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Puma monetises emissions

Can the sportswear company’s environmental profit and loss statement show the true cost of its supply chain? Jessica Shankleman reports

RISING ENERGY costs, new legislation and increasing stakeholder pressures are stirring a growing number of businesses to measure and report their carbon emissions. But while some companies are still getting to grips with the basics, Puma has taken the leap of creating its first environmental profit and loss (P&L) statement.

Working with PwC and Trucost, Puma has monetised its emissions, in the hope of identifying the “true cost” of the natural resources it uses. The first phase of Puma’s environmental P&L statement focused on greenhouse gas emissions and water consumption. The next phase will include other impacts such as land use change and waste, while the third section is designed to reduce the company’s growing so-called environmental debt, by factoring in economic and social benefits such as job creation and taxes.

Puma has estimated its greenhouse gas emissions and water consumption for 2010 at €94.4m (£83.7m), the vast majority of which occurred in the supply chain rather than the company’s manufacturing. It paid about €66 per tonne of carbon in its environmental P&L statement, much higher than the €17 per tonne price in the European Union’s emissions trading scheme.

Carbon reporting experts broadly applauded the company’s efforts as an ambitious move that could prompt others to follow suit, despite a few questions about the validity of some aspects of the reporting. This year, Puma failed to release the environmental account with its other financial reports, but it claims that future information will form part of the financial accounts, subject to the same scrutiny from investors as its other year-end figures.

Trailblazing efforts

Frances Way, programme director of the Carbon Disclosure Project, a non-profit organisation which asks companies to report their emissions, told Financial Director that Puma’s analysis would have been more significant if it were linked to financial results.

“If their intention is really to show environmental management in its operations, then Puma should combine the two reports to show how certain sensitivities would have an impact on its profits,” she says.

Others have raised eyebrows over the fact that PwC is thought to be auditing the results, as the accounting company also helped collate and organise the information – although Puma told Financial Director that as the figures have yet to be audited, no decision on the firm has been made.

However, despite such discrepancies, Puma has been hailed as a trailblazer for its efforts. Alongside the environmental P&L statement, the company has published a breakdown of how it is measuring and monetising its impact to help others follow suit.

Alan McGill, the PwC partner who works on the Puma account, says stakeholders now have a more accurate picture of the company’s business position, as it has identified where it uses resources and is able to act now to minimise future damage and reduce its carbon footprint.

“Even if you don’t agree with the carbon impact on business and are faced with hard-nosed investors who are only interested in returns, this gives you the information now,” he says.

Way admits that not every finance director would be ready or able to go to the expense that Puma has, but also maintains that they should still take a holistic view of the company’s accounts.

“The FD who doesn’t see this as part of his remit is going to run into trouble in the next 10 years,” says Way. ?

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