People and Planet in the Accounts: how this food giant learned to measure sustainability
18 November 2020: Olam’s finance team measures more than just financial capital. Managing director and group CFO for Olam Food Ingredients Rishi Kalra explains how they did it.
Agriculture giant Olam International has done just that. Over the past few months, the company has taken its goal to create a new, more sustainable approach to industrial-scale food production and pushed it further, engaging with stakeholders and reviewing its approach to business and sustainability.
“The pandemic has exposed the importance of addressing the long-term wellness and operational resilience needs of smallholder farmers in emerging markets who provide much of the world’s ingredients and raw materials,” says Rishi Kalra, managing director and group CFO for Olam Food and Ingredients (OFI). “There is a pressing need to support these small-scale farmers to become more resilient to shocks, including price drops, pests, and climate change impacts.”
Public-private collaboration is crucial
Olam is working towards making a real difference to the world post-COVID, working to ensure that its operations and objectives are aligned with UN Sustainable Development Goals. This means addressing three major challenges for the century, says Kalra: the climate emergency, biodiversity collapse, and widening social inequality. To do it right, public-private collaboration is crucial, he says.
“We must encourage crop and income diversification, ensure access to finance, promote health and human rights, and commit to preservation of the environment. For Olam’s part, we have committed to partnering with customers and partners in tackling the issue and set targets to do so.”
Alongside the moral and ethical arguments for a sustainable strategy for Olam, there’s a strong business case, too. Olam operates in more than 60 countries, with a network of five million farmers that supply the company both directly and indirectly. If Olam is more sustainable, it will have a knock-on effect in preserving that network.
“We are in a position to create a real impact on our sector and its future, which is facing many sustainability issues from climate change to farmer livelihood,” says Kalra. “We focus on the need to re-imagine agriculture because we recognise that if we do not do this, the planet will not be able to meet the nutritional needs of the 10 billion people who will be populating it 30 years from now.”
Olam’s restructuring is occurring through all aspects of the business, including its finance team and the C-suite. The company has taken governance in this area seriously. The board’s Corporate Responsibility and Sustainability Committee takes an active role in providing oversight, strategic direction and stakeholder management.
The company created its ‘Finance for Sustainability’ (F4S) team to apply more financial rigour and oversight in embedding sustainability into the initiatives. Since 2017, in addition to Financial Capital, Olam also reports on manufactured, human, social, natural, intangible and intellectual capital. “We look at these not only from a measurement approach but assessing if we are meeting our challenges and obligations as an ethical business.”
Sustainability through integration
This integration of various pillars has been crucial, says Kalra. “We have taken the concept of sustainability measurement to an elevated level by establishing a financial link to sustainability through the development of our Integrated Impact Statement (IIS).”
The IIS gives finance and business teams a numerical link between Olam’s ground-level actions and their impact and dependency on our non-financial capitals, Kalra explains.
“The IIS takes a systems approach that captures the complexity of a diverse but 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.”
Ambitious targets
Olam set itself some ambitious ethical and sustainable targets back in 2015, such as to have 100% of direct operations WASH (water supply, sanitation and hygiene) Standard compliant by 2020. The company aims to cut greenhouse gas emissions by 50% by 2030. “We are ahead of target for another goal set in 2015, which was to bring one million hectares and half a million smallholders under Olam sustainability programmes within this year.”
Targets are measured, in part, by collecting data on the ground. Around 3,500 enumerators collect data from farmers and communities, which is used in reporting against set targets and in the company’s business-to-business sustainable sourcing platform, AtSource. “The data is provided to our customers, who can use it to measure their own credentials in their third-party supply chains. This enables us to collaborate with customers on improvement programmes.”
To enhance business decision making, Olam’s IIS is being deployed at a profit centre and entity level: something the company aims to make part and parcel of the day-to-day decision making in future. This requires more rationalisation of data and more collaboration across functions and operations.
“The Finance and Treasury team at Olam have approached this by linking and embedding the company’s purpose of ‘Re-imagining Global Agriculture and Food Systems’ with our financing and treasury strategy,” says Kalra.
Sustainable funding
The company’s funding approach is also sustainable. In 2018, Olam secured a $500m sustainability-linked loan –the first of its kind in Asia. It has secured two more since: a $525m sustainability KPI-linked revolving credit facility in 2019 and another $250m in funding this year.
“Sustainability-linked loans are indicative of the importance we attach to green financing and a natural extension of Olam’s core purpose and belief in a collaborative approach to maximise positive impact,” says Kalra. “These loans reflect not just an innovative approach to financing but one that is also financially sensible. Our objective is to see a larger share of our financing come from sustainable channels, as long as they are competitive.”
In developing its IIS and creating its F4S team, Olam has set its own framework for measuring more than financial performance through the finance function. It has helped to inform the organisation’s business decisions, and the aim is to push it further out into the business to ensure that all departments are on the same page.
To make it work, finance professionals need to have a 360-degree view of the organisation and its place in the world, says Kalra. They must develop an ability to take a multi-capital approach, rather than just working with purely financial capital in focus. “On a broader perspective, professional finance bodies should come together to support its members, to develop the necessary skills to report, bring insight and help decision-makers manage multi-capitals that their businesses rely upon.”
While it might seem conceptually difficult to grasp, says Kalra, it cannot be ignored. “It has real financial considerations wrapped around a moral one. We are very proud of the progress we have made with our Finance for Sustainability team, but we need to continue to further develop and evolve.”
Are you professionally ready for climate change? Find resources, information and inspiration on the ICAEW Climate Hub.
Find out more about the work ICAEW and its members are doing to change behaviour and drive sustainable outcomes by visiting icaew.com/technical/sustainability.
People and Planet in the Accounts: how this food giant learned to measure sustainability
18 November 2020: Olam’s finance team measures more than just financial capital. Managing director and group CFO for Olam Food Ingredients Rishi Kalra explains how they did it.
Agriculture giant Olam International has done just that. Over the past few months, the company has taken its goal to create a new, more sustainable approach to industrial-scale food production and pushed it further, engaging with stakeholders and reviewing its approach to business and sustainability.
“The pandemic has exposed the importance of addressing the long-term wellness and operational resilience needs of smallholder farmers in emerging markets who provide much of the world’s ingredients and raw materials,” says Rishi Kalra, managing director and group CFO for Olam Food and Ingredients (OFI). “There is a pressing need to support these small-scale farmers to become more resilient to shocks, including price drops, pests, and climate change impacts.”
Public-private collaboration is crucial
Olam is working towards making a real difference to the world post-COVID, working to ensure that its operations and objectives are aligned with UN Sustainable Development Goals. This means addressing three major challenges for the century, says Kalra: the climate emergency, biodiversity collapse, and widening social inequality. To do it right, public-private collaboration is crucial, he says.
“We must encourage crop and income diversification, ensure access to finance, promote health and human rights, and commit to preservation of the environment. For Olam’s part, we have committed to partnering with customers and partners in tackling the issue and set targets to do so.”
Alongside the moral and ethical arguments for a sustainable strategy for Olam, there’s a strong business case, too. Olam operates in more than 60 countries, with a network of five million farmers that supply the company both directly and indirectly. If Olam is more sustainable, it will have a knock-on effect in preserving that network.
“We are in a position to create a real impact on our sector and its future, which is facing many sustainability issues from climate change to farmer livelihood,” says Kalra. “We focus on the need to re-imagine agriculture because we recognise that if we do not do this, the planet will not be able to meet the nutritional needs of the 10 billion people who will be populating it 30 years from now.”
Olam’s restructuring is occurring through all aspects of the business, including its finance team and the C-suite. The company has taken governance in this area seriously. The board’s Corporate Responsibility and Sustainability Committee takes an active role in providing oversight, strategic direction and stakeholder management.
The company created its ‘Finance for Sustainability’ (F4S) team to apply more financial rigour and oversight in embedding sustainability into the initiatives. Since 2017, in addition to Financial Capital, Olam also reports on manufactured, human, social, natural, intangible and intellectual capital. “We look at these not only from a measurement approach but assessing if we are meeting our challenges and obligations as an ethical business.”
Sustainability through integration
This integration of various pillars has been crucial, says Kalra. “We have taken the concept of sustainability measurement to an elevated level by establishing a financial link to sustainability through the development of our Integrated Impact Statement (IIS).”
The IIS gives finance and business teams a numerical link between Olam’s ground-level actions and their impact and dependency on our non-financial capitals, Kalra explains.
“The IIS takes a systems approach that captures the complexity of a diverse but 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.”
Ambitious targets
Olam set itself some ambitious ethical and sustainable targets back in 2015, such as to have 100% of direct operations WASH (water supply, sanitation and hygiene) Standard compliant by 2020. The company aims to cut greenhouse gas emissions by 50% by 2030. “We are ahead of target for another goal set in 2015, which was to bring one million hectares and half a million smallholders under Olam sustainability programmes within this year.”
Targets are measured, in part, by collecting data on the ground. Around 3,500 enumerators collect data from farmers and communities, which is used in reporting against set targets and in the company’s business-to-business sustainable sourcing platform, AtSource. “The data is provided to our customers, who can use it to measure their own credentials in their third-party supply chains. This enables us to collaborate with customers on improvement programmes.”
To enhance business decision making, Olam’s IIS is being deployed at a profit centre and entity level: something the company aims to make part and parcel of the day-to-day decision making in future. This requires more rationalisation of data and more collaboration across functions and operations.
“The Finance and Treasury team at Olam have approached this by linking and embedding the company’s purpose of ‘Re-imagining Global Agriculture and Food Systems’ with our financing and treasury strategy,” says Kalra.
Sustainable funding
The company’s funding approach is also sustainable. In 2018, Olam secured a $500m sustainability-linked loan –the first of its kind in Asia. It has secured two more since: a $525m sustainability KPI-linked revolving credit facility in 2019 and another $250m in funding this year.
“Sustainability-linked loans are indicative of the importance we attach to green financing and a natural extension of Olam’s core purpose and belief in a collaborative approach to maximise positive impact,” says Kalra. “These loans reflect not just an innovative approach to financing but one that is also financially sensible. Our objective is to see a larger share of our financing come from sustainable channels, as long as they are competitive.”
In developing its IIS and creating its F4S team, Olam has set its own framework for measuring more than financial performance through the finance function. It has helped to inform the organisation’s business decisions, and the aim is to push it further out into the business to ensure that all departments are on the same page.
To make it work, finance professionals need to have a 360-degree view of the organisation and its place in the world, says Kalra. They must develop an ability to take a multi-capital approach, rather than just working with purely financial capital in focus. “On a broader perspective, professional finance bodies should come together to support its members, to develop the necessary skills to report, bring insight and help decision-makers manage multi-capitals that their businesses rely upon.”
While it might seem conceptually difficult to grasp, says Kalra, it cannot be ignored. “It has real financial considerations wrapped around a moral one. We are very proud of the progress we have made with our Finance for Sustainability team, but we need to continue to further develop and evolve.”
Are you professionally ready for climate change? Find resources, information and inspiration on the ICAEW Climate Hub.
Find out more about the work ICAEW and its members are doing to change behaviour and drive sustainable outcomes by visiting icaew.com/technical/sustainability.