Discover the edge
1. Why is Kering sharing its methodology?
Collaboration is a key element of sustainability. We can only solve problems of scale, like the depletion of natural capital, if we can scale the analysis that leads to solutions. Therefore by open-sourcing our E P&L methodology and sharing our work, we hope others in our industry and adjacent industries can work together to address our shared issues. Furthermore, we are supporting the international movement towards corporate natural capital accounting and the development of a globally accepted methodology. As such, we are contributing to the Natural Capital Coalition’s work developing the Natural Capital Protocol.
2. How and why do you expect the results of the E P&L to help benefit your business in the long term?
The E P&L helps us develop a more resilient business model in the context of the most significant environmental changes in our history. Only by understanding our dependencies and impact today, can we seek sustainable solutions that can ensure our business model is robust in the future.
3. Why are you measuring the environmental impacts in your supply chain and accounting for your externalities when traditional environmental reporting stops at a company’s own operations?
At Kering, we take the view that business should recognize and account for its impact beyond its own operations, and throughout its supply chain. As such, we define our business activities by the entire scope of activities that are driven by our business. Furthermore, business performance is affected by both the performance of its own operations, and those of its supply chain. Looking beyond the impacts of our own operations puts us in a better position to understand the performance of our business. We are not alone in this view, and, for example, Scope 3 GHG emissions reporting under the GHG Protocol looks to impacts in the wider value chain.
4. Why are you using monetary value as a metric? How does assigning a monetary value help your decision-making process?
The E P&L is presented in monetary terms to: help us translate environmental impacts into the language that business understands; compare between different types of impacts which before could not easily be compared; and to facilitate comparisons between brands and business units.
5. What is a profit in E P&L terms?
To date the E P&L has been focused primarily on the negative impacts of a business’ activities on the environment, however there are many ways we can work with our supply chain to deliver benefits, or “profits”, for the environment and society. An overall net profit is achieved if a business can demonstrate improvements over and above what would have occurred if the business did not exist and no other business took its place. We have illustrated this via select projects like the Kering REDD+ initiative and our offsetting programme, which create measurable, positive benefits to the environment.
6. What is different from the E P&L and other seemingly similar tools such as Life Cycle Assessment (LCA)? What distinguishes the E P&L from these?
The E P&L builds on approaches such as LCA by seeking to understand the consequences of emissions and resource use by placing a monetary value on these. To achieve this the E P&L takes into account local conditions which effect the scale of the impacts and in monetising these impacts enables comparisons between different types of impacts. We find this to be essential for decision-making within the business. Additionally, LCA’s typically focus on a product whereas our E P&L looks at the impacts of our entire business and across the supply chain.
7. How are Kering’s E P&L results in relation to your industry’s results?
Analysis by PWC shows that if we operated in the same manner as a typical industry supply-chain, our impacts would be 40% higher. This difference is primarily driven by our sourcing locations and efforts thus far to reduce impacts from manufacturing.
8. Your E P&L covers cradle to gate, what about cradle to cradle? What about consumer impacts?
We are piloting studies on consumer use and end of life to gain a better understanding of these impacts. One of the challenges is how to understand the behavior of different consumers. For example: the washing and ironing habits of consumers within and between countries.
9. Kering and PUMA published the first-ever E P&L in 2011 for PUMA’s 2010 results. How has the E P&L evolved since then?
Starting with an expert review of the original E P&L methodology, Kering, supported by our brands and PwC, has further developed the E P&L, enabling it to bettersupport key decisions across the brands. For example, we shifted the focus to primary data from our suppliers and brands, and to ensure that the results are directly actionable.
10. Have you been working on initiatives identified before you had the consolidated E P&L results? How do these relate to your Sustainability Targets?
The E P&L has confirmed that the initiatives we embarked on, such as more sustainable sourcing and process efficiency, have been in the right direction and the E P&L results have helped finetune our focus. In addition, we have been able to chart new areas to innovate and improve through the E P&L analysis. These all directly contribute to our Sustainability Target performance as they are interlinked.