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<p>Our business model helps us live up to our purpose.</p>

<h3>Our business is about turning science into sustainable biological solutions in a growing world. We use enzymes and microorganisms as a starting point to unlock business opportunities. From enabling farmers to feed animals more efficiently to creating greener, high-performing solutions for household cleaning, our innovations are paving the way for a better tomorrow.</h3>

<h2>Our business model</h2>

<h3>Our business model and our <a href="https://strategy.novozymes.com/#Purpose" target="_blank">strategy</a> form the framework for how we use our resources to live up to our purpose, meet our long-term goals and develop meaningful partnerships.</h3>

<p>The very nature of our solutions means that sustainability is in our DNA as well as being a key part of both our value proposition and business model.</p>

<p>We believe that it is important to optimize our use of resources and minimize our footprint, which is why we set targets for reducing resource consumption and CO<sub>2</sub> emissions, both in our own operations and through our customers applying our solutions. From the moment we enter into agreements with our suppliers and partners through to the production process and beyond, sustainability is a key priority.</p>

<p>And our customers appreciate this. Combining our innovative solutions with a strong sustainability ethos creates the kind of differentiator that our customers value.</p>

<p>From the moment they were established in 2015, the UN Sustainable Development Goals (SDGs) have been integral to our business. These goals guide our purpose, our mid-term targets and our long-term commitments.</p>

A model for sustainability

<p>Because we work so closely with our customers and know that our solutions often have a tremendous impact on their production processes, we see them as partners.</p>

<p>Our starting point is a deep understanding of our customers' needs and those of their consumers. Then we offer biosolutions that fulfill those needs. Biosolutions combine existing products, new technology, digital solutions and a comprehensive service package.</p>

<p>By using Novozymes’ enzymatic and microbial solutions, our customers can save on costs and reduce the environmental footprint of their products and processes. Our solutions have the potential to lower the need for raw materials, conserve resources and improve product quality and effectiveness.</p>

Customers

<p>We are driven to seek out and build meaningful partnerships with other influential industry players, for example Bayer and Syngenta in Agriculture and DSM and Adisseo in Animal Health &amp; Nutrition.</p>

<p>These partnerships enable Novozymes to explore and enter new business areas faster and more efficiently by combining our strong innovation know-how and manufacturing expertise with our partners’ strong skills in areas such as screening, testing, data processing and commercialization.</p>

Partners

<p>With R&amp;D facilities in multiple regions and commercial teams with strong insights into different markets, we are able to identify enzymes and microorganisms capable of meeting global and regional needs. Every year, our researchers screen thousands of microorganisms to track down the one that produces the enzyme with the exact characteristics we need for a specific solution. Most of our solutions take between two and five years to progress from idea to market.</p>

<p>We have anchored our specialized Applied Research units in the commercial side of our organization within our two divisions: Consumer Biosolutions and Agriculture and Industrial Biosolutions. This creates a strong connection between the commercial side and R&amp;D. The result is a solid pipeline of impactful solutions with the characteristics our customers are looking for.</p>

Innovation

<p>In order to produce large quantities of enzymes, we use fermentation techniques that enable our microorganisms to multiply. Fermentation is a core part of our production process. After recovering enzymes or microbes from the fermentation process, we prepare them for use by our customers, either in the form of liquids or granulates. We produce our enzymes and microbes at 16 plants on four continents, and continuously endeavor to optimize and innovate our production processes to ensure that we get the most out of our production capacity. Thanks to these efforts, our capacity utilization is very high.</p>

Production

<p>By using an efficient supplier management system, we support and encourage our suppliers to apply the same rigorous standards to their processes as we do. We work closely with them to innovate and implement responsible and sustainable solutions.</p>

Suppliers

<p>At Novozymes, we pride ourselves on our high-quality solutions, services and processes. Our close relationships with our customers allow us to anticipate and understand their needs and, consequently, deliver the quality expected of us.</p>

<p>Continuous monitoring and improvement are an integral part of our quality system and a cornerstone of how we advance the solutions and services we offer our customers.</p>

Quality

<p>Our technical service teams set us apart from the competition because they optimize product use and make the necessary adjustments tailored to the needs of individual customers. This ensures that our customers realize the value they expect.</p>

<p>Our service does not come to an end when our teams leave the customer’s plant. The knowledge our teams gain from working closely with customers feeds back into our pipeline and goes into improving future innovations. In this way, our relationships with customers are key to measuring our progress and helping us to rethink tomorrow.</p>

Technical services

<p>Every interaction we have with our customers is an opportunity to learn more about their needs and engage in dialogue about our solutions. We leverage this in-depth understanding of our customers’ products and production processes when selling our enzymes and microorganisms, because we know exactly how our solutions can make a difference to the customer. Take Bioenergy as an example. Here we provide tailored solutions to ethanol plants where we supplement the technology we sell with technical know-how, bringing additional value to the customer.</p>

<p>With facilities all over the world, we are able to showcase to customers exactly how our solutions work for their specific product or industry. The close proximity to customers in different regions is also a great advantage when presenting new solutions to existing and new markets.</p>

<p>Traditionally, we market most of our solutions in direct interaction with customers, but digital go-to-market strategies are becoming increasingly important, and we are constantly looking to optimize how we make customers aware of the benefits of our solutions and services. We are available and open for dialogue through social media, at trade events and via our owned digital channels such as Novozymes.com.</p>

Commercial execution

<p>Distribution of Novozymes’ products differs from one business area to the next. In Bioenergy and Household Care, most products are dispatched directly from Novozymes to our customers. Within Agriculture, Animal Health &amp; Nutrition, distribution is carried out by our industry partners. Food, Beverages &amp; Human Health and Technical markets are more fragmented, with a mixed distribution setup.</p>

Distribution

<p>Novozymes’ revenue comes from sales of enzymes and microorganisms. Product prices include the cost of technical services. Around 13% of our sales revenue is reinvested in R&amp;D, benefiting both innovation and production economy. Novozymes’ largest costs are direct production costs and R&amp;D. When it comes to shareholder returns, we have a target dividend payout ratio of around 50%. We also conduct regular share buyback programs to provide returns for investors.</p>

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