Chr. Hansen ESG presentation - March 2019
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Chr. Hansen ESG presentation March 2019
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
Corporate Knights named Chr. Hansen most
sustainable company in the world in 2019
► Independent ranking conducted by Canadian media and research firm
Corporate Knights since 2005
► Review of all publicly listed companies with >USD 1bn revenue worldwide
(7,500 in total)
► Screening based on 21 quantitative indicators
► Chr. Hansen was named #1 because of the contribution of its product
portfolio to the UN Global Goals and its reporting (‘100% score on clean
revenue’)
► Corporate Knights’ Global 100 index has outperformed MSCI All Country
World Index since inception (2005-2018)
3
‒ Chr. Hansen
‒ ESG story 2017/18
Content
5 Business overview & sustainability strategy
19 Commercial highlights
32 Operational highlights
39 Governance
45 UN Global Goals mapping methodology
48 Other
4
Business
overview &
sustainability
strategy
5
7
M
a
r
c
h
PURPOSE
We deliver natural innovative solutions
that address global challenges by
advancing food, health, and productivity.
6
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
7
BUSINESS OVERVIEW
We are market and technology Dairy cultures
incl. probiotics
leaders in our core business Dairy
enzymes
Meat, wine &
fermented beverages
Food Cultures & Enzymes
59%
Share of revenue
Bioprotection
Shared R&D platform –
the Microbial Platform
Natural Colors Health & Nutrition
Food Cultures & Enzymes and Health &
Nutrition share a common research
platform, and production method.
20%
Share of revenue
21%
Share of revenue
Human Health
The R&D platform is a process of
& Microbiome
screening, developing and upscaling of Confectionery
microbes. Production is the optimization & ice cream
of recipes, flows and infrastructure for the
fermentation of microbes.
Together: The Microbial Platform. Dairy & fruit Animal Health
preparation
Prepared Plant Health
food
8 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
9
OUR PRODUCTS
We develop natural solutions that help to reduce sugar, ensure food
safety, improve health, replace artificial ingredients and much more!
SAFEPRO® cultures help to keep
meat safe from Listeria
NOLA® Fit reduces added sugar in yogurt by 2g Replace artificial ingredients with our e-number free
per 100g yogurt without losing sweetness labeling coloring foodstuffs range FRUITMAX®
QUARTZO® and PRESENCE® are probiotic plant LGG® has been studied in +300 clinical studies that
health solutions that help sugar cane and other crops indicate that the strain may have beneficial effects on
fight off attacks from nematodes immune and gastrointestinal functions
With CHY-MAX® dairies can increase cheese output
by 0.5% compared to other coagulants (i.e. 100 tons
in case of a production volume of 20,000 tons)
10OUR PRODUCTS
We help 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
reduce CO2 emissions MORE MILK using MORE CHEESE using MORE YOGURT using
equivalent to 2,000 BOVAMINE® CHY-MAX® FRESHQ®
average UK households.
13,200 tons more milk 1,000 tons saved milk 5,000 tons saved milk
≈ 20,000 tons CO2 ≈ 1,500 tons CO2 ≈ 7,500 tons CO2
Source: Grain and IOP Science 2017.
11STRATEGY
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 foodstuffs
of new innovation Animal Health
Develop adjuncts and adjacencies
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 segments
Application support in core
adjacencies Strengthen route-to-market in Ag
businesses
Generate fuel Drive scalability in supply chain Reinvest in future growth Continue drive to restore
profitability
for growth Digitalize core processes
12STRATEGY
With our lighthouses we commit to deliver 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
13FINANCIAL PERFORMANCE
Steady delivery since the IPO with 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%
9,1%
39,7% 40,1% EUR650m
37,6% 38,0% Reinvested in
34,3% 34,9% capex since IPO 8,2%
34,1% 8,3%
8,2%
30,0%
26,5%
28,2% 28,9% 29,2% 7,1%
26,1% 27,1% 27,1%
25,3% 25,0% 25,6% 7,0%
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
14FINANCIAL PERFORMANCE
Three complementary businesses with strong fundamentals
FOOD CULTURES & ENZYMES HEALTH & NUTRITION NATURAL COLORS
46,2% 47,1% 45,6%
42,7% 42,4%
ROIC ex. 40,3%
goodwill
34,6%
30,6% 31,0%
EBIT 29,8% 30,3%
34,3% 34,5% 34,3% 33,3%
margin 33,0%
31,5% 26,2% 25,8%
30,2% 29,2% 29,0% 24,6%
28,3%
17,4%
Organic
revenue
growth
13,0% 12,9% 12,0%
10,9%
8,3%
8% 9% 12% 9% 12% 15% 13% 2% 14% 8% 1% 9% 19% 10% 5%
13/14 14/15 15/16 16/17 17/18 13/14 14/15 15/16 16/17 17/18 13/14 14/15 15/16 16/17 17/18
59% of Group sales 21% of Group sales 20% of Group sales
15LONG-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 18/19 (as per Jan 17, 2019)2
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 6-9%
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, the risk of a ‘hard’ Brexit 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
16 2017/18. Cash flow used 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.
17OUR 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.
18 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
19
7
M
a
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hMicrobial plant health
solutions have the
potential to increase
crop productivity and
reduce fertilizer and
pesticide requirements
Better farming by 20% within 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.
20BETTER 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.
21BETTER 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
22BETTER 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).
23More 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.
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
0
some markets
2005 2017 2021
Organic Growth CAGR
1Key Opinion Leaders (KOL).
Source: Euromonitor and management estimates.
25GOOD HEALTH
We educate customers on the functional benefits of probiotics and the
value of scientific documentation
Potential beneficial effects on immune and gastrointestinal function1
LGG® May reduce respiratory tract challenges Hatakka et al. 2001, Hojsak et al. 2010a
The world’s best documented probiotic strain
Used in food and dietary supplements since 1990 May enhance the immune response de Vrese et al. 2005
Described in more than 1,000 scientific publications May alleviate symptoms of irritated skin Pärtty et al. 2013
Studied in more than 300 clinical studies
May reduce crying and fussiness in infants Isolauri et al. 2000
BB-12® May reduce the risk of an upset stomach Chouraqui et al. 2004; Saavedra et al. 1994
The world’s best documented Bifidobacterium
Used in food and dietary supplements since 1985 May enhance the immune response Holscher et al. 2012; Schiffrin et al. 1997
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
Lactobacillus Bifidobacterium
rhamnosus (BB-12®) Culture bank of
(LGG®) +30,000 strains
3 out of the 4
best documented strains
in our library
1 Selection of scientific studies as per April 2017 (LGG®) and Feb 2016; for more details refer to Chr. Hansen website.
26GOOD 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®
27Dairy 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.
28LESS WASTE
Using nature’s good bacteria to keep food fresh longer
Informing consumers about food waste
reduction increases 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.
29LESS WASTE
Our bioprotection journey
Bioprotection business split by category and region 2024/25
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
30LESS 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
progress since 2013, and will
continue to create long-term 7%
revenue 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)
31Operational
highlights
32
7
M
a
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hWORKPLACE RESPONSIBILITY
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 2018/19 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
33ENVIRONMENT
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.
34ENVIRONMENT
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
Dairy Copenhagen, Milwaukee, Arpajon
Enzymes Graasten, Nienburg, Valinhos
Meat Pohlheim, Milwaukee
Wine Copenhagen, Pohlheim, Arpajon, Valinhos, Brazil
Milwaukee
Lima, Peru
Human Roskilde, Copenhagen
Animal Nienburg, Pohlheim, Hustopece,
Valinhos, Milwaukee
Plant Nienburg, Valinhos
Natural Colors Lima, Valinhos, Copenhagen
35BUSINESS 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
Actions for food safety audit findings were
defined; most findings related to internal
documentation issues and were not product- Code of Conduct available
related on Chr. Hansen website
36HUMAN 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.
37HUMAN 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
38Governance
39
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hMANAGEMENT STRUCTURE
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% 36% 36% & strategy
members independent Women Non-Danish
Executive Board (4 members)
Diversity
Corporate Leadership Team (11 members)
target:
3 female
shareholder
representatives
by 21/22
40MANAGEMENT
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 Sten Estrup
H&N NCD APAC & LATAM
Corporate Leadership Team
Compliance, Comm. & Sustainability
Alice Larsen Jacob Vishof Paulsen Torsten Steenholt
Human Resources EMEA & NA Global Operations
41BOARD OF DIRECTORS
A high quality Board with a diverse mix of competencies and experience
Remuneration
Committee
Nomination
Comittee
Committee
Committee
BoD since
Audit
Independent?
YoB
Nationality
Scientific
Name Board competencies Other Board
positions
Dominique Reiniche – Chairman Experience in food, beverage and beauty industries; 22 years in senior PayPal Luxemb.,
Professional board member ’55 F Yes ’13 C C leadership positions at French and European levels, including CEO at Mondi, Severn Trent
Shareholder representatives only
Coca-Cola.
Jesper Brandgaard – Vice Chairman Experience from group management in a multinational pharmaceutical SimCorp, Novo
EVP Biopharm and Legal Affairs, ’63 DK Yes ’17 X X company, including responsibility for strategy development and Nordisk Haemophilia
Novo Nordisk (until 2019) implementation, legal affairs and patents, IT and investor relations Foundation
Luis Cantarell ES/ Professional global experience within the food and beverage industry; Froneri, URIACH,
’52 Yes ’16 C
Professional board member CH over 10 years of leadership experience with the Nestlé. Fundacion Fero
Heidi Kleinbach-Sauter More than 25 years of innovation and R&D experience in the CPG
Professional board member DE/ industry globally; former Senior VP Global R&D of PepsiCo. Founding
’56 Yes ’17 X X
US Chair of several councils, experience as a member of the Advisory
Committee of Northern Seed Montana LCC, US.
Niels Peder Nielsen Former partner of consulting firms Bain & Company and McKinsey,
Deputy-CEO Novo Nordisk Fonden -56 DK Yes ‘18 X broad industry expertise including healthcare and biological solutions;
experience in digital strategy and business development.
Kristian Villumsen Extensive knowledge of the medical and life science industry; solid Coloplast
’70 DK Yes ’14 X X
CEO, Coloplast international experience in both European and emerging markets. subsidiaries
Mark Wilson International CEO/MD with over 40 years in FMCG companies and
Professional board member ’52 UK Yes ‘10 C X service/B2B industries in Asian, South American, UK, Irish and
international markets. Financial and accounting experience.
42 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) Dominique Reiniche (Chairman)
Jesper Brandgaard Heidi Kleinbach-Sauter
Kristian Villumsen Mark Wilson
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) Dominique Reiniche (Chairman)
Heidi Kleinbach-Sauter Jesper Brandgaard
Niels Peder Nielsen Kristian Villumsen
43EXECUTIVE 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
44UN Global
Goals mapping
methodology
45
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hWe focus on the three SDGs where we can make the strongest impact
End hunger and Ensure healthy lives Enable sustainable
promote sustainable and promote well-being consumption and
agriculture for all at all ages production patterns
More out of milk Better health and well-being Less food waste
by increasing productivity for a smarter gut by using bioprotection
e.g. CHY-Max® e.g. BB-12® or LGG® e.g. FreshQ®
More out of land Better healthier alternatives Less food contamination
by increasing crop yields for a good life by using natural solutions
e.g. Presence® e.g. NOLA® Fit or SALTLITE® e.g. SafePro®
Better animal welfare
More access to nutrition Less artificial ingredients
for reduced antibiotic
by increasing affordability by using natural colors
resistance
e.g. Far-m® e.g. FRUITMAX®
e.g. Bovamine®
46Our 5-step methodology was reviewed by PwC
1 2 3 4 5
Identify impact areas Measure business impact Collect documentation Get external assurance &
with UN Global Goals report on progress
Impact category SDG 2 SDG 3 SDG 12 • Levels of documentation: • Methodology, process and findings are
verified by PwC
Impact Improving food and the environment • 1 Weakly documented: Sporadically or
weakly documented to a degree where • The accumulated revenue generated from
Increase productivity X X Chr. Hansen cannot claim the effect products contributing to the SDGs is tracked
annually
Reduce waste X X • 2 Moderately documented: Medium level
of documentation, leaving room for • Life cycle assessment perspectives will be
Substitute artificial
X X improvement, but still strong enough that included in the assessment of products to
ingredients
the effect can be claimed ensure a holistic product assessment
Increase food safety X X
• 3 Well documented: Strong
Improving animal and human health documentation, potentially
Enhance animal verified/developed by third party clearly
X defining the product effect
welfare
Promote health and
X
• If a product scores 2 or 3 and is categorized in
Products not included may not
!
well-being one (or more) of the impact categories
criteria, it’s revenues are included have sufficient documentation or
Reduce salt, sugar, fat
Opportunity X there is no direct sustainability
and lactose
impact, e.g. products that enable
Ensure access to
affordable and X X
cheese maker to make holes in
available nutrition the cheese.
47Other
48
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hSUSTAINABILITY ORGANIZATION
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
World’s most sustainable company in 2019 by Corporate Knights
Rankings & awards Rank Description
No. 1 Ranked the Most Sustainable Company in the World in 2019
AA Top 14% in industry
5th of 132 Ranked in the top 5th / 132 in industry – “Leader”
C 32% of companies responding to CDP at C level
C Best ESG scores amongst sector peers
Top 5% Ranked in the top 5% performers on Eco Vadis
✓ Chr. Hansen listed as a constituent
50SELECTED POSITIONS
Our stance on GM techniques, palm oil and land usage
Genetic modification techniques statement
We recognize that the use of genetic modification (GM) techniques in the food chain is subject to public debate and that the 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.
Products requiring GM labeling are labeled as required where the products are sold.
We do not source materials for the manufacturing of our products, which would result in the products of our customers being GM labeled according to the EU
Regulations without explicitly informing our customers.
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.
Chr. Hansen has elaborated product-specific statements relating to the use or non-use of genetically modified components, which are available upon request.
Palm oil statements (Natural Colors Division and Food Cultures & Enzymes)
Chr. Hansen has been an affiliate member of the Roundtable on sustainable Palm Oil (RSPO) since 2011.
Chr. Hansen uses palm oil in two ways:
Primarily in the palm-carotenoids, an important pigment in our product range. The natural carotene is a bi-product (waste product from e.g. the biofuel and
cosmetic production).
A small amount of palm oil derivatives can be found as ingredients and additives in the raw materials used for production.
We work closely with our customers to investigate options for supplying RSPO certified or palm-free products.
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 agricultural practices for cultivating these.
51‒ Chr. Hansen
‒ ESG story 2017/18
Contacts
Sustainability Investor Relations
Annemarie Meisling Martin Riise
Head of Sustainability Head of Investor Relations
+45 52180168 +45 53 39 22 50
DKANME@chr-hansen.com DKMARI@chr-hansen.com
Nassera Ahmend Annika Stern
Sustainability Specialist Investor Relations Officer
+4552180835 +45 2399 2382
DKNAAH@chr-hansen.com DKASTE@chr-hansen.com
Louise Rosenmeier
Sustainability Business Partner
+45 53 39 27 82
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