PUMA and Environmental Costs

Did you hear that “sportlifestyle company” PUMA burns up about half its income in environmental degradation? That factoid was not emphasized in this week’s announcement that the company had developed an “Environmental Profit & Loss Account.”

The E P&L calculates environmental aspects of the company’s operations, such as water use and greenhouse gas emissions, and ascribes a financial cost to them. An E P&L doesn’t have to show only costs; it would ascribe revenue to initiatives that produced a net improvement of environmental performance, such as planting trees. PUMA does not show any such “environmental revenue” lines.

The company calculated that the environmental cost of the greenhouse gas emissions and water consumption across its supply chain in 2010 was €94.4 million, with over 90% of the total attributable to its suppliers. Net earnings in 2010 were €202.2 million, meaning that including environmental costs in the company’s P&L for real would slash its earnings nearly in half.

This initiative, the splashy announcement of it, complete with a live online Q&A by PUMA CEO and chief sustainability officer Jochen Zeitz, and ensuing publicity around it, are likely to stir greater interest in the corporate mainstream in the financial costs of environmental degradation.This is a great thing because accounting for the full cost, including ecological costs, of doing business, would go along way toward creating the incentives needed for dramatic improvements in corporate environmental performance. So despite my grim take on PUMA’s numbers, this is a wholly positive step and should be applauded.

PUMA’s calculus draws on the concept of “ecosystem services.” For readers wanting to get up to speed on the concept of ecosystem services and how they are valued financially, I’ve assembled this selective reading list to get you started. If you have other sources you find valuable, please leave a comment.

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Filed under carbon, ecosystem services, emissions, Supply chain, sustainability, water

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