Puma Reveals ‘World’s First’ Environmental P&L Results

by | May 16, 2011

Puma has announced the first results of its Environmental Profit & Loss Account, valuing the greenhouse gas and water consumption impacts of the company’s operations and supply chain at €94.4 million ($133.5 million).

The economic valuation of Puma’s environmental impacts, carried out by PricewaterhouseCoopers for GHG emissions and Trucost for water use, estimates the direct ecological cost of the company’s operations at €7.2 million. Another €87.2 million falls upon four tiers along the supply chain.

The calculations estimated a value per tonne of CO2e at €66 and an average water value of €0.81/ m3.

Puma and PwC described the EP&L statement as a global first. The company had revealed its intention to create an EP&L less than two months ago.

“Fundamentally, this analysis is about risk management for the environment, and for business, because you cannot separate the two,” said Alan McGill, partner at PwC Sustainability and Climate Change. “This is a first for a company to measure and value the impact of its business in this way and gives PUMA a unique and challenging insight into their supply chain.

“It’s a game-changing development for businesses to integrate environmental issues into their current business model like this, because it provides a basis for embedding their reliance on ecosystem services into business strategy,” McGill added.

Puma said that by putting a monetary value on environmental impacts, it is preparing for potential future legislation such as disclosure requirements. The estimated costs will also serve as a metric for the company when aiming to mitigate the footprint of its operations and supply chain, and will not affect its net earnings, Puma said.

Puma chose GHG emissions and water for the first analysis in its EP&L development because it considered those to be the most significant environmental impacts. The EP&L estimated greenhouse gas impacts at €47 million and water impacts at €47.4 million. Puma’s operations accounted for 15 percent of the overall GHG emissions analyzed, and 0.001 percent of water consumption.

Analyses of the water and GHG impacts were performed across Puma’s value chain, including the operations of raw material and product suppliers as well as logistic services, which the company said it has limited control over. The tiers were classified as follows:

• Tier 4: Raw material production, such as cotton farming, oil drilling, etc.
• Tier 3: The processing of raw materials, such as leather tanneries, chemical industry, oil refining
• Tier 2: Outsourced processes such as embroiders, printers, outsole production
• Tier 1: The manufacturing of its products
• PUMA core operations: Design, logistics services, warehousing, head office functions and retail

Tier 4 accounts for the highest relative greenhouse gas and water consumption impacts within the supply chain, Puma said.

Puma said it will use the results to examine how to adjust the targets in its sustainability scorecard, launched in early 2010. The scorecard sets targets such as 100 percent sustainable packaging and 25 percent reductions of carbon, energy, water for 2015. The company said it has so far been using the scorecard to address impacts of operations and Tier 1 suppliers.

The EP&L effort will also eventually lead to Puma creating further environmental KPIs and further estimating social and economic impacts, the company said.

“[The EP&L] is an essential tool and a shift in how companies can and should account for and, ultimately, integrate into business models the true costs of their reliance on ecosystem services and [company sustainability initiative] PPR HOME will encourage and collaborate with the industry to adopt this tool,” said Jochen Zeitz, chairman and CEO of Puma and chief sustainability officer of its majority shareholder, PPR.

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