A Triple Bottom Line Showdown: Analyzing LUXI and Dongji Projects and

GreenWood's Ultimate Choice

Student Name and ID

Institutional Affiliation

Moodle Name and ID

[WORD COUNT: 2900 Words]

1
 A Triple Bottom Line Showdown: Analyzing LUXI and Dongji Projects and

GreenWood's Ultimate Choice

Introduction

GreenWood Resources is a global sustainable venture that develops and manages sustainably

harvested timber plantations. The company's goal is to create a sustainable and renewable

source of timber for the global market while promoting sustainable land management

practices that support biodiversity and local communities. Although the company is based in

the United States, it aimed to expand its customer base and assets through expanding

toseveral countries, including China. GreenWood would partner with an indigenous project

so as to enables it cope well with the new environment, and to enable it source raw materials.

Although China has over 50 afforestation projects, it still suffers a serious shortage of timber,

presenting a good market opportunity for GreenWood.

Through leveraging its decision making skills, GreenWood had a huge opportunity to select

the most viable project to partner with in China. GreenWood should use the triple bottom line

model to decide the most viable business partner. The triple bottom line theory is an

accounting framework that emphasizes the importance of considering three dimensions of

organizational performance: social, environmental, and financial. The social dimension

considers an organization's impact on people, including its employees, customers, and the

broader community. This includes issues such as employee working conditions, customer

satisfaction, and community engagement. Companies also consider the environmental

dimension to analyse its impact on the planet, including its use of natural resources and its

contribution to pollution and climate change. Profitability within an organization is

considered through the financial dimension. Many companies rank this aspect as the most

2
important and are likely decide based on this consideration only. Howeve, it is important to

consider all the other perspectives as they are equally important.

Following its expansion ambitions in 2005, GreenWood Resources expressed interest in

expanding its sustainable timber plantation model to China, which had a significant demand

for timber and a growing interest in sustainable practices. The company saw an opportunity

to partner with Chinese companies and investors to develop sustainable forestry operations

that met economic and environmental goals. In March 2009, the company assessed twenty

potential investment Chinese projects, emphasizing the quality of the assets and the project's

ability to sell timber in the international market.

The Luxi and Dongji projects emerged as the most viable partners for GreenWood Resources

to partner with. Marc Hiller, a Forest Stewardship Council (FSC) specialist, stated that these

projects were selected based on their ability to sell, fulfillment of the FSC requirements,

current owners' relational status with the community, etc. These projects, therefore, managed

to enter phase two of the GreenWood Resources decision considerations. There are multiple

and different opportunities and risks that GreenWood Resources would face in choosing

either project. For instance, the Luxi project, located in Shandong province, provided

favorable environmental conditions for the flourishing of Poplar plantations but with a higher

land lease price. On the other hand, Dongji Project, located in the inner Mongolia region,

offered a cheaper land leasing option but with a retarded plant growth rate. Therefore, the

company was required to conduct a deeper but comprehensive due diligence report based on

economic (Internal Rate of Return and Net Present Value), social, and environmental

considerations to select the most viable and profitable of the two projects.

Economic Perspective

It is important to compare Luxi and Dongji projects regarding their economic viability to

enable GreenWood Resources to make the best investment decision. This comparison will

3
embark on economic value indicators such as each project's Net Present Value (NPV) and

Internal Rate of Return (IRR).

Table 1: Financial comparison of the two companies

Project LUXI DONGJI

Total area- MU 92073 82644
Initial investment 296548734 40903578.3
Planting expense/mu 632 255
Per annum costs
Land lease 367 87
Crop care expense 110 45
477 132
Stumpage volume
Luxi (after 7 years) 12.6 -
Dongji (after 10 years) - 7.0
Total yield 1160119.8 578508
Price per MU 559 445

Revenue, R 648506968.2 257436060

Costs
Planting 58190136 21074220
Per annum cost 307431747 109090080
Investment 296548734 40903578.3
Total cost, c 662170617 171067878.3

Cashflow (r-c) -13663648.8 86368181.7

Discount factor @ 12% -6180740.8 27808243
Dollar value at 6.83 -904940 4071485

The financial projections indicate that the LUXI project has a net present value (NPV) of -

$0.904 million, which implies that the project is not financially viable. On the other hand, the

DONGJI project is expected to yield a positive NPV of $4.07 million, indicating that the

project is financially feasible (Greenwood, 2019).

Social Perspective