Supply chain weighs on Puma's first green accounts
Solar panels at Puma HQ are just the tip of the iceberg of PPR's green plans
Sporting goods company Puma is calling for industry-wide engagement in environmental reporting after parent company PPR Group released its first set of green accounts for the brand as an aside to regular financial reporting.
“We hope this will be a catalyst and create debate in our industry about how best to tackle the environmental challenges we face," says Jochen Zeitz, chairman and CEO of Puma. "And we hope more companies will follow us and will release data transparently as we are doing.”
The first step in Puma’s environmental profit and loss (E P&L) account has been to report greenhouse gas (GHG) emissions and water consumption during 2010. Eventually the accounting - part of the EUR10m (US$142m) a year PPR Home green initiative announced in March - will also include social aspects.
Although the company has no base value to compare its first findings against, initial figures show environmental costs appear to be heaviest further down the supply chain, on everything from cotton production through to garment manufacture.
And this means Puma will look to work closer than ever with its global suppliers in order to meet ambitious environmental goals.
“Placing a monetary value on the environmental impacts”
With green accounting still in its infancy, Puma enlisted the help of PriceWaterhouseCoopers (PwC) and Trucost to put a monetary value on the ecological impact of its operations.
Calculations were made using an estimated value per tonne of CO2 at EUR66 and an average water value of EUR0.81 per m2.
“An environmental P&L account is a means of placing a monetary value on the environmental impacts along the entire supply chain of a given business,” Zeitz says.
“We are not defining the ‘inherent’ value of nature but rather we do believe that since business relies on financials and is driven by the ‘bottom line’, that for the health of ecosystems to be taken seriously, placing a monetary value must be attributed to these services to help illustrate the potentially negative financial impact on a businesses future performance as ecosystems are depleted.”
Including Puma’s supply chain, the company’s total environmental impact from GHG emissions and water consumption was found to be EUR94.4m (US$134m). Water and GHG each represented around half of this value.
Puma’s own operations resulted in an environmental impact of EUR7.2m, the company reported at a press briefing yesterday (16 May), with EUR87.2m attributed to four tiers of its supply chain, including cotton farming, tanneries, embroiders and garment manufacturers.
Raw materials prove costly
Puma found that tier four suppliers, such as cotton harvesting, cattle ranching for leather and natural rubber production, had the highest environmental impact on the E P&L balance sheet.
Indeed, the production of these raw materials made up 36% of GHG and 52% of water consumption.
In order to address sustainability in its supply chain, Puma is urging its suppliers to ensure the next tier down is following the same guidelines.
Puma’s E P&L showed that 62% of GHG emission costs arose in Asia, where the majority of the company’s sourcing is based. EMEA and the Americas represented 17% and 21% of this value respectively.
Zeitz added: “True transparency along our entire supply chain is the logical next step.
“But because Puma does not “own” the supply chain we do not have control over it and the farther the tier is down the supply chain, the greater our authority is reduced. However as a business we can have an effect on our supply chain.”
Under previously-stated sustainability goals, Puma is aiming for 50% of its collections to be made to its internal sustainability standard. It is also targeting a 25% reduction in carbon, energy and water usage by 2015.
Zeitz, who is also chief sustainability officer of PPR, has spearheaded Puma’s sustainability drive, having led the German company’s operations for the past 18 years.
"Puma's E P&L shows in monetary terms the scale of its reliance on natural capital and provides the platform to determine what can be done to manage the impact, and where the first priorities lie," adds Alan McGill, partner, PWC sustainability and climate change.
"While it's an emerging field for reporting, it's a significant first step that is likely to accelerate extremely quickly."
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