Finance for Sustainability
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Olam reports on 7 Capitals
Internalisation of externalities  Accountants’ culture and mindset change Common numerical language

F4S will internalise externalities via our Business Units, 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 Olam to explain the impact of our actions on the ground to all internal and external stakeholders.

 

“Sustainability is at the heart of Olam. The IIS gives finance and business teams the needed numerical link between actions on the ground and 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
Managing Director and Group Chief Financial Officer, Olam Food Ingredients

The Capitals drive Long-Term Value and underpin a significant portion of a company’s market value. The Integrated Impact Statement is a decision-making tool which allows Olam 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 3 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 that Olam is dependent upon 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 Olam’s contributions to those relationships through its community-based programmes.

- Human Capital: The talent, skills, dedication and inspiration of our workforce & management and our responsibilities towards them. This includes the accounting for all internal stakeholders, our workforce and management, that Olam relies on and contributes to through training & capacity building,  safe & healthy workplace where rights are respected.

Like a control tower, the IIS decision-making tool effectively reports and allows Olam to manage long-term value.

The Integrated Impact Statement 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 Integrated Impact Statement for the Cocoa business. A summary of some insights from Cocoa’s Integrated Impact Statement 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 Olam endeavours to become a resilient and more reliant partner for all our stakeholders by ensuring Long-Term Value creation.

The IIS Natural Capital valuation scope is detailed in the table below.

 Indicator  Valuation Scope Main Data 
 Inputs
Valuation 
 Approach
 Cost /
 Benefit
Country
 Specific
Watershed
 Specific
Biome
 Specific
 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

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