Environmental Profit and Loss Account

From P2P Foundation
Jump to: navigation, search


Example

Simon Beavis:

"When Puma, the sport and lifestyle company, published its first ever full Environmental Profit & Loss Account in November 2011 it came with a powerful call to action from executive chairman, Jochen Zeitz.

"I sincerely hope," he wrote. "That the Puma EP&L and its results will open eyes in the corporate world and make the point that the current economic model, which originated in the industrial revolution some 100 years ago, must be radically changed.

"A new business paradigm is necessary and a transformation of corporate reporting will be central to this – one that works WITH nature and not AGAINST it."

Zeitz, who also serves as chief sustainability officer for Puma's parent company, the branded goods business, PPR, conceived the idea of an EP&L after many years turning the Puma business around.

Inspired by The Economics of Ecosystems and Biodiversity (TEEB) study on the economic benefits of biodiversity, he realised that if Puma wanted to be truly sustainable it needed to put a transparent cost on its impact on nature across the company's entire supply chain.

This would put a direct monetary value on both nature's "services" used by the business – such as fresh water, clean air, healthy biodiversity and productive land – and on the negative impacts the company had on the environment.

Although these costs would have no impact on the company's actual net earnings, the exercise would, for the first time, make clear the magnitude of the costs to managers and stakeholders, and pinpoint where in the supply chain they were being incurred and, therefore, where action was needed to address them.

It was an attempt, says Puma, to spell out its environmental impacts "from cradle-to-gate".

All well and good, in theory. The question was – where to start? No other corporation had ever attempted to use financial accounting methods to make such a calculation on an international basis. The EP&L was and is, Puma says, a genuine first – but also, by necessity, a work in progress.

Working with PriceWaterhouseCoopers and Trucost, it developed the EP&L and associated methodology using recognised ecological and economic measuring techniques.

Puma started with greenhouse gas emissions and water usage – which were reported earlier in 2011 – later adding land use, air pollution and packaging throughout its operations and supply chain. It then costed these as services that must be paid for – in this case, with the planet as a service provider.

Analysis of where these costs were being incurred showed that €8m (£6.4m) or 6% of the costs lay with company's own direct operations, such as offices, warehouses and stores. A further 9% (€13m) lay with its Tier 1 suppliers, the companies responsible for manufacturing Puma shoes and clothing.

The remaining €124m – or 85% of the impacts – were distributed through its Tier 2, 3 and 4 suppliers going right back the actual sourcing of raw materials, such as leather, cotton and rubber.

By doing this Puma has a much better understanding of the impacts it can most easily and most directly tackle and those further from its control where it needs to work with other companies, sharing the same supply chain, to achieve results.

For example, the analysis revealed that the group's Tier 1 suppliers – over whom Puma has far greater control – were mostly responsible for the group's waste production. Puma is now working with these suppliers to make reductions, for instance introducing fully automated cutting machines and new sewing technologies that cut down on discarded materials.

The EP&L identifies impacts by region – most of Puma's waste is generated in the Asia Pacific region – and by product line and raw material, too. Leather production is the greatest single factor impacting land use, for example, which means footwear, the number one product line, is identified as accounting for 91% of the land use impact, at a cost of €34m.

The company is now feeding this analysis directly into its sustainability strategy and targets." (http://www.guardian.co.uk/sustainable-business/best-practice-exchange/puma-impact-environment-counting-cost)