Scenario Modeling for Responsible Sourcing
A client has a significant portion of a key raw material purchased on the open market, leaving the farm source unknown to the company. As a result, current labor and growing practices associated with most of the material purchased is also unknown. A leading competitor was recently exposed for promoting poor labor and pesticide management practices leading to the potential for NGOs to turn their attention to other similar companies.
Our client wanted to understand and monetize the business implications of such a scenario as a means to justify and drive a more aggressive responsible sourcing program internally.
Leveraging Antea Group’s Accounting for Sustainability (AA4S®) platform, we facilitated a cross-functional process that:
- Framed the scenario from diverse functional/business vantage points;
- Inventoried the necessary data and inputs;
- Ran AA4S™ Financial Models;
- Reached consensus on the magnitude of the business impacts and opportunity;
- Defined the appropriate investment; and,
- Monetized the business case using company-specific investments hurdle rates.
The process was able to provide a robust understanding of sustainability scenarios of this nature and provide a full cost accounting perspective. The team was able to outline a clear plan of action and justified business case with a higher degree of confidence in predicting business impacts and return on investment for proposed measures. The model quantified, in a transparent manner, the projected costs that could be avoided, plus identified opportunities to realize incremental sales growth resulting from the proposed investments.
The process elevated a very real scenario for the company and coalesced leadership to integrate a new approach to responsible sourcing. The client captured the value of the process, stating “the AA4S model focused our minds, and inspired the team to think about the subject of responsible sourcing in a new, visual and appealing way. It has already helped with taking the discussion forward internally towards funding, investment and strategic sourcing.”