Sportswear brand Puma announced the completion of its groundbreaking Environmental Profit and Loss Account (EP&L) for 2010.
The EP&L puts the total cost of the brand’s environmental impact at EUR 145 million. In May, Puma announced preliminary figures of EUR 94 million for GHG emissions and water consumption only. The complete accounting includes an additional EUR 51 million resulting from land use, air pollution and waste.
Puma’s EP&L is a first-of-its-kind attempt to put a financial figure on a company’s environmental impact. It’s no simple task, but if others follow suit, it will create an accounting method that includes the inherent value of ecosystems. Current accounting practices do not recognize the lost value of natural systems destroyed by industry, and as a result they are not protected by market forces.
Puma says only EUR 8 million of the EUR 145 million total derives from the brand’s core operations such as offices, warehouses, stores and logistics, while the remaining EUR 137 million results from Puma’s supply chain. Over half (57% or EUR 83 million) of all environmental impacts are associated with the production of raw materials (including leather, cotton and rubber) in Tier 4 of Puma’s supply chain.
These costs, which do not affect Puma’s net earnings, will serve as an initial metric for the company when aiming to mitigate the footprint of Puma’s operations and all supply chain levels.
PPR Group, Puma’s majority shareholder, also announced that it will institute the EP&L methodology across its all of its luxury and sport & lifestyle brands by 2015.
“The results of the Puma EP&L underpin the urgency for a paradigm shift in the way we all currently do business and I have been pleased to also see that the release of Puma’s first results has generated widespread interest among governments, corporations, NGOs and academics,“ said Jochen Zeitz, Executive Chairman of PUMA and Chief Sustainability Officer of PPR.
The PUMA EP&L and the associated methodology were developed with the support of PricewaterhouseCoopers LLP and Trucost PLC, using recognized ecological and economic techniques and building on a large volume of work in the fields of environmental and natural resource economics.
“These values are enough to make any business pay attention. The PUMA EP&L offers a real insight into the environmental consequences of commercial decisions and at the same time highlights potential commercial consequences of the environmental realities unfolding around the world,” Alan McGill, partner, Sustainability and Climate Change, PwC, said.
“This will make many companies consider how they can apply similar analysis in their own organizations. Companies – big and small – are now reliant on global supply chains, making their environmental footprint much larger than many realize. Assigning economic values to the environmental impact of a company’s operations enables a business to tackle vital questions now, not just about environmental impacts, but business risk, costs savings and finding new ways to become more effective. Without measuring them, the impacts cannot be managed, or reduced,” McGill added.
Stepping up internal Resources
In support of the EP&L findings, PPR and PUMA say they have stepped up their internal resources, hiring additional staff on a group level as well as within the PUMA.Safe team in order to address the challenge of reducing the environmental impact. On a corporate level, PPR is adding an Energy Management Specialist to its sustainability team, who will immediately begin to investigate opportunities for reducing Greenhouse Gas emissions.
PPR has also hired a Conservation and Ecosystem Services Specialist who will be investigating the development of broadly-accepted definitions of sustainable cotton and rubber and internal standards for their sourcing.
The PUMA.Safe team, which ensures that supplier factories adhere to Puma’s social and environmental standards, has created both a Humanity and an Ecology team. Five additional environmental and social auditors will be joining the existing 13 employees in the PUMA.Safe team, so that environmental impacts at Puma’s Tier 1 and Tier 2 suppliers can be better addressed and solutions for their reduction more rapidly developed. Puma is also hiring a Chemical Engineer to look at solutions to identify more sustainable materials as well as supporting. (Earlier this year Puma announced it will phase out harmful substances within the supply chain.)
Big Interest in the EP&L
The release of the initial EP&L results in May generated extensive media coverage and attained significant interest among governments, industry peers and international organizations. Jochen Zeitz presented the results and benefits of the PUMA E P&L to 15 members of the German Council for Sustainable Development last month. As a result, the council will launch a project that aims at implementing standards for Puma’s environmental accounting statement and will promote the EP&L approach as an innovative practice in public debates.
The UK government featured Puma’s groundbreaking analysis as a best practices case study for sustainable business in the Department for Environment, Food and Rural Affair (DEFRA) Natural Environment White Paper in June 2011.
Also, the Co-Chair of the Investment Commission and Treasurer for the UN Environment Programme Financial Initiatives referred to the Puma EP&L when speaking at the 2011 UNEP Financial Initiatives Global Roundtable in Washington last month.
Developing more Sustainable Products
Puma also is looking into opportunities to address the impact of its suppliers through the development of more sustainable products. The company recently introduced a version of its popular suede sneaker that is made with recycled materials. The Puma Re-Suede is comprised of 100% recycled polyester fibers, produced by a chemical recycling process that reduces both the energy consumption and the CO2 emission by 80% compared to the production of virgin materials.
With the development of the Re-Suede Puma has come a little closer to achieving its goal of manufacturing 50% of the international collections using more sustainable materials by 2015.
Bart King is a PR consultant and principal at Cleantech Communications, and a regular contributor to Sustainable Life Media.