“Sustainability is at the heart of ofi. The IIS gives finance and business teams the needed numerical link between actions on the ground, as well as their impact and dependency on the Capitals. This will help in both improving the understanding of the Capitals and in taking necessary steps towards increasing the long-term value for the company.”
Taking the initiative forward
F4S will uncover hidden costs and benefits not previously reported, support the leveraging of sustainable financing to address the most pressing supply chain sustainability issues and help support the business to “be the change for good food and a healthy future”. Our vision is to be a best-in-class business partner, responsible for maximizing long-term intrinsic value for all our stakeholders using non-financial drivers of value.
In 2021, we performed a monetary valuation of material natural capital (NC) impacts and dependencies by assigning an approximate monetary impact value. The outcomes are illustrated in our NC Profit and Loss statement (NC P&L) and NC Balance Sheet (NCBS) under the IIS.
F4S will internalize externalities via ourproduct platforms, supporting strategic financial business decisions and influencing significant stakeholders, bringing finance and sustainability concepts together.
With no formal framework for measuring these capitals, we needed a better way to measure, quantify and report our long-term “invisible” value. F4S will create partnerships and collaborations to grow this mindset.
We use a common numerical language – where applicable – that everyone can understand, evaluate and articulate. IIS allows ofi to explain the impact of our actions on the ground to all internal and external stakeholders.
FAQs
The Capitals drive Long-Term Value and underpin a significant portion of a company’s market value. The Integrated Impact Statement (IIS) is a decision-making tool, which allows ofi to manage Long-Term Value. This tool will help embed sustainability concepts – such as multi-capital accounting – into the heart of our business, through finance.
The IIS tool is made up of 3 elements: Profit and Loss; Balance Sheet; and Risk and Opportunity Statement; and covers three Capitals;
Natural Capital: The land, water, biodiversity and other ecosystem services required for food, feed and fibre production. This includes the accounting for renewable and non-renewable environmental resources which ofi depends on for its long-term sustainable operations and associated externalities.
Social Capital: The relationships we forge and nurture for long-term commercial success. This includes the accounting for external stakeholders in society – community, institutions and ofi’s contributions to those relationships through its community-based programmes.
Human Capital: The talent, skills, dedication and inspiration of our workforce and management, and our responsibilities towards them. This includes the accounting for all internal stakeholders, our workforce and management – which ofi relies upon and contributes to, through training and capacity building – and safe and healthy workplaces where rights are respected.
Like a control tower, the IIS decision-making tool effectively reports and allows ofi to manage long-term value.
The IIS leverages existing frameworks by Accounting for Sustainability, the Capitals Coalition and The Economics of Ecosystems and Biodiversity for Agriculture and Food (TEEBAgriFood).
Source of framework: Capitals Coalition (https://capitalscoalition.org/)
F4S in 2019 developed the IIS for the Cocoa business. A summary of some insights from Cocoa’s IIS on key aspects of Natural Capital is presented in Olam’s Annual Report 2019.
The insights from IIS can positively change and differentiate the way we operate and with whom we operate. We are now better informed about our Natural, Social and Human Capital impact, and can provide actionable management information to enable our Business Units to better understand their key impact areas (by Farmer Group level, by country, by commodity), and devise more appropriate plans. This way ofi endeavours to become a resilient and more reliant partner for all our stakeholders by ensuring the creation of Long-Term Value.
The IIS Natural Capital valuation scope is detailed in the table below.
Indicator | Valuation Scope | Main Data | Valuation | Cost / | ||
Country | Watershed | Biome | ||||
Land Use |
|
| Y | Farmed | Gain in biome specific benefits (Ecosystem | Benefit |
GHG | Y |
|
| Total GHG | Social cost of carbon | Cost |
GHG | Y |
|
| Carbon Sequestered | Benefit of sequestered carbon | Benefit |
Water |
| Y |
| Water | Human and ecosystem damage cost | Cost |
Water |
| Y |
| Fertiliser | Human damage cost | Cost |
Read ofi news
How do you differentiate between the environmental impacts of organizations across different geographies, local conditions, products, local regulations etc.?
For several years, ofi has been working towards assessing the true value (cost or benefits) of some of our operations on the ground. Our latest case study on Natural Capital Valuation: Assessing Natural Capital costs in coffee operations, delves into year-on-year monetary impact of our select coffee growing operations in five origins.
Globally, an estimated 12.5 million to 25 million smallholder farmers depend on the coffee industry for their livelihoods, according to figures from Fairtrade1 and the FAO2. However, the majority of these farmers face significant challenges including limited access to formal agronomy training, inadequate resources, small farm sizes and insecure land tenure. These factors often hinder the adoption of sustainable agricultural practices, which are crucial for preserving Natural Capital over the medium and long term. As a result, coffee production often imposes a cost on nature in the form of GHG emissions, degradation of soil structure and fertility, depletion of ground and surface water, and loss of natural ecosystem services critical to agricultural production.
To address these challenges, we employ Natural Capital valuation techniques, which leverage environmental economics to assign a monetary value (US$) to our impacts and dependencies, encompassing carbon emissions, water usage and ecosystem services. Quantifying Natural Capital in this way enables us to assess and mitigate risks while fostering investments that promote a positive impact on landscapes and ecosystem.
We evaluated twenty AtSource+ coffee farmer groups sourced from five different origins3 to assess their GHG emissions and water use related Natural Capital Costs (NCC). Reporting on the NCC is based on each metric tonne of product which makes the cost intensities very sensitive/ dependent on farm level yields. Thus, understanding the underlying yield dynamics is also crucial for interpreting these NCC footprints effectively.
The combined expertise of our local sustainability teams with partners such as Funcafé, TechnoServe, Côte d’Ivoire's National Nutrition program, USAID (United States Agency for International Development), and Global Alliance for Improved Nutrition (GAIN) delivers solutions to improve access to clean water, healthcare services and supplies, and nutritious food.
Initiatives range from using geo-location to identify and screen for infant malnutrition in farming communities in Côte d'Ivoire - where one in five children experience stunted growth and development - to fortifying key staples with vitamins and minerals in our processing facilities.
Child Labour Monitoring and Remediation Systems (CLMRS) have become increasingly valuable in helping us understand and tailor our interventions. They help us identify children at risk of, or in a situation of child labour, so that we can engage with families to improve and enable school attendance through training and facilitation of necessary certificates for example.
Drawing on best practices by the Fair Labor Association and the International Cocoa Initiative (ICI), CLMRS has been scaled up to cover all nine of our direct cocoa sourcing countries, coffee in Guatemala, cashew in Nigeria and 100% of our hazelnut sustainability programmes in Turkey. To date, our CLMRS systems covers over 260,000 farmer households.
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