Puma’s EP&L: Is it a Game-Changer?
Puma last month announced the initial results of its Environmental Profit & Loss Account, which it called a “world’s first”. The account valued the greenhouse gas and water consumption impacts of the company’s operations and supply chain at €94.4 million ($133.5 million).
The Guardian analysis says that Puma’s consultants, PricewaterhouseCoopers and TruCost, used emerging methodologies to calculate costs to the company of carbon dioxide output (£57 per ton) and water usage (£0.69 per cubic meter). These calculations included equity weighting, future damage discounting and inflation adjustments.
TruCost chief executive Richard Mattison told the Guardian that the governing principle was to determine the social cost of carbon and water. But, he said, “The [scientific] studies sometimes use different techniques, so you’re comparing apples and oranges.”
The analysis also said that while Puma could ascribe a high degree of accuracy to environmental figures from its 60 biggest suppliers, it had to use some guesswork to come up with the data for smaller companies further down the supply chain. This guesswork is important because the producers of Puma’s raw materials account for 36 percent of its indirect greenhouse gas emissions and 52 percent of its water consumption, the Guardian said.
To calculate these carbon emissions, PwC used an “economic input-output model based on government industry data,” the Guardian said. TruCost based most of its water calculations for raw material providers on water scarcity studies by the United Nations’ Food and Agriculture Organization. “It’s not accurate to the nth degree, but it’s in the right ballpark,” Alan McGill, partner in PWC’s sustainability and climate change department, told the paper.
Another issue with the EP&L is that it only covers environmental impacts from raw materials to finished product, not “cradle to grave” effects that include products’ disposal, the analysis said. And so far it only includes carbon and water impacts, though Puma promises that by the end of 2011, it will publish an updated version with information on land use, waste and the emissions that contribute to acid rain and smog.
As for the EP&L’s effects, Puma now plans to factor water scarcity into its procurement decisions, chief executive Jochen Zeitz says, and the company now requires that its top suppliers guarantee that sub-suppliers meet Puma’s core environmental standards.
The EP&L could lead Puma to extend its offset program to cover emissions from its supply chain. But Zeitz is careful not to overstate the immediate effects of the EP&L, the Guardian says, even as he hopes that the EP&L will help spark change among industry peers.
One of the biggest impacts of the EP&L will be internal, Zeitz predicts. A ten percent reduction in carbon footprint might not mean anything to most Puma managers, but “if we say we’re going to save £20 million from our P&L, that’s much more tangible.”
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