Isra-Mart srl : PUMA's pioneering environmental P&L shows unexpected cost of raw materials

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PUMA has valued its water use and greenhouse gas emissions (GHG) in 2010 at €94.4m (£82.7m) in what is being hailed as the first environmental profit and loss (EP&L) statement by a global business.

The sports and lifestyle firm yesterday announced the first results from its three-stage EP&L statement designed to gain a better understanding of its environmental impact and boost its competitive position.

PUMA's overall environmental impact was valued at €94.4m for 2010, split almost equally between GHG emissions and water use. The financial impact of GHGs, calculated by PwC, totalled €47m, while water use, calculated by Trucost, was valued at €47.4m.

To put a price tag of €0.81/m3 on the environmental impact of PUMA's water use, Trucost used a formula which took into account water scarcity in a particular region, as well as the market cost of the resource.

Meanwhile, PUMA's GHG emissions were valued at €66/tCO2e, based on an estimate of the 'social cost of carbon' developed by Richard Tol in his 2009 paper The Economic Effects of Climate Change.

While PUMA acknowledged that there is "significant uncertainty" around the true social cost of carbon, McGill believed that PUMA had applied "sensible assumptions" to reach its value. The estimate will also be revised as the science and economics of climate change develop in the coming years, the company said.

Jochen Zeitz, chairman and chief executive of PUMA and chief sustainability officer for PUMA's majority shareholder PPR, said he was surprised that the results showed that raw material production, such as cotton farming and oil drilling, accounted for a large proportion of the company's environmental impact.

Those suppliers, known as Tier Four, accounted for 36 per cent of total GHGs, worth €16.7m, and 52 per cent of water use, worth €24.7m, last year. The environmental impacts of PUMA's own operations were valued at of €7.2m.

"The biggest surprise was Tier Three and Four," said Zeitz. "If we can find a solution to that, then we've already fixed half of the problem. I expected the actual manufacturing of the goods to have a much higher impact."

Zeitz is keen for other companies to follow in becoming more transparent about their environmental impacts, and said that PUMA has had requests from "pretty significant" corporations in the automotive, chemical, electronics and soft drinks sectors seeking advice on how to create an EP&L.

Alan McGill, a partner at PwC's sustainability and climate change division, expects corporate environmental reporting to enter the mainstream in the coming years, driven by stricter regulations and rising energy prices.

"PUMA has taken an extraordinary first step, effectively holding a mirror up to its supply chain, showing its dependencies on natural capital so they can be tackled from the first design concept to the shop shelf," he said.

"While it's an emerging field for reporting, it's a significant first step that is likely to accelerate extremely quickly. It's about demonstrating that the business understands how wider factors such as ecosystem services could impact its ability to operate and grow."

PUMA's is planning to complete stage one of its EP&L in autumn, revealing the economic values of acid rain and smog generators, waste and impacts on land use.

Stage two will then examine the company's social impacts, such as wages, working conditions and cultural heritage.

Finally, stage three aims to put a value against PUMA's positive impacts such as job creation and tax payments in order to create a full environmental and social profit and loss sheet.