“Just One Indicator, Please”: PUMA’s Environmental Profit and Loss Statement

Recently, the sports brand PUMA released a preliminary version of their “unprecedented” environmental profit and loss statement which reveals no profits but a loss of 94.4m Euros.

Complete Cradle To Gate Approach

Where this figure comes from? Most likely from the desire to provide managers with one monetary figure on environmental impacts rather than several ecological ones. Together with their partnering organizations Trucost and PWC, PUMA analyzed the water and carbon footprints of their own operations and four supply chain tiers (cradle to gate approach). The ecological results measured in tons of CO2-equivalents and m³ of water have been converted into one financial figure that reflects the full damage caused in monetary terms.

*One* Environmental Performance Indicator

Does it ring a bell? This is what full/true/social cost accounting is all about. If you like to know more about the concept, you can for instance read this ACCA (Association of Chartered Certified Accountants) publication: Bebbington et al. (2001): Full cost accounting: An Agenda for Action (PDF). Or you take a look at the case study on full cost accounting for decision making at Ontario Hydro from 1996 which can be found on the US EPA website (PDF). Simply said, full cost accounting satisfies the demand of decision makers for one meaningful environmental performance indicator instead of several and difficult to understand ones on eutrophication, acidification, global warming and so forth.

Definitely Not Unprecedented

Why I am bothering you with these antique concepts and old publications? “Unprecedented” seems to be a somehow misleading adjective for PUMA’s environmental profit and loss statement. It is rather the reanimation of concepts that are well known among scientists in fields such as industrial ecology, life cycle assessment, ecological economics or material flow analysis, but failed to get sufficient business attention. And business and public attention is what PUMA’s profit and loss has achieved already (see here or here or here or…). It is time therefore to stop being a mean wiseacre and to start to hail PUMA for their effort to include externalities into their corporate strategy, accounting, and decision making.

Ambitious Corporate Sustainability Strategy

The profit and loss approach underpins PUMA’s position as a forerunner in the field of corporate sustainability with ambitious environmental and social targets for their own operations, products and the supply chain. Sustainability is clearly a strategic issue and not a window-dressing one. Hence accounting for the external impacts of PUMA’s activities is an important next step in moving towards sustainability.

How Will They Price Biodiversity?

I look forward to learn more about PUMA’s approach in the future: How will they price environmental and social externalities in the future (biodiversity seems to be a particularly tricky one)? How does this affect corporate decision making and decision makers? Will it be integrated into the ERP environment and linked to top management premiums? Will this eventually lead to a systematic approach to sustainability performance management of operations, products and the supply chain?