Shareholders request evaluation of organic fruit crops producer.
A producer of organic fruit crops wanted to develop the company further and distinguish itself in the field of sustainability, for example by using less energy and, where possible, to increase its use of green energy. The company invested in sustainable systems and now produces some of the greenest crops in the world.
The investments resulted in higher costs than expected. Furthermore, the investments were financed with borrowed capital on which interest and repayments still have to be settled. The company’s profits dropped significantly and the cash flow also became negative. If measures had not been taken, the future of this sustainable company would have been bleak. Together with its financer, we were asked to screen the company and to work out the possible options for the future.
We made a comparison between the original assumptions in the sustainable plan and the actual results. We also held talks with the management team and other involved parties in order to assess these assumptions. By examining, as an independent outsider with knowledge of the sector, the situation that had developed, we could relatively quickly determine where the bottlenecks were and how these could be overcome.
After the quick scan had been done, the causes of the current situation were clear, as was the solution for making the company profitable again. We also gained a clear picture of the measures required to generate adequate long-term profits that would provide both the financers and the owners with acceptable returns. The moral of the story is that investing in sustainability can pay off, but that a sound and comprehensive business case is essential. This requires not only a focus on sustainable entrepreneurship, but also being constantly aware of the financial and organisational consequences of the programme. After all, green companies ultimately also need to make enough profit.