Sportswear giant Puma wants to lead the growing pack of multinationals seeking to develop greener accounting models, but while large corporates race ahead with new approaches for measuring environental impacts, how can smaller companies keep up, and more importantly, why should they try?
Puma last year unveiled its first environmental profit and loss (EP&L) account, aiming to put a monetary figure on the environmental impact of its entire value chain – right from its operations through to the production of raw materials by suppliers.
The move was hailed as a pioneering effort, despite a few questions at the time about the viability of the final figures and how they would be audited.
Now one year on, Puma is showing how these EP&L accounts can have a real practical application, by using the EP&L to drill down to a product level and assess how the design and manufacture of each shoe or running top could be improved to limit its environmental impact.
The company has compared the financial value of the environmental impacts of its conventional shoes and t-shirts, with counterparts in a forthcoming collection of biodegradable and recyclable clothing, dubbed InCycle.
The EP&L showed that the InCycle range has an environmental impact that is one-third smaller than its conventional collection. Puma now hopes to scale this model up across its own business and other sectors.
The process means that Puma as a customer can make better informed decisions about its suppliers, and pass that knowlege on to its own customers.
As an example, the InCycle compostable sneaker has a total environmental cost of £2.47, consisting of the cost of related greenhouse gas emissions, water, waste, air pollution, and land use. In contrast, its conventional suede counterpart has an environmental cost of £3.60.
Puma will inevitably make trade-offs when selecting its materials, and the EP&L will help inform these crucial decisions. The synthetic fabrics in the InCycle trainer have a lower environmental cost in every area when compared to their suede counterpart. However, they have a higher cost in terms of air pollution because the energy required for leather production is lower than the energy required from cotton fabric production, such as yarn, weaving and finishing.
But importantly, Puma now knows exactly where the biggest impacts fall, and can select suppliers accordingly in an effort to minimise them as much as possible.
Puma is not the only company seeking to clean up its supply chain in this way and there are now countless examples of large multinationals demanding that their suppliers meet minimum environmental standards.
Alan McGill, partner at PricewaterhouseCoopers (PwC), who worked on the EP&L with Puma, predicts that as a result small and medium-sized businesses are likely to face increasing pressure to measure and manage their own carbon emissions as larger firms demand more information on the environmental footprint of their supply chains.
“A lot of these smaller businesses actually supply companies like Puma,” he said, “So as the larger organisations start to innovate and look for new products and raw materials, then new partnerships and businesses will open up across the supply chain.
“This should be viewed as an opportunity for businesses to engage with large corporates and other organisations to generate new relationships.”
Puma, and its group owner PPL, hired consultancies PwC and Trucost to work on the EP&L. It also presumably has the contacts and wherewithal to widen the model’s reach at a global level.
Puma chairman Jochen Zeitz revealed this week that he is hoping to eventually develop a standardised tool that would crunch the environmental cost numbers on any product in any sector.
Smaller businesses could argue that they cannot afford to invest in carbon accounting on the same scale. They also may not have the same level of commitment at the board level to do so.
However McGill maintains that there is a clear tangible business benefit for investing in carbon accounting.
“Puma are doing this because they can see it’s economically viable and delivers an environmental improvement,” he said. “So for small and medium sized businesses, to engage in this there’s a real reason – because its economically viable to do so.”
Richard Mattison, chief executive of Trucost, added that there are a number of low-cost or even free environmental accounting tools that SMEs can use to give them a better understanding of their environmental performance.
“The first step really for any company is to measure some of these impacts,” he said. “The second step is evaluation. But there are tools available to do this.”
Large businesses that are already measuring their own impact, might also be able to offer their suppliers free tools and software, on the grounds that they want to map out their emissions and consumption through the supply chain.
In addition, there is a wide range of carbon management software on the market, which SMEs can use to start to measure their impact – even if they cannot emulate Puma and put a monetary value on each source of emissions, waste and consumption.
Some tools on offer, such as the Environment Agency’s Carbon Reduction Commitment toolkit, are essentially an Excel spreadsheet on the internet, but Mattison maintains that they offer a good starting point for an SME to measure its basic impacts, such as water and energy use.
Other software suppliers include the Carbon Trust, CloudApps and Carbon Guerrilla, as well as global software giants such as SAP and Oracle. It is worthwhile spending some time talking to different suppliers and peers to find out which products best suit your own company’s needs.
If your business is based in London, it could also apply to get free help from Heart of the City, a charity set up to help smaller businesses build corporate social responsibility programmes. Companies are offered mentoring, as well as resources for monitoring environmental impact.
Whichever toolkit a company chooses to measure its environmental impact, it is becoming increasingly apparent that large companies will be prepared to drop suppliers that fail to meet their environmental criteria.
Ultimately, it is those companies that can keep up with the likes of Puma in developing environmental accounting models who will be best positioned to compete for contracts from environmentally conscious multinational clients.