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Sustainable company of the week: Novozymes

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Renewable energy, electric and hybrid cars, water conservation. These are a few of sustainable living’s favourite things.

Mentioned less frequently – but playing as important a role – is the increasing use of enzymes to replace chemicals. Detergents, for example, relied for decades on strong chemicals to eat away at dirt and stains; enzymes provide a sustainable alternative that is just as effective and is beginning to translate into other uses.

Novozymes, a company committed to industrial enzyme production, has served as a leader in the industry. The company enjoyed a 7% increase in organic revenues in 2013 due to growth in both its home and bioenergy enzyme divisions. The reported earnings are telling, as 36% of sales came from the home enzyme position and 16% of sales from bioenergy. Novozymes expects 2014 to be an even stronger year, anticipating 6-9% growth expected as a continuation of trends seen in 2013.

Home Enzymes

Detergents are increasingly replacing surfactants (soap) and other conventional ingredients with enzymes for improved washing performance. Enzymes are often used in detergents formulated for cold-water laundry, which results in lower energy bills. Last year, Novozymes launched a new enzyme that improves the performance in liquid dishwashing. 

Novozymes states its new enzyme is particularly effective at removing protein such as cheese, egg yolk and meats from dishes.  The company believes it has more than 60% of the detergent enzyme market in a “practical duopoly” with Dupont. Segment revenues increased 9% last year as enzymes are increasingly incorporated into detergents and as penetration grows in emerging markets as more people can afford washing machines and higher-quality detergents.

Better yet, this has plenty of room for further growth; while enzymes are found in more than 90% of the detergents sold in Europe, only 70% of North American detergents contain enzymes and less than 60% of the detergents sold in Asia contain enzymes.  That trend should change as enzymes becomes more prevalent in the market.

Bioenergy Enzymes

Enzymes are used in the production of ethanol, and investors have focused on Novozymes’ role in the biofuels market.  While there is concern about using food crops to produce ethanol, Novozymes takes the ‘second generation’ approach: fermenting sugars from scrap corn cobs, woody crops and other organic materials.  The ethanol is then blended into gasoline by refiners and helps contribute to growing the fuel supply.

Second-generation biofuels are renewable and domestically produced. They also reduces greenhouse gas emissions, since carbon dioxide is taken out of the atmosphere as the crops grows.  In fact, the US Department of Energy writes, “Corn-based ethanol… reduces greenhouse gas emissions by up to 52% compared to gasoline.”

Novozymes controls 60% of the enzyme market for biofuel enzymes. Segment revenues increased 12% in 2013 despite US fuel ethanol production remaining flat compared to the prior year. Revenues increased due to the introduction of products such as Avantec, which is an enzyme that helps convert more of the starch into sugar and enables ethanol producers “to squeeze an extra 2.5% ethanol out of the corn, thereby improving their profit margins significantly”, according to Novozymes.

Starch conversion

Novozymes is poised to make a greater impact in the food industry, as well, with the launch of its new product, Novozymes LpHera. The product will improve the liquefaction stage, significantly reducing the amount of chemicals needed to break down starch.

Approximately 60m tons of starch is converted into sweeteners and ingredients per year, and these are used in a wide variety of popular consumer food products, including confectionery, soft drinks, sauces and canned fruits”, according to the company.

The new enzyme “is designed to break down starch in a way that creates more dextrose when compared to the conventional enzymes used during this process stage”.

Looking ahead, we believe Novozymes’ broad-based business and market-leading position are attractive. We are also attracted to the environmentally-responsible aspect of the company.

Novozymes writes, “Typically, small amounts of enzymes are used in industrial processes in a targeted way to speed up reactions and reduce the temperature at which processes take place, thereby saving water, energy and chemicals.”  Therefore, while we may take some profits in Novozymes on valuation concerns, we continue to recommend holding the stock in accounts.

Chat Reynders is chairman and CEO of Reynders, McVeigh Capital Management. He brings more than 20 years of experience in investment management and social venture investing to the company. 

In accordance with the Financial Services and Markets Act 2000, Blue & Green Communications Limited does not provide regulated investment services of any kind, and is not authorised to do so. Nothing in this article and all parts herein constitute or should be deemed to constitute advice, recommendation, or invitation or inducement to buy, sell, subscribe for or underwrite any investment of any kind. Any specific investment-related queries or concerns should be directed to a fully qualified financial adviser.

Further reading:

The Guide to Sustainable Investment 2014

The Guide to Ethical & Sustainable Financial Advice 2013

The Guide to Sustainable Funds 2013

Economy

New Zealand to Switch to Fully Renewable Energy by 2035

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renewable energy policy
Shutterstock Licensed Photo - By Eviart / https://www.shutterstock.com/g/adrian825

New Zealand’s prime minister-elect Jacinda Ardern is already taking steps towards reducing the country’s carbon footprint. She signed a coalition deal with NZ First in October, aiming to generate 100% of the country’s energy from renewable sources by 2035.

New Zealand is already one of the greenest countries in the world, sourcing over 80% of its energy for its 4.7 million people from renewable resources like hydroelectric, geothermal and wind. The majority of its electricity comes from hydro-power, which generated 60% of the country’s energy in 2016. Last winter, renewable generation peaked at 93%.

Now, Ardern is taking on the challenge of eliminating New Zealand’s remaining use of fossil fuels. One of the biggest obstacles will be filling in the gap left by hydropower sources during dry conditions. When lake levels drop, the country relies on gas and coal to provide energy. Eliminating fossil fuels will require finding an alternative source to avoid spikes in energy costs during droughts.

Business NZ’s executive director John Carnegie told Bloomberg he believes Ardern needs to balance her goals with affordability, stating, “It’s completely appropriate to have a focus on reducing carbon emissions, but there needs to be an open and transparent public conversation about the policies and how they are delivered.”

The coalition deal outlined a few steps towards achieving this, including investing more in solar, which currently only provides 0.1% of the country’s energy. Ardern’s plans also include switching the electricity grid to renewable energy, investing more funds into rail transport, and switching all government vehicles to green fuel within a decade.

Zero net emissions by 2050

Beyond powering the country’s electricity grid with 100% green energy, Ardern also wants to reach zero net emissions by 2050. This ambitious goal is very much in line with her focus on climate change throughout the course of her campaign. Environmental issues were one of her top priorities from the start, which increased her appeal with young voters and helped her become one of the youngest world leaders at only 37.

Reaching zero net emissions would require overcoming challenging issues like eliminating fossil fuels in vehicles. Ardern hasn’t outlined a plan for reaching this goal, but has suggested creating an independent commission to aid in the transition to a lower carbon economy.

She also set a goal of doubling the number of trees the country plants per year to 100 million, a goal she says is “absolutely achievable” using land that is marginal for farming animals.

Greenpeace New Zealand climate and energy campaigner Amanda Larsson believes that phasing out fossil fuels should be a priority for the new prime minister. She says that in order to reach zero net emissions, Ardern “must prioritize closing down coal, putting a moratorium on new fossil fuel plants, building more wind infrastructure, and opening the playing field for household and community solar.”

A worldwide shift to renewable energy

Addressing climate change is becoming more of a priority around the world and many governments are assessing how they can reduce their reliance on fossil fuels and switch to environmentally-friendly energy sources. Sustainable energy is becoming an increasingly profitable industry, giving companies more of an incentive to invest.

Ardern isn’t alone in her climate concerns, as other prominent world leaders like Justin Trudeau and Emmanuel Macron have made renewable energy a focus of their campaigns. She isn’t the first to set ambitious goals, either. Sweden and Norway share New Zealand’s goal of net zero emissions by 2045 and 2030, respectively.

Scotland already sources more than half of its electricity from renewable sources and aims to fully transition by 2020, while France announced plans in September to stop fossil fuel production by 2040. This would make it the first country to do so, and the first to end the sale of gasoline and diesel vehicles.

Many parts of the world still rely heavily on coal, but if these countries are successful in phasing out fossil fuels and transitioning to renewable resources, it could serve as a turning point. As other world leaders see that switching to sustainable energy is possible – and profitable – it could be the start of a worldwide shift towards environmentally-friendly energy.

Sources: https://www.bloomberg.com/news/articles/2017-11-06/green-dream-risks-energy-security-as-kiwis-aim-for-zero-carbon

https://www.reuters.com/article/us-france-hydrocarbons/france-plans-to-end-oil-and-gas-production-by-2040-idUSKCN1BH1AQ

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Economy

How Going Green Can Save A Company Money

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going green can save company money
Shutterstock Licensed Photot - By GOLFX

What is going green?

Going green means to live life in a way that is environmentally friendly for an entire population. It is the conservation of energy, water, and air. Going green means using products and resources that will not contaminate or pollute the air. It means being educated and well informed about the surroundings, and how to best protect them. It means recycling products that may not be biodegradable. Companies, as well as people, that adhere to going green can help to ensure a safer life for humanity.

The first step in going green

There are actually no step by step instructions for going green. The only requirement needed is making the decision to become environmentally conscious. It takes a caring attitude, and a willingness to make the change. It has been found that companies have improved their profit margins by going green. They have saved money on many of the frivolous things they they thought were a necessity. Besides saving money, companies are operating more efficiently than before going green. Companies have become aware of their ecological responsibility by pursuing the knowledge needed to make decisions that would change lifestyles and help sustain the earth’s natural resources for present and future generations.

Making needed changes within the company

After making the decision to go green, there are several things that can be changed in the workplace. A good place to start would be conserving energy used by electrical appliances. First, turning off the computer will save over the long run. Just letting it sleep still uses energy overnight. Turn off all other appliances like coffee maker, or anything that plugs in. Pull the socket from the outlet to stop unnecessary energy loss. Appliances continue to use electricity although they are switched off, and not unplugged. Get in the habit of turning off the lights whenever you leave a room. Change to fluorescent light bulbs, and lighting throughout the building. Have any leaks sealed on the premises to avoid the escape of heat or air.

Reducing the common paper waste

paper waste

Shutterstock Licensed Photo – By Yury Zap

Modern technologies and state of the art equipment, and tools have almost eliminated the use of paper in the office. Instead of sending out newsletters, brochures, written memos and reminders, you can now do all of these and more by technology while saving on the use of paper. Send out digital documents and emails to communicate with staff and other employees. By using this virtual bookkeeping technique, you will save a bundle on paper. When it is necessary to use paper for printing purposes or other services, choose the already recycled paper. It is smartly labeled and easy to find in any office supply store. It is called the Post Consumer Waste paper, or PCW paper. This will show that your company is dedicated to the preservation of natural resources. By using PCW paper, everyone helps to save the trees which provides and emits many important nutrients into the atmosphere.

Make money by spreading the word

Companies realize that consumers like to buy, or invest in whatever the latest trend may be. They also cater to companies that are doing great things for the quality of life of all people. People want to know that the companies that they cater to are doing their part for the environment and ecology. By going green, you can tell consumers of your experiences with helping them and communities be eco-friendly. This is a sound public relations technique to bring revenue to your brand. Boost the impact that your company makes on the environment. Go green, save and make money while essentially preserving what is normally taken for granted. The benefits of having a green company are enormous for consumers as well as the companies that engage in the process.

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