required to give and noncompetition clauses. terminated by the company without any misconduct - cer has a notice period of 12 months. In addition to termination compensation of 12 months’ base salary and pension contributions. Further details on the Executive Management’s remuneration and their shareholdings etc. can be found in the Novozymes Remuneration Report 2021. Remuneration of senior leadership The remuneration of Novozymes’ senior leadership (185 vice presidents and directors) is consistent with the general remuneration policy. Incentive programs for vice presidents and directors have been estab- lished for the 2021-2023 period. The programs follow the same mechanisms as the program for the Executive Management. Further information on the incentive programs for these employee groups can statements, which also includes an overview of out- standing stock options. Governance Summary of the remuneration report 54Novozymes A/S Accounts and performance The big picture Our business The Novozymes stock The total shareholder return was 55% in 2021, including share price appreciation of 54% and DKK 1.5 billion dividend payments made during the year. Novozymes repurchased shares worth DKK 1.5 billion thereby completing the 2021 stock buyback program. A dividend of DKK 5.50 per share has been proposed and a new stock buyback program of up to DKK 500 million will be initiated in 2022. S tock performance Novozymes total market cap reached DKK 151.5 B) increased by 54% from the closing price of DKK 349.5 at the end of 2020 to DKK 537.2 at the end of 2021. The strong share price performance together with the dividend payment of DKK 1.5 billion made during the year resulted in a total shareholder return of 55% for the year. This was the highest shareholder return average annual return (compounded) to shareholders The average daily trading volume of the stock was 410,337 shares or DKK 180 million, making it the 13th most actively traded company on Nasdaq Copenhagen, which was unchanged from 2020. Share and ownership structure The common stock consists of 282,000,000 shares all with a nominal value of DKK 2 per share. The com- mon stock is divided into 53,743,600 A shares that carry 20 votes each and 228,256,400 B shares that carry 2 votes each. Novozymes had more than 57,000 shareholders at the end of 2021, and roughly 74% of the B shares were held outside Denmark, mainly by institutional Holdings A/S, held approximately 62% of the B shares. Novo Holdings A/S held 25.5% of the total common stock in Novozymes and controlled 72.6% of the votes. Novo Holdings A/S is wholly owned by the Novo Nordisk Foundation, an independent stable base for the companies within the Novo Group A stock B stock Total Share capital (DKK) Number of shares Held by Novo Holdings A/S (%) Number of votes Voting rights (%) Held by Novo Holdings A/S (%) Share price development 2021 Dec DecNovJan Feb Mar Apr May Jun July Aug Sep Oct 80 90 100 110 120 130 140 150 160 Novozymes OMX C25 CAP Governance The Novozymes stock 55Novozymes A/S Accounts and performance The big picture Our business The Novozymes stock Ownership structure Institutional and private investors 74.5% of total shares 27.4% of votes Novo Nordisk Foundation Novo Nordisk Holding A/S 25.5% of total shares 72.6% of votes Stock buyback programs Novozymes repurchased 3,401,975 shares during the period from February 8 to August 30, as part of the DKK 1.5 billion stock buyback program for 2021. The repurchased shares were added to the treasury stock. Novozymes held 4,894,362 treasury shares, or 1.7% of the total stock capital, at the end of 2021. A new stock buyback program worth up to a total of DKK 500 million or a maximum of 5 million shares will be initiated in 2022. Dividends The Board of Directors proposes that the Annual Shareholders’ Meeting approve a dividend of DKK 5.50 per share for a total payout of DKK 1,524 mil- The Novo Nordisk Foundation is an independent Danish foundation with corporate interests. The to provide a stable base for the commercial and research activities conducted by the companies social and humanitarian purposes. Investor Relations Novozymes’ Investor Relations maintains an ongoing dialogue with sell-side equity analysts as well as dividend corresponds to a payout ratio of 48.5%, which would be a decrease from 51.9% in 2020. The proposal is in line with the previously stated plan to have a payout ratio of ~50%. If approved, the 2021 dividend will be disbursed on March 21, 2022, with March 16, 2022, as the last trading day with dividend for 2021. Novozymes repurchased 3,401,975 shares from February 8 to August 27, as part of the DKK 1.5 billion stock buyback program for 2021 A list of the current analysts covering Novozymes can be found at Investors.novozymes.com. Total shareholder return including dividends % 201920182017 2020 2021 47% -16% 14% 9% 55% Ownership by geography (B shares) Denmark 26% UK & Ireland 32% Rest of Europe 17% North America 21% Rest of world 4% Governance The Novozymes stock 56Novozymes A/S Accounts and performance The big picture Our business Accounts and performance Governance Our business The big picture 57Novozymes A/S Accounts and performance 58 Performance and consolidated 66 Performance and consolidated environmental data 68 Performance and consolidated social and governance data 70 Notes 143 Statements 148 Financial statements for Novozymes A/S 162 Glossary 163 About the report EBIT and EBIT margin DKK million 2019 2018 2017 2020 2021 4,047 4,070 4,039 3,652 4,007 EBIT EBIT margin (%) 28.3 28.1 26.1 27.9 26.8 Sales and sales growth DKK million 2019 2018 2017 2020 2021 14,531 14,390 14,374 14,012 14,951 Sales Sales growth, organic (%) 4 4 (1) 0 6 Novozymes A/S Accounts and performance Governance Our business The big picture Sales and earnings 58 Sales Total sales in 2021 were DKK 14,951 million, corresponding to an increase of 6% organically and of 7% reported in DKK compared with 2020. lessened in 2021, changes in consumer behavior Beverages & Human Health delivered strong was supported by recovering U.S. ethanol ethanol production in Latin America, while Processing came from strong demand for Nutrition performed much as expected. Other operating income Other operating income was DKK 188 million, compared with DKK 56 million in 2020. Other operating income in 2021 was positively impacted by DKK 62 million from the contingent related royalty, and DKK 60 million from the sale EBITDA up from DKK 4,918 million in 2020. Depreciation, amortization and impairment losses were DKK 1,416 million in 2021, up 12% from DKK 1,266 million in 2020. The increase was mainly due to amortization related to the PrecisionBiotics Group and the Microbiome Labs acquisitions. EBIT and EBIT margin ended at 26.8%, up from 26.1% in 2020. in 2021 was around 27%. margin was 57.7%, up from 56.0% in 2020. The increase was mainly due to improved production currency developments. Operating costs million. Operating costs as a percentage of sales • Sales and distribution costs increased by 22%, • Research and development costs increased by • Administrative costs increased by 16%, accounting for 6% of sales. The increase in operating costs in 2021 was mainly due to increased commercial activities, the reorganization within research and development. compared with DKK 127 million in 2020. Novozymes realized a DKK 4 million currency hedging/revaluation net loss for 2021, compared Tax in 2020. Earnings per share (diluted) compared with DKK 10.02 in 2020. Sales and earnings Sales and earnings Novozymes A/S Accounts and performance Governance Our business The big picture Sales and earnings 59 Consolidated statements of income Income statement DKK million Note Revenue 14,951 14,012 (6,328) (6,159) 8,623 7,853 Sales and distribution costs (1,936) (1,581) Research and development costs (2,009) (1,937) Administrative costs (859) (739) Other operating income, net 188 56 4,007 3,652 Share of result in associates (4) (4) Financial income 174 26 Financial costs (253) (153) 3,924 3,521 Tax (779) (695) 3,145 2,826 Shareholders of Novozymes A/S 3,146 2,825 (1) 1 3,145 2,826 Proposed dividend per share, DKK 5.50 5.25 Earnings per share, DKK 11.32 10.07 Earnings per share, diluted, DKK 11.23 10.02 Statement of comprehensive income DKK million Note 3,145 2,826 income statement: Currency translation adjustments 723 (786) Tax on currency translation adjustments (2) 1 Currency translation adjustments 721 (785) Fair value adjustments (173) 154 Tax on fair value adjustments 38 (34) (31) (15) 7 3 (159) 108 Other comprehensive income 562 (677) Comprehensive income 3,707 2,149 Shareholders of Novozymes A/S 3,706 2,149 1 - 3,707 2,149 Cash flow from operating activities DKK million 2019 2018 2017 2020 2021 4,063 3,679 3,196 4,355 4,062 * The comparatives for 2017-2018 have not been restated for IFRS 16 Net investments DKK million 2019 2018 2017 2020 2021 1,665 1,388 991 936 11.5 9.6 6.9 6.7 7.5 1,116 Net investments Net investments (% of sales) Free cash flow before acquisitions DKK million 2019 2018 2017 2020 2021 2,398 2,291 2,205 3,419 2,946 Novozymes A/S Accounts and performance Governance Our business The big picture 60 improved earnings quality. The change in net Net investments Net investments excluding acquisitions were DKK Net investments in property, plant and equipment amounted to DKK 1,071 million, compared with DKK 794 million in 2020, partly due to the investment in the new production line in Blair, Financing activities negative at DKK 1,586 million, compared with a program of DKK 1,500 million and dividend net borrowings. Cash position Undrawn committed credit facilities were DKK acquisitions and divestments divestments amounted to DKK 2,946 million, decrease of 14% was mainly driven by the activities and an increase in net investments. acquisition of Microbiome Labs and Synergia Life Sciences. Novozymes A/S Accounts and performance Governance Our business The big picture 61 DKK million Note 3,145 2,826 2,198 2,220 (627) (951) 18 10 (52) (62) 4,682 4,043 (574) 395 (556) 181 contract liabilities 518 (265) (8) 1 4,062 4,355 Investments Purchase of intangible assets (169) (146) Purchase of property, plant and equipment (1,071) (794) Sale of property, plant and equipment 124 4 Business acquisitions, divestments and purchase of (1,631) (588) (2,747) (1,524) 1,315 2,831 DKK million Note Financing Borrowings 2,144 999 Repayment of borrowings (1,283) (434) 313 (293) Repayment of lease liabilities (103) (111) Shareholders: (1,500) (1,500) 309 508 Dividend paid (1,466) (1,483) (1,586) (2,314) (271) 517 included in cash and cash equivalents 53 (47) Net change in cash and cash equivalents (218) 470 1,181 711 963 1,181 Net working capital % of sales 2019 2018 2017 2020 2021 Inventories Receivables Net working capital Payables and deferred income -30 -20 -10 0 10 20 30 ROIC and average invested capital DKK million 2019 2018 2017 2020 2021 12,732 25.6 13,417 15,038 15,301 16,606 24.2 21.1 18.9 19.3 Average invested capital ROIC (%) Net interest-bearing debt (NIBD) and net interest-bearing debt-to-EBITDA DKK million 2019 2018 2017 2020 2021 1,642 2,535 4,049 3,871 0.3 0.5 0.8 0.8 1.0 5,225 NIBD NIBD/EBITDA Novozymes A/S Accounts and performance Governance Our business The big picture Balance sheet and financial position 62 Total assets Total assets increased from DKK 20,510 million at driven by net investments, an increase in net Microbiome Labs and Synergia Life Sciences, Invested capital million in 2020 to DKK 18,118 million in 2021. This was mainly a result of an increase in intangible assets from the acquisitions of Microbiome Labs and Synergia Life Sciences. million, dividend payments of DKK 1,466 million and the acquisitions of Microbiome Labs and Synergia Life Sciences as well as the investment ROIC from 18.9% in 2020. The increase was mainly following the PrecisionBiotics Group, Microbiome Labs and Synergia Life Sciences acquisitions. due to an increase in inventories and trade payables. Novozymes A/S Accounts and performance Governance Our business The big picture Balance sheet and financial position 63 Assets DKK million Note 5,024 2,554 Land and buildings 3,980 3,853 Plant and machinery 4,290 4,136 Other equipment 1,039 941 Assets under construction 876 682 Deferred tax assets 1,637 1,339 30 21 29 33 Other receivables 39 40 Non-current assets 16,944 13,599 2,992 2,361 Trade receivables 2,948 2,549 40 6 Tax receivables 286 460 Other receivables 519 212 75 119 963 1,181 7,823 6,888 Assets held for sale - 23 Current assets 7,823 6,911 Assets 24,767 20,510 DKK million Note 564 570 Reserves and retained earnings 11,263 10,663 11,827 11,233 379 11 Total equity 12,206 11,244 Share purchase liability 717 - Deferred tax liabilities 1,337 1,204 Provisions 153 115 543 146 Lease liabilities 360 386 Deferred income 98 - 3,680 3,254 6,888 5,105 Lease liabilities 122 136 Provisions 21 90 2,139 1,309 Trade payables 1,490 1,100 129 67 Deferred income 34 22 Tax payables 486 336 Other liabilities 1,252 1,101 5,673 4,161 12,561 9,266 24,767 20,510 DKK million Stock buyback Compre- hensive income Equity Jan. 1, 2021 Dividend Other Equity Dec. 31, 2021 11,244 3,707 (1,466) 221 12,206 Movements in equity 2021 (1,500) Payout ratio and dividend per share % 2019 2018 2017 2020 2021 42.3 44.6 4.50 5.00 5.25 5.25 46.8 51.9 5.50 48.5 Payout ratio Dividend per share Shareholder return DKK million 2019 2018 2017 2020 2021 3,317 3,439 3,483 2,966 3,024 Stock buyback program Dividend * Dividend for 2021 is the proposed dividend. Novozymes A/S Accounts and performance Governance Our business The big picture Equity and shareholder return 64 Equity and shareholder return Equity million, up from DKK 11,244 million at December in 2021. Equity ratio Return on equity points from 24.9% in 2020. The increase was a Dividend The Board of Directors proposes that the Annual Shareholders’ Meeting approve a dividend of DKK corresponding to an increase of 5% compared with 2020. This will result in an expected total dividend payment of approximately DKK 1,524 million, corresponding to a payout ratio of 48.5%. shares at an aggregate transaction value of DKK initiated on February 8, 2021, and completed on and to meet obligations arising from employee Equity and shareholder return Novozymes A/S Accounts and performance Governance Our business The big picture Equity and shareholder return 65 Consolidated statement of equity Attributable to shareholders of Novozymes A/S DKK million Currency translation adjustments hedges Retained earnings Total Non-controlling interests Total equity 570 (727) 127 11,263 11,233 11 11,244 3,146 3,146 (1) 3,145 Other comprehensive income for the year 719 (159) 560 2 562 Total comprehensive income for the year 719 (159) 3,146 3,706 1 3,707 (1,500) (1,500) (1,500) 309 309 309 (6) 6 - - Dividend (1,465) (1,465) (1) (1,466) 75 75 75 (717) (717) 368 (349) Tax related to equity items 186 186 186 Changes in equity (6) 719 (159) 40 594 368 962 564 (8) (32) 11,303 11,827 379 12,206 582 57 19 10,810 11,468 12 11,480 2,825 2,825 1 2,826 Other comprehensive income for the year (784) 108 (676) (1) (677) Total comprehensive income for the year (784) 108 2,825 2,149 - 2,149 (1,500) (1,500) (1,500) 508 508 508 (12) 12 - - Dividend (1,482) (1,482) (1) (1,483) 53 53 53 Tax related to equity items 37 37 37 Changes in equity (12) (784) 108 453 (235) (1) (236) 570 (727) 127 11,263 11,233 11 11,244 The proposed dividend of approximately DKK million for 2021 is included in Retained earnings. 1,524 Five-year operational emissions (CO 2 -eqv.) 1,000 tons 2019 2018 2017 2020 2021 447 472 365 268 288 Scope 2 Scope 3 Scope 1 Energy by source 2021 (2020) Electricity conventional 18% (18%) Electricity renewable 38% (39%) Steam 22% (22%) Fuels conventional 16% (15%) Heat conventional 2% (2%) Heat renewable 3% (3%) Fuel and heat renewable 1% (1 %) Novozymes A/S Accounts and performance Governance Our business The big picture Environmental performance 66 Environmental performance led to increases in production, and in the consumption of energy and water compared to 2020. Novozymes strives to decouple environmental targets and metrics that measure and drive our sustainability performance. Climate change 2 emissions were 288,000 tons in 2021, a 7% increase from 268,000 tons in 2020. Energy 2020. Renewable sources accounted for 42% of the in 2020. Of the total electricity the renewable part accounted for 68% in 2021. Water Novozymes’ water consumption increased by 7%, from 7,998,000 m in 2021. The total volume of wastewater generated in 2021 increased by 2%. Waste across our global production sites increased to 62%, from 48% in 2020. The improved recycling rate was the result of a large number of waste initiative launched in 2020. Environmental compliance The number of breaches of regulatory limits recorded worldwide in the Novozymes 2020. Most of these breaches were related to wastewater treatment. Novozymes is addressing neighbor complaints in 2021, compared with ten in 2020, mostly related to minor temporary odor and noise issues. Environmental performance Novozymes A/S Accounts and performance Governance Our business The big picture Environmental performance 67 Consolidated environmental data Note n.a. n.a. Number of employees 2019 2018 2017 2020 2021 6,245 6,427 6,125 6,185 6,527 No. of employees Frequency of injuries (per million working hours) 2019 2018 2017 2020 2021 1.6 2.4 0.9 1.3 1.5 Novozymes A/S Accounts and performance Governance Our business The big picture Social and governance performance 68 Social and governance performance employees was 6,527, compared with 6,185 in 2020. The increase was partly related to the acquisitions of Microbiome Labs and Synergia Life Sciences. compared to 1.9% in 2020. The frequency of occupational injuries increased 2020. families, which comprise the number of inventions that have active patent applications or active patents. The number of active patent high number of expired and abandoned patents. Business ethics to business integrity. During the year, 99% of Novozymes’ employees in scope completed business integrity training, on par with 2020. As in 2020, there were no breaches of competition law in 2021. Customer engagement Novozymes conducts an annual customer Promoter Score (NPS), which is assessed on a relationships with our customers. Business Ethics Novozymes´ employees in scope completed training. Novozymes promotes equal opportunities and (directors and higher) were women compared to Innovation Novozymes is committed to delivering bioinnovation and launched 14 new products in 2021. Social and governance performance Novozymes A/S Accounts and performance Governance Our business The big picture Social and governance performance 69 Consolidated social and governance data Note No. Innovation New products Active patent families Business ethics Breaches of competition law Customer engagement n.a. Responsible sourcing n.a. Accounts and performance Governance Our business The big picture Notes 70Novozymes A/S Notes 1 Basis of reporting 1.2 Basis of reporting 2 2.1 Segment 2.2 Revenue 2.4 Research and development costs 2.5 Other operating income, net 2.6 Tax 2.7 Earnings per share 3 Invested capital test of goodwill 4 4.2 Trade receivables and contract assets 4.4 Other liabilities 4.5 Assets held for sale 5 management 5.2 Financial income and Financial costs 5.4 Derivatives – hedge accounting 5.6 Financial assets and liabilities by category 6 6.1 Management remuneration 6.4 Related party transactions 6.6 Fees to statutory auditors 6.9 Group companies 7 Environmental data 7.2 Energy 7.4 Waste 7.5 Environmental compliance 7.6 Bioethics & biodiversity 7.7 Product stewardship 8 Social and governance data 8.1 Labor practices & human rights 8.4 Business ethics 8.7 Responsible sourcing Notes Accounts and performance Governance Our business The big picture Notes 71Novozymes A/S 1 Basis of reporting 1.1 1.2 Basis of reporting Notes 72Novozymes A/S Accounts and performance Governance Our business The big picture Basis of reporting impacted Accounts and performance in 2021. for alternative and healthier sources of protein. The capital investment of roughly DKK 2 billion will span over the Reference is made to Note 3.2. a broad range of proprietary microbiome solutions securing an Both acquisitions are related to the BioHealth business, which also comprises the 2016 acquisition of Organobalance GmbH, the 2020 acquisition of PrecisionBiotics Group along with research and development activities based on Novozymes’ existing technology. world. Reference is made to Notes 3.5, 3.6 and 6.5 for a description of statements. Strengthening and accelerating our Investing in Advanced Protein Solutions Basis of reporting Notes 73Novozymes A/S Accounts and performance Governance Our business The big picture 1.2 Basis of reporting This section provides an overview of Novozymes’ principal accounting policies, the critical accounting estimates and judgments applied, a interpretations. The symbols I/S , B/S and ESG show which amounts in the notes can be found in the income statement, the balance sheet, and in environmental data and social and governance data respectively. The accounting policies described below apply to Accounting policies and critical accounting estimates and judgments are described in the notes to which they relate to enhance understanding. The descriptions of accounting policies in the notes form part of the overall description of accounting policies. ACCOUNTING POLICIES Consolidation Novozymes A/S, prepared in accordance with Group accounting policies. The consolidated Financial statements of foreign subsidiaries are translated into DKK at the exchange rates prevailing at the reporting date for assets and liabilities, and at average exchange rates for income statement items. from translation using the exchange rate prevailing at the reporting date, are recognized in Other comprehensive income: • Translation of foreign subsidiaries’ net assets at the beginning of the year • Translation of foreign subsidiaries’ income statements from average exchange rates iXBRL reporting the European Single Electronic Format (‘ESEF’) and The Novozymes Report is therefore prepared in the XHTML format that can be displayed in a standard browser. The primary statements in the using inline eXtensible Business Reporting Language (iXBRL). The iXBRL tags comply with the ESEF taxonomy, which is included in the ESEF items of a uniform nature and subsequently eliminating intercompany transactions, internal disclosed separately. governance data follows the same principles as Translation of foreign currencies exchange rates at the transaction date and the reporting date are recognized as Financial income or Financial costs. Foreign currency transactions are translated into using the exchange rates prevailing at the transaction date. Monetary items denominated in foreign currencies are translated into the functional currency at the exchange rates prevailing at the reporting date. taxonomy has been created. Extensions are anchored to elements in the ESEF taxonomy, except for extensions which are subtotals. The Novozymes Report submitted to the Danish Financial Supervisory Authority consists of the XHTML document together with certain technical from similar measures in other companies, and may thus not be comparable. The Novozymes Report are: • Organic sales growth • Operating costs provided in the Glossary. Basis of reporting Notes 74Novozymes A/S Accounts and performance Governance Our business The big picture 1.2 Basis of reporting (continued) Basis of reporting Critical accounting estimates and judgments statements and the environmental, social and estimates and assumptions that can have a and reported amounts of assets, liabilities, income, expenses and related disclosures. The estimates and underlying assumptions are based DKK million Note Exchange gains/(losses) Share of loss in associates DKK million Note Property, plant and equipment Provisions Derivatives Tax, net Invested capital Average invested capital ROIC percentage of average invested capital. on historical experience and various other factors. The estimates and underlying assumptions are estimates may be necessary if there are changes in the circumstances on which the estimate was based, or if more detailed information becomes available. Such changes are recognized in the period in which the estimate in question is revised. Critical accounting estimates Potential impact from Fair value measurement Estimate 4.2 Trade receivables and Allowances for doubtful trade Estimate The application of the Group’s accounting the amounts recognized in the consolidated required in particular when assessing the substance of transactions that have a complicated structure or legal form. The critical accounting estimates and judgments ROIC Notes 75Novozymes A/S Accounts and performance Governance Our business The big picture 1.2 Basis of reporting (continued) Basis of reporting Group have been prepared in accordance with as adopted by the EU and further requirements in prepared on a going concern basis and under the historical cost convention, with the exception of derivatives, securities, contingent consideration and share purchase liability, which are measured at fair value. The accounting policies are unchanged from last year. The consolidated environmental, social and governance data have been prepared in accordance with principles that adhere to internationally recognized voluntary reporting standards and policy initiative for businesses that are committed to aligning their operations and strategies with ten universally accepted principles in the areas of human rights, labor, the environment and disclosures. Our reporting and materiality assessments were The principles are unchanged from last year. The Novozymes Report is based on the concept of materiality, to ensure that the content is material and relevant. aggregated with other items of a similar nature in the statements or in the notes. Novozymes unless the information is considered immaterial to The Novozymes Report. As for environmental, social and governance (ESG) matters, we disclose information on issues that disclosures in the notes include information on our management approach, targets, initiatives, and related progress. Novozymes’ materiality assessment is a systematic and rigorous process that has been allows us both to evaluate whether Novozymes has an impact on environment and society and to Basis of reporting engagement with relevant departments including Quality, Sustainability and our commercial divisions. This process results in a materiality matrix of economic and ESG issues. The matrix and it is used to guide our strategy and reporting. As a result of the materiality assessment performed in 2021, two new issues were added: Further information on diversity and inclusion are this report (see Note 8.2). to an increased focus on how companies manage practices. As a responsible corporate citizen, Novozymes continuously strive to strengthen our governance and management of these material issues. highlight some of the material issues, for which, more information, refer to www.novozymes.com/ Limited reporting scope The environmental data cover those activities that Sites with activities considered not to have a sites with limited blending and storage of products. 97% of the total Novozymes quantity of the measured environmental parameter is included in the reported numbers. governance data, companies acquired in 2021 are only included in number of employees, as appropriate procedures for recording data on other measures have not yet been established. Notes 76Novozymes A/S Accounts and performance Governance Our business The big picture 1.2 Basis of reporting (continued) interpretations not yet adopted standards and interpretations that have not yet statements for 2021. Novozymes expects to adopt the accounting standards and interpretations as they become mandatory. None of the new or amended standards or interpretations are expected Novozymes has adopted the following new or amended standards and interpretations from related rent concessions as if they where not rates to alternative interest rates without giving rise to accounting impacts that would not provide useful information to users of the The adoption of the new and amended standards on recognition, measurement or disclosures in the future periods. Basis of reporting Material issues for Novozymes Issue category Corporate focus area Innovation Compliance Partnerships & customer engagement Profitable growth Solid capital structure Supply chain security (new) Climate change & Energy Water Waste Labor practices and human rights Diversity & inclusion (new) Employee safety & wellbeing Coperate governance Business ethics Target/Flagship initiatives All Economic Environmental Governance Social Accounts and performance Governance Our business The big picture Notes 77Novozymes A/S 2 Net operating 2.1 Segment 2.2 Revenue 2.3 Employees 2.4 Research and development costs 2.5 Other operating income, net 2.6 Tax 2.7 Earnings per share Gross margin up from EBIT margin up from Organic sales Revenue 2021 (2020) Denmark 207 (175) Rest of Europe, Middle East & Africa 5,474 (5,361) North America 4,683 (4,441) Latin America 1,578 (1,280) Asia Pacific 3,009 (2,755) DKK million 14,951 (14,012) Intangible assets and property, plant and equipment 2021 (2020) Denmark 6,647 (5,790) Rest of Europe, Middle East & Africa 828 (833) North America 4,019 (3,498) Latin America 108 (101) Asia Pacific 3,607 (1,944) DKK million 15,209 (12,166) Denmark 431 (452) Rest of Europe, Middle East & Africa -32 (6) North America 517 (312) Latin America 22 (12) Asia Pacific 178 (154) DKK million Net investments 2021 (2020) 1,116 (936) Notes 78Novozymes A/S Accounts and performance Governance Our business The big picture 2.1 Segment U.S. Segment reporting reporting on revenue and expenses to the Executive Leadership Team and the Board of report on the global functional responsibility setup at Novozymes. This setup consolidates functions by type, and Management reviews the results of the Group as a whole to assess performance. Thus, there is only one operating segment. The Group operates in four geographical regions: Europe, Middle East & Africa, North America, perspective, U.S. is the largest single country, contributing ~29% of the Group’s revenue (2020: ~29%). The geographical distribution of revenue is based on the country in which the goods are delivered. For a number of customers, central deliveries are distribution of revenue may therefore vary from year to year if delivery destinations for these customers change. Most of the Group’s intangible assets and property, plant and equipment are located in Net operating profit after tax DKK 7% (8%) EUR 36% (37%) USD 35% (35%) CNY 9% (8%) Other 13% (12%) Sales by currency 2021 (2020) Sales growth 2021 M&A impact Organic growth 2020 Exchange rates 2021 DKK million (1)% 2% 6% 14,951 14,012 Notes 79Novozymes A/S Accounts and performance Governance Our business The big picture 2.2 Revenue DKK million Consumer Biosolutions Food, Beverages & Human Health Bioenergy Grain & Tech Processing Agriculture & Animal Health Revenue I/S Revenue I/S Most of Novozymes’ revenue is derived from the sale of goods to customers, with revenue being recognized when the goods are delivered. Critical accounting estimates and judgments to DKK 129 million (2020: DKK 74 million), of in 2021 (2020: DKK 5 million). Novozymes has entered into various sales agreements, including agreements where Novozymes manufactures and sells products sold to end customers is shared between the partner and Novozymes based on Recognition of revenue requires judgment and estimates by Management in connection with determining the appropriate revenue recognition as well as the timing of recognition. Net operating profit after tax Notes 80Novozymes A/S Accounts and performance Governance Our business The big picture 2.2 Revenue (continued) Novozymes produces a wide range of industrial enzymes, microorganisms and probiotics. Revenue includes the sale of goods and related services and royalties, and is recognized at an Novozymes expects to be entitled. Revenue from the straightforward sale of goods to customers is recognized when control of the goods is transferred to the customer, i.e. when goods are revenue to the extent that they are not subject to The performance obligations in the contracts are to deliver enzymes, microorganisms and probiotics to customers, and each batch delivered is considered a separate performance obligation, as each batch is distinct. Enzymes, microorganisms and probiotics are sometimes sold at a rebate. A rebate agreement can be set up in various ways, but common to all agreements is that revenue is recognized based estimated rebate. The rebates are estimated based on experience, as well as information advance. The estimated rebates are reassessed at the end of each reporting period. Returns of return. No revenue is recognized for the goods expected to be returned, as a refund liability is recognized. Estimates of the expected level of returns are based on analysis of historical returns products. These estimates are updated at the end of each reporting period. As the goods returned are usually scrapped, no inventory asset is recognized. Novozymes has entered into partnerships where Novozymes manufactures and sells products to a customers is shared between the partner and sharing mechanisms. Accounting policies Revenue from these arrangements consists of sales of products to the partner and the shared are delivered to the other contracting party. This on insights, experience and other input factors. asset or contract liability until an invoice is Commission Novozymes has entered into commission third parties in return for a commission on realized sales. Revenue from such agreements is recognized when the goods are delivered, as the nature of the performance obligation is to Other Revenue collected on behalf of third parties is not recognized as revenue. Novozymes’ obligation to provide a refund for products that are not of the agreed quality or standard warranty terms is recognized as contract liabilities. A trade receivable is recognized when the customer obtains control of the goods and an invoice is issued, as this is the point in time when the consideration becomes unconditional and only the passage of time is required before payment is due. Typical payment terms are around 60 days. deferred revenue and liabilities for refund goods. The contract liabilities are recognized as revenue as the performance obligations under the Net operating profit after tax Notes 81Novozymes A/S Accounts and performance Governance Our business The big picture 2.3 Employees DKK million Wages and salaries Other social security costs Other employee costs Employee costs Recognized in the income statement under the following items: Sales and distribution costs Research and development costs Administrative costs Employee costs Employee costs in 2021 included severance costs related to the consolidation of research and development activities of DKK 41 million. Employee costs in 2020 included severance costs of DKK 87 million related to organizational changes, of which DKK 65 million was related to changes to the Executive Leadership Team. Net operating profit after tax Denmark Rest of Europe, Middle East & Africa Number of employees end of year & employee costs 2021 (2020) Employees: 214 (203) Cost: 157 (149) DKK million Employees: 2,787 (2,646) Cost: 2,276 (2,058) DKK million North America Employees: 1,238 (1,185) Cost: 1,054 (964) DKK million Latin America Employees: 321 (318) Cost: 93 (88) DKK million Asia Pacific Employees: 1,967 (1,833) Cost: 533 (472) DKK million Number of employees 6,527 (6,185) Total costs 4,113 (3,731) Notes 82Novozymes A/S Accounts and performance Governance Our business The big picture 2.3 Employees (continued) No. Average number of employees in the Group 6,240 6,099 number of employees ESG Senior management Management Professional Administrative Process operators ESG The number of employees is derived from contractual obligations, but does not include employees on unpaid leave, temporary replacements, student interns, agency employees, The average number of employees is calculated as the average of the number of permanent employees at the end of each month. presidents, vice presidents and directors. Management comprises middle managers and specialists. Professional comprises employees Accounting policies leaders. Process operators comprises operators Net operating profit after tax Employee gender distribution 2021 (2020) Women 39% (38%) Men 61% (62%) Senior management gender distribution 2021 (2020) Women 34% (33%) Men 66% (67%) Notes 83Novozymes A/S Accounts and performance Governance Our business The big picture 2.4 Research and development costs DKK million Employee costs Amortization and impairment losses, intangible assets Depreciation and impairment losses, property, plant and equipment Total research and development costs As a percentage of revenue development of new products, none of the development projects met the critieria for capitalization in 2021 and 2020. (2020: 12 new products). New products comprise products with new or improved characteristics. comprise the number of inventions for which Novozymes had one or more active patent Research and development costs primarily comprise employee costs, internal and external costs related to the development of new products and to the ongoing optimization of production processes for existing products, and amortization, depreciation and impairment losses related to intangible assets and property, plant and equipment used in research and development activities. Research costs are expensed as incurred, while development costs are expensed as incurred unless the criteria for capitalization are deemed to have been met. agreements is recognized in Other operating income. Accounting policies Net operating profit after tax DKK million collaborations Other secondary income, net Net gain from sale of buildings held for sale by DKK 60 million due to a realized gain from the sale of an administration building and by DKK 62 million from the contingent consideration relating where entitlement has been obtained due to completion of patent registrations. Other operating income comprises income that is research and collaboration agreements, government grants, sale of licenses, patents, etc., and other income of a secondary nature in Accounting policies by DKK 42 million from the contingent consideration relating to the divestment of a relation to the main activities of the Group. This respect of damages, outlicensing, etc., and gains and losses on divestments. I/S I/S Notes 84Novozymes A/S Accounts and performance Governance Our business The big picture Tax in the income statement DKK million Tax in the income statement I/S Other adjustments 2.6 Tax companies and distributors, while production is located in a few countries. This leads to transactions between group companies. internal transfer prices for these transactions. This because the transactions are subject to judgment of bilateral advance pricing agreements (APAs). Bilateral APAs As stated in our tax policy, Novozymes proactively engages in bilateral APAs negotiated at competent authority level to increase predictability and to intercompany transaction value within the Novozymes Group is covered by bilateral APAs. An APA is an agreement between a taxpayer and a tax authority determining the transfer pricing methodology for pricing the taxpayer’s international transactions for future years. The methodology is applied for a certain period conditions (called critical assumptions). An APA can be unilateral or bilateral. Novozymes only enters into bilateral APAs, meaning that they are negotiated between the competent tax authorities of the two countries involved in the transaction. An APA provides assurance with respect to the tax outcome of our international transactions, by determining in advance arm’s length pricing and the pricing methodology to be applied to the international transactions. Novozymes has entered into bilateral APAs with the tax authorities in the countries where internal Joint taxation Novozymes A/S and its Danish subsidiaries are jointly taxed with the Danish companies of the covers withholding taxes in the form of dividend tax, royalty tax and interest tax. The Danish companies are jointly and individually liable for the joint taxation liability. Any subsequent adjustments to income taxes and withholding taxes may increase the liability. Tax for the individual companies is allocated in full on the basis of the expected taxable income. Tax in the income statement Transfer of intellectual property from Switzerland tax rate of 2.7% in 2021 (2020: 2.9%). This is Net operating profit after tax Critical accounting estimates and judgments countries, the calculation of the Group’s total tax charge in the income statement inherently disputes with authorities in various countries may occur, and Management’s assessment is applied to assess the possible outcome of such disputes. Payments in respect of tax liabilities for an accounting period result from payments on items. As a result, there may be substantial recognized in the consolidated income statement and actual tax payments. Notes 85Novozymes A/S Accounts and performance Governance Our business The big picture 2.6 Tax (continued) DKK million Tax related to business acquisitions Tax related to the income statement Tax on equity items Tax paid for the current year, net Tax receivables B/S Tax payables B/S Of which due within 12 months Total income taxes paid DKK million Tax related to the income statement Tax on equity items Deferred tax assets B/S Deferred tax liabilities B/S The tax value of the unrecognized share of tax expire amounted to DKK 22 million (2020: DKK 25 million). Net operating profit after tax Deferred tax Deferred tax assets DKK million property, plant and equipment forwards Other Deferred tax at B/S Notes 86Novozymes A/S Accounts and performance Governance Our business The big picture 2.7 Earnings per share DKK million Weighted average number of shares in circulation Earnings per share, DKK Earnings per share, diluted, DKK attributable to shareholders of Novozymes A/S divided by the average number of shares in circulation. Diluted earnings per share is calculated as net A/S divided by the average number of shares in options “in the money”. Accounting policies Net operating profit after tax liability, change in deferred tax for the year and possible adjustments relating to prior years, is recognized in the income statement, unless it relates to items recognized either in Other comprehensive income or directly in equity. Uncertain tax positions are assessed individually and recognized if it is probable that an amount will be paid or received. Deferred tax is measured using the balance sheet liability method and carrying amount and the tax base of assets and liabilities. No deferred tax is recognized for goodwill, unless amortization of goodwill for tax purposes is allowed. The tax value of tax loss deferred tax to the extent that the tax losses can be expected to be utilized in the future. Deferred tax is measured according to current tax rules and at the tax rate expected to be in force in deferred tax due to tax rate changes are recognized in the income statement, unless they relate to items recognized either in Other comprehensive income or directly in equity. Accounting policies 2.6 Tax (continued) Accounts and performance Governance Our business The big picture Notes 87Novozymes A/S 3 Invested capital 3.1 3.2 Property, plant and equipment 3.3 Leases 3.4 Provisions 3.5 Business acquisitions 3.6 Increase in average invested capital of DKK million Net investments excl. acquisitions up from DKK 936 million in 2020 to DKK million ROIC up from Notes 88Novozymes A/S Accounts and performance Governance Our business The big picture DKK million licenses and Completed IT development projects IT development projects in progress Total Additions from business acquisitions Additions during the year Disposals during the year Transfers to/(from) other items Amortization and impairment losses at Amortization during the year Amortization and impairment losses at B/S Critical accounting estimates and judgments impairment of the Group’s intangible assets. This requires judgment in relation assumptions in the Group’s impairment model. value in use is estimated and compared with the carrying amount. The calculation of value in use is based on the discounted parameters are the expected revenue streams and the rate used to discount the of intangible assets through business acquisitions (2020: DKK 797 million), of which DKK 1,709 (technology), customer relationships and brands Impairment loss has been recognized in Research and development costs. patents was recognized and included in Research and development cost. The impaired asset was part of a project that was terminated, and the An impairment test of goodwill of Novozymes' entire Group, as cost bases of the are used to determine whether impairment of goodwill exists (2020: no impairment). Recognition of amortization and impairment losses by function 2021 (2020) DKK million Cost of goods sold 92 (82) Sales and distribution 50 (14) Research and development 184 (154) Administration 39 (34) 365 (284) Notes 89Novozymes A/S Accounts and performance Governance Our business The big picture (continued) DKK million licenses and Completed IT development projects IT development projects in progress Total Additions from business acquisitions Additions during the year Disposals during the year Transfers to/(from) other items Amortization and impairment losses at Amortization during the year Disposals during the year Amortization and impairment losses at B/S Notes 90Novozymes A/S Accounts and performance Governance Our business The big picture (continued) measured at cost less accumulated amortization development projects in progress are not subject to amortization. capitalized if incurred with a view to developing new and improved systems. assets, as follows: development assets are amortized over a are amortized over their useful lives. The normally identical to the patent period. Licenses are amortized over the agreement years. Expected useful lives are reassessed regularly. The Group regularly reviews the carrying amounts whether there is an indication of an impairment loss. An impairment loss is recognized to the extent that the asset’s carrying amount exceeds losses are reversed only to the extent of changes in the assumptions and estimates underlying the impairment calculation. Goodwill is tested for impairment annually or whenever there is an indication that it may be impaired. Accounting policies Recognition of depreciation and impairment losses by function 2021 (2020) DKK million Cost of goods sold 762 (712) Sales and distribution 32 (30) Research and development 163 (161) Administration 94 (79) 1,051 (982) Notes 91Novozymes A/S Accounts and performance Governance Our business The big picture DKK million Land and Plant and machinery Other equipment Assets under construction Total Additions from business acquisitions Additions during the year Disposals during the year Transfers to/(from) other items Depreciation and impairment losses at Depreciation for the year Disposals during the year Transfers to/(from) other items Depreciation and impairment losses at B/S Capitalized interest and pledges was capitalized under Additions during the year Land and buildings with a carrying amount of pledged as security to credit institutions in respect of mortgage loans expiring in 2029 and Impairment goods sold (2020: no impairment losses). property, plant and equipment amount to DKK Novozymes is committed to establishing the new The capital investment of roughly DKK 2 billion the second half of 2021 and with expected investment activities are planned for 2022 and incurred in 2021. The contractual obligations to third parties relating to property, plant and equipment related to the above production line amounted to DKK Notes 92Novozymes A/S Accounts and performance Governance Our business The big picture (continued) Property, plant and equipment is measured at cost less accumulated depreciation and impairment losses. Borrowing costs in respect of construction of major assets are capitalized. over the expected useful lives of the assets, as follows: The residual values and useful lives of the assets are reviewed on an annual basis and adjusted if necessary at each reporting date. The Group regularly reviews the carrying amounts of its property, plant and equipment to determine whether there is any indication of impairment in recoverable amount of the asset is estimated in order to determine the extent of any impairment estimated to be lower than its carrying amount, the carrying amount is reduced to the recoverable the extent of changes in the assumptions and estimates underlying the impairment calculation. Accounting policies DKK million Land and Plant and machinery Other equipment Assets under construction Total Additions from business acquisitions Additions during the year Disposals during the year Transfers to/(from) other items Depreciation and impairment losses at Depreciation for the year Disposals during the year Transfers to/(from) other items Depreciation and impairment losses at B/S Notes 93Novozymes A/S Accounts and performance Governance Our business The big picture 3.3 Leases DKK million Land and buildings Plant and machinery Other equipment Carrying amount of lease assets DKK million Less than 1 year Between 1 and 5 years More than 5 years DKK million Amounts recognized in the income statement Depreciation of lease assets per asset class Land and buildings Plant and machinery Other equipment Depreciation of lease assets Additions to the lease assets during 2021 amounted to DKK 102 million (2020: DKK 58 million). Lease assets contract contains a lease, a lease asset is recognized. Lease assets are initially measured at the present value of future lease payments, plus the cost of obligations to refurbish the asset. payments depending on an index or a rate and the exercise price of purchase options that are reasonably certain to be excercised. line method over the shorter of the expected lease term and the useful life of the underlying asset. Lease assets are tested for impairment whenever there is an indication that the assets may be impaired. Lease assets are depreciated as follows: recognized as expenses in the income statement Novozymes’ portfolio of leases covers leases of land, buildings and other equipment such as cars and transportation containers. Lease liabilities are initially recognized at the present value of future lease payments including payments from extension or purchase options that are considered reasonably certain to be exercised. The lease liability is measured using the implicit borrowing rate in the contracts or, where this is not available, the marginal borrowing rate in the countries in which Novozymes operates. Novozymes applies a single discount rate to portfolios of leases in the countries in which Novozymes operates based on contract currency and loan periods. remeasured. For building leases, lease terms are strategic importance into consideration. building leases and building leases with extension options. Lease terms of such agreements are estimated based on the strategic importance of the buildings and the estimated time frame necessary to vacate the premises. The estimated lease term is reassessed at each reporting date. The estimated lease terms for such contracts do not exceed 12 years. Accounting policies Notes 94Novozymes A/S Accounts and performance Governance Our business The big picture 3.4 Provisions DKK million Dismantling - ration Legal and other Total and resto- ration Legal and other Total Additions from business acquisitions Additions during the year Reversals during the year Utilization during the year Recognized in the balance sheet as follows: B/S B/S Dismantling and restoration Dismantling and restoration relates to estimated future costs of environmental restoration. Novozymes aims for its production sites not to have a negative environmental impact. These liabilities relate to established circumstances, and the costs are expected to be incurred either when concrete measures are implemented or when a site is vacated. The expected costs and timing are inherently uncertain. Novozymes is involved in a number of ongoing legal disputes, and provisions are made for the estimated costs based on a current evaluation of Management’s opinion, the outcomes of these cases are not expected to give rise to any obligations. Additions from business acquisitions of DKK 50 million is related to the acquisition of Synergia Life Sciences. related royalty was recognized in Other operating income. The remaining consideration was reversed because certain patent registrations were not obtained in 2021. only a minor amount, as most of Novozymes’ covering approximately 99% of employees. These obligations are mainly expected to be incurred over a relatively long period of time. Provisions are recognized where a legal or constructive obligation has been incurred as a result of past events and it is probable that it will Provisions are measured at the present value of the expected expenditure required to settle the obligation. Accounting policies Notes 95Novozymes A/S Accounts and performance Governance Our business The big picture 3.5 Business acquisitions Acquisitions in 2021 DKK million Synergia Life Sciences Assumed fair values of acquired assets and liabilities are as follows: Property, plant and equipment Trade and other receivables Deferred tax liabilities, net Financial and other liabilities Acquired net assets Purchase price: Deferred consideration Total purchase price Goodwill Less cash and cash equivalents in acquired business 1. There are only minor changes to the opening balance as presented in The Novozymes Report 2020. 2. Excess Earnings Method (MEEM) method The purchase agreement includes a contingent consideration of up to DKK 825 million at the acquisition date. The consideration is contingent on the achievement of sales targets for 2022 and is recognized at the anticipated fair value of DKK probable sales estimates in 2022 discounted at a rate of 8%. The contribution from Microbiome Labs would Novozymes Report 2020. The transaction costs incurred in 2020 amounted to DKK 29 million and are included in Sales and distribution costs. Critical accounting estimates and judgments Fair value measurement of the acquired assets and liabilities as well as contingent estimates and use assumptions, as The determined fair values are associated with uncertainty and may be subject to subsequent adjustments. shares in Microbiome Labs. Microbiome Labs probiotic and microbiome solutions targeting gastrointestinal, immune, metabolic and cognitive the company’s own supplement brands and in private label products. The branded products are sold exclusively through the company’s access to predominately consisting of medical doctors, nutritionists and naturopaths. By acquiring Microbiome Labs, Novozymes added a broad range of proprietary microbiome solutions to its human health activities. The acquisition also created an attractive entry point million is attributable to expected synergies with Novozymes’ existing business operations and technologies within probiotics and enzymes for human health. The goodwill is tax deductible. The following valuation techniques have been assets acquired: Notes 96Novozymes A/S Accounts and performance Governance Our business The big picture 3.5 Business acquisitions (continued) assets acquired and the liabilities and contingent liabilities assumed are recognized at their fair values at the acquisition date. The consideration transferred includes the fair value at the acquisition date of any contingent consideration arrangement. is recognized either at fair value or at the acquisition basis. Goodwill may subsequently be adjusted for changes in the fair value of the consideration transferred and/or changes in the fair value of the changes relate to facts and circumstances present at the acquisition date. Acquired companies are consolidated from the date of acquisition. Accounting policies Synergia Life Sciences On December 10, 2021, Novozymes acquired 60% of the shares in Synergia Life Sciences. Synergia Life Sciences is a leading player within Sciences has a global footprint and adds strong developing and manufacturing capabilities in the producer and supplier to Microbiome Labs, which was acquired by Novozymes early in 2021. complementary enabler to support growth in Novozymes’ BioHealth platform. The acquisition that strengthens Novozymes’ human health business Goodwill of DKK 507 million is attributable to expected synergies with Novozymes’ existing business operations and technologies within spore probiotics for human health and is highly synergistic to the previous acquisition of Microbiome Labs within the human health business. The goodwill is not tax deductible. The fair value and allocation of acquired assets, valuations. The following valuation techniques have been applied in the fair value assessment of method Excess Earnings Method (MEEM) The remaining 40% of the shares in Synergia Life proportionate share of the acquired net million. The remaining 40% is to be acquired in 2025. Reference is made to Note 6.5 to the The purchase price includes a deferred consideration of DKK 77 million, which is expected to be paid in 2022. Life Sciences to the consolidated income statement are immaterial for the reporting period. On a pro forma basis, if the acquisition Synergia Life Sciences would have contributed The transaction costs incurred in 2021 amounted to DKK 46 million and are included in Sales and distribution costs. Acquisition in 2020 in PrecisionBiotics Group at a purchase price of DKK 798 million. PrecisionBiotics Group holds a leading position within probiotics for human gut health and is well positioned with several expertise within clinical development, upscaling and commercialization and is well situated in within human gut health. The purchase price allocation led to recognition of goodwill of DKK 158 million, intangible assets expected synergies with Novozymes’ existing business operations and technologies within probiotics and enzymes for human health. The goodwill is not tax deductible. The purchase agreement includes a contingent consideration of up to DKK 298 million at the acquisition date. The consideration is contingent and is recognized at the anticipated fair value of DKK 146 million at the acquisition date. Fair PrecisionBiotics Group have been reassessed in 2021, which led to an increase of the fair value at the acquisition date of DKK 44 million in contingent consideration and goodwill. Notes 97Novozymes A/S Accounts and performance Governance Our business The big picture 3.6 Contingent consideration DKK million Additions from business acquisitions Foreign exchange adjustments Fair value adjustment of contingent consideration Recognized in the balance sheet as follows: Financial costs (2020: DKK 0 million). The contingent liability related to PrecisionBiotics Group is denominated in EUR. The purchase agreement of Microbiome Labs includes a contingent consideration of up to DKK 886 million. The consideration is contingent on the achievement of sales targets for 2022 and is recognized at the anticipated fair value of DKK from the most probable sales in 2022 discounted at a rate of 8%. PrecisionBiotics Group The purchase agreement for PrecisionBiotics Group includes a contingent consideration of up to DKK 298 million. The consideration is contingent on the of DKK 211 million (2020: DKK 146 million). Fair discounted at a rate of 7%. reassessed in 2021 which led to an increase of the fair value at the acquisition date of DKK 44 million in contingent consideration and goodwill. The sales target for 2022 has been reassessed of the contingent consideration of DKK 62 million. The fair value adjustment has been recognized in Financial income. Accounting policies value at each reporting date. Financial costs (2020: DKK 0 million). The contingent liability related to Microbiome Labs is denominated in USD and increased by DKK 28 million due to foreign exchange adjustments. Critical accounting estimates and judgments Fair value of contingent consideration is and use assumptions. Estimates are based on updated information since the initial recognition of the liability such as budgets, sales forecasts, discount rates etc. The fair value of the contingent consideration is calculated as the present value of the most probable redemption amount using the determined fair value is associated with uncertainty and may be subject to subsequent adjustments. in Financial income or Financial costs. B/S Accounts and performance Governance Our business The big picture Notes 98Novozymes A/S in 2020 to Inventories increased in 2020 to DKK million Average net DKK million in 2021 4 capital 4.1 4.2 Trade receivables and contract assets 4.3 Other receivables 4.4 Other liabilities 4.5 Assets held for sale Notes 99Novozymes A/S Accounts and performance Governance Our business The big picture 4.1 Inventories DKK million Raw materials and consumables Finished goods B/S realizable value. comprises direct production costs such as raw materials and consumables, energy and labor directly attributable to production as well as indirect production costs such as employee costs, maintenance and depreciation of plants, etc. costs and costs to execute the sale (net realizable value) of inventories is lower than the carrying amount, inventories are written down to net realizable value. Novozymes has entered into a few agreements where Novozymes supplies goods to a customer’s premises but retains title to the inventory until the goods are consumed in the customer’s production. Such goods are derecognized from inventories in the period when they are consumed in the customer’s production. Critical accounting estimates and judgments measured at cost, including indirect capitalized under inventories amounted to costs are assessed on an ongoing basis to ensure reliable measurement of employee costs, capacity utilization, cost drivers and parameters may have an impact on the gross progress and Finished goods. Accounting policies Notes 100Novozymes A/S Accounts and performance Governance Our business The big picture DKK million Trade receivables, gross B/S Aging of trade receivables, gross: More than 90 days Allowances during the year Reversed allowances DKK 5 million) held as security for trade receivables in selected countries. Contract assets mainly related to goods delivered but not invoiced. The contract assets are initially recognized as revenue when goods are delivered to the other contracting party. When invoiced, the contract No allowance for expected credit losses had been (2020: no allowance). Trade receivables and contract assets are measured at amortized cost less allowance for lifetime expected credit losses. To measure the expected credit losses, trade receivables have been grouped based on shared Furthermore, an allowance for lifetime expected credit losses for trade receivables is recognized on initial recognition. individual assessment. Trade receivables and contract assets are written exhausted and there is no reasonable expectation of recovery. The cost of allowances for expected credit losses assets are recognized in Sales and distribution costs. Critical accounting estimates and judgments The allowance for expected credit losses for trade receivables and contract assets is based on historical credit loss experience updated at each reporting date. Accounting policies Notes 101Novozymes A/S Accounts and performance Governance Our business The big picture DKK million Deposits Prepaid expenses Other Recognized in the balance sheet as follows: B/S B/S DKK million Employee costs payable Deferred consideration Other payables Recognized in the balance sheet as follows: B/S 4.5 Assets held for sale DKK million Land and buildings Total B/S - Assets held for sale comprised buildings that are expected to be sold within the next 12 months. Buildings held for sale were sold in 2021, resulting in a gain of DKK 82 million, of which DKK 60 million was recognized as Other operating income and DKK 22 million was recognized in Sales and distribution. for sale when their carrying amounts are to be recovered principally through a sale transaction and a sale is considered highly probable. Such assets are stated at the lower of the carrying amount and fair value less costs to sell. Accounting policies The increase in prepaid expenses mainly relates to establishing the new production line in Blair, Accounts and performance Governance Our business The big picture Notes 102Novozymes A/S Return on equity up 3.4 million B shares under at a value of DKK million increased from 0.8x in 2020 to 1.0x 5 Capital structure 5.1 5.2 Financial income and Financial costs 5.3 5.4 Derivatives – hedge accounting 5.5 5.6 Financial assets and liabilities by category Notes 103Novozymes A/S Accounts and performance Governance Our business The big picture Due to the international nature of Novozymes’ entire Group. The Treasury Policy is approved by the Board of Directors and sets the limits for the and contains rules on which derivatives can be used for hedging, which counterparties can be income and costs in each individual currency and because Novozymes has more assets than liabilities in foreign currencies in connection with its global operations. currencies in which Novozymes has the largest exposure. Hedging is managed by entering into derivatives such as forward contracts, currency options and swaps. Loans and deposits in foreign currencies are also utilized for hedging purposes. basis by comparing changes in the timing and value of the expected exposure in the relevant currencies with the timing and value changes for to net investments in foreign subsidiaries is used to hedge equity investments. Foreign exchange sensitivity – 2021 The sensitivity analysis shows the impact on net For other comprehensive income, the analysis shows the impact on currency translation of net investments and does not include the impact of commercial transactions. other variables remain constant. The table shows decrease in the exchange rates would have the Foreign exchange sensitivity – 2022 estimate to USD and EUR. A movement of 5% in the USD/ DKK exchange rate would result in a change in the movement in the EUR/DKK exchange rate would around DKK 200 million (2021: DKK 200 million). Foreign exchange sensitivity analysis DKK million Increase in exchange rates Change Change in other com- prehensive income Change Change in other com- prehensive income USD Other Total has been hedged by forward contracts at an average rate of DKK 6.26. As a result, the impact increase of one percentage point in the average instruments held by Novozymes are impacted by equivalents, derivatives, trade receivables and receivables and contract assets is countered by thorough, regular analysis based on customer derivatives is mitigated by the Treasury Policy, which limits exposure solely to counterparties Notes 104Novozymes A/S Accounts and performance Governance Our business The big picture management (continued) Policy. Novozymes has entered into netting 4,219 million (2020: DKK 4,021 million), which is facilities and placing free funds in deposits, in accordance with the Treasury Policy. resources amounted to DKK 4,748 million (2020: DKK 6,522 million), consisting of net cash, cash equivalents, and undrawn committed credit With the exception of debt to credit institutions, the maturity dates are primarily within one year. Capital structure Novozymes favors a modestly leveraged balance the target is considered as met in 2021. The capital structure is mainly managed using two instruments: 1) Dividend payments where Novozymes aims for a payout ratio of around 50%. For 2021, the payout ratio is expected to be 48.5% which is in line with the communicated 1,500 million was executed in 2021. A new program of up DKK 500 million is planned for 2022. 5.2 Financial income and Financial costs DKK million Fair value adjustments of contingent consideration Gains on fair value hedges Financial income I/S Other foreign exchange losses, net Financial costs I/S Financial income and Financial costs comprise interest income and interest costs, realized and unrealized foreign exchange gains and losses, as liabilities and fair value adjustments of Other Financial income and Financial costs also include fair value adjustments of derivatives used to hedge assets and liabilities, and income and transferred from Other comprehensive income on realization of the hedged item. Accounting policies Credit institutions - currency 2021 (2020) DKK million EUR 2,273 (1,658) Other 3,433 (2,692) 5,706 (4,350) Less than 1 year 2,029 (1,106) Between 1 and 5 years 2,424 (1,912) More than 5 years 1,253 (1,332) Credit institutions - time to maturity 2021 (2020) DKK million 5,706 (4,350) Fixed interest rate 3,540 (2,995) Between 1 and 5 years 2,166 (1,355) Loan portfolio - fixed or floating interest rate 2021 (2020) DKK million 5,706 (4,350) Notes 105Novozymes A/S Accounts and performance Governance Our business The big picture DKK million Derivatives Recognized in the balance sheet as follows: B/S B/S DKK million Credit institutions Lease Total Credit institutions Lease Total Foreign exchange adjustments Notes 106Novozymes A/S Accounts and performance Governance Our business The big picture 5.4 Derivatives – hedge accounting Fair value hedges The table above shows the derivatives the Group has contracted in order to hedge currency give rise to currency adjustments in the income statement. The forward exchange contracts fall due in the 2021 DKK million Contract on agreed rates Contract on agreed rates USD Other Fair value hedges at Dec. 31 Hedge accounting consists of positive and negative fair values of derivatives, which are recognized in the balance sheet under Other respectively. Derivatives used for fair value hedges are measured at fair value on the reporting date, and value adjustments are recognized as Financial income or Financial costs. of net investments in subsidiaries are measured at fair value at the reporting date, and value adjustments are recognized in Other comprehensive income. and hedges of net investments in subsidiaries are transferred from Other comprehensive income on realization of the hedged item and are recognized as Financial income or Financial costs. Derivatives are recognized at the transaction date. Accounting policies million (2020: gain of DKK 1 million), compared (2020: loss of DKK 1 million). Notes 107Novozymes A/S Accounts and performance Governance Our business The big picture 5.4 Derivatives – hedge accounting (continued) The table above shows the derivatives that the Group has contracted to hedge currency and 2021 DKK million Contract on agreed rates Contract on agreed rates USD (2020: (0.22%)) The forward exchange contracts fall due in the fall due in May 2026 and December 2026 (2020: May 2026 and December 2026). At the end of 2021, the Group had hedged 88% an average rate of DKK 6.26 (2020: 88% of average rate of DKK 6.41). % of common stock Disposals during the year Additions during the year Treasury stock at Jan. 1, 2021 Cancellation of common stock Treasury stock at Dec. 31, 2021 2.0 1.2 (0.4) (1.1) 1.7 Treasury stock 2021 % of common stock 3.3 1.5 (0.8) (2.0) 2.0 Treasury stock 2020 Disposals during the year Additions during the year Treasury stock at Jan. 1, 2021 Cancellation of common stock Treasury stock at Dec. 31, 2021 Notes 108Novozymes A/S Accounts and performance Governance Our business The big picture Each A share entitles the holder to 20 votes, while each B share entitles the holder to two votes. Each year, the Board of Directors assesses whether the ownership structure with A and B common to believe that this is the best way to safeguard of the company’s shareholders and other 2021 No. Nominal value DKK million No. Nominal value DKK million B/S Additions during the year Disposals during the year No. shares. Notes 109Novozymes A/S Accounts and performance Governance Our business The big picture DKK million Note Trade receivables Other receivables, excl. prepaid expenses Financial assets at amortized cost Derivatives Fair value through other comprehensive income Financial assets DKK million Note Lease liabilities Trade payables Transitional holiday accrual Other payables, incl. deferred consideration Derivatives Fair value through other comprehensive income Share purchase liability Fair value through equity - Fair value hierarchy measured at fair value on the basis of quoted prices (level 1 input). measured at amortized cost (level 2 input), the carrying amount approximate fair value. Derivatives are measured at fair value based on observable data (level 2 input). The derivatives are prices but on individual contracts. The fair value of these assets is determined using valuation volatilities. and share purchase liability are measured at fair a description of fair value measurement. Accounts and performance Governance Our business The big picture Notes 110Novozymes A/S Realized Group audit fee ratio during 2021 No. of Danish and in the Group Grant date fair value of options granted in 2021 in DKK million 0.4 49 85 6 Other 6.1 Management remuneration 6.2 6.3 6.4 Related party transactions 6.5 6.6 Fees to statutory auditors 6.7 6.8 6.9 Group companies Notes 111Novozymes A/S Accounts and performance Governance Our business The big picture 6.1 Management remuneration Executive Leadership Team Executive Leadership Team DKK million Board of Directors Registered executives Non- registered executives Total Board of Directors Registered executives Non- registered executives Total Remuneration Remuneration including additional payments General guidelines for the remuneration of the Board of Directors and the Executive Leadership Team of Novozymes A/S, as assessed by the Board of Directors in accordance with the recommendations of the Nomination and Annual Shareholders’ Meeting. A summary of the Management remuneration can be found in the Governance section of The Novozymes Report. Executive Leadership Team Members of the Executive Leadership Team in line with Novozymes’ strategic focus and investments in the business. designed to incentivize performance against interests of shareholders, customers and other Other financial notes 65% is expected to be payable at target are described in Note 6.2. Members of the Executive Leadership Team have contracts of employment containing standard conditions for executives of Danish listed companies, including the periods of notice that both parties are required to give and contract of employment is terminated by the company without any misconduct on the part of termination compensation of 12 months’ base salary and pension contributions. Board of Directors The remuneration of the Board of Directors incentives. Changes to the Executive Leadership Team Strategy & Business Transformation and Morten accordance with an agreement made in 2020. Notes 112Novozymes A/S Accounts and performance Governance Our business The big picture programs for the Executive Leadership Team, vice presidents, directors, and other employees. The purpose of these programs is to ensure an alignment of interests of the Management, employees and shareholders. Allocation of programs has been, and remains, dependent on sustainability targets being achieved, and are made based on individual base salary. The to exercise the options, the employee must still be employed at the exercise date. This does not voluntary early retirement or been given notice. new incentive program for the Executive Leadership Team was established, covering the the intrinsic value of the program exceeds twice the full annual conditional grant. the date of grant was approximately DKK 40 have a vesting period of four years, followed by A new program was also established in 2021 for vice presidents and directors covering the presidents and directors). The total target level fair value at grant date was DKK 55 million and based on the same requirements and targets as for the Executive Leadership Team. The program allowing the Board of Directors to choose to limit the intrinsic value of the program exceeds twice the full annual conditional grant. 40%), organic sales growth (weight 40%) and sustainability targets (weight 20%). Sustainability sustainability targets carry a weight of 5%. The performance targets are as protocolled in the minutes of the board meeting approving the prior to the performance period. aspiration and on all four measures for the granted. of the four sustainability targets, then none or allowing the Board of Directors to choose to limit incentive program was also established in 2021 employee program follows the same requirements and targets as the program for the Executive Leadership Team and the program for vice presidents and directors. The Executive Leadership Team, vice presidents and directors, who are already included in an existing incentive program, are excluded from the target level value of the program is approximately DKK 40 million. 2022 follow the same principles as those described for the 2021 programs, and the fair value at grant date of the programs was approximately the same. Other financial notes Notes 113Novozymes A/S Accounts and performance Governance Our business The big picture (continued) DKK DKK million Executive Leadership Team Vice presidents and directors Other employees Total Avg. exercise price per option Grant date fair value per option Grant date fair value total Granted Exercised Forfeited Expired Granted Exercised Forfeited Expired Other financial notes Notes 114Novozymes A/S Accounts and performance Governance Our business The big picture (continued) the weighted average remaining term to maturity During 2021, DKK 78 million arising from income statement (2020: DKK 54 million), DKK 75 Most programs are equity settled, and no liability Furthermore, the options are assumed to be period, on average, or at the option’s expiry date historical volatility over the last three years. The government bonds with a maturity equivalent to the option’s term to maturity. Assumptions Expected future dividends per share DKK % % Weighted average share price at grant date DKK Other financial notes programs are made in countries where ownership liability of DKK 44 million was recognized for this in 2021 (2020: DKK 15 million). The intrinsic value The fair value of employee services received is measured with reference to the fair value of the equity instruments granted. Fair value at grant date is measured in accordance with the price, the option term and the following with a fair value of DKK 41 million were granted The fair value of the employee services received granted. The fair value is measured using the grant date is recognized as an employee cost over number of employees expected to gain entitlement to the options as well as the number of options the employees are expected to gain. This estimate is adjusted at the end of each reporting period such that only the number of options to which employees are entitled or expected to be entitled is recognized. programs, which are recognized as Other liabilities, is adjusted to fair value at the end of each reporting period, and the subsequent adjustment is recognized in the income statement under Financial income or Financial costs. Accounting policies Notes 115Novozymes A/S Accounts and performance Governance Our business The big picture Other financial notes 6.3 Commitments and contingencies Novozymes is engaged in certain legal cases. The Board of Directors and Management believe that settlement or continuation of these cases will not position. A liability is recognized under Provisions Property, plant and equipment are described in Contract conditions Several of the partnership contracts to which Novozymes is a party may be terminated by the ownership or control of Novozymes. Furthermore, a few contracts contain provisions that restrict technology in such situations. DKK million Other guarantees Other guarantees and commitments to related companies Other guarantees and commitments Notes 116Novozymes A/S Accounts and performance Governance Our business The big picture 6.4 Related party transactions Other financial notes Novozymes A/S is controlled by Novo Holdings A/S 72.6% of the votes in Novozymes A/S. The parent of the Group is the Novo Nordisk Foundation Related parties are considered to be Novo Holdings Board of Directors and Executive Management of these entities together with their immediate families. Other related parties are considered to be DKK million Sale of services Dividend payment to Novo Holdings A/S Sale of services Sale of assets Purchase of goods and materials Purchase of services The NNIT Group Purchase of services The Chr. Hansen Group Sale of goods and materials Purchase of goods and materials Purchase of services Purchase of services DKK million Receivables Payables The NNIT Group Payables The Chr. Hansen Group Receivables Purchase of services of Novozymes A/S, as well as the Board of Directors and Executive Leadership Team of Novozymes A/S together with their immediate families. Related parties also include companies in which the above persons have control or joint control. All agreements relating to these transactions are majority of the agreements are renegotiated regularly. Holdings A/S 765,000 of its own B shares with the approval of the Board of Directors, at a price There were no transactions with related parties other than the transactions described and normal remuneration of the Board of Directors and Executive Leadership Team, which is presented in Note 6.1. Rental commitments to related parties at December Transactions Notes 117Novozymes A/S Accounts and performance Governance Our business The big picture On December 10, 2021, Novozymes acquired 60% of the shares in Synergia Life Sciences, The remaining 40% of the shares in Synergia Life and are recognized at the proportionate share of The remaining 40% of the shares in Synergia Life Sciences is to be acquired in 2025 and a liability of DKK 717 million is recognized in 2021. The redemption amount is contingent on the achievement of sales targets for Synergia Life 2025. The consideration will be within the range of DKK 652 million to DKK 1,174 million and includes acquisition date of Synergia Life Sciences. Fair value of the Share purchase liability is assessed by using the most probable redemption amount, discounted at a rate of 11%. The share 6.5 Non-controlling interests Accounting policies Share purchase liability is Novozymes’s obligation subsidiaries and is remeasured at fair value at each reporting date. The fair value of the most within liabilities with a corresponding charge recognition are recognized in Retained earnings within Equity. Audit fee policy nonaudit services provided by the statutory auditors should not exceed the annual fee for statutory audit services measured at Group level. The Group audit fee ratio may only exceed 1 with No such approvals were given in 2021 or 2020. restrictions on the nonaudit services that the auditors elected at the Annual Shareholders’ fee for nonaudit services performed for advisory services concerning transfer pricing, reporting and tax consultancy. DKK million Statutory audit Other assurance engagements Tax assurance services Other services Fees to statutory auditors Group audit fee ratio 6.6 Fees to statutory auditors Other financial notes Critical accounting estimates and judgments Fair value of the share purchase liability estimates and use assumptions. Estimates are based on updated information since the initial recognition of the liability such as budgets, sales forecasts, discount rates etc. The fair value of the share purchase liability is calculated as the present value of the most probable redemption amount using determined fair value is associated with uncertainty and may be subject to subsequent adjustments. Notes 118Novozymes A/S Accounts and performance Governance Our business The big picture DKK million Note Non-cash items Accrued interest income and interest costs Depreciation, amortization and impairment losses Realized loss and allowances for doubtful trade receivables (Gain)/loss on sale and disposal of assets Unrealized foreign exchange (gain)/loss Tax Non-cash items DKK million Note Acquisition of PrecisionBiotics Group Acquisition of Microbiome Labs Acquisition of Synergia Life Sciences Additions of intangible assets Additions of property, plant and equipment Less additions to lease assets Other financial notes is compiled using the indirect method, shows cash activities, and the Group’s cash and cash equivalents at the beginning and end of the year. items, corporate income tax paid and change in payments relating to the acquisition and sale of Accounting policies assets, and property, plant and equipment. proceeds from borrowings, repayment of principal liabilities, payment of dividends, proceeds from other securities. demand. Notes 119Novozymes A/S Accounts and performance Governance Our business The big picture No events of importance to the consolidated reporting date. Other financial notes 6.9 Group companies Production Research and development Holding companies, etc. Activity Percentage of Parent Company A/SDenmark Novozymes BioAg S.A., Argentina Novozymes BioAg Productos Para Agricultura Ltda., Brazil Activity Percentage of Novozymes Berlin GmbH, Germany Novozymes Hong Kong Ltd., Hong Kong Novozymes Switzerland AG, Switzerland 6.9 Group companies (continued) Notes 120Novozymes A/S Accounts and performance Governance Our business The big picture 6.9 Group companies (continued) Other financial notes Activity Percentage of Notes 121Novozymes A/S Accounts and performance Governance Our business The big picture 7 Environmental data 7.1 7.2 Energy 7.3 Water 7.4 Waste 7.5 Environmental compliance 7.6 Bioethics & biodiversity 7.7 Product stewardship m 3 Biomass recovered electricity Notes Notes 122Novozymes A/S Accounts and performance Governance Our business The big picture 7.1 Climate change strategy and we are committed to a net zero climate impacts across our operations and value chain. Through the application of our solutions, we enable our customers and end users to reduce 2 emissions. Our approach Our ambitious climate commitment, Accelerate under our refreshed strategy as part of our commitments to a healthy planet, and it guides our approach to addressing climate change issues. achieving net zero across operations and value are now accelerating our net zero journey and change. We have committed to a 50% reduction 2 emissions from our operations compared to a 2018 baseline, and to source implementation, we have set internal annual targets. 2 emissions from our operations by 40% by 2022 (relative to 2018). This reduction is driven by our We are also implementing the recommendations opportunities please refer to the ‘Governance’ section of this report. environmental impact of our solutions. These informed and to demonstrate to our customers 2 emissions and leverage the positive impact on climate change that Novozymes’ solutions can enable. Our published We disclose our climate change impacts through disclosures). 2021 highlights 2 emissions from our operations higher sales, thus higher production activity. Despite this increase, we reduced our absolute Environmental data CO-equivalent emissions Natural gas Gas oil, light fuel oil and diesel oil - Scope 1 District heat Electricity Steam Ship Air freight Scope 3 * 455. emission factors, and changes to our production processes. 1,000 tonnes Scope 1 Scope 2 2019 2018 2017 2020 2021 408 437 330 234 Notes 123Novozymes A/S Accounts and performance Governance Our business The big picture 7.1 Climate change (continued) Environmental data 2 emissions comprise scope 1, scope 2 and emissions from outbound transport of products. from internally generated energy (scope 1) is calculated based on the amount of fuel consumed using local emission factors. 2 from externally generated energy (scope 2) is 2 emissions from the sourced renewable energy 2 2 factors from 2 calculated based on principles described in the 2 emissions related to transport from all primary enzyme production sites to customers where Novozymes pays for the freight. Transport between production sites is also included. Transport of raw materials to a production site is 2 emissions generated at external warehouses are not included. Emissions data are calculated based on distance and emission factors from the GHG Protocol. The environmental impact potentials for global warming and ozone layer depletion are calculated on the basis of data published by the U.S. Environmental Protection Agency (EPA) and the Montreal Protocol published by the United Nations Environment Programme (UNEP). Accounting policiesNovozymes' bioenergy solutions helped the 2 in 2021 by enabling the production of low carbon fuels. better understand our supply chain emissions and our suppliers’ climate maturity, in support of provide carbon footprint or best available data for the products they deliver to Novozymes. Some greenhouse gas emissions (GHG) data, and many had targets to save energy and/or reduce GHG emissions in the coming decade. supply chain emission reductions. We will continue to focus on executing our renewed climate commitment by exploring renewable energy opportunities for all our sites, by investing opportunities, and by engaging with our suppliers. Five-year energy consumption 1,000 GJ 2019 2018 2017 2020 2021 4,760 4,831 4,574 4,475 4,699 Wind power 52% (51%) Solar 25% (26%) Hydro 4% (4%) Biomass 19% (19%) Renewable energy sources 2021 (2020) Notes 124Novozymes A/S Accounts and performance Governance Our business The big picture 7.2 Energy Novozymes' operations depend on fuel, steam and electricity. Many of our biosolutions enable downstream users to save energy in certain applications compared with conventional methods, such as in laundry and dishwashing detergents and textile applications. Our approach We manage energy in our operations through a renewable energy and reducing energy use in production by implementing optimization or performance in these areas. Novozymes’ Operations, Supply and Quality function manages and monitors all energy Through the RE100 initiative, we have committed Novozymes pursues a strategy to recover energy that would otherwise go to waste and distribute it to local communities. Natural gas Biogas Gas oil, light fuel oil and diesel oil Electricity – conventional Electricity – renewable , , Steam , , , ESG , , Energy production from waste Environmental data 2021 highlights 5% compared to 2020. This was driven by higher production volumes as sales grew organically by 6%. throughout the year resulted in energy savings of investments but only interventions in the way a compressor is run, resulted in energy savings of baseline year for this project). The share of renewables in our total energy Electricity is more than half of the total energy consumed, and 68% of the electricity came from renewable sources. We have developed a new renewable electricity strategy with elevated focus on accelerating ensuring high quality and impactful projects for our local communities. Moreover, new projects have been matured for several sites across Novozymes’ global footprint, with a new agreement securing from 2022 onwards. Going forward, in addition to further investing in renewable energy, we will continue to explore energy saving opportunities at all sites as well as Notes 125Novozymes A/S Accounts and performance Governance Our business The big picture 7.2 Energy (continued) Energy consumption includes quantities consumed both in the production process and in other areas. consumption converted to energy based on the lower combustion value and weight by volume, except in the U.S., where legal requirements for 2 state that the higher combustion value is to be applied. Fuel consumption comprises all types of fuel used to produce electricity, heat and steam on site and converted to energy using factors supplied by utility providers or local authorities. Fuel for transportation is not included. Externally generated energy is the input to Novozymes of externally generated electricity, heat and steam. Energy produced from waste or wastewater is renewable and corresponds to the total energy (heat, electricity or steam) produced by an internal or external utility provider. An example is energy produced from biomass waste or biogas. Reported quantities are based on meter readings, with the exception of steam, which may be subject to calculation. The renewable energy percentage is calculated by dividing renewable energy consumed by total energy consumption. Renewable energy used at Novozymes sites comprises energy generated from natural processes and continuously replenished. Sources include solar, wind and biogas and biomass. from biomass. Environmental data Accounting policies Water consumption by primary source 1,000 m 3 2019 2018 2017 2020 2021 8,106 8,205 7,845 7,998 8,538 Drinking water Industrial water Steam Notes 126Novozymes A/S Accounts and performance Governance Our business The big picture 7.3 Water Water is an essential part of Novozymes’ production and value chain. We rely on freshwater for production and processing. Our product quality and safety is directly dependent on the quality of the freshwater we receive at our facilities. Additionally, the production of our solutions results in generation of wastewater. Our solutions enable our customers to reduce wastewater quality by replacing chemicals. They also have the capabilities to provide improvements in the wastewater treatment industry by replacing hazardous chemicals. Our approach As part of our commitments to a healthy planet, commitment to responsible water management and our ambitious target to manage water in consumed. We are committed to ensure water is respected as water security. Therefore, we are developing contextual water management programs for all production sites by 2022 to help us further focus impact. wastewater compliance and improving our treated internally or externally in biological wastewater treatment systems before being discharged. Externally, we collaborate with organizations and communities for collective action to address water challenges in our surrounding communities such as depleting water quality, WASH (water, sanitization and hygiene) and watershed restoration. , , , , Steam ESG , , Environmental data We disclose our water security impacts through to be recognized for our good water management practices). Notes 127Novozymes A/S Accounts and performance Governance Our business The big picture 7.3 Water (continued) 2021 Highlights compared with 2020, mainly driven by the increased production. Through our major projects in operations, we achieved water savings of 87,000 m for the year. This year, we operationalized a project at our 40,000 m of treated wastewater for cooling towers, irrigation and other internal processes. . and external engagements to drive results in Amongst our external engagements, we initiated restoration of local wetland ecosystems. We continued our partnership with the World Wide Fund for Nature for developing our contextual water programs. At the end of the year, 11 out of our 15 production sites had programs with actions to help us address local water challenges. based target methodology for water, to help us better understand the methodology and move science. Going forward, we will focus on completing the development of contextual water management programs for our remaining production sites, optimize water use and further expand our wastewater generated in 2021. Environmental data 3 Wastewater to irrigation Wastewater to surface water or treatment , , , , Water consumption refers to the withdrawal of water and externally supplied steam. but is suitable for certain industrial processes, for Accounting policies The reported quantities are stated based on the include quantities consumed both in the production process and in other areas. The reported quantities of steam are converted to volumes of running water and are therefore subject to calculation. Wastewater is measured as the volume discharged by Novozymes or calculated based on water withdrawal. ESG Wastewater by treatment method 1,000 m3 Novozymes-treated to external water recipient Novozymes-treated to irrigation Novozymes-treated to external treatment Untreated to external treatment 2019 2018 2017 2020 2021 6,182 6,306 6,147 6,471 6,610 1,000 2,000 3,000 4,000 5,000 6,000 7,000 Total waste by disposal method 2021 (2020) Used in agriculture 96.5% (93.5%) Recycling 1.9% (1.5%) Incineration with energy recovery 0.6% (0.0%) Landfill and incineration without energy recovery 1.0% (5.0%) Notes 128Novozymes A/S Accounts and performance Governance Our business The big picture 7.4 Waste in favor of managing waste and resources in a responsible manner. Our biological solutions enable our customers to adopt more responsible use of resources. We are committed to minimizing waste from our operations, while utilizing precious resources in a circular manner. Our approach As part of our commitments to a healthy planet, commitment to responsible waste management. operations. To pave the way, by 2022 all production sites should have programs to reach Guided by our aim to achieve zero waste, we have The localized approach allows us to manage the complex issue in alignment with local regulations and external service providers. 2021 Highlights Despite increased business activities, the generated waste was on par with 2020. The total recycling and composting rate of the or incineration without energy recovery. Environmental data local farming communities to distribute biomass transportation and application, we adjust water content in biomass in accordance with local requirements. The biomass upon exit from our Biomass Most of the waste generated from the production of our solutions is biomass. The biomass generated from our operations has essential nutrients such as nitrogen and phosphorus, activities. We have set a target of achieving 100% circular management of our biomass by 2022. circular manner, with utilization as a raw material in fertilizer production for agriculture with or facilities has a water content in the range of 5% biomass used in agriculture was 51 tonnes (2020: 1 tonnes (2020: 10 tonnes). Waste Biomass Used in agriculture . . . . . . . . . . Recycling (external) . . . . . . . . Recycling (external) . . Recycling (internal) . . . . ESG . . Notes 129Novozymes A/S Accounts and performance Governance Our business The big picture 7.4 Waste (continued) Environmental data incineration. 2021, 10 of our 15 production sites had a reduction of our waste as well as an increase in recycling. These initiatives include process improvements, optimal utilization of resources and process planning, waste sorting to allow more recycling, etc. We are committed to minimizing the impact of compostable. Therefore by 2022, we aim to have materials. We are progressing as planned for the Biomass is measured or calculated based on volume or weight produced. At each site, biomass ratio. The quantity of dry biomass is calculated based on the water ratio in the biomass. nonhazardous waste, and by disposal method. The amount recycled is the quantity recycled internally or sent to an external service provider for recycling. Accounting policies Notes 130Novozymes A/S Accounts and performance Governance Our business The big picture 7.5 Environmental compliance running of operations. Novozymes is committed to complying with all environmental regulations and maintaining high standards of environmental management in various aspects, including pollution prevention, resource conservation and Our approach Our commitment to environmental compliance is outlined in our Sustainability Policy. All activities to ensure environmental compliance are anchored in the Quality, Environment & Safety function. Novozymes’ production sites are Management Systems standard. Our Management System is based on this standard and applies to all our operations. Novozymes’ products are based on technologies found in nature and our business is based on biotechnology. As a biotechnology leader developing solutions and applications for customers, we explore the available biodiversity from nature via a process called bioprospecting. optimized using biotechnological research and used to develop new biological solutions that help our customers improve their products and reduce their environmental footprint. Our approach Novozymes’ position paper on Biodiversity and Gene Editing captures the method in which we interact with biodiversity and how we contribute towards sustainable development. We are potential of biology and industrial biotechnology Novozymes. operating in compliance with legislation and following any guidance and requirements from regulatory authorities on biotech innovation Environmental incidents and neighbor complaints management system. This system enables us to implement suitable remedial actions to correct and prevent their occurrence in the future. We compliances and neighbor complaints. registered across our facilities, compared with 20 in 2020. Most of these were related to wastewater treatment. None of them have preventive action to avoid such incidents have been agreed with the relevant authorities. Novozymes received seven neighbor complaints in 2021, compared to 10 received in 2020. humans, animals and the environment. samples in nature, we ensure that local laws are followed, and safeguard the globally recognized principles on the utilization of genetic resources. We continuously discover new microbes that are friendly industrial processes. Novozymes’ position paper on biodiversity articulates how we endorse, Diversity and the complementary Nagoya have established systems and processes that ensure we comply with the relevant regulations, guidelines and international protocols. 2021 Highlights We continue to closely monitor the ongoing we became a member of the Science Based and are closely following the developments related to new methodologies for companies to manage their impacts and dependencies on nature. Breaches of environmental regulatory limits are measured as the number of incidents in the reporting year considered not to be in conformity with environmental permits or requirements under environmental law. Environmental data Accounting policies Breaches related to annual control measurements of spills reported in previous years are not included, as they are not indicative of performance during the reporting year. Neighbor complaints refers to the number of registered environmental complaints, primarily odor and noise related. Notes 131Novozymes A/S Accounts and performance Governance Our business The big picture Novozymes is committed to ensuring product safety and stewardship in our operations and across our value chain. Many of our biological solutions serve as ingredients in consumer goods (e.g. in laundry detergents) or are used for manufacturing consumer products such as food, material issue for us. products safer for humans, animals and the substances in our operations with safer alternatives wherever feasible and constantly Our approach Product stewardship is an integral part of Novozymes’ Quality Management System, and our approach is outlined in our Quality and Product Safety Policy. Procedures ensuring are enforced globally and audited by an collaborate with our customers, suppliers, and various trade associations to drive product safety and stewardship. Novozymes has set internal targets on product stewardship that guide our progress. We measure performance particularly in the areas of product safety and hazardous substance management. functional process, new and existing chemicals are screened annually for environmental, health feasibility assessments to determine candidates Novozymes has a clear position and a structured approach to related topics such as product information and labeling, traceability, industrial safety and provide transparency. 2021 highlights registration dossiers must be submitted in countries, in 2021, Novozymes arranged a customers, which will ensure customer compliance with these regulations and a of hazardous substances and materials, we which was phased out and a new, safer process, we also reinforced the relevance of our hazardous preservatives from our enzyme enzymes are readily biodegradable and hence society’s concern and wish for “preservative free” products. Novozymes North America was recognized as an Environmental Protection Agency (EPA) in 2021, recognizing our commitment to produce safe solution. Novozymes is also accelerating the products for laundry detergents and collaborating Going forward, we will continue to prioritize product stewardship practices at Novozymes. We system, which will provide a strong foundation for our product stewardship commitment. This processes, such as dossier compilation and submissions. Environmental data Notes 132Novozymes A/S Accounts and performance Governance Our business The big picture 8 Social and governance data 8.1 Labor practices & human rights 8.2 8.3 Employee safety & wellbeing 8.4 Business ethics 8.5 8.6 8.7 Responsible sourcing Women in senior management integrity training for employees Lost-Time Injury frequency (per million 1.5 Notes 133Novozymes A/S Accounts and performance Governance Our business The big picture Employees are vital for Novozymes’ growth and the successful execution of our strategy. Novozymes is responsible for ensuring that human rights are respected both within the organization and throughout its value chain. Our approach We have adopted a common management approach and reporting structure for labor practices and human rights. Our People and Organization (P&O) function, together with leaders across Novozymes are responsible for ensuring equal rights for all employees. We are committed to ensuring equal opportunities and avoiding discrimination based on age, sex, gender identity, race, national origin, ethnicity, disability, education, sexual orientation and religious beliefs in our global organization. together comfortably and productively, free of Novozymes recognizes and respects the right to form and join associations and to bargain of these fundamental rights in countries with limited labor legislation. the UN Guiding Principles on Business and Human Rights and has implemented them in our operational policies and procedures. We respect since 2001, we have been a signatory to the also a signatory to the Women’s Empowerment Principles. We publish an annual statement under the UK Modern Slavery Act. The employee survey is an important tool that This is critical for ensuring our success as a business and for sustaining our reputation as a Social and governance data Notes 134Novozymes A/S Accounts and performance Governance Our business The big picture Social and governance data Accounting policies employee´s illness, including leave, and occupational injuries and diseases. The rate af absence is calculated as the number of registered days of absence as a percentage of the total vacation and public holidays. The rate of employee turnover is calculated as employee turnover divided by the average number of permanent employees. Employee turnover is measured as the number of permanent employees leaving the Group during the preceding year (excluding employees at divested entities transferred to the acquiring company. Average age and seniority are calculated as the sum of employees´ total age/seniority in whole years at the reporting date, divided by the number of employees. Expatriation refers to Novozymes employees temporary reassigned within Novozymes from the country of original employment for periods of more than six months. 2021 highlights Labor practices The rate of employee turnover increased to 11.8% from 8.7% in 2020. The increase was a consequence of the low turnover in 2020 due to economic recovery 2021. We recorded a 2.2% rate of absence compared to 1.9% in 2020. The rate of absence has been Human rights We conduct regionally focused human rights impact assessments to identify and assess human Employee statistics % . . % . . % . . % . . Senior management, management, professional and administrative % . . technicians and process operators % . . All employees % . . Other employee statistics Average age years . . Average seniority years . . Number of expatriates No. ESG (continued) region to region, this approach enables us to gain a more comprehensive understanding of human conducted the human rights impact assessment completed assessments for the Americas, Europe, Novozymes believes that respectful, professional conduct furthers Novozymes’ mission and is harassment. Notes 135Novozymes A/S Accounts and performance Governance Our business The big picture and shared values to form a vibrant culture. Nurturing an inclusive and diverse organization we can continue to bring the power of biotech to the world. Our approach We are committed to nurture a culture of themselves. We recognize that focusing on diversity of representation alone is not enough. For diverse teams to succeed, people need to feel that they are valued and have a sense of shared purpose, and therefore we focus on inclusion. At Novozymes, we have a policy for diversity and equal opportunities, which covers the entire implement measures across all layers of management. Our People and Organization function, together with leaders across Novozymes, is responsible for ensuring equal we set ambitious targets to nurture a diverse, environment. Specifically, we aim to achieve gender balance across all professionals and in senior leadership by 2030. This means that, as a minimum, we will have 45% women and 45% men across all professionals and in senior leadership. based on local demographics, to address diversity dimensions beyond gender. We have a target to achieve a score of 86 on our Nurture Diversity 2021 highlights diversity. The number of women in senior management, management and professional levels increased compared to 2020. Furthermore, we achieved 85 on our Nurture our 2022 target. participated in the sixth UN Women Gender Diversity Roundtable on the theme of driving diversity and inclusion. During the United Nations' General Assembly Summit, Novozymes was hosted by Business Fights Poverty. This panel regional employee representatives. They shared corporations can bring out the best in their Novozymes. We provided unconscious bias training material in recruitment to hiring managers with Social and governance data information on how to strengthen diversity in recruitment with a focus on bias, and addressing screening, interviewing, and evaluating candidates. To show our support for the cause and symbolize our commitment to human rights, equity, diversity, events. for professional and personal development. To monitor compliance to our diversity and equal impact of our initiatives, e.g. gender diversity of new hires and internal transfers. Women in senior management measures the percentage of women in director positions or higher (i.e. director, vice president or executive vice president). Women in management measures the percentage of women in middle management and specialist positions. Women in professional levels measures the percentage of women in positions typically leaders. Nurture Diversity index measures the ratio of women and international employees at both Senior international employees were represented at the same ratio in all management layers as in the academic population ("professionals") in Novozymes as such, the index would be 100. Accounting policies Gender diversity Women in senior management % Women in management % Women at professional levels % Notes 136Novozymes A/S Accounts and performance Governance Our business The big picture Being a company where people thrive always has and always will be a core ambition for Novozymes. Our strong safety culture provides to bring out their best, at home with their loved Our approach We are committed to helping our employees whether it is staying safe, healthy and stress free support our safety and wellbeing culture, we have our global People Policy and global Health and Safety Policy, along with internal standards and procedures. Our Health & Safety strategy aims to ensure that robust safety processes, equipment, standards, tools, and training form an integral part of the indicators. Novozymes’ Quality, Environment and Safety function is responsible for supporting the organization in ensuring a safe and healthy initiatives. Our preventive program for enzyme enable us to further improve the enzyme safety wellbeing groups to bring solutions that address responsibility of each manager to focus on supported by our People & Organization function. Our employee survey is an important tool that This is critical for ensuring our success as a business and for sustaining our reputation as a 2021 highlights challenges to Novozymes around the world. We running. Teams have handled changes related to in our employee survey. Social and governance data 2022. Safety focused on safety challenges across Novozymes. We implemented a medical application in Protection Regulation) compliant management of all medical cases. 2022. Wellbeing employees can access a variety of materials, tools, training, and information addressing general wellbeing, including a stress prevention we have continued to focus on mental wellbeing activities such as BrainSpace, which aim to help and inspire our leaders and employees. Consequences of occupational injuries No. Return to original job - - - - Occupational injuries Days of absence due to occupational injuries No. Frequency of occupational injuries Per million . . Notes 137Novozymes A/S Accounts and performance Governance Our business The big picture (continued) Consequences of occupational diseases No. Return to original job - - - - - Occupational diseases Days of absence due to occupational diseases No. Frequency of occupational diseases Per million . . Training costs Average training cost spent per employee DKK Percentage of total employee costs % 0.6 0.7 Social and governance data Growth development, we launched an online learning platform called ‘Degreed’. This platform is competencies needed for success in existing job roles and career growth by allowing discovering, The enrollment of leaders in our leadership development program ‘Lead the Way’ was 52%. score of 79 points on Enable learning (78 in 2020), number of incidents that occur in the performce of job duties at or between Novozymes locations that prevents the individual from assuming of diseases contracted as a result of an exposure national legislation. The consequences of occupational injuries with absence and occupational diseases are measured resulting from an incident has stabilized, for example whether the employees have returned to their original jobs, and the total number of calendar days of absence. Frequencies of occupational injuries with absence and frequencies of occupational diseases are questions in the annual employee questionnaire. The resulting score is a value between 0 and 100. The 'Lead the Way' program indicates the number of leaders globally who have been registered for the leadership development program 'Lead the number of current leaders at Novozymes. Training cost expresses the cost of external training courses and seminars, translated into spend is also shown as a percentage of total employee costs. Moving forward, we will focus on implementing our refreshed strategy, aiming to improve safety assure the continued wellbeing and development of all our employees. Accounting policies Notes 138Novozymes A/S Accounts and performance Governance Our business The big picture 8.4 Business ethics Novozymes is committed to conducting business in a responsible, ethical, and transparent manner, high business integrity standards across our operations. Our approach At Novozymes, we live and act as a responsible corporate citizen, and business ethics are integrated into everything we do or plan. We relevant measures to ensure compliance to the highest standards across all material related issues. business integrity matters across Novozymes. Members of the committee include executive and senior management representatives from both business and compliance functions. They meet on prioritizations and to follow up on the state of business integrity compliance and relevant initiatives. and respond to fraud, corruption and other violations of the business integrity principles. Novozymes has seven business integrity principles, which lay the ground rules for engaging with third parties and apply to all employees across the world. The business integrity principles underline Novozymes’ zero tolerance approach to hospitality. They act as Novozymes’ code of conduct in business integrity matters and form corruption. All employees have access to relevant guidance on business integrity and are encouraged to raise any concerns through the relevant grievance channels. Novozymes provides annual compliance training in business integrity and competition law, which on questions raised during the year and includes applicability. Novozymes has a global corporate whistleblower system which allows employees and external partners to report any concerns on illegal or unethical misconduct or other violations of Novozymes’ business integrity principles. The whistleblower system is supplemented by various internal reporting channels and screening activities. All allegations of fraud, corruption and other business integrity violations are thoroughly investigated. Substantiated violations lead to proportionate disciplinary sanctions for the parties involved. Novozymes has an ethical and responsible approach to the data we handle. We respect data of personal data and ensure ethical management of data in the Novozymes Group as a supplement to our general commitment to integrity and compliance. Novozymes’ responsibility for ensuring ethical business practices also extends to our business conduct business with integrity and share our values regarding legal compliance. Social and governance data Dismissal 21% (29%) Other disciplinary sanctions 26% (25%) Unknown perpetrator 53% (46%) Consequences of substantiated fraud and corruption cases 2021 (2020) 34 (24) Whistleblower/tip-off 12% (13%) Internal controls and proactive detection 88% (87%) Reporting channels for potential fraud and corruption 2 021 (2020) 422 (286) Notes 139Novozymes A/S Accounts and performance Governance Our business The big picture 8.4 Business ethics (continued) Social and governance data 2021 highlights Again this year, our business integrity training was completed by 99% of our employees in scope. The training provided a general reminder of our business integrity principles which serve to by Novozymes. The competition law compliance training in 2021 served as a general reminder of do’s and don’ts and had a focus on competition law aspects associated with the application of As in previous years, Novozymes had no violations of competition law in 2021. The number of potential fraud and corruption cases investigated increased in 2021 due to the continued development of digital tools for number of substantiated cases increased compared to 2020, due to an increased exposure to cyber crime. There was no material business or covering personal data and other categories of data, and implemented a governance supportive hereof, as a supplement to the policies and procedures already in place to ensure compliance with rules regarding data protection and privacy. The number of reports in Novozymes’ whistleblower system remains fairly low, internal grievance channels. Promotional initatives are planned for 2022 to ensure general awareness of the whistleblower system. information on all whistleblower reportings and The charts provide further details of the reporting channels and consequences for fraud and corruption cases. the percentage of employees in scope who have undergone business integrity training in the last training period. New entities are included within six months of acquisition. Business integrity training is conducted for employees who can decisions as part of their job role. This comprises employees in professional, managerial or administrative positions. The reporting criteria for a competition law violation is whether it has been established by an anywhere in the world that a company in the Novozymes Group has violated applicable deliberate misconduct with the intent to gain a direct or indirect personal advantage. Accounting policies Notes 140Novozymes A/S Accounts and performance Governance Our business The big picture Social and governance data 8.5 Customer engagement Together with customers, partners, and the global community, we improve industrial performance and consumer products while preserving the planet’s resources and helping to build better lives. Therefore, customer engagement and to continue being a trusted business partner that delivers reliable products and innovative solutions. Our approach are some of the main drivers behind our strategy solutions and applications to help improve their products and processes. Our Technical Service understanding of our customers´ needs. They adjustments, tailored to the needs of individual customers. Lastly, we engage strategically with customers across various industries to jointly develop sustainable biological solutions. customers. We aim to bring value in a more designed to be easy to use, inspirational and available whenever our customers need them. Throughout the year, we respond to several information requests from customers in areas such as governance, strategy, sourcing practices, safety, quality and sustainability. We provide information on products, services and corporate policies, commitments, targets, and initiatives in a transparent manner. customers is crucial in determining our expectations and driving improvements to our 2021 Highlights We are on a journey to accelerate our digital sample and buy products, and digital of our sales opportunities were generated digitally, and we launched a new portal for technical collaboration to meet customer needs for trials collaboration, product documentation, and trouble shooting. We will expand the collaboration portal to the majority of customers in 2022. solution for our bioenergy customers which reducing variability, maximizing conversion, and resulting in more consistent liquefaction for every batch. We continue to partner with our customers to jointly develop and deliver better biological solutions. As one example, in 2021, Novozymes expanded its partnership in homecare & industrial and ingredient distributor. Together we will deliver biological solutions to address demand for resources while optimizing performance in homecare & industrial cleaning, and growing health consciousness and reducing chemical raw materials in food & beverages. Net Promotor Score (“NPS”) of 69 in 2021. The score shows that our customers value our demonstrates how Novozymes’ teams responded incredibly well despite operating in a challenging As part of our refreshed strategy, Novozymes will customers to better understand their world and help create products that will delight consumers. Particular focus will be on the food and health space. Accounting policy The criteria for selection of customers to include changed in 2021. Therefore result is not comparable to the surveys performed in previous years. Notes 141Novozymes A/S Accounts and performance Governance Our business The big picture 8.6 Community engagement We believe that businesses have an obligation to engage with the communities in which they operate and to invest strategically in programs that create value to society. We inspire each other promise of better lives in a growing world, both Our approach As part of our refreshed strategy, we set ambitious targets to nurture an inclusive and to drive outreach initiatives they are passionate groups coordinating the local agenda in alignment with the regional leadership teams. time to community outreach, help educate the 2021 highlights We continued supporting our communities donated 500 oximeters to the Health Department to schools and hospitals in North America. countries. The campaign was conducted together with the Novo group companies, including Novo enough to fully vaccinate 800,000 people. Since 2020, the Novozymes Water Opulence towards strengthening the water supply and systems in villages situated around our Foundation and a Bronze award in the ‘Water mobilized employees to clean up trash and beautify our local neighborhoods while also supporting charities. We cleaned the beach of also organized activities supporting local biodiversity. All over the world, our employees continued to engage with local university students to share our lives via webinars, lectures and case competitions. For example, 81 people joined a webinar with Novozymes experts on industrial enzymes, organized for students at Taylor’s University in Malaysia. Sustainability Professionals by mentoring social solutions to sustainable development challenges and create tangible impact to local communities Opportunity Explorer 2.0. ‘Girls’ Day in Science’ and invited 50 girls from the 8th and 9th grades to interact with our two public school teachers through the Kenan world made personal pledges to change some of their habits to reduce their environmental footprint, such as eating less meat. learn about the implementation of SDGs at the as part of the ‘Waste Not, Want Not’ campaign, our employees participated in activities to their communities. Social and governance data COVID-19 Our Zymers joined forces and helped raise funds COVID-19 vaccines to countries. Notes 142Novozymes A/S Accounts and performance Governance Our business The big picture Novozymes' responsible sourcing practices are focused on environmental, social, and governance issues across our value chain. Agricultural raw materials are a major component of our production processes and a responsible and secure supply of them is crucial to Novozymes' production. Our approach Novozymes’ sourcing department drives our supplier management and responsible sourcing program, anchored within Novozymes Operations, Supply and Quality function. Our approach to Responsible Purchasing Standards (RPS) and managed through our Supplier Performance Management (SPM) process and the Supplier Ethical Data Exchange (SEDEX) platform. Through the SPM process, Novozymes screens meet our assessment criteria, either an action plan is established, or an alternate supplier is collaboration platform to engage with suppliers chain. Novozymes requires all contracted suppliers to comply with our RPS, as well as, when requested, to complete questionnaires and to accept visits compliance with the standards. These standards cover various ESG criteria including respect for human and labor rights, business ethics, employee health and safety and environmental stewardship. All our suppliers of directly sourced agricultural raw materials are required to adhere to our deforestation requirements by not contributing to further deforestation and to have zero tolerance for land grabbing. Novozymes’ journey towards becoming carbon neutral, and we continue to focus on our commitment of securing 100% renewable 2 emissions together with suppliers. 2021 highlights Novozymes continued to expand the use of the SEDEX platform to enhance the transparency of conducted the previous year, for all categories of regions. This year, we conducted a similar hotspot analysis with a regional focus on all categories of indirect sourcing. The results will serve as input to future responsible sourcing strategies. During 2021, to advance towards sourcing 100% progressing on the existing renewable opportunities and on identifying further electricity consumption came from renewable suppliers regarding supply chain emission reductions. As a member of the Roundtable on Sustainable Palm Oil (RSPO), 100% of the palm oil we sourced having a centrally managed return process for all plastic bottles used for cleaning and using doormats made from recycled materials such as replacing diesel vans with electric vans and bicycles. Furthermore, we also completed a Human Rights assessments in Note 8.1 Labor Practices & Human Rights. Social and governance data Statement of the Board of Directors and Executive Management The Board of Directors and the Executive Management have today considered and approved the Annual Report of Novozymes A/S for the financial year January 1 – December 31, 2021. The Consolidated Financial Statements have been prepared in accordance with International Financial Reporting Standards as adopted by the EU and further requirements in the Danish Financial Statements Act, and the Parent Company Financial Statements have been prepared in accordance with the Danish Financial Statements Act. Management’s Review has been prepared in accordance with the Danish Financial Statements Act. In our opinion, the accounting policies used are appropriate, and the Group’s internal controls relevant to preparation and presentation of the Annual Report are adequate. The Consolidated Financial Statements and the Parent Company Financial Statements give a true and fair view of the financial position at December 31, 2021 of the Group and the Parent Company and of the results of the Group and the Parent Company operations and consolidated cash flows for the financial year January 1 – December 31, 2021. In our opinion, Management’s Review includes a true and fair account of the development in the operations and financial circumstances of the Bagsvaerd, February 1, 2022 Executive Management Ester Baiget Lars Green Board of Directors Jørgen Buhl Rasmussen Cornelis (Cees) de Jong Anne Breum Heine Dalsgaard Sharon James Anders Hentze Knudsen Kasim Kutay Kim Stratton Mathias Uhlén Group and the Parent Company, of the results for the year, and of the financial position of the Group and the Parent Company as well as a description of the most significant risks and elements of uncertainty facing the Group and the Parent Company. Novozymes’ Consolidated environmental data and the Consolidated social and governance data and the related notes have been prepared in accordance with the reporting principles of materiality, inclusivity, responsiveness and the accounting policies. In our opinion, they give a true and fair view of the organisation’s environmental, social and governance performance in accordance with these principles. In our opinion, the Annual Report of Novozymes A/S for the financial year January 1 - December 31, 2021 identified as NOVOZYMES-2021-12-31. zip has in all material respects been prepared in compliance with the ESEF Regulation. We recommend that the Annual Report be adopted at the Annual Shareholders’ Meeting. Accounts and performance Governance Our business The big picture Statements 143Novozymes A/S Statements Independent Auditor’s Reports To the shareholders of Novozymes A/S Report on the audit of the Financial Statements Opinion In our opinion, the Consolidated Financial Statements give a true and fair view of the Group’s financial position at December 31, 2021 and of the results of the Group’s operations and cash flows for the financial year January 1 to December 31, 2021 in accordance with International Financial Reporting Standards as adopted by the EU and further requirements in the Danish Financial Statements Act. Moreover, in our opinion, the Parent Company Financial Statements give a true and fair view of the Parent Company’s financial position at December 31, 2021 and of the results of the Parent Company’s operations for the financial year January 1 to December 31, 2021 in accordance with the Danish Financial Statements Act. In our opinion, the Consolidated environmental data and the Consolidated social and governance data for the financial year January 1 to December 31, 2021 are prepared in accordance with the accounting policies for the Consolidated environmental data and the Consolidated social and governance data. Our opinions are consistent with our Auditor’s Long-form Report to the Audit Committee and the Board of Directors. What we have audited The Consolidated Financial Statements of Novozymes A/S, pages 57-65 and 70-120 for the financial year 1 January to 31 December 2021 comprise the consolidated income statement and statement of comprehensive income, the consolidated balance sheet, the consolidated statement of equity, the consolidated cash flow statement and the notes, including significant accounting policies. The Parent Company Financial Statements of Novozymes A/S, pages 148-161 for the financial year January 1 to December 31, 2021 comprise the income statement, the balance sheet, the statement of equity and the notes, including significant accounting policies. Collectively referred to as the “Financial Statements”. The Consolidated environmental data and the Consolidated social and governance data of Novozymes A/S, pages 66-69 and 121-142, for the financial year January 1 to December 31, 2021 comprise the environmental performance and consolidated data, the social and governance performance and consolidated data and the related notes, including significant accounting policies. These are collectively referred to as the “Environmental, Social and Governance Data.” Basis for opinion We conducted our audit in accordance with International Standards on Auditing (ISAs) and the additional requirements applicable in Denmark. Our responsibilities under those standards and requirements are further described in the Auditor’s responsibilities for the audit of the Financial Statements and the Environmental, Social and Governance Data section of our report. We believe that the audit evidence we have obtained is sucient and appropriate to provide a basis for our opinion. Independence We are independent of the Group in accordance with the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (IESBA Code) and the additional ethical requirements applicable in Denmark. We have also fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. To the best of our knowledge and belief, prohibited non-audit services referred to in Article 5(1) of Regulation (EU) No 537/2014 were not provided. Appointment We were appointed auditors of Novozymes A/S for the first time aer the initial public oering on 21 March 2001. We have been reappointed annually by shareholder resolution for a total period of uninterrupted engagement of 21 years including the financial year 2021. Accounts and performance Governance Our business The big picture Statements 144Novozymes A/S Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the Financial Statements for 2021. These matters were addressed in the context of our audit of the Financial Statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key audit matter How our audit addressed the key audit matter Revenue recognition Novozymes has entered into various sales agreements that are subject to interpretation, which increases the inherent complexity of revenue recognition. Additionally, the volume of transactions and geographical spread of the Group’s operations increase complexity, including in respect of occurrence and timing of revenue. We focus on this area because of the significance to the Consolidated Financial Statements, as well as the inherent complexity in both application of revenue recognition and individual sales agreements. Refer to Note 2.2 the Consolidated Financial Statements. We considered the appropriateness of the Group’s accounting policies for revenue recognition and assessed compliance with applicable accounting standards. We assessed applicable information systems and tested relevant controls and monitoring controls implemented to ensure the occurrence and timing of revenue recognised. We discussed the judgements related to the recognition and classification of revenue with Management. We performed substantive procedures regarding returns, delivery terms and rebates in order to assess the principles applied for occurrence and timing of revenue. We applied data analysis in our testing of revenue transactions in order to identify and test transactions outside the ordinary transaction flow. Finally, we assessed the adequacy of disclosures relating to the revenue recognition. Acquisitions and Purchase price allocation In 2021, Novozymes entered into agreements to acquire Microbiome Labs and Synergia Life Sciences Pvt. Ltd. Acquisitions are non-standard and complex transactions, which are subject to significant estimates, including valuation of assets, liabilities, contingent consideration and share purchase liability. We focus on this area because of the significant impact on the Consolidated Financial Statement including the fair value assessment of assets and liabilities in the purchase price allocation, which are subject to Management's judgment and assumptions. Refer to Note 3.5 and 3.6 to the Consolidated Financial Statements. Our audit procedures included assessing whether the acquisitions met the criteria of a business combination. We assessed and challenged the purchase price in relation to the assumptions applied for the valuation, including the share purchase liability. We verified the assets and liabilities recognised in the opening balance sheet by performing audit procedures in relation to the opening balance. We tested the Purchase Price Allocation of the acquisitions prepared by Management. We discussed the Purchase Price Allocation including identification of assets and liabilities with Management and challenged the key assumptions used to determine the fair value of the acquired assets and liabilities in the business combinations. We involved our valuation specialists in assessing the valuation methodologies used by Management and the fair value of the acquired assets and liabilities. Finally, we assessed the adequacy of disclosures relating to the business combination. Accounts and performance Governance Our business The big picture Statements 145Novozymes A/S Statement on Management’s Review Management is responsible for Management’s Review, pages 3-56 and 162. Our opinion on the Financial Statements and on the Environmental, Social and Governance Data does not cover Management’s Review, and we do not express any form of assurance conclusion thereon. In connection with our audit of the Financial Statements, our responsibility is to read Management’s Review and, in doing so, consider whether Management’s Review is materially inconsistent with the Financial Statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. Moreover, we considered whether Management’s Review includes the disclosures required by the Danish Financial Statements Act. Based on the work we have performed, in our view, Management’s Review is in accordance with the Consolidated Financial Statements, the Parent Company Financial Statements and the Environmental, Social and Governance Data and has been prepared in accordance with the requirements of the Danish Financial Statements Act. We did not identify any material misstatement in Management’s Review. Management’s responsibilities for the Financial Statements and the Environmental, Social and Governance Data Management is responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with International Financial Reporting Standards as adopted by the EU and further requirements in the Danish Financial Statements Act and for the preparation of parent company financial statements that give a true and fair view in accordance with the Danish Financial Statements Act, and for such internal control as Management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Furthermore, Management is responsible for preparing the Environmental, Social and Governance Data in accordance with the accounting policies for the Environmental, Social and Governance Data, and for such internal control as Management determines is necessary to enable the preparation of Environmental, Social and Governance Data that are free from material misstatement, whether due to fraud or error. In preparing the Financial Statements, Management is responsible for assessing the Group’s and the Parent Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless Management either intends to liquidate the Group or the Parent Company or to cease operations, or has no realistic alternative but to do so. Auditor’s responsibilities for the audit of the Financial Statements and the Environmental, Social and Governance Data Our objectives are to obtain reasonable assurance about whether the Financial Statements and the Environmental, Social and Governance Data as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs and the additional requirements applicable in Denmark will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these Financial Statements and the Environmental, Social and Governance Data. As part of an audit in accordance with ISAs and the additional requirements applicable in Denmark, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the Financial Statements and the Environmental, Social and Governance Data, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sucient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the eectiveness of the Group’s and the Parent Company’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by Management. • Conclude on the appropriateness of Management’s use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s and the Parent Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the Financial Statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group or the Parent Company to cease to continue as a going concern. Accounts and performance Governance Our business The big picture Statements 146Novozymes A/S • Evaluate the overall presentation, structure and content of the Financial Statements, including the disclosures, and whether the Financial Statements represent the underlying transactions and events in a manner that gives a true and fair view. • Obtain sucient appropriate audit evidence regarding the financial information, environmental, social and governance of the entities or business activities within the Group to express an opinion on the Consolidated Financial Statements and the Environmental, Social and Governance Data. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence and, where applicable, actions taken to eliminate threats or safeguards applied. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the Financial Statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on compliance with the ESEF Regulation As part of our audit of the Financial Statements we performed procedures to express an opinion on whether the annual report of Novozymes A/S for the financial year January 1 to December 31, 2021 with the filename NOVOZYMES-2021-12-31. zip is prepared, in all material respects, in compliance with the Commission Delegated Regulation (EU) 2019/815 on the European Single Electronic Format (ESEF Regulation) which includes requirements related to the preparation of the annual report in XHTML format and iXBRL tagging of the Consolidated Financial Statements. Management is responsible for preparing an annual report that complies with the ESEF Regulation. This responsibility includes: • The preparing of the annual report in XHTML format; • The selection and application of appropriate iXBRL tags, including extensions to the ESEF taxonomy and the anchoring thereof to elements in the taxonomy, for all financial information required to be tagged using judgment where necessary; • Ensuring consistency between iXBRL tagged data and the Consolidated Financial Statements presented in human-readable format; and • For such internal control as Management determines necessary to enable the preparation of an annual report that is compliant with the ESEF Regulation. Our responsibility is to obtain reasonable assurance on whether the annual report is prepared, in all material respects, in compliance with the ESEF Regulation based on the evidence we have obtained, and to issue a report that includes our opinion. The nature, timing and extent of procedures selected depend on the auditor’s judgment, including the assessment of the risks of material departures from the requirements set out in the ESEF Regulation, whether due to fraud or error. The procedures include: • Testing whether the annual report is prepared in XHTML format; • Obtaining an understanding of the company’s iXBRL tagging process and of internal control over the tagging process; • Evaluating the completeness of the iXBRL tagging of the Consolidated Financial Statements; • Evaluating the appropriateness of the company’s use of iXBRL elements selected from the ESEF taxonomy and the creation of extension elements where no suitable element in the ESEF taxonomy has been identified; • Evaluating the use of anchoring of extension elements to elements in the ESEF taxonomy; and • Reconciling the iXBRL tagged data with the audited Consolidated Financial Statements. In our opinion, the annual report of Novozymes A/S for the financial year January 1 to December 31, 2021 with the file name NOVOZYMES-2021-12-31.zip is prepared, in all material respects, in compliance with the ESEF Regulation. Hellerup, February 1, 2022 Lars Baungaard State Authorized Public Accountant Michael Groth Hansen State Authorized Public Accountant Accounts and performance Governance Our business The big picture Statements 147Novozymes A/S 1 Basis of reporting 1.1 Accounting policies 2 Primary operations 2.1 Revenue 2.2 Employee costs 3 4 Financial activities 4.1 Financial income and costs 5 Other notes pending litigation 5.2 Related party transactions 5.5 Derivatives Financial statements Income statement Balance sheet Statement of equity Financial statements for Novozymes A/S 148Novozymes A/S Accounts and performance Governance Our business The big picture Financial statements for Novozymes A/S Income statement DKK million Note Revenue . , , (,) (,) , , Sales and distribution costs (,) (,) Research and development costs (,) (,) Administrative costs () () Other operating income, net . , , , , . Share of result in associates . () () Financial income . Financial costs . () () , , Tax () () , , Dividend to shareholders , , Revaluation reserve according to the equity method , , Retained earnings () () . , , Proposed dividend per share, DKK . . Accounts and performance Governance Our business The big picture Financial statements for Novozymes A/S 149Novozymes A/S Assets DKK million Note Dec. , Dec. , . , , Property, plant and equipment . , , . , , . . Receivables from Group enterprises . , , Fixed assets , , Raw materials and consumables Finished goods Inventories , , Trade receivables , , Receivables from Group enterprises - Tax receivables Other receivables . , , Current assets , , Assets , , DKK million Note Dec. , Dec. , (,) (,) Revaluation reserve according to the equity method , Reserve for development costs () Retained earnings , , Proposed dividend , , Total equity , , Provisions for deferred tax . Other provisions . Provisions Lease liabilities , , Payables for Group enterprises . - , , Lease liabilities , , Transitional holiday accrual - Trade payables Payables for Group enterprises , , Other liabilities , , , , , , Accounts and performance Governance Our business The big picture Financial statements for Novozymes A/S 150Novozymes A/S DKK million Common stock Treasury stock Revaluation reserve accord- ing to the equity method Reserve for development costs Cash flow hedges Retained earnings Proposed dividend Total (,) , , , , , , () - Dividend received (,) , - Dividend paid (,) (,) () - Proposed dividend (,) , - (,) (,) () , (,) - - Fair value adjustments () () Other adjustments B/S (,) , () , , , Accounts and performance Governance Our business The big picture Financial statements for Novozymes A/S 151Novozymes A/S been prepared in accordance with the Danish Financial Statements Act (accounting class D). The accounting policies are unchanged from 2020. The accounting policies are consistent with those except as described below. For a description of the Group’s accounting policies, please refer to Recognition and measurement in general earned. All costs incurred in generating the year’s revenue are also recognized in the income statement, including depreciation, amortization and impairment losses. liabilities measured at fair value or amortized cost are also recognized in the income statement. Assets are recognized in the balance sheet when it is considered probable that future economic the asset can be measured reliably. Liabilities are recognized in the balance sheet when they are considered probable and can be measured reliably. At initial recognition, assets and liabilities are measured at cost. Assets and liabilities are subsequently measured as described below for each item. prevailing at the reporting date. follow those of the Group with the exception of goodwill, which is amortized over a period of 10 An amount equal to the total capitalized Equity in Reserve for development costs. Financial assets associates are recognized initially at cost and subsequently measured using the equity method. The company’s share of the equity of subsidiaries, assets at the acquisition date, less or plus the addition of any residual value of goodwill, is associates is negative and Novozymes A/S has a legal or constructive obligation to cover the company’s negative equity, a provision is recognized. Net revaluation of investments in subsidiaries and associates is recognized under Equity in the Revaluation reserve according to the equity method. The reserve is reduced by payments of dividends to the parent company and adjusted to subsidiaries. subsidiaries less goodwill amortization is subsidiaries in the income statement. Goodwill in subsidiaries is amortized over a period of 10 Share purchase liabilities are obligations to invest in subsidiaries and are disclosed as a contractual obligation. The derivative embedded in the share purchase obligation is measured at fair value through the income statement. Dividend shown as a separate item under Equity. 1.1 Accounting policies Note section 1 Accounts and performance Governance Our business The big picture Financial statements for Novozymes A/S 152Novozymes A/S 2.1 Revenue 2.2 Employee costs DKK million Geographical distribution: Rest of Europe, Middle East & Africa , , North America , , Latin America , , Revenue I/S , , DKK million Wages and salaries , , Other social security costs Other employee costs Employee costs , , Average number of employees in Novozymes A/S , , DKK million Royalty income relating to subsidiaries , , Sale of intellectual property license - Net gain from divestment of building held for sale - Other operating income Other operating income I/S , , Note section 2 Employee costs in 2020 included severance costs of DKK 80 million related to organizational changes, of which DKK 65 million was related to changes to the Executive Leadership Team. Reference is made to Note 6.1 to the remuneration of the Board of Directors and the Executive Leadership Team. 2.2 Employee costs (continued) Accounts and performance Governance Our business The big picture Financial statements for Novozymes A/S 153Novozymes A/S DKK million Goodwill Acquired patents, licenses and know-how, etc. Completed IT development projects IT development projects in progress Total Total , , , , Additions during the year , , , Disposals during the year - - - - - () Transfers to/(from) other items - - () - - , , , , () (,) () (,) (,) Amortization for the year () () () () () - () - () - Disposals during the year - - - - (,) (,) () (,) (,) B/S , , , , Impairment loss has been recognized in Research and development costs. Accounts and performance Governance Our business The big picture Financial statements for Novozymes A/S 154Novozymes A/S DKK million Land and buildings Production equipment and machinery Other equipment Property, plant and equipment under construction Total Total , , , , , Additions during the year Disposals during the year () () () - () () Transfers to/(from) other items () - - , , , , , (,) (,) () (,) (,) Depreciation for the year () () () () () () - - () - Disposals during the year (,) (,) () (,) (,) B/S , , , , Capitalized interest Additions during the year (2020: no interest Land and buildings with an aggregate carrying million) had been pledged as security to credit institutions in respect of mortgage loans expiring property, plant and equipment amounted to DKK 84 million (2020: DKK 129 million). Impairment goods sold (2020: no impairment). Accounts and performance Governance Our business The big picture Financial statements for Novozymes A/S 155Novozymes A/S 3.3 Leases DKK million Land and buildings Plant and machinery Other equipment Carrying amount of lease assets DKK million Less than 1 year Between 1 and 5 years More than 5 years DKK million Depreciation of lease assets per asset class Land and buildings Plant and machinery Other equipment Depreciation of lease assets Additions to the lease assets during 2021 amounted to DKK 76 million (2020: DKK 9 million). Accounts and performance Governance Our business The big picture Financial statements for Novozymes A/S 156Novozymes A/S DKK million Investments in subsidiaries Investments in associates Receivables from Group companies Total , , Additions during the year , - , Disposals during the year - - () () , , (,) () (,) , () , () - () Dividends received (,) - (,) - Other adjustments - (,) () (,) B/S , , transfers. The carrying amount on investments in Reference is made to Note 6.9 to the investments in subsidiaries, joint operations and associates. Novozymes A/S has a contingent liability to purchase the remaining 40% of the shares in Synergia Life Sciences in 2025. Reference is made DKK million Prepaid expenses Derivatives Other receivables Recognized in the balance sheet as follows: B/S B/S Accounts and performance Governance Our business The big picture Financial statements for Novozymes A/S 157Novozymes A/S 3.6 Deferred tax DKK million () () () Tax related to the income statement () () Tax on equity items () B/S () () Deferred tax assets Deferred tax liabilities DKK million - - () () Property, plant and equipment - - () () - - () () - - Other - - () () () () () B/S - - () () 3.7 Other provisions Other provisions include contingent consideration related to the acquisition of PrecisionBiotics Group. information related to PrecisionBiotics Group applying to Novozymes A/S are identical to the information provided there. relates to an internal transfer of assets from Microbiome Labs. the most probable sales in 2022 discounted at a rate of 8%. Fair value adjustment of DKK 62 million is recognized as Financial income. Accounts and performance Governance Our business The big picture Financial statements for Novozymes A/S 158Novozymes A/S 4.1 Financial income and costs and pending litigation4.2 Credit institutions 4.3 Proposed appropriation DKK million Dividend to shareholders , , Revaluation reserve according to the equity method , , Retained earnings () () , , DKK million Other guarantees Other guarantees and commitments to related companies Other guarantees and commitments DKK million , , pending litigation and arbitration. Note section 4 Note section 5 property, plant and equipment is described in DKK million Fair value adjustment of payables relating to subsidiaries - Financial income () () () () Financial costs () () I/S I/S Accounts and performance Governance Our business The big picture Financial statements for Novozymes A/S 159Novozymes A/S 5.2 Related party transactions Transactions DKK million Sales Dividend payment to Novo Holdings A/S Sales Purchases () () The NNIT Group Purchases () () The Chr. Hansen Group Sales Purchases - () Purchases () () DKK million Receivables Payables () () The NNIT Group Payables () () The Chr. Hansen Group Receivables - Payables () () Holdings A/S 765,000 of its own B shares with the approval of the Board of Directors, at a price There were no transactions with the related parties other than the transactions described and normal remuneration of the Board of Directors and Executive Leadership Team, which is presented in Note 6.1 in the consolidated Reference is made to Note 6.4 to the transactions with related parties. Novozymes A/S is included in the consolidated Note section 5 Accounts and performance Governance Our business The big picture Financial statements for Novozymes A/S 160Novozymes A/S 5.3 Fees to statutory auditors 5.5 Derivatives DKK million Statutory audit Other assurance engagements - - Tax advisory services Other services - Fees to statutory auditors Reference is made to Note 6.6 to the consolidated auditors. Reference is made to Note 5.5 to the consolidated Reference is made to Note 5.4 to the consolidated Novozymes A/S are identical to the information provided there. Reference is made to Note 6.8 to the consolidated reporting date. Note section 5 Accounts and performance Governance Our business The big picture Financial statements for Novozymes A/S 161Novozymes A/S Financial terms Earnings per share (diluted) shareholders of Novozymes A/S) divided by the weighted average number of shares outstanding (diluted). EBIT margin percentage of revenue. EBITDA depreciation and amortization. EBITDA margin depreciation and amortization as a percentage of revenue. Equity ratio Total equity as a percentage of total assets at year end. capital, business acquisitions, divestments and purchase of Invested capital bearing assets and minority liabilities. iXBRL tags information embedded in the source code of an XHTML document readable XBRL data record by and in hand and other readily assets. percentage of last 12 months’ used in, or necessary for, the company’s operations. The main components are inventories, trade receivables and trade payables. Adjusted operating exchange gains/ losses, share of Operating costs Operating costs consist of Sales and distribution costs, Research and development costs and Administrative costs. Sales growth from existing business, excluding divestments, measured in local currency. For acquisitions, pro forma sales for the prior year is included in the calculation. Return on equity shareholders' of Novozymes A/S as a percentage of average Equity attributable to shareholders' of Novozymes A/S. Return on invested capital (ROIC) a percentage of average invested capital iXBRL Taxonomy Taxonomy is an electronic dictionary of business reporting elements used to report business data. A taxonomy element is an element of information in an XBRL data record. XHTML XHTML (eXtensible HyperText documents that are displayed as Web pages in an updated standard Other terms CO 2 2 ” is used to represent 2 4 , N 2 O etc.) on an equivalency basis in this report. Climate neutral and Net Zero Emissions neutrality as a state in which human the climate system. Net zero emissions are achieved when anthropogenic emissions of greenhouse gases to the atmosphere are balanced by anthropogenic removals over a the state of net zero emissions covers both our operations and value chain. Scope 3 The Greenhouse Gas Protocol indirect emissions (not included in scope 2) that occur in the value chain of the reporting company, including both upstream and downstream emissions. For (Purchased goods and services), related activities (not included in transportation and distribution) and weight) of hazardous and nonhazardous waste is either composted, reused, recycled or incinerated with energy recovery. Accounts and performance Governance Our business The big picture Management Review 162Novozymes A/S Glossary Management Review Editorial team Editor in chief Ann Lauritzen Steel Ulla Matthiesen [email protected] Finance [email protected] Investor Relations [email protected] Taís Pinheiro [email protected] Neha Ganesh [email protected] Text The editorial team from Novozymes, & Brand Photography Ty Stange and Mads Armgaard BystedFFW A/S Project management Reporting and audits version of The Novozymes Report 2021 as well as the XHTML version submitted to the Danish Financial Supervisory Authority. Management's Review, including the sections of the report under the headings: The big picture, Our business and Governance. environmental, social and governance data. See also the statement in the report. The report has been prepared in Financial Reporting Standards requirements in the Danish Financial Statements Act and additional requirements of Nasdaq in the report for more details. The Novozymes Report contains including statements about future performance, plans, strategies and statements are associated with words such as, but not limited to, “believe,” “anticipate,” “expect,” “estimate,” “intend,” “plan,” “project,” “could,” “may,” “might” and other words with a similar meaning their very nature associated with materially from expectations, both positively and negatively. These unexpected developments in i) the driven price decreases, industry consolidation, and launches of competing products or disruptive technologies in Novozymes’ core enforce the company’s intellectual the materialization of the company’s growth platforms, notably the opportunity for technologies or the development of as acceptance of enzymes produced vii) global economic and capital not limited to, currency exchange rates (USD/DKK and EUR/DKK in particular, but not exclusively), inputs and materials that compete with Novozymes’ biological future developments or new information. Novozymes’ reporting ambition is to provide a single integrated report connecting our business model, strategy, targets and performance through Accounts and performance Governance Our business The big picture About the report 163Novozymes A/S About the report Explore interactive highlights from the report at report2021.novozymes.com © Novozymes A/S, Krogshoejvej 36 2880 Bagsvaerd, Denmark CVR 10007127 529900T6WNZXD2R3JW382021-01-012021-12-31529900T6WNZXD2R3JW382021-01-012021-12-31cmn:ConsolidatedMember529900T6WNZXD2R3JW382021-12-31cmn:ConsolidatedMember529900T6WNZXD2R3JW382021-01-012021-12-311cmn:ConsolidatedMember529900T6WNZXD2R3JW382021-01-012021-12-312cmn:ConsolidatedMember529900T6WNZXD2R3JW382021-01-012021-12-311cmn:ConsolidatedMember529900T6WNZXD2R3JW382021-01-012021-12-312cmn:ConsolidatedMember529900T6WNZXD2R3JW382021-01-012021-12-313cmn:ConsolidatedMember529900T6WNZXD2R3JW382021-01-012021-12-314cmn:ConsolidatedMember529900T6WNZXD2R3JW382021-01-012021-12-315cmn:ConsolidatedMember529900T6WNZXD2R3JW382021-01-012021-12-316cmn:ConsolidatedMember529900T6WNZXD2R3JW382021-01-012021-12-317cmn:ConsolidatedMember529900T6WNZXD2R3JW382021-01-012021-12-318cmn:ConsolidatedMember529900T6WNZXD2R3JW382021-01-012021-12-319cmn:ConsolidatedMember529900T6WNZXD2R3JW382021-01-012021-12-3110cmn:ConsolidatedMember529900T6WNZXD2R3JW382021-01-012021-12-3111cmn:ConsolidatedMember529900T6WNZXD2R3JW382021-01-012021-12-311cmn:ConsolidatedMember529900T6WNZXD2R3JW382021-01-012021-12-312cmn:ConsolidatedMember529900T6WNZXD2R3JW382020-01-012020-12-31529900T6WNZXD2R3JW382020-12-31529900T6WNZXD2R3JW382021-12-31529900T6WNZXD2R3JW382019-12-31529900T6WNZXD2R3JW382020-12-31ifrs-full:IssuedCapitalMember529900T6WNZXD2R3JW382021-01-012021-12-31ifrs-full:IssuedCapitalMember529900T6WNZXD2R3JW382021-12-31ifrs-full:IssuedCapitalMember529900T6WNZXD2R3JW382020-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember529900T6WNZXD2R3JW382021-01-012021-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember529900T6WNZXD2R3JW382021-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember529900T6WNZXD2R3JW382020-12-31ifrs-full:ReserveOfCashFlowHedgesMember529900T6WNZXD2R3JW382021-01-012021-12-31ifrs-full:ReserveOfCashFlowHedgesMember529900T6WNZXD2R3JW382021-12-31ifrs-full:ReserveOfCashFlowHedgesMember529900T6WNZXD2R3JW382020-12-31ifrs-full:RetainedEarningsMember529900T6WNZXD2R3JW382021-01-012021-12-31ifrs-full:RetainedEarningsMember529900T6WNZXD2R3JW382021-12-31ifrs-full:RetainedEarningsMember529900T6WNZXD2R3JW382020-12-31ifrs-full:EquityAttributableToOwnersOfParentMember529900T6WNZXD2R3JW382021-01-012021-12-31ifrs-full:EquityAttributableToOwnersOfParentMember529900T6WNZXD2R3JW382021-12-31ifrs-full:EquityAttributableToOwnersOfParentMember529900T6WNZXD2R3JW382020-12-31ifrs-full:NoncontrollingInterestsMember529900T6WNZXD2R3JW382021-01-012021-12-31ifrs-full:NoncontrollingInterestsMember529900T6WNZXD2R3JW382021-12-31ifrs-full:NoncontrollingInterestsMember529900T6WNZXD2R3JW382019-12-31ifrs-full:IssuedCapitalMember529900T6WNZXD2R3JW382020-01-012020-12-31ifrs-full:IssuedCapitalMember529900T6WNZXD2R3JW382019-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember529900T6WNZXD2R3JW382020-01-012020-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember529900T6WNZXD2R3JW382019-12-31ifrs-full:ReserveOfCashFlowHedgesMember529900T6WNZXD2R3JW382020-01-012020-12-31ifrs-full:ReserveOfCashFlowHedgesMember529900T6WNZXD2R3JW382019-12-31ifrs-full:RetainedEarningsMember529900T6WNZXD2R3JW382020-01-012020-12-31ifrs-full:RetainedEarningsMember529900T6WNZXD2R3JW382019-12-31ifrs-full:EquityAttributableToOwnersOfParentMember529900T6WNZXD2R3JW382020-01-012020-12-31ifrs-full:EquityAttributableToOwnersOfParentMember529900T6WNZXD2R3JW382019-12-31ifrs-full:NoncontrollingInterestsMember529900T6WNZXD2R3JW382020-01-012020-12-31ifrs-full:NoncontrollingInterestsMember529900T6WNZXD2R3JW382020-01-012020-12-31cmn:ConsolidatedMemberiso4217:DKKiso4217:DKKxbrli:sharesxbrli:pureAnnual reportAuditor's report on audited financial statementsParsePort XBRL Converter2021-01-012021-12-312020-01-012020-12-31529900T6WNZXD2R3JW38Novozymes A/SReporting class D10007127Krogshoejvej362880BagsvaerdDenmarkBagsvaerd2022-02-01Ester BaigetPresident & CEOLars GreenCFOJørgen Buhl RasmussenChairCornelis (Cees) de JongVice ChairAnne BreumHeine DalsgaardSharon JamesAnders Hentze KnudsenKasim KutayPreben NielsenKim StrattonMathias UhlénJens Øbro529900T6WNZXD2R3JW3810007127Novozymes A/SKrogshoejvej 362880 BagsvaerdOpinionBasis for OpinionHellerup2022-02-01Lars BaungaardState Authorized Public Accountantmne2333133771231PricewaterhouseCoopers Statsautoriseret RevisionspartnerselskabStrandvejen442900HellerupMichael Groth HansenState Authorized Public Accountantmne3322833771231PricewaterhouseCoopers Statsautoriseret RevisionspartnerselskabStrandvejen442900Hellerup
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