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Making COP count

ADM: decarbonising a complex value chain

Author: ICAEW

Published: 21 Nov 2023

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COP 28: ADM is working towards its net zero transition target by considering carbon, the communities that supply the company, and the nature that it relies on.

Shari Graves, Global Director Enterprise Risk Management at ADM, was working within the finance department in 2011/12 when US regulators asked the company to apply new accounting frameworks that encompassed non-financial data into the accounts. Former CEO Patricia Woertz had a keen focus on safety and the environment, which drove the adoption of non-financial metrics, monitoring and reporting.

“The finance people got on board because they had special training not only on how to account for this data, but also how to audit it,” says Graves. “We've worked with scientists around this. It was very exciting to get all the minds together. There was some push and pull along the way, but the commitment was there. That's what's really paid off for us today.”

Last year, ADM – a “human, pet and animal nutrition company” – set a target to reach net zero by 2050, committing to working with the Science Based Targets Initiative. The company set a Strive 35 goal of 25% of its total energy usage coming from low-carbon sources by 2035. 

In February 2022, the company successfully issued its inaugural sustainability bond. Net proceeds from the bond will be put towards eligible environmental and social projects that meet specific criteria as outlined in ADM’s Sustainable Financing Framework. 

This first bond issuance, totalling $743.5m of net proceeds, will finance or refinance projects that advance the company’s sustainability strategy, particularly related to climate obligations, responsible sourcing practices, and community engagement. 

To ensure the rightful allocation of these funds, ADM set up a Sustainable Finance Committee with representation across its internal sustainability, treasury, legal, procurement and operations units. The committee is responsible for identifying, evaluating, and selecting projects based on the eligibility criteria outlined in the Sustainable Financing Framework while ensuring a comprehensive external verification process for project-related expenditures.

“We’re working towards developing a regenerative agricultural programme. That's going to take time and focus on working with our producers, helping them understand some of the aspects and the benefits around that, and really play a part in making that movement,” says Graves.

Empowering local communities

Responsible sourcing is a hallmark of ADM’s sustainability strategy. It was the basis for the development of SAVANTM (Sahanala ADM Vanilla), a joint venture partnership with Sahanala Madagascar SA that represented a farmer-owned supply chain for vanilla beans in Madagascar. 

Proceeds from the inaugural sustainability bond issuance were allocated toward the procurement of sustainably sourced vanilla from SAVAN. The price premium that ADM pays for these sustainable beans supports social and environmental programmes for growers. 

More than 6,000 smallholder vanilla farmers are currently involved through SAVAN’s ownership structure, as well as more than 9,000 farmers in other industries. This project and the associated community investments have led to more than 70,000 people being positively impacted, according to ADM.

So far, ADM is around 62% advanced in its goal to have deforestation-free palm by 2025 and 86% towards deforestation-free soy. By 2025 the goal is to be 100% deforestation-free across all supply chains.

“Our global regions team of more than 70 people is putting all the pieces together making sure that we can pass the test to get the grain in there that is traceable all the way from beginning to end. We've done several tests and they failed. But now we're almost there and it's October 2023. We're a year ahead of schedule,” she says.

Graves says that biodiversity is an area that the company is working towards. “The leadership is there. The awareness is there and we’re laying the groundwork just like we did on carbon sequestration.”

Former ADM CFO Ray Young and current CFO Vikram Luthar (appointed in 2022) are involved in the US chapter of CFO leadership network Accounting for Sustainability (A4S), which has helped ADM in its transition, says Graves.

“When [former CFO Ray Young] began working with A4S in years past, that played a lot into some of the information that he brought back to the company and brought to the team as well. He laid out a strategy from the finance side.” 

Young wanted to “crawl, walk and run”. He made sure that everyone on the team knew the expectations and when they would be met. “He guided and supported us in getting what we needed in order to meet those expectations.”

Radical collaboration will be vital to its ability to sustainably feed the world’s growing population. ADM has shown that with focus, consistency and determination, global companies can transform their value chains to consider environment and social impact as vitally important as profit.