Kering is putting a monetary value on the environmental impact of its operations

Kering is putting a monetary value on the environmental impact of its operations

Luxury goods group Kering is scaling up its efforts to put a monetary value on the environmental impact racked up by its operations and global supply chain – but admits the impact of raw materials has increased as its business has grown.

The group behind brands such as Gucci, Saint Laurent and Stella McCartney in May released its first ever Environmental Profit & Loss (EP&L) report for 2013, revealing that 93% of its total environmental impact falls within the supply chain.

Its latest report for 2014 confirms that over half of the impact is associated with raw material production (49%) and processing (25%).

The good news is that over the past year, revenue growth has outstripped the growth of its impacts. In 2014, group environmental impacts are estimated to be EUR793m, representing a 2.2% increase compared to EUR776m 2013, while revenue growth over the same period was 4.5%, rising from EUR9,656m to EUR10,038m.

Much of the group's sustainability efforts focus on reducing the impacts of the materials such as leather and cotton, as well as textiles made from synthetics and animal fibres, used in its products.

While there has been some improvement associated with some materials, overall raw material impact has increased, the company says, "largely due to with an increase in production volume, resulting in larger quantities of raw materials required."

The impacts associated with Kering's own operations including retail (Tier 0) fell by EUR2m between 2013 and 2014, and improvements in energy efficiency at its Tier 1 and Tier 2 suppliers manufacturing and product assembly operations saved EUR9m.

But an increased manufacturing volume compared to 2013 contributed to a gain of EUR15m, and changes in sourcing locations and quantities of raw materials purchased added another EUR12m to its raw material production and processing impacts.

The Kering EP&L is a tool to measure and value the impacts on the environment resulting from the business activities across the entire supply chain and its resulting cost to society.

The metrics analysed are the impacts linked to Kering's operations (retail, offices and transport) as well as those of its supply chains, from raw materials through to manufacturing, and include Greenhouse Gas (GHG) emissions, water use, water and air pollution, waste production and land use changes.

"In order to create a more sustainable and more resilient business model, we have embedded natural capital accounting in our business through our EP&L," explains Kering chairman and CEO, François-Henri Pinault.

"We are also further integrating the EP&L into key decisions and to monitor environmental impacts, such as climate change, on our supply chains and on the raw materials that are strategically important to us in the short and long term."

The group says key highlights from its 2014 EP&L analysis confirm it is an effective tool for decision-making, and that there have been "some positive results" in terms of lower-impact raw materials and manufacturing techniques.

Click on the following link for more insight into the group's first ever Environmental Profit & Loss (EP&L) report:

Supply chain weighs on Kering environmental footprint