HERZOGENAURACH, GERMANY (Jan. 3, 12:20 p.m. ET) — If Mother Nature had a bank account, Puma AG would have to write her a big check, one with nine figures.
In November, the German sport-lifestyle company made corporate reporting history by issuing the first-of-its-kind Environmental Profit and Loss Account (E P&L) detailing its financial impact on ecosystems to the tune of 145 million euros ($196 million) in 2010.
In addition, the PPR Group, Puma's majority shareholder, announced that this economic valuation methodology to quantify a company's environmental impact will be implemented across its luxury and sport and lifestyle brands by 2015.
The undertaking was complex, collecting and validating figures along the global company's expansive supply chain in the areas of greenhouse gas emissions (GHG), water use, land use, air pollution and waste.
The motivation, however, was uncomplicated, said Reiner Hengstmann, global director of sustainability for the maker of footwear, apparel and accessories.
“We are following a principle: ‘What you cannot measure, you cannot manage,'” said Hengstmann, who is based in Vietnam but spoke to Waste & Recycling News from Cambodia. “The way of doing business, not just at Puma but everywhere, is not being done in the right way. We take too many things for granted and we don't think about the impact. ... Having now the full financial impact on the environment or the ecosystem services, we can adjust and we can change the way we are doing business.”
In setting this benchmark for corporate environmental reporting, Puma has finalized its 2010 numbers to round out earlier released economic valuations of GHG emissions and water consumption that totaled 94 million euros. The final E P&L revealed 51 million euros caused by land use change for the production of raw materials, air pollution and waste along its value chain.
The Puma E P&L and associated methodology were developed with the support of PricewaterhouseCoopers LLP and Trucost PLC. Here are some of the noteworthy findings:
• Puma's supply chain is responsible for 94 percent of its total environmental impact.
• More than half (57 percent or 83 million euros) of all environmental impacts are associated with the production of raw materials (including leather, cotton and rubber) in Tier 4 of Puma's supply chain. The use of leather is the greatest single factor contributing to its impact on land use.
• Only 6 percent or 8 million euros derive from Puma's core operations such as offices, warehouses, stores and logistics.
• GHGs make up 90 percent of the total impact of Puma's offices, stores and warehouses.
• The environmental impact caused by waste generation (landfill and incineration) is valued at 3 million euros, representing 2 percent of the total Puma E P&L. More than half of this derives from Tier 1 with some 21,000 metric tons of waste, followed by Tier 2 suppliers with some 8,000 metric tons and Puma Operations with some 6,000 metric tons of waste. The vast majority of Puma's overall waste is produced in Asia / Pacific where most of Puma's suppliers are located.
Perhaps the most unexpected disclosure was that only 8 million of the 145 million euros come from Puma's core operations such as offices, warehouses, stores and logistics while the remaining 137 million euros fall upon Puma's supply chain.
“The biggest highlight and biggest surprise of the E P&L is the impact of our supply chain, particularly in raw materials and the agricultural supply chain,” Hengstmann said. “The biggest question is now, how much impact can we have here on the very, very lowest tier suppliers when we are one of thousands of customers who are asking for cotton and asking for leather? How can we change things?”
In terms of raw materials, Puma has introduced a product called Re-Suede made for the environmentally conscious consumer. Comprised of 100 percent recycled polyester fibers, produced by a chemical recycling process that reduces both the energy consumption and carbon dioxide emission by 80 percent compared to the production of virgin materials, the recycled polyester is scrap from manufacturing processes that is repurposed to create the synthetic material. This effort is in line with Puma's goal of manufacturing 50 percent of the international collections using more sustainable materials by 2015.
Hengstmann said the company plans to do an E P&L on an annual basis and to use the figures from the reports to distinguish between “good and bad suppliers in terms of their impact on ecosystem services.”
“We from Puma know if we want to change things, our activities are probably like a drop in the ocean. Of course, every drop in the ocean counts at the end of the day, but we have figured out as well is that you can only change things through collaboration with industry peers,” he said.
As a company, Puma is already working toward sustainability goals to reduce carbon, waste, energy and water use by 25 percent by 2015.
Puma's results have generated widespread interest among governments, corporations, nongovernmental organizations and academics, Hengstmann said.
“I think this should encourage the industry as a whole to look and to consider their impact on ecosystem services,” he said. “We are more than happy to share our methodology and to work together.”