Finance for Sustainability

One of the six principals of ofi and Olam’s Strategic Plan is to focus on Long-Term Value.

This depends in part on the active management of six non-financial capitals, which we report against in our annual reports. These capitals are not universally assessed in current reporting frameworks, despite driving a significant portion of a company’s market value, so we challenged ourselves to re-imagine business reporting.

Olam first began reporting against these capitals in its 2017 Annual Report. A task force has been setup since, to evaluate Olam’s approach to multi-capital accounting and establish a numerical link to sustainability using multi-capital accounting methodologies. This led to the development of the Integrated Impact Statement (IIS).

Talk to Us Annual Reports

“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.”

Rishi Kalra | Executive Director and Group Chief Financial Officer, ofi

Testing our methodologies

In 2018, Olam piloted the initial IIS tool with three business units – Dairy (Russia), Cocoa (Côte d’Ivoire) and Palm (Gabon) – covering Natural, Social and Human capital. The tool was also independently validated and shared with experts for their input and further refinement.

Making it business as usual

In 2019, a dedicated Finance for Sustainability (F4S) department was created to further develop the multi-capital accounting methodologies, to act as a centre of excellence and to help embed capitals accounting within the organisation. F4S will leverage the expertise of Finance and Accounting to help address the most pressing supply chain sustainability issues. To enhance business decision-making, the IIS is also being deployed at profit centre level.

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.

Inspiring the Finance Leaders of Tomorrow

In collaboration with The Capitals Coalition, Ria Bakshi, Head of Sustainability Accounting, Reporting & Impact for ofi, shares more about the pathbreaking work the Finance for Sustainability (F4S) department has spearheaded in the Non-Financial Capital Accounting sphere, and how this is woven into the organisation’s business decision-making process in a simple, meaningful and transparent manner. This is all showcased in two courses that are free* to enrol on Coursera:

The objective of these courses is to transition from accounting for profit to accounting for business value delivered for people, the wider society, and the planet. It seeks to ignite businesses to contribute, collaborate and create methodologies which value impact from a lens that is not calibrated to just financial implications.

*Coursera charges a fee to receive the course certificate for completion.

Internalization of externalities

F4S will internalize externalities via ourproduct platforms, supporting strategic financial business decisions and influencing significant stakeholders, bringing finance and sustainability concepts together.

Accountants’ culture and mindset change

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.

Common numerical language

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.

Embedding multi-capital accounting

The IIS takes a systems approach that captures the complexity and reality of today’s diverse and intertwined “eco-agrifood” systems, providing a holistic picture to business decision-making, avoiding the risks and limitations inherent in simplistic metrics such as “productivity per hectare”, which ignores Natural Capital stocks, flows, outcomes and impacts. The IIS approach will increase business resilience, allowing ofi to make changes on the ground, to mitigate the risks associated with carbon taxes, biodiversity loss or procurement concerns. Uncovering these risks and opportunities will enable us to better prepare and respond to the challenges of tomorrow.

We believe the IIS will positively change and differentiate the way we operate and with whom. We are better informed about our Natural, Social and Human capital impact and can provide actionable management information to better understand key impact areas (by farmer group, by country, by product, and devise more appropriate plans to address externalities and enhance positive impacts. ofi endeavours to become a resilient and more reliant partner for all our stakeholders by ensuring the creation of long-term value.

F4S in the News

At ofi, we believe our finance teams are well-positioned to help businesses embed sustainability issues into a company’s risk and performance management. Our work aims to re-imagine the valuation approach and integrate the positions of key non-financial capitals in our business decisions. Find out more on how we are driving conversations across different platforms and sharing more about our work.

A4S APAC Launch F4S Sharing (Reuters) Finance & Talent (FM) Insights on COP26 (FM)

Natural Capital (BT)

How Olam is putting natural capital accounting into action

In a new research paper by Eco-Business on the financial mechanisms to protect biodiversity, the Olam and ofi teams explain how we’re accounting for our impacts on the healthy future of our planetthrough our IIS. 

Better decision making by knowing the true value of food

The Olam team was pleased to contribute to the World Business Council for Sustainable Development’s (WBCSD) latest publication on the True Value of Food, aimed at guiding business leaders in accounting for the real value of food in their decisions and action.

FAQs

What is the Integrated Impact Statement?

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/)

What is the IIS Natural Capital scope and results?

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 Inputs	Valuation Approach	Cost / Benefit
Indicator	Country Specific	Watershed Specific	Biome Specific	Main Data Inputs	Valuation Approach	Cost / Benefit
Land Use			Y	Farmed Area	Gain in biome specific benefits (Ecosystem services)	Benefit
GHG Emissions	Y			Total GHG emissions	Social cost of carbon	Cost
GHG Sequestration	Y			Carbon Sequestered	Benefit of sequestered carbon	Benefit
Water Consumption		Y		Water consumption	Human and ecosystem damage cost	Cost
Water Pollution		Y		Fertiliser chemicals and components	Human damage cost	Cost

Capital accounting transparency (Caveat)

The ofi IIS is not related to financial results or financial reporting. All underlying methodologies are based on well-established databases and frameworks, but as they depend on formula and third-party expert studies, they can only ever be an approximation. The results are for internal purposes only. In the coming years, results could be readjusted according to further methodological refinements. Taken together however, the IIS is a valuable sustainability tool that can help uncover issues and provoke questions necessary to be the change for good food and a healthy future.

Read ofi news

Articles Nov 14, 2024

The sweet treats and trends winning hearts this Valentine’s Day

Author | Madeline Bills | Cocoa Innovation Manager at ofi

Chocolate has long been synonymous with Valentine’s Day, with sweet treats a classic way to celebrate the season of love.

But Valentine’s Day is evolving, with Gen Z and Millennials redefining traditions. Many consumers are choosing to celebrate this day with friends and family members, as well as significant others. In 2023, 40% of Gen Z and 20% of Millennials said they were planning to buy their friends a Valentine’s gift.^[1] And what better way to do so than with cocoa?

As consumers change the way they celebrate Valentine’s Day – and who they celebrate with – there is an opportunity for manufacturers to develop new products. From introducing more exotic flavors in confectionery to creating more experiential formats and expanding into new categories, we’re seeing companies inventing new ways for consumers to celebrate the season of love with those who matter most to them. At ofi we explore the top chocolate, confectionery and bakery trends shaping Valentine’s Day 2024 and how manufacturers can develop new offerings to win the hearts of consumers.

^[1] Actually, Lots of Gen Z Would Rather Spend Valentine’s Day with Their Friends - YPulse

Articles Nov 14, 2024

Rishi Kalra, Executive Director and Group CFO at ofi quoted in Financial Times curtain raiser article ahead of COP

Marco Lambertini holds up his hands and splays his fingers: that is how many companies turned up to previous UN conferences on biodiversity, says the veteran conservationist, with only a flicker of exaggeration.

Press Release Sep 25, 2024

ofi’s net-zero ambition recognized at UK’s largest sustainable business awards

A new carbon monitoring tool developed by leading food ingredients supplier ofi and Google geo-spatial partner NGIS, has been recognized in the “Net-Zero Innovation of the Year” category at this year’s Edie awards, which celebrate sustainability leadership.

The tool is designed to measure carbon gains and losses across supply chains. It uses satellite imagery and machine learning to track changes in forest cover and carbon stocks at a granular level - down to the individual farm¹. This data is helping ofi to identify areas at risk of deforestation and prioritize conservation efforts on cashew, cocoa and coffee suppliers’ farms and in sourcing landscapes.

Climate Action Manager at ofi, Dr Pedro Lafargue said: “We are delighted to be recognized for our innovative solution that is helping us monitor and measure GHG emissions and progress towards net-zero goals. Part of this is about driving transformational change in strategic landscapes which means keeping growing and retaining more trees on and around farms.

“Planting more trees is one of the ways to move towards net-zero, but carbon sequestration potential is highly dependent on tree species and farm typology. The tool allows us to assess the optimum level of planting for different farmers and farms so we can create more efficient agroforestry programs that maximize both yields and carbon storage.”

ofi’s customers, who are some of the world’s largest food retailers and manufacturers, can access results of the data-driven sequestration efforts in their joint supply chains via performance metrics on ofi’s sustainability management system AtSource. These insights can help them monitor and reduce their climate risk and meet science-based targets, as well as prepare for compliance with new EU rules and disclosures in relation to nature and climate risks.

The move by ofi to take carbon stock monitoring from a manual, desktop-based process to an integrated pipeline which leverages cloud computing, is allowing ofi to progressively scale this analysis across multiple commodities and regions – covering over 950,000 farms so far.

But Lafargue says that there’s a role for industry partners to play to scale up the innovation and progress towards net-zero at scale: “While the tool can help our customers quantify the ecosystem services provided to supply their ingredients and invest efficiently in better farming systems, we need them to recognize the efforts made by farmers to plant trees and maintain agroforestry systems with financial incentives, like annual premiums, to scale up these efforts over the long-term.”

Looking ahead, there is potential to take the tool beyond ofi supply chains to quantify carbon stocks and removals across entire production landscapes to provide better data for the industry on land use change and carbon removals.

ofi was also a finalist in the Circular Economy of the Year award for using residual cocoa shells to fuel its cocoa factories², where it produces its premium cocoa ingredients deZaan. The circular biomass boilers will reduce natural gas usage and CO₂ emissions at ofi’s Koog aan deZaan facility in the Netherlands by 50% and in Mannheim, Germany, where it is believed to be the first cocoa shell boiler of its kind in the country, it will save approximately 8,000 tons of CO₂ annually.

Discover much more about what ofi has to offer at ofi.com

Notes to Editors

¹ The Carbon Sequestration Monitoring Tool combines data from ofi polygon-mapped farms and satellite data with machine learning techniques to build models in Google Earth Engine that calculate the total aboveground biomass (AGB) - vegetation above the soil, such as stumps, trees, and foliage and how much carbon is present in each plot.

² https://www.ofi.com/news-and-events/press-release/olam-food-ingredients-turns-cocoa-shells-into-power-to-fuel-factory.html

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