Chr. Hansen ESG presentation 2017/18 - November 2018
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Chr. Hansen ESG presentation 2017/18 November 2018
Safe harbor statement
‒ This presentation contains forward-looking statements that reflect management’s current views with respect to certain future events and potential financial
performance.
‒ Forward-looking statements are other than statements of historical facts. The words “believe,” “expect,” “anticipate,” “intend,” “estimate,” “outlook,” “will,”
“may,” “continue,” “should” and similar expressions identify forward-looking statements.
‒ Forward-looking statements include statements regarding: objectives, goals, strategies, outlook and growth prospects; future plans, events or performance
and potential for future growth; liquidity, capital resources and capital expenditures; economic outlook and industry trends; developments of the Company’s
markets; the impact of regulatory initiatives; and the strength of competitors. The forward-looking statements in this presentation are based upon various
assumptions, many of which are based, in turn, upon further assumptions, including without limitation, management’s examination of historical operating
trends, data contained in records and other data available from third parties.
‒ Although the Company believes that these assumptions were reasonable when made, these assumptions are inherently subject to significant known and
unknown risks, uncertainties, contingencies and other important factors which are difficult or impossible to predict and may be beyond our control. Such
risks, uncertainties, contingencies and other important factors could cause the actual results of the Company or the industry to differ materially from those
results expressed or implied in this presentation by such forward-looking statements.
‒ The information, opinions and forward-looking statements contained in this presentation speak only as at the date of this presentation, and are subject to
change without notice. The Company and its respective agents, employees or advisors do not intend to, and expressly disclaim any duty, undertaking or
obligation to, make or disseminate any supplement, amendment, update or revision to any of the information, opinions or forward-looking statements
contained in this presentation to reflect any change in events, conditions or circumstances beyond what is required by applicable law or applicable stock
exchange rules and regulations.
‒ By viewing this presentation, you acknowledge and agree to be bound by the foregoing limitations and restrictions.
2
‒ Chr. Hansen
‒ ESG story 2017/18
Content
4 Business overview & sustainability strategy
18 Commercial highlights
31 Operational highlights
38 Governance
44 UN Global Goals mapping methodology
48 Other
3
Business
overview &
sustainability
strategy
4
1
2
N
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PURPOSE
We deliver natural innovative solutions
that address global challenges by
advancing food, health, and productivity.
5
PURPOSE
Sustainability is at the core of what we do
Better farming Good health Less waste
82%
We help feed the We improve global We help customers
growing population by health through reduce food waste and
promoting sustainable healthier and more improve yield and
agriculture. safe products. productivity.
of Chr. Hansen’s revenue
contributes to the UN Global Goals
Operational foundation
- reviewed by PWC
Workplace Climate and Business and Human rights and
responsibility environment product integrity responsible sourcing
6
BUSINESS OVERVIEW
We are market and technology Dairy cultures
incl. probiotics
leaders in our core business – Dairy
since 1874! enzymes
Meat, wine &
fermented beverages
Food Cultures & Enzymes
59%
Share of revenue
Bioprotection
Natural Colors Health & Nutrition
Shared R&D platform – 20% 21%
the Microbial Platform Share of revenue Share of revenue
Human Health
Food Cultures & Enzymes and Health & Nutrition share a & Microbiome
common research platform, and production method. The Confectionery
R&D platform is a process of screening, developing and & ice cream
upscaling of microbes. Production is the optimization of
recipes, flows and infrastructure for the fermentation of
microbes. Together: The Microbial Platform. Dairy & fruit Animal Health
preparation
Prepared Plant Health
food
7 Beverages
GLOBAL CHALLENGES
Finding solutions to society’s most pressing challenges drives our daily
business
Growing world population
Need for innovation to improve productivity & reduce food waste
and resource scarcity
“Real foods” and consumerism Optimization of recipes to meet clean label demands
Aging population and
Need for cheaper and preventive solutions
increasing health care costs
Urbanization and industrialization Enhanced value of potential markets
Technology breakthroughs Scientific evidence of benefits from good bacteria
8
OUR PRODUCTS
Decrease sugar, ensure food safety, reduce sick days, …
SAFEPRO® cultures help to keep
meat safe from Listeria
NOLA® Fit enzyme reduces added sugar in yogurt Replace artificial ingredients with our e-number free
by 2.0 g per 100 g yogurt without losing sweetness labeling coloring foodstuff range FRUITMAX®
NEMIX® C can increase yield in sugar cane crops by Study showed that test persons that took probiotic
+10% using naturally occurring microorganisms L. CASEI 431® had 37.5% fewer sick days
With CHY-Max® dairies can increase cheese output
by 100 tons compared to other coagulants (in case of
a production volume of 20,000 tons i.e. 0.5%)
9
OUR PRODUCTS
… and can help to make dairy farming more efficient!
An average dairy sources
300,000 tons milk to
produce
• 20,000 tons cheese
• 100,000 tons yogurt.
Using Chr. Hansen’s
products can potentially MORE MILK using MORE CHEESE using MORE YOGURT using
reduce CO2 emissions BOVAMINE® CHY-MAX® FRESHQ®
equivalent to 2,000
average UK households.
8,800 tons more milk 1,000 tons saved milk 5,000 tons saved milk
≈ 13,200 tons CO2 ≈ 1,500 tons CO2 ≈ 7,500 tons CO2
Source: Grain and IOP Science 2017.
10STRATEGY
Our Nature’s no. 1 strategy: Evolution since 2013 – now Sustainably
FOCUS AREAS FOCUS AREAS FOCUS AREAS
FOOD CULTURES & ENZYMES HEALTH & NUTRITION NATURAL COLORS
Leverage the Develop the Create
full potential microbial platform further value
Drive penetration Continue to prioritize core dairy Drive new products for Human Expand FruitMax® range of
business Health (incl. Microbiome) and coloring foodstuff
of new innovation Develop adjuncts and adjacencies Animal Health
Invest in Plant Health platform to
Drive Bioprotection lighthouse to unlock potential of EUR 100m by
EUR 200m by 2025 2025
Reinforce position Further strengthen global market Human Health: Expansion into Drive US conversion and secure
presence emerging markets and growth APAC growth
in growth markets Application support in core segments
adjacencies Strengthen route-to-market in Ag
businesses
Generate fuel Drive scalability in supply chain Reinvest in future growth Continue drive to restore
profitability
Digitalize core processes
for growth
11STRATEGY
With our lighthouses we commit to delivering tangible results by 2025
Bioprotection Designated as
Bacterial solutions for food safety and lighthouse in 2016
FOOD CULTURES
& ENZYMES freshness – target of EUR 200m by 2025
Plant Health Designated as
Bacterial cultures for crop protection – lighthouse in 2013
HEALTH & NUTRITION
target of EUR 100m by 2025
Human Microbiome Designated as
Lighthouse Next generation bacteria for lighthouse in 2013
Potential revenue Human Health
of minimum
EUR 100m per year
12FINANCIAL PERFORMANCE
Steady delivery since the IPO with ongoing investments in long-term growth
Revenue, EUR m/EBIT margin and ROIC, % Capex and R&D investments, EUR m and % of revenue
EUR500m 10.0% 9.8%
Spent on R&D
since IPO 9.6%
40.1% 9.1%
39.7%
38.0%
EUR650m
37.6% Reinvested in
34.1% 34.3% 34.9% capex since IPO
8.2%
8.3%
8.2%
30.0%
26.5%
28.2% 28.9% 29.2% 7.1%
26.1% 27.1% 27.1% 7.0%
25.3% 25.0% 25.6%
7.3%
7.1% 7.0%
6.7%
6.3% 6.4%
6.1% 6.1%
5.9%
552 636 699 738 756 859 949 1,063 1,097 33 39 80 108
09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17 17/18 09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17 17/18
Revenue EBIT margin b.s.i. ROIC ex. Goodwill R&D Capex Capex in % of sales R&D in % of sales
13FINANCIAL PERFORMANCE
Three complementary businesses with strong fundamentals
FOOD CULTURES & ENZYMES HEALTH & NUTRITION NATURAL COLORS
12.9% 13.0% 12.9%
35.0% 12.6%
34.3% 34.5% 34.3% 12.0%
33.4% 33.0% 33.3%
EBIT 31.5% 10.5% 10.9%
margin 31.5% 31.0% 10.5%
30.2% 29.4% 28.3% 29.2%
29.3% 29.4% 29.5%
28.5%
8.3%
Organic
revenue
growth
6% 6% 10% 9% 8% 9% 12% 9% 12% 14% 16% 13% 14% 15% 13% 2% 14% 8% 1%
29% 19% 12% 0% 9% 19% 10% 5%
09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17 17/18 09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17 17/18 09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17 17/18
14LONG-TERM FINANCIAL AMBITION
We will continue to pursue profitable growth through 2021/22
Long-term financial ambition
8-10% organic growth 30+% EBIT margin b.s.i. 1 +10% CAGR FCF b.s.i.a. 1
with 7-8% organic growth in FC&E
Outlook 18/192
9-11% Around 29.5% Around the same
FC&E above long-term ambition; level as 17/18 (EUR 196m)
H&N 10% or above; NCD 6-10%
1Before special items (and acquisitions).
2Based on constant currencies and stable raw material prices, and assumes no acquisitions. The outlook is also based on the current political and economic environment, although there is a risk of increased political and economic
uncertainty – e.g. the economic climate in the Middle East and Latin America, and trade tensions between large economies. Any deterioration in these situations might impact the outlook. FCF guidance assumes lower growth in
cash flow from operating activities than growth of EBIT before special items, due to a higher level of taxes to be paid in 2018/19, mainly related to the absence of acquisition-driven tax benefits realized in 2017/18. Cash flow used
15 for operational investment activities will be at a relatively high level, and is expected to be between EUR 110-130 million. This includes multiple investments across the group, and also assumes a successful sale-and-lease-back of
the company’s main site in Hørsholm in Q4 2018/19.OUR APPROACH TO SUSTAINABILITY
From farm to fork
Our approach to sustainability is innovation led.
Through pioneering science we provide our
customers with effective, natural solutions
throughout the entire value chain, from farm to
fork.
At the same time, by rethinking how we operate,
we will reduce the environmental footprint of our
own operations and work with our suppliers to
help spread best practice throughout our supply
chain.
We also know that creating systemic change
requires strong partnerships. To maximize our
sustainability efforts we will work with key
stakeholders and partners, including on pre-
commercial innovation, to achieve collaborative
success.
16OUR SUSTAINABILTY TARGETS
Developing sustainable solutions whilst keeping the house in order
Target dimensions Goal KPI Progress 17/18 Target 21/221
Better farming Expand reach of natural plant solutions Hectares of farmland treated (cumulative)2 6.7m hectares 25m hectares
Commercial
Good health Launch new products with a Number of products (cumulative) 3 products 6 products
documented health effect
Less waste Reduce global yogurt waste Tons of yogurt saved (cumulative)3 0.4m tons 1.2m tons
Workplace Improve work safety LTIF4 2.46 ≤1.8
responsibility Increase diversity of workforce % of diverse corporate teams5 78% 80%
Climate and Reduce environmental footprint in:
environment Energy Efficiency in % compared 9% 20%
Operational
Water to base year 13/146 6% 20%
CO2 22% 25%
Waste recycled 42% 40%
Business and Ensure fair, transparent and ethical standards of Completion of Code of Conduct training 99% 100%
product integrity business conduct
Human rights and Respect human rights and ensure responsible On site sustainability assessment of high Supplier requirements
and internal training
responsible sourcing practices in supply chain risk suppliers
1 For better farming the target is to be reached by 24/25.
2 Based on sales numbers and application rates of Plant Health solutions and silage inoculants.
3 Based on 7 days extended shelf life and sales numbers for FreshQ®.
4 Frequency of Lost Time Incidents per million working hours.
17 5 Defined as corporate management teams reporting to VP level and above that include at least one woman and one non-local.
6 Efficiency relative to production units.Commercial
highlights
18
1
2
N
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rMicrobial plant health
solutions have the potential
to increase crop
productivity and reduce
fertilizer and pesticide
requirements by 20% within
Better farming 20 years.1
Chr. Hansen contributes to more sustainable
Global challenges2
agricultural practice through plant probiotics
and silage inoculants. The world will need to increase global agricultural outputs by a minimum of 70% by
2050.
Population is expected to reach more than nine billion by 2050. That’s two billion more
Million hectares of farmland treated with natural solutions people than today.
(cumulative) Arable land is degraded and polluted as a result of improper use of fertilizers and
pesticides.
Our solutions
Biological solutions for plant health can increase yield - even in harsh conditions.
Silage inoculant products can reduce the waste of fodder for a typical EU dairy cow by
more than 15%.
Our probiotic solutions help animals improve gut health and digestibility, which can
lead to weight gain, feed efficiency and reduce the need for antibiotics.
Sustainability activities
2.2 3.5 6.7 25
Five year grant from the Danish Development Agency DANIDA to expand Chr. Hansen
15/16 16/17 17/18 24/25 plant protection solutions to Africa, in partnership with CARE Denmark.
Trials and testing of natural plant solutions to new crops and markets.
1 Source: How Microbes can help feed the world, American Academy of Microbiology, 2012.
2 Source: World Resources Institute, UN World Population Prospects, Food and Agriculture Organization.
19BETTER FARMING
Plant Health to unlock a potential of EUR 100m revenue by 2025
Big and growing market Ambitions of Plant Health
5% penetration of microbial ► Today: On market primarily in South America (Brazil)
products in the industry
>10 % expected growth of the bio- ► 2019/20: Expansion in North America
pesticide industry towards 2021
2.5 % expected growth of the Crop ► 2024/25: Presence in all major geographies
protection industry towards 2021
► Ramping up investments in capacity, discovery, and tech support
Hectares harvested in existing vs. potential markets, 2015
APAC Latin Latin
APAC Latin America America
America
EU
Sugarcane Soybean Corn
23m 108m 119m
EUR 100m
North America Unlocked potential by 2025
North America APAC North America
EU
Source: Phillips McDougall, FaoStat, Markets&Markets.
20BETTER FARMING
Our recent alliance launches Quartzo and Presence have a nematocidal
claim and effect
Description Bacillus based product Bacillus based product
Applied in-furrow or through drip irrigation Applied as seed treatment before planting
Applicable crops Sugarcane, F&V, other Soybean, Corn, Cotton, beans, wheat
Registration Bionematicide Bionematicide
Benefits and yields Root colonization Root colonization
Protection against nematodes and soil diseases Protection against nematodes and soil diseases
Increase of plant robustness and yield Increase of plant robustness and yield
Chemical Chemical
nematicide nematicide
Untreated Untreated
Competing technologies Chemicals Chemicals
GMO GMO
Biological Biological
21BETTER FARMING
Consumers and regulators are demanding natural alternatives to
antibiotics in livestock production
Antibiotic resistance is one of the main Regulators are increasing pressure & Probiotics for animals help improve
threats defined by the WHO end consumers start to demand non- feed efficiency and reduce need for
antibiotic-ever meat antibiotics
Seasonal % of Birds fed Non-Antibiotic-Ever in the US
Bovamine®
45% 42%
decreases
number of
40%
35%
health events
30% and increases
25%
milk yield for
Deaths attributable to major causes annually (in m)1 20%
dairy cows
2014 2050
15%
10%
5%
0% 5%
Jan Apr Jul Okt Jan Apr Jul Okt Jan Apr Jul Okt Jan Apr Jul Okt
Cholera Measles Road traffic Diabetes Cancer Antibiotical 2014 2017
accidents resistance
1 Source: AMR Review (2014).
22More than 100 trillion
bacteria live in and on our
bodies. They outnumber
human cells and play a
crucial role for our health.
Good health
Chr. Hansen contributes to global health
through its probiotics and healthy food Global challenges1
ingredients. Global health spend is estimated at USD 6.5 trillion, with an expected growth rate of
5% until 2018.
Worldwide, 12% of the population suffers from constipation. In some regions, the
New products launched with documented health benefits (cumulative) prevalence of irritable bowel syndrome is as high as 23%.
International scientists indicate that it is best for children to avoid artificial colors.
Therefore, many manufacturers are moving to natural colors.
Our solutions
Our natural ingredients give food companies the opportunity to remove salt, sugar,
and fat without reducing taste or texture.
Probiotic solutions for promoting health by strengthening gut balance and improve
respiratory infections.
We are investing heavily in research of human microbiomes and its therapeutic
potential towards metabolic, gastrointestinal and other diseases.
We enable customers to replace artificial ingredients with natural colors, vegetable
concentrates and juices.
1 2 3 6
Sustainability activities
15/16 16/17 17/18 21/22
Impact study on the potential positive effect of probiotics is initiated. Initial results are
1
expected during 2019.
WHO, IFFGD, Prescrire International.
23GOOD HEALTH
We have the largest culture bank in the world with over 30,000 strains
Potential beneficial effects on immune and gastrointestinal function1
May reduce respiratory tract challenges Hatakka et al. 2001, Hojsak et al. 2010a
LGG®
The world’s best documented probiotic strain May enhance the immune response de Vrese et al. 2005
Used in food and dietary supplements since 1990 May alleviate symptoms of irritated skin Pärtty et al. 2013
Described in more than 1,000 scientific publications
Studied in more than 300 clinical studies May reduce crying and fussiness in infants Isolauri et al. 2000
May reduce the risk of an upset stomach Chouraqui et al. 2004; Saavedra et al. 1994
BB-12®
The world’s best documented Bifidobacterium May enhance the immune response Holscher et al. 2012; Schiffrin et al. 1997
Used in food and dietary supplements since 1985
Described in more than 307 scientific publications May reduce respiratory tract challenges Smith et al. 2013; Taipale et al. 2011
Studied in more than 180 clinical studies May support bowel function Matsumoto et al. 2001; Pitkälä et al. 2007
Avoidance of antibiotic courses (52 000 - 84 000) and
sick-leave days (330 000 - 500 000)
Probiotics can save
€38 million on health
care costs in France
1 Selection of scientific studies as per April 2017 (LGG®) and Feb 2016; for more details refer to Chr. Hansen website.
24GOOD HEALTH
Probiotics remains an attractive market with strong fundamentals
Positive fundamentals in probiotic dietary supplements Changing market dynamics
► The market for probiotics keeps outgrowing adjacent categories
► CAGR expectations 2002-2021
Key market dynamics Our position
► OTC: 4.4%
► Vitamins: 4.9%
Growth increasingly driven by Strong presence and growth in
► Dietary Supplements: 6.5%
7000 emerging markets emerging countries
6000 8%
Global probiotics KOLs1, medical professionals Chr. Hansen offers the best
5000
market growth consumers increasingly aware of documented strains in the
microbiome and probiotics highest quality
4000
11%
3000
Current customers adapting to
Rapid online channel migration new channels at varying speed
2000 and success
1000
Proliferation of undocumented
Helping our customers
products confusing consumers in
differentiate and educate KOLs1
some markets
0
2005 2017 2021
Organic Growth CAGR
1Key Opinion Leaders (KOL).
Source: Euromonitor and management estimates.
25GOOD HEALTH
Human Health to focus on launch of new products
1 Microbiome is creating new opportunities within
conventional strains and existing end markets
2
Long term Infants in hospitals Reduce risk of gastrointestinal complications
Pharma
Novel uses for potential but not
existing bacteria a current
(partnership model) investment focus Infant: Support infant gut microbiome for healthy
development
End market
Adult: Promote intestinal integrity
Women: Rebalance a healthy vaginal microbiome
& Infant Nutrition
1
Supplements
Opens new
segments such
Existing as metabolic
Human Health 2 Recent partnership with Prota Therapeutics to treat
and skin health
business peanut allergy with LGG®
26Dairy provides a vital
opportunity to reduce food
waste as 20% of all EU dairy
products goes to waste.
80% of the yogurt waste is due
to use-by-date expiration.
Less waste Global challenges1
Chr. Hansen’s bioprotective
cultures can extend shelf life and Roughly 1/3 of food produced for human consumption is lost or wasted globally.
reduce food waste. Just 25% of this food would be enough to feed the more than 800 million people
currently suffering from hunger and malnutrition.
Million tons of global yogurt waste reduced (cumulative)
Our solutions
Extend shelf life and reduce food waste through natural bioprotection in dairy.
Enable customers to produce more food using fewer resources, e.g. producing more
cheese using less milk.
Sustainability activities
0.1 0.2 0.4 1.2
Impact study on the effect of bioprotection (FreshQ®) for reducing food waste.
15/16 16/17 17/18 21/22
Consumer sensory test conducted to investigate consumer acceptance of extended
shelf life.
1 Source: Food and Agriculture Organization.
27LESS WASTE
Using nature’s good bacteria to keep food fresh longer
Informing consumers about food waste
reduction increase their purchasing
intention
extends 30% ~440,000 EUR250m ~520,000
shelf life less yogurt tons yogurt net saving
tons less CO2
Would you buy this yogurt with longer shelf live?1
to European
of yogurt waste saved economy Group A
• Seven days older Yes 75% No 25%
by 7 days • Food waste info
Group B:
Value proposition • Seven days older Yes 52% No 48%
Manufacturers Retailers Consumers
Information given to the consumers in Group A:
Help reduce food waste: Too much food is wasted. One of the most
• Increase shelf life • Sell more yogurt before expiry date • Enjoy more fresh yogurt effective ways for us to help you reduce waste, is to improve the
• Clean up labels • Reduce waste levels > Savings from • Waste less and thereby save money quality and shelf life. This yogurt can stay fresh a little longer, because
• Protect brand & reputation waste reductions will offset lost we have used a new and better yogurt culture. There are of course no
• Avoid reallocation costs and discounts profit from reduced demand artificial ingredients. We all need to stand together to reduce food
• Increase batch volume and frequency waste.
1 Study commissioned by Chr. Hansen and carried out May 2018 with German consumers by independent sensory evaluations institute Inspe-ct.
28LESS WASTE
Our bioprotection journey
2024/25
Bioprotection business split by category and region EUR200m
sales target
APAC
Today: Unlocking the full
NA
potential of the business
Meat
Regional expansion into
EMEA LATAM and APAC
Dairy LATAM Building application
knowledge and client
relationships in adjacent
areas
2017/18
Working with authorities on
Launch of 2nd regulatory framework &
generation FreshQ® labelling solutions
2013 targeted at regions with
Chr. Hansen enters hotter climates and less
bioprotection market reliable cold chains
in dairy with launch
Early 2000 of FreshQ® brand
Chr. Hansen launches
first bioprotection
Late 1990s solutions in meat to
First bioprotection control Listeria
solutions emerge
29LESS WASTE
We continue to roll out the 2nd generation bioprotection in emerging
markets and drive penetration across core food applications
Bioprotection has made strong Today Tomorrow
progression since 2013, and will
continue to create long-term revenue 7%
optionality
Fresh Cheese Fermented Animal Vegetable
6% dairy meat products products
(meat adjacencies/fish)
Traditionally Non Traditionally
Fermented Food Products Fermented Food Products
Food waste
Shelf life extension
targeting
yeasts/mould
3%
2%
Food Safety
Additional
protection against
gram-positive food
pathogens (Listeria,
12/13 13/14 14/15 15/16 16/17 17/18 Clostridium)
30Operational
highlights
31
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New culture model launched to articulate the unique corporate culture
Comments/highlights 13/14 14/15 15/16 16/17 17/18
Increased employee engagement clearly outperforming Gallup PEOPLE STATISTICS
benchmark Total number of employees 2,605 2,651 2,852 3,111 3,304
Global leadership development program CONNECT launched Average number of employees 2,510 2,573 2,708 2,940 3,151
and Core Scientist program strengthened Employee turnover, % 11 12 10 12 12
Ongoing efforts in diversity Rate of absence, % 2 2 2 2 2
Continued focus on zero-accident mindset resulting in further
LTIF improvement DIVERSITY AND INCLUSION
New culture model launched in Q1 2018 with four cultural Gender - all employees (male/female), % 58/42 58/42 58/42 58/42 58/42
drivers that articulate Chr. Hansen’s unique corporate culture Gender - managers (male/female), % 65/35 64/36 61/39 61/39 61/39
Gender - key positions (male/female), % 81/19 82/18 78/22 78/22 78/22
Nationality - key positions (local/non-local), % 73/27 75/25 77/23 76/24 75/25
Nationality - key positions (Dane/non-Dane), % 59/41 63/37 59/41 57/43 54/46
Diverse teams, % 69 77 69 66 78
Board of Directors - (male/female/non-local), % 83/17/50 71/29/57 71/29/57 71/29/71 71/29/57
OCCUPATIONAL HEALTH AND SAFETY
Lost Time Incidents (LTIs) 17 16 19 13 14
Frequency of LTIs per million working hours (LTIF) 4 3.52 4 2.5 2.46
Severity (days away per LTI) 20 28 10 5 9
Fatalities 0 0 0 0 0
32ENVIRONMENT
Efficiency gains across all dimensions; good progress with waste recycling
Comments/highlights 13/14 14/15 15/16 16/17 17/18
Improvement across all environmental efficiency ENERGY1
parameters; target for recycled solid waste exceeded Total energy consumption, GWh 166.5 167.6 171.7 186.2 201.3
Two more sites certified according to ISO 14001 Energy efficiency, relative to base year 13/14, % 7 9
WATER1
Focus on strengthening data quality, integrity and
collection method Total water consumption, Mm3 1.13 1.13 1.18 1.31 1.51
Water efficiency, relative to base year 13/14, % 5 6
CO2 FOOTPRINT1
Efficiency and recycled solid waste Total scope 1 CO2 emitted, kt 24.3 22.8 21.4 24.5 24.8
Relative to base year 13/14, %
Total scope 2 CO2 emitted, kt 24.7 24.3 24.8 23.9 25.9
Total scope 3 CO2 emitted, kt 54.5 62.3 63.3 88.1 87.9
Total scope CO2 emitted, kt 103.5 109.4 109.5 136.6 138.6
CO2 efficiency, relative to base year 13/14 (1+2), % 17 22
WASTE1
Recycled biomass, kt 67.4 76.5 82.7 90.0 99.3
Recycled solid waste, % 23 20 23 33 42
Solid waste, kt 3.2 3.1 3.2 4.0 4.4
Hazardous waste, % of solid waste 1 1 1 1 1
5 17 7 33 6 22 9 42
Waste water, Mm3 0.88 0.83 0.84 0.88 1.11
16/17 17/18 ENVIRONMENTAL VIOLATIONS
Water efficiency CO2 efficiency Environmental violations, no. 7 4 3 0 2
Energy efficiency Recycled waste
1For NCD, the calculation method has been changed from comparing utility use with kg of sold products to site specific production units. The new method is more accurate and better reflects production efficiency.
The change effects our overall corporate KPIs progress. The KPI performance has therefore been recalculated from the base year 2013/14.
33ENVIRONMENT
Global footprint with centralized production in Denmark, Germany, Brazil
and US Copenhagen, Denmark
Roskilde, Denmark
Graasten, Denmark
Nienburg, Germany
Milwaukee, US Pohlheim, Germany
Hustopece, Czech Republic
Arpajon, France Unterlangkampfen, Austria
Canossa, Italy (Hundsbichler)
Dairy Copenhagen, Milwaukee
Enzymes Graasten, Nienburg, Valinhos
Meat Pohlheim, Milwaukee
Wine Copenhagen, Pohlheim, Valinhos, Brazil
Arpajon, Milwaukee
Lima, Peru
Human Roskilde
Animal Nienburg, Pohlheim, Hustopece,
Valinhos, Milwaukee
Plant Nienburg, Valinhos
Natural Colors Lima, Valinhos, Canossa
34BUSINESS AND PRODUCT INTEGRITY
Further strengthening the integration of our Code of Conduct
Comments/highlights 13/14 14/15 15/16 16/17 17/18
Roll-out of a new Code of Conduct e-learning PRODUCT SAFETY
module to all employees Product retrievals, no. 4 4 3 2 2
Whistleblower hotline: one case reported that has Product safety audit findings, no. 17 10 9 8 11
been investigated and was concluded
unsubstantiated
BUSINESS INTEGRITY
Third party audits of quality and food safety Participation rate in Code of Conduct training, % 92 94 100 100 99
All production sites are certified to food safety
standard FSSC 22000
Approximately one audit every other week at
Chr. Hansen site conducted by Bureau Veritas
Code of Conduct available
Actions for food safety audit findings were on Chr. Hansen website
defined; most findings related to internal
documentation issues and were not product-
related
35HUMAN RIGHTS AND SOURCING
Responsible sourcing in Natural Colors
Case studies: How we support rural farming and reduce waste
Local footprint with eight sourcing offices in Denmark,
Turkey, Italy, USA, Peru, Brazil, India and China
Dual sourcing, particularly for volume pigments, to
mitigate risk against poor harvest, have a stronger Annatto has been grown and used for color for hundreds of years. We develop
price negotiating platform and better support large strains with high pigment and share our best practices with farmers in Africa
conversions to help them increase their profitability.
Own agronomy programs and cooperation with
leading universities with focus on improving yield
through higher pigment load per plant, better Cochineal is grown in desert areas. We work with farmers by signing long-
utilization of arable land and reduction of waste term contracts. This gives the security needed to invest in better production
Supporting local farmers through Good Agricultural methods. One result is an investment in drip irrigation to get three times the
Practices harvest for the same amount of water.
Sustainability assessment of farmers and audits of
high risk suppliers; regular training of QA auditors and
Category Managers in sustainability Grape pomace (waste) is customarily delivered by wineries to extractors who
extract alcohol from grape skins. When the pigment content in the skin is high
enough, anthocyanin is extracted for color. One of our suppliers even burns
their final waste to generate steam and energy.
36HUMAN RIGHTS AND SOURCING
Answering to increased integration of due diligence in local legislations
Responding to increasing requirements for due diligence processes
A human rights due diligence process was conducted in 2017 and updated in 2018
The process identifies and highlights potential human rights risk scenarios and the associated
severity (impact and likelihood), taking into account existing actions for mitigation
The process is updated annually to reflect any changes in the value chain or governance system
Review against
Identify potential Assess impact and Adjust for Prioritization of
Map value chain human rights
scenarios likelihood mitigation actions severity
articles
37Governance
38
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Dual system with two independent bodies
Board of Directors supervises the work of the Executive Board and Management structure
is responsible for general strategic management
The Board of Directors currently has eleven members consisting of AGM
shareholder and employee representatives
elects
Shareholder representatives serve for 1 year; at least half shall be
independent according to the Danish Corporate Governance Codex
Shareholder representatives Employee representatives
Employee representatives serve for 4 years (current term until 2021); the
number of employee representatives is equal to half the number of 7 members – elected every year 4 members – elected for 4 years
shareholder-elected members
Executive Board is in charge of day-to-day management (CEO, form
CFO, CSO and EVP FC&E)
Corporate Leadership Team assists Executive Board
Board of Directors
Board of Directors statistics
Monitoring &
11 64% 29% 57% strategy
members independent Women Non-local
Executive Board (4 members)
Diversity
Corporate Leadership Team (12 members)
target:
3 female
shareholder
representatives
by 21/22
39MANAGEMENT
Executive Board and Corporate Leadership Team
Executive Board
Mauricio Graber Soeren Westh Lonning Christoffer Lorenzen Thomas Schaefer
CEO CFO FC&E CSO
Christian Barker Klaus Bjerrum Winnie Buegel Anne Reker Cordt
H&N NCD
Corporate Leadership Team
Compliance, Comm. & Sustainability Strategy & Business Development
Sten Estrup Alice Larsen Jacob Vishof Paulsen Torsten Steenholt
APAC & LATAM Human Resources EMEA & NA Global Operations
40BOARD OF DIRECTORS
A high quality Board with a diverse mix of competencies and experience
Committee
Nomination
Comittee
Remuneration
Committee
Committee
BoD since
Audit
Independent?
YoB
Nationality
Scientific
Name Board competencies Other Board
positions
Ole Andersen - Chairman ‘56 DK Yes ’10 X C C Extensive board experience from private equity owned and listed Danske Bank, Bang
Professional board member companies. Financial and accounting expertise. & Olufsen
Shareholder representatives only
Dominique Reiniche – Vice ’55 F Yes ’13 X X X Experience in food, beverage and beauty industries; 22 years in senior PayPal Luxembourg,
Chairman leadership positions at French and European levels, including CEO at Mondi, Severn
Professional board member Coca-Cola. Trent
Jesper Brandgaard ’63 DK Yes ’17 X Experience from group management in a multinational pharmaceutical SimCorp
EVP Biopharm and Legal Affairs, company, including responsibility for strategy development and
Novo Nordisk (until 2019) implementation, legal affairs and patents, information technology and
investor relations. Board and executive experience with financial
reporting and capital markets.
Luis Cantarell ’52 ES/ Yes ’16 C Professional global experience within the food and beverage industry; Froneri
Professional board member CH over 10 years of leadership experience with the Nestlé.
Heidi Kleinbach-Sauter ’56 DE/ Yes ’17 X More than 25 years of innovation and R&D experience in the CPG
Professional board member US industry globally; former Senior VP Global R&D of PepsiCo. Founding
Chair of several councils, experience as a member of the Advisory
Committee of Northern Seed Montana LCC, US.
Kristian Villumsen ’70 DK Yes ’14 X X Extensive knowledge of the medico and life science industry; solid Coloplast
CEO, Coloplast international and managerial experience in both European and emerging subsidiaries
markets.
Mark Wilson ’52 UK Yes ‘10 C X International CEO/MD with over 40 years in FMCG companies and
Professional board member service/B2B industries in Asian, South American, UK, Irish and
international markets. Financial and accounting experience.
41 C= Chair, X = Member.BOARD OF DIRECTORS
Committees established in line with Danish Corporate Governance Codex
Audit Committee Remuneration Committee
Assist in fulfilling its responsibilities in the financial reporting process, the system of Assist in fulfilling its responsibilities in regard to establishing, implementing and
internal controls, the audit process and monitoring compliance with laws, executing its remuneration position for the members of the Board of Directors and
regulations, internal policies and positions, including considering the independence the Executive Board; preparation of a general remuneration policy for the
of the external auditor and reviewing the interim financial reports. Company.
Mark Wilson (Chairman) Ole Andersen (Chairman)
Ole Andersen Dominique Reiniche
Jesper Brandgaard Mark Wilson
Kristian Villumsen
Scientific Committee Nomination Committee
Assist in fulfilling its responsibilities with respect to the Company’s R&D activities Assist in fulfilling its responsibilities with respect to the nomination and
and ensuring that the Board of Directors has an informed, independent view of the appointment of members of the Board of Directors and the Executive Board.
focus and direction of the R&D function’s work and capabilities.
Luis Cantarell (Chairman) Ole Andersen (Chairman)
Heidi Kleinbach-Sauter Dominique Reiniche
Dominique Reiniche Kristian Villumsen
42EXECUTIVE COMPENSATION
Closely aligned to key metrics and with strong incentive component
SHORT TERM LONG TERM
Annual incentive program for CEO and CFO Progressive three-year incentive program
Based on group financial targets and discretionary, personal goals Requires personal investment in Chr. Hansen shares to participate
Bonus is paid as 1/3 of the payout in Restricted Stock Units, and 2/3 in cash; Grant value estimated (based on Black-Scholes) at 20-25% of the
normally accounts for 25-30% of total remuneration package remuneration package
x0.5 Retention
20% Organic growth target
Group x1.5 Organic growth target (CAGR)
financial 20% EBIT target Group
targets financial
targets
20% Free cash flow target x1.5 Accumulated EBIT target
Discretionary,
40% Individual non-financial targets x2 TSR performance relative to peers
personal goals
Matching shares
per 1 invested share
43UN Global
Goals mapping
methodology
44
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How we contribute to the 17 SDGs
SDG Chr. Hansen’s impact and opportunity SDG Chr. Hansen’s impact and opportunity
1 No Poverty Direct impact on affordable food and increase in yield 10 Reduced Indirect impact as our solutions enable small-scale farmers and dairies
Inequalities worldwide to create more efficient production and earn a living wage
2 Zero Hunger Significant direct impact and strong opportunity due to multiple products 11 Sustainable Cities Limited impact and opportunity
enabling more productive food production and resilient and sustainable and Communities
agriculture that reduces hunger
3 Good Health and Significant direct impact and strong opportunity due to multiple products 12 Responsible Significant direct impact and strong opportunity through multiple
Well-being enabling global health through probiotics and healthier and safer food Consumption and solutions that reduce food waste and enable dairy producers and farmers
solutions to produce more with less
Production
4 Quality Education Indirect impact through numerous collaborations
13 Climate Action Direct impact due to multiple solutions that reduce the use of energy in
with universities and training of employees
dairy production and support less carbonintensive agricultural practices
5 Gender Equality Indirect impact through solutions that enable women globally to initiate
14 Life Below Water Limited impact and opportunity
more effective yogurt and cheese production
6 Clean Water Indirect impact as natural plant solutions make uptake of water more
15 Life on Land Direct impact due to solutions that increase forage flexibility may have a
and Sanitation efficient and reduce contamination of groundwater
significant contribution
7 Affordable Direct impact through more efficient production in dairy and agriculture
that reduces energy consumption 16 Peace, Justice and Limited impact and opportunity
and Clean Energy
Strong Institutions
8 Decent Work and Direct impact through multiple solutions to enhance more efficient
17 Partnerships for Direct impact through multiple partnerships to reach targets in the 2020
Economic Growth production, resulting in increased yield, sustainable growth and job
the Goals Sustainability strategy
creation, especially in dairy, agriculture and animal feed industries
9 Industry, Limited impact and opportunity
Innovation
and Infrastructure
45UN GLOBAL GOALS
We focus on the three SDGs where we can make the strongest impact
Mapping of SDGs
Impact category Example SDG 2 SDG 3 SDG 12
Improving food and the environment
Increase productivity CHY-Max® that enables cheese
manufactures to increase yield X X
and yield
Reduce waste FreshQ® bioprotection solutions
for yogurt that reduces spoilage/ X X
extends shelf life
Substitute artificial Fruitmax® coloring foodstuff
range X X
ingredients
Increase food safety SafePro® that reduces risk of
Listeria in meat
X X
Improving animal and human health
Enhance animal Products that reduce number of
welfare animal deaths, severity and
length of diseases e.g.
X
Bovamine®
Promote health and Products that enhance digestive
health e.g. BB-12® X
well-being
Reduce salt, sugar, fat NOLA® Fit that reduces lactose
and sugar in yogurt X
and lactose
Ensure access to Products that enable camel
affordable and farmers to produce milk from X X
camels e.g. Far-m®
available nutrition
46UN GLOBAL GOALS
Our SDG product mapping methodology – reviewed by PwC
All Chr. Hansen’s products are assessed in terms of their contribution to the UN
Sustainable Development Goals, in particular goal no. 2, 3, and 12
Each products is assessed in terms of its contribution to the assessment criteria and the
level of documented effects:
Weakly documented: Sporadically or weakly documented to a degree where Chr.
Hansen cannot claim the effect
Moderately documented: Medium level of documentation, leaving room for
improvement, but still strong enough that the effect can be claimed
Well documented: Strong documentation, potentially verified/developed by third
party clearly defining the product effect
If a product scores 2 (moderately documented) or 3 (well-documented) and is
categorized in one (or more) of the assessment criteria, it will be included in group of
products that contributes to the SDGs
Life cycle assessment perspectives will be included in the assessment of products to
ensure a holistic product assessment
The accumulated revenue generated from products contributing to the SDGs is tracked
annually
The products not included can still have a positive contribution, but it has not yet been
sufficiently documented or it is products where there is no direct sustainability impact,
e.g. products that enable cheese maker to make holes in the cheese.
47Other
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Sustainability Board was established in 2015/16
Chr. Hansen’s Sustainability Board is
Chairman
responsible for ensuring ownership,
Mauricio Graber,
involvement and commitment from the entire President & CEO
business in defining, prioritizing and executing
Chr. Hansen’s sustainability objectives and
activities.
Sustainability
Strategy Office
Annemarie Meisling,
Director, Sustainability
Research & Investor Relations Customers, Products Responsible Business HR, Diversity Environment,
Development & Communications & Markets Sourcing Integrity & Human Rights Health & Safety
T. Schaefer, EVP & CSO, Martin Riise, Senior C. Lorenzen, EVP, FC&E K. Tollin, Senior Director, W. Buegel, General A. Larsen, CVP, Global T. Steenholt, EVP, Global
R&D Director, IR K. Bjerrum, EVP, NCD Global Sourcing Conusel & CVP Human Resources Operations
Sanne Seyer-Hansen, H. J. Nielsen, VP, H&N
Director, Corporate
Communications
49RATINGS & AWARDS
Corporate knights ranked us amongst the Global 100 Most Sustainable Firms
ESG Rankings 2018 Rank Description
Top 14% in industry
AA AA since 2013 (highest rating is AAA)
C up from C-/D: 2012-2015
C Aim for C+ to qualify for Oekom*s “Prime” category
Best ESG scores amongst sector peers In 2017, Chr. Hansen was
ranked 66th in the Global 100
Ranked in the top 5% performers on Eco Vadis Most Sustainable Corporations
Top 5% Received a Gold CSR Award ranking. This is among the top
2% performers in the world
and the top rank within the
chemicals industry.
6th of 132 Ranked in the top 6th/132 in industry – “Leader”
C: Awareness, B – and B: Management, A- and A: Leadership
C 32% of companies responding to CDP at C level, benchmarked
against avg. scores within sector, and industry
✓ Chr. Hansen listed as a constituent
Only companies that meet the FTSE4Good ESG criteria are included
50SELECTED POSITIONS
Our stance on GM techniques, palm oil and land usage
Genetic modification techniques statement Further policies and statements
We recognize that the use of genetic modification (GM) techniques in the food chain is subject to public debate and that the are available on our website
acceptance of such technology by our customers depends on its acceptance by the end consumers.
Chr. Hansen’s use of GM techniques adheres to all rules and regulations governing this area Code of Conduct
Products requiring GM labeling are labeled as required where the products are sold Supplier Requirements for Sustainability
We do not source materials for the manufacturing of our products, which would result in the products of our customers California Transparency in Supply Chain
being GM labeled according to the EU Regulations without explicitly informing our customers Act Statement 2017/18
All vendors and raw materials must be approved in accordance with the Chr. Hansen internal procedures. The approval
includes assessment of the validity of the genetic modified labeling or the lack thereof Business Integrity
Chr. Hansen has elaborated product-specific statements relating to the use or non-use of genetically modified components, Anti-corruption
which are available upon request. Quality & Product Safety
Product Safety
Palm oil statements (Natural Colors Division and Food Cultures & Enzymes) Product Security
GM techniques
Chr. Hansen has been an affiliate member of the Roundtable on sustainable Palm Oil (RSPO) since 2011. Palm Oil
Chr. Hansen uses palm oil in two ways: Health & Safety
Primarily in the palm-carotenoids, an important pigment in our product range. The natural carotene is a bi-product Reward & Remuneration
(waste product from e.g. the biofuel and cosmetic production). Corporate Governance
A small amount of palm oil derivatives can be found as ingredients and additives in the raw materials used for Sustainability
production. Diversity & Inclusion
We work closely with our customers to investigate options for supplying RSPO certified or palm-free products. Enterprise Risk Management
Land use statement
Chr. Hansen works closely with suppliers to ensure good agricultural practices and continue to improve quality and
standards.
We create local development for the farmers, and help ensure a stable income from coloring crops.
We collaborate with suppliers to continue to improve efficiency both in terms of the specific color intensity of crops and the
51
agricultural practices for cultivating these.SELECTED POSITIONS
Our position on animal studies
Chr. Hansen does not do animal testing on a continuing basis (at all), it has been several years since the last study.
This is our general position.
Chr. Hansen has a limited amount of animal testing, within the Animal Health and Human Health areas.
Chr. Hansen does not carry out animal testing in the Natural Color or Food Cultures & Enzymes Divisions.
The purpose for the majority of the trials is to obtain product registrations to be able to commercialize the products. In Europe, a local
authorization can be required to perform an animal study based on a submitted protocol which goes through ethical review.
At Chr. Hansen, we work under strict local ethical regulations when undertaking animal trials, taking into consideration that the
animals are treated with minimal pain and stress.
Animal Health Human Health
Animal studies are only undertaken when in vitro testing is considered Animal testing is often bypassed, moving directly from in vitro testing into human
insufficient. Calculations are performed prior to the studies to reduce the number trials. Possible as most lactobacilli and bifido bacteria are granted safe status by
of animals necessary in each group and to optimize statistical outcome. FDA and EFSA.
Alternatives are used whenever scientifically valid. All animal studies are always In specific cases where animal testing will provide additional information
done at licensed third party research facilities and follow the local Ethical rules compared to in vitro and human studies, we initiate studies in animals specifically
and legislation governing animal testing. bred for animal testing. During these studies, samples such as blood, urine and
feces may be collected, as we also do in our human clinical trials.
If the studies, undertaken by third parties on the company’s behalf includes the
use of invasive procedures in living animals, an evaluation and permission from
the local animal welfare authorities are required before the trial is initiated.
52‒ Chr. Hansen
‒ ESG story 2017/18
Contacts
Sustainability Investor Relations
Annemarie Meisling, Head of Sustainability Martin Riise, Head of Investor Relations
+45 52180168 +45 53 39 22 50
DKANME@chr-hansen.com DKMARI@chr-hansen.com
Louise Rosenmeier, Sustainability Business Partner Annika Stern, Investor Relations Officer
+45 53 39 27 82 +45 2399 2382
DKLORO@chr-hansen.com DKASTE@chr-hansen.comYou can also read
