Calculation methodology

3.1 Calculation methodology

The risk calculation methodology that this tool uses is developed by Blue North Sustainability. The methodology combines and calculates different scores to normalize them in a credible way, which allows the risk scores to be reported and interrogated (“sliced and diced”) in diverse ways and at various levels.  

The risk scores are on a scale of 0 to 10, where “0” always represents “Low Risk” and “10” represents “High Risk”. 

The primary objective of this tool is to support users’ due diligence processes. Combining the Dimension Scores in the above-mentioned manner reduces subjective bias while allowing users to apply their own weightings (by overriding the default weightings). 

3.2 Glossary

Category Score Consolidation of the Dimension Scores for each of the Risk Categories (Social, Environmental, and Governance) respectively.  

Category Scores exist at three levels: Country-level, product-level, or for a complete product portfolio (based on the info that is uploaded) for a particular company (based on the procurement details they provide).  

Product Score Consolidation of the Country Scores for a specified product into one overall score for the product. The Nett volume per country is used as a weighting factor.  

Country Score Consolidation of the Category Scores for Social, Environmental, and Governance for a country into one overall score for the country. 

Dimension Score The risk score assigned to each Risk Dimension. Dimensions Scores are the most fundamental building block of risk score calculation and are derived from the risk scores/scoring databases selected for each Risk Dimension. Detailed Dimension Scores exist at three levels: Country-level, product-level, or across all commodities for a particular SIFAV member (based on the procurement details they provide).  

Overall Score Consolidation of the Product Scores into one overall score, covering all commodities, for the SIFAV member (based on the procurement details they provide). The net volume of the procured commodities is used to weigh the risk scores for the specific commodity/country combinations selected. 

Risk Category Describes the broad thematic categories within which the Risk Dimensions are logically grouped. There are three such Risk Categories defined: Social, Environmental, and Governance.  

Risk Dimension Describes the specific subject, impact, behavior, or attribute that represents an actual or potential risk to a business and/or supply chain. Each Risk Dimension has a Dimension Score ascribed to it at the product and country levels, thereby allowing the risk profiles of different product/country combinations to be calculated, reported, and interrogated. 

3.3 Risk score explained

 

Figure 1. 

The aggregating of the scores from the lowest (Risk Dimension) to the highest (Overall risk 

score) levels would proceed as follows: 

• The Dimension Scores for each Risk Dimension (for example, GHG emissions, child labor, etc.) are in the lowest tier of the risk score structure. Each is scored on a scale of 0 -10. 

• The Dimension Scores are combined (averaged by applying the weighting factor) to create the Category Scores for the Social, Environmental, and Governance categories respectively (the red block in Figure 1). 

• The Category Scores are combined (averaged by applying the weighting factor) to create the Country Score (the green block in Figure 1). 

• The various Country Scores are combined (averaged by applying the weighting factor) to create a Commodity Score for each respective commodity (the blue block in Figure 1).  

• Finally, the various Commodity Scores are combined (averaged by applying the weighting factor) to create an Overall Score for the supply chain being analyzed (the orange block in Figure 1). 

3.2.1 Category Score  

To calculate the Category Score for each Risk Category (Social, Environmental, and Governance), the underlying Dimension Scores are weighted and combined. Per default, each risk dimension is weighted equally to obtain the category score. However, the tool also provides the possibility for users to adapt to the weighting, therefore enabling them to consider their own priorities and focus areas.  

 

3.2.2 Country Score 

The risk score for a specific country is made up by averaging the Category Scores for the three Risk Categories (Social, Environmental, and Governance), utilizing the scores calculated as per the example set out in Section 2.1.  

3.2.3 Commodity Score  

The Commodity Score is calculated by aggregating the various Country Scores into a single score representing all countries the commodity is sourced from. Nett volume (weight in metric tons) is used as a weighting factor.  

The formula for the calculation of the Commodity Scores is: 

 

3.2.4 Overall Score  

The Overall Score is a function of the Commodity Scores, and the characterization of the particular supply chain being investigated, as defined by the user.  

Net volume (in metric Tons) is used as the weighting factor for the Overall Risk Score. This data is already entered for the calculations in Section 2.3.  

The formula for the Overall Score is: 

 

The formula above also applies to the roll-up of the commodity Dimensions Scores (GHG emissions, child labor, etc.) and the commodity Category Scores (Social, Environmental, and Governance) to the overall level. 

3.4 Addressing 'data gap' scenarios

Missing generic scores Not all countries are covered in each Risk Rating. The SRA tool must therefore make provision for the eventuality that a user may configure the risk tool to calculate risk ratings that include countries for which the underlying data is, as yet, unavailable. At the SIFAV Technical Steering Committee meeting held on 27 February 2023, it was agreed that:

• The “Institutional Arrangements / Good Governance” data point must be used as a proxy for any missing risk dimension scores.
• The missing risk dimension score must be calculated as indicated below. If the “Institutional Arrangements / Good Governance” data point is:

• less than 60, then the risk dimension score is 10 (high risk);
• 60 or above, but less than 80, then the risk dimension score is 5;
• 80 or above, then the risk dimension score is 1 (low risk).

The SRA tool output/reporting indicates when a proxy was used to calculate a missing risk dimension score with a footnote and blue highlight. This will provide valuable feedback for the next iteration/update of the database.

Missing region scores in case users look at a specific region in the Risk Explorer, or add regions in a Custom Risk Assessment, it may happen that no data is available for that region specifically. Another possibility is that no regions, only countries, are specified in the Custom Risk Assessment. In both cases, an average of all region scores in this country is used as a score for the region-specific risk dimensions in the tool (Soil degradation and Water risk)

Missing product scores 44 products (see list below) in the database are listed to show product-specific scores for two risk dimensions: ‘GHG emissions’ and ‘Food loss & Waste’. If no product is specified in the filters on the Risk Explorer, an average score will be shown. This score is an average of all available product scores from this given origin (country or region). Not all 44 products have scores for each country.

In case a Product does not have a score in a given country and users are filtering for this specific product, no value is shown (-) on the Risk Explorer. On the Custom Risk Assessment, an average of all available product scores from this origin will be shown in that case. The SRA tool output/reporting indicates when an average was used to calculate a missing score. This will provide valuable feedback for the next iteration/update of the database. The 44 products which may have product-specific scores (depending on the country) are listed below

• Apples
• Apricots
• Asparagus
• Aubergines
• Avocados
• Bananas
• Beans
• Broccoli
• Cabbages
• Capsicums (Peppers / Chilies)
• Carrots
• Cauliflower
• Clementines
• Coconuts
• Cranberries
• Cucumbers
• Dates
• Figs
• Garlic
• Ginger
• Grapes (Table)
• Kiwis
• Leeks
• Lemons
• Lentils
• Lettuce
• Limes
• Mandarins
• Mangoes
• Melons
• Mushrooms
• Nectarines
• Onions
• Oranges
• Peaches
• Pears
• Peas
• Pineapples
• Pumpkins
• Spinach
• Strawberries
• Sweet Potatoes
• Tomatoes
• Turnips