Admit it. Enzymes are not the sexiest thing you’ve ever heard of. In fact, to the untrained ear, they sound like they might have something to do with food digestion and, lets be honest, the gut is really not very inspiring. In truth, enzymes speed up chemical reactions of all kinds for industrial applications from pharmaceutical development to paper textile manufacture to food and beverage production to household cleaner manufactures and even biofuel. When it comes to biofuel production, enzymes make the difference between a usable fuel and a pile of wet woody mush.
Novozymes, a Danish company that is a world leader in enzyme production, has been serving biofuel producers for years, and have recently started to expand their operations by increasing their involvement all along the value chain. Their recent investment in CleanStar Mozambique (which is currently producing ethanol from cassava for sale in Maputo, the capital of Mozambique) is a test foray into deeper involvement – and more obvious engagement in socially responsible projects.
I had the pleasure of sitting with CEO Steen Riisgaard on a flight from Maputo to Beira, Mozambique to witness the opening of CleanStar Mozambique’s ethanol distillery, and he shared some insights with me into Novozymes’ decision to get involved in such a small scale, yet valuable project, how it fits into Novozymes’ overall business strategy, and what his plans are for the future.
Novozymes is a biotechnology company with a strong focus on enzymes. Any time you need to change one material into another at the chemical level, enzymes will speed that process. Obviously, when you’re talking about manufacturing a product for national or international use, speeding that process along might be the difference between going broke and making a profit. But thus far, Novozymes has stuck to manufacturing and refining the enzymes needed by their buyers. They haven’t gotten involved too deeply in what happens after the enzymes leave the plant, so to speak. So what happened?
Riisgaard and his team were inspired by the 1997 UN Millenium goals. The challenge was figuring out how to use his company’s technology to meet the goals and make a profit at the same time. Says Riisgaard, “We wanted to use enzymes in Africa but we needed a business rationale.” In other words, if you want to prove that biotechnology has a place in the developing world, Africa is a good place to start.
Branching out beyond being a supplier into being a manufactuer in their own right obviously makes great business sense because it gives the company dozens if not hundreds of new potential revenue streams.
In the case of the CleanStar Mozambique project, it’s a business risk, but it’s one worth taking because if it works out, Novozymes will have proven that they can afford to go deep into the value chain, so long as they have the right partners. In the case of Cleanstar Mozambique, Cleanstar Ventures is managing the whole supply chain from farmers to stove sales in the capital city, Novozymes is providing the enzymes to make the ethanol viable, ICM built the ethanol plant, and Bank of America Merrill Lynch has invested in exchange for options on future carbon credits associated with the project.
BofA’s investment is significant because it means that CleanStar Mozambique can sell the stoves at a discount, making the price much more reachable for the targeted market (the 70% of Maputo families who earn $100-$500 per month). With all these players in the venture – Novozymes has dedicated a few staff members to working full time with CleanStar to make sure the operations and supply chain plans are rock solid (or at least as rock-solid as they can be for a venture in Africa, where projects at scale are pretty difficult to get off the ground).
How does Novozymes decide which value chains to pursue?
Well, they do a Life Cycle Assessment on the project, Riisgaard mentioned this to me offhand, and when I expressed shock that a company like Novozymes would care about the ultimate impact of their products, he told me that he has a team of 10 conducting LCAs on a regular basis. They are primarily interested in the scientific impact of their technology – who might use it and for what purpose – but they are also concerned with the environmental impact of their projects as well as how much C02 they produce and whether they enrich local soil.
They’ve even gotten involved in the life cycle analysis of laundry detergent, helping their clients like Procter and Gamble and Unilever to get a handle on the carbon associated with the use of their product (Ed note: we’re thinking it’s all that washing in hot water).
When Riisgaard instituted the LCA department, he faced many skeptics within the company. But he held true to his belief that if a process is environmentally superior – even if costs are on par with alternative options – 5 years down the line the environmentally preferable process will be much more cost-competitive than the alternative. Riisgaard has also found that this focus on long term thinking has been very positive in terms of employee retention. It turns out the best employees really do care about having pride in the products they produce and they’ll reward their employer with loyalty. Riisgaard himself has been with the firm for 32 years. Doesn’t it make you wish you worked for a european company?
So what’s next for this secret empire builder?
The company will continue to focus on refining their enzymes, specifically in the biofuels market, to make enzymes targeted to a wider variety of inputs like switchgrass, cane, and whatever grows best in the local market, to make them more efficient. Efficiency increases output which reduces costs for the manufacturers, which makes them want to stick with Novozymes as their enzyme supplier of choice.
[Image credit: Jen Boynton]
Travel and accommodations provided by Novozymes