Financial Analysis of Sustainability Initiatives in the Cashmere Supply Chain

Abstract

Many corporations have begun to make sustainability investments, and those investments typically have relied on reducing costs, for example, though reduced energy, water, and material usage. However, an expanded focus on where sustainability can increase revenue and reduce risk will likely drive future corporate investment. The number one risk that supply chain purchasers have identified is raw material price fluctuation. Working with a large European luxury goods manufacturer, the coefficient of variation (standard deviation/mean) is used to analyze price volatility in the cashmere supply chain, both for the Client and the market as a whole. Since implementing direct purchasing, among other sustainability initiatives, the Client has reduced their raw material price volatility. However, the analysis includes no causal assessment. Future work should incorporate more data to look at the causal relationship between sustainability initiatives and reduced price volatility.