PPR announced earlier this months that all its 16 luxury, sports and lifestyle brands, which include names such as Puma, Gucci and Yves Saint Laurent, will produce an “environmental profit and loss account” (EP&L) by 2015. Such EP&Ls will not be used to determine the companies' financial results, but to add increasingly important environmental considerations to the decision-making process.
Taking an unprecedented step that can only improve its image as a pioneer in the area of sustainable development, Puma disclosed at the same time a first set of figures that quantify the environmental impact of five major elements throughout its supply chain: greenhouse gas emissions, excessive water use, excessive land use, air pollution and waste. Their cost to the natural environment has been calculated at a total of $145 million for the year 2010.
Jochen Zeitz, the former chief executive of Puma who is now executive chairman of the sports company and chief sustainability officer of PPR, said he hoped that other companies will adopt the same methodology sooner or later. Noting that he has been approached by governmental authorities and other companies in the sports, automotive and other fields, he offered to place at their disposal the complex environmental metrics developed by PricewaterhouseCoopers and Trucost for Puma to monetize environmental impacts.
“What we don't measure, we don't manage,” said Zeitz, arguing that an EP&L such as the one developed for Puma allows a company to set priorities for action and to set clear targets for the implementation of the most appropriate initiative over a period of five to 10 years. The initiatives can range from the development of new sustainable products to the selection of the least polluting suppliers of raw materials and finished products, and the most favorable regions to produce them.
The 2010 EP&L presented by Puma points to production and the processing of leather and other raw materials such as rubber and cotton, including the effect of raising cattle, as the major challenges for sustainability along the supply chain. They were responsible for 57 percent of the environmental impacts measured by Puma.
Only 6 percent of the total environmental impact came from Puma's own operations including its offices, its warehouses and its stores. GHGs make up 90 percent of the total impact on these operations.
As Puma reported last May, excessive water use and GHGs had an almost equal impact on the company's total supply chain in 2010, making up just under two-thirds of the overall impact with a value of about €47 million each. The damage deriving from excessive land use on biodiversity and the ecosystem was assessed at €37 million, or 26 percent of the total EP&L, and much of it came from the production of leather for Puma shoes. Air pollution and waste generation had shares of 7 and 2 percent, respectively.
Analyzing Puma's product range, it turned out that 66 percent of the total environmental impact came from its footwear, 27 percent from its apparel and 7 percent from its accessories. Not surprisingly, the Asia-Pacific region was responsible for 66 percent of the environmental damage, followed by the Americas with 24 percent, and by Europe, the Middle East and Africa with 10 percent.
To help take the most appropriate measures in favor of sustainability, PPR has appointed an energy management specialist, charged with reducing GHG emissions, and a conservation and ecosystem services specialist who will look at ways to source more sustainable cotton and rubber for the whole group. Five more environmental and social auditors will be joining the 13 present employees of Puma's so-called Puma.Safe team. The company is also hiring a chemical engineer to identify more sustainable materials while supporting the phase-out of harmful substances from its supply chain.
For Puma, the EP&L is only the first of three steps in a process that will see the inclusion of social impacts and economic benefits in its value chain. The next stage will analyze many aspects of social responsibility including decent and fair wages, health, safety, standards of living, security, stability, diversity, gender equality and cultural heritage for the people involved in the supply chain. To complete the other side of the equation, Stage 3 will take into consideration the creation of jobs and disposable wealth, indirect and induced employment, creation and growth of new businesses, productivity and efficiency gains, direct and indirect tax payments, etc.
These benefits will be quantified to offset the previously calculated environmental and social costs (more in Sporting Goods Intelligence Europe).