Sustainable Sourcing of Agricultural Raw Materials, a Practitioner’s Guide, developed by Swiss-based business school IMD, the Sustainable Agriculture Initiative Platform and five other global organizations, advises managers to begin by ensuring any sustainability plans are in line with the company’s core business strategy.
The guide warns that the business case for sustainable sourcing is oftentimes neither well developed nor formulated by executives in a way others understand. Rather than taking a pre-emptive approach based on a sound business case, managers tend to concentrate more on how to tackle ongoing challenges of a sustainable sourcing plan, the guide said.
Sustainable sourcing should help a company create new products and supplier relationships, improve risk management, brand value and reputation and leverage public partnerships, the guide advises.
The guide provides key questions to help companies prioritize which agricultural raw materials they want to sustainably source. Questions include what proportion of the total cost base that the commodity represents, how it contributes to the end-product quality, strength of the company’s balance sheet and prevalence of external supply risks.
The food and beverage industry, the world’s biggest purchaser of agricultural raw materials, is at particular risk from the effect climate change has on crops and the global water supply, according to the guide’s developers.
For example, the worst U.S. drought in five decades caused more damage than expected to corn and soybean crops and helped push the global food price index up 6 percent in July 2012. Earlier this year, Cargill said it would close its Plainview, Texas beef processing plant, citing a tight cattle supply brought on by years of drought in the region.