Why Every CFO Needs to Prioritize Product Origin Verification

Origin is a fundamental component of product. Every product on the market is in large part defined by where its raw materials are sourced from.

For businesses, this is both a risk and an opportunity. Knowing the true origin of our products is more important than ever. It forms part of the broader way a business can contain its risk and promote its capabilities.

While Chief Financial Officers may not traditionally have had much oversight of product origin, it’s now essential that they do. Verified origin will increasingly become a critical growth enabler.

There are many compelling reasons why CFOs must lead the charge here. As the volume of reporting around sustainability and ethical sourcing escalates, and the demands of the market rise, CFOs can spearhead positive practices that enhance business stability and profitability.

In this article we examine why product origin verification is essential for CFOs, including expert insights from Tom Holgate, Chief Financial Officer at Oritain.

1. Reduced risk exposure

Your business’s raw material sourcing can introduce risk if your business (however inadvertently) is:

1. Procuring materials from prohibited sources, or
2. Procuring counterfeit materials

Research has shown that reputational damage results in a loss of financial performance, social capital and market share. The financial consequences of this can take years to recover from, if recovery happens at all.

“The harm a business can experience through regulatory breaches or media attention can impact their reputation, and therefore their commercial performance, quickly and over a protracted period,” said Tom Holgate.

Regulations have been introduced across the globe to address these issues, and enforcement agencies handed significant power to ensure compliance.

This is most apparent in the fashion and textiles sector. Under the Uyghur Forced Labor Prevention Act (UFLPA), which prohibits cotton products sourced through forced labor from entering the United States, shipments worth $3.7 billion have been detained at the US border. Of these, 61% were denied entry.

Trust alone isn’t enough to protect against these risks. Supplier declarations can be falsified; sourcing routes may be ethically compromised.

Verifying origin is the only way to prove the integrity and authenticity of your products – which in turn supports compliance and reduces your risk. You can’t ensure compliance if you can’t prove origin.

2. Greater investment potential

Increasing disclosure and compliance around ESG (Environmental, Social and Governance) means there is a greater obligation on companies to have clear ESG strategies.

Consumers, regulators and investors are demanding that companies, boards and CFOs commit to and uphold high standards of sustainable behavior. Beyond just corporate goodwill, there are strong financial reasons to do so.

According to Tom Holgate, “Strong ESG and mission-focused companies have broader sources of capital available to them.” A 2024 study by KPMG reported that 77% of financial investors say ESG considerations influence their deal strategy, and 24% of corporate investors are actively divesting from companies due to inadequate ESG performance.

The potential is there – but markets have a low tolerance for greenwashing. Making ESG claims without substantiation is a fast road to ruin. Failing to verify your sourcing and origin information will compromise your strategy.

Origin verification underpins your ESG stance by assuring investors that sourcing practices are ethical, products are what they claim to be, and that no hidden risks exist to endanger their investment.

3. Enhanced business equity

Product authenticity and ESG credentials can be developed into compelling narratives for commercial advantage. Over time this positioning can form a critical success factor in building business success.

Consider French champagne, Egyptian cotton or New Zealand lamb. Origin is integral to competitive advantage.

Origin verification demonstrates a company’s commitment to ethical sourcing, compliance, and transparency that strengthens relationships with customers, investors, and regulators.

These audiences are more likely to trust and support businesses that substantiate their claims than those which rely on promises alone.

Tom Holgate related his experience with this. “In my position as finance lead in a listed company, I saw first-hand the value of putting the company on a very public footing around its ESG and risk management strategies.”

But it’s more than just trust. Proof of origin also supports product premiumization. Being able to independently verify product authenticity allows a business to potentially add a premium to their product or access markets that would otherwise be closed off.

4. Improved contractual arrangements

Supply chains are the fuel that drive our business production. But today’s supply chains are fragmented, complex and opaque. Managing advantageous supplier arrangements can be a time-consuming challenge.

Product origin verification helps businesses optimize their supply chains by arming CFOs with important information to renegotiate supplier contracts.

If you know a supplier is using prohibited materials in the manufacture of your goods, you’re empowered to introduce corrective actions or cease trading with the supplier.

Similarly, if you know your products include materials sourced from regions outside those you’ve contracted for, you can enforce changes to supplier processes.

This places your business in a stronger position to negotiate preferential supplier contracts. It arms procurement functions with irrefutable data with which to enter into negotiations.

“The increased focus on what is being sourced, and from where, asserts a new buying impetus around many critical supply aspects,” said Tom Holgate. With procurement functions generally falling under the jurisdiction of finance teams, origin-based contracting provides a strong financial advantage for CFOs.

5. Stronger internal alignment

Origin doesn’t just drive external metrics – it also enables the strong internal synergies that support growth. The interest and active participation in ESG-related practices by staff goes to show that a strong ESG proposition is now a baseline expectation for staff within any business.

Tom Holgate commented, “I’m a strong believer that every organization’s success is founded in the people who work there.”

Staff must believe in the company’s mission, trust the honesty of its commitments, and feel affinity for its values. But that’s impossible to realize if the products you sell aren’t authentic.

Product origin verification fulfills an important role in assuring staff and marshalling their support. It underpins their discretionary effort. It’s an endorsement that their work is meaningful and contributes positively to broader objectives and the wider world.

Building origin verification into business and financial frameworks

We’ve discussed the compelling reasons for CFOs prioritizing product origin verification. However, embedding this into corporate standards and financial processes can be a tougher nut to crack.

The main challenge lies in shifting mindsets – helping stakeholders see origin verification and ethical sourcing not as a cost but as a strategic investment.

Clearly communicating the risk mitigation, reputational and commercial benefits, combined with pilot programs that show measurable results, can help CFOs build buy-in across their organizations.

Seeking the support of an experienced verification partner like Oritain to act as a guide will also be a significant enabler in achieving this.

In addition, Tom Holgate provides the following practical tips for successfully embedding this across an organization:

• Start small but strategic – identify high-risk areas of the supply chain where verification can deliver immediate impact.
• Work closely with procurement and sustainability teams, or passionate members of your broader company when these functions don’t exist, who can support you.
• Partner with a vendor who is highly experienced in origin verification and can also help with internal pitching and business case building. Oritain work with clients throughout the product life cycle to provide critical scientific product verification, but also to act as a trusted, independent commercial business partner.
• Use early wins and vendor support as a springboard to build and expand the business case for broader adoption across the organization.