E P&L. N a t u r a l C a p i t a l A c c o u n t i n g : a n E s s e n t i a l T o o l f o r B u s i n e s s

Transcription

1 E P&L N a t u r a l C a p i t a l A c c o u n t i n g : a n E s s e n t i a l T o o l f o r B u s i n e s s Michael Beutler Director Sustainability Operations 4 June 2014

2 About Kering LUXURY SPORT & LIFESTYLE GUCCI BOTTEGA VENETA SAINT LAURENT ALEXANDER McQUEEN BALENCIAGA BRIONI CHRISTOPHER KANE MCQ STELLA McCARTNEY TOMAS MAIER SERGIO ROSSI BOUCHERON DODO GIRARD-PERREGAUX JEANRICHARD POMELLATO QEELIN 2 PUMA VOLCOM COBRA ELECTRIC TRETORN

3 Natural Capital Accounting: The Cost of Business to Nature Mining Agriculture Forestry Ecosystem services Production What are our impacts, how do we measure them? We rely on the environment for everything we use in our business Transport Retail 3

4 What does business need to know? As a company, do you know your true impact? Where do you source from, is there a better location? What do you use, is there a better material? How do you make it, is there a better way? How well do you really know your business? 4

5 Finding the answers with an E P&L Definition Value to business An Environmental P&L account is a tool to An Environmental P&L account is a means of placing measure environmental impacts of the company and its suppliers across the entire supply chain a monetary value on the environmental impacts place a monetary value on the environmental impacts along act the in entire a more efficient supply chain of a given way business 1.Strategic Tool Make more informed decisions 2.Risk Management Tool Manage your bottom line by managing your impacts 3.Transparency Tool Know how your business really runs 5

6 METRIC SCOPE METHODOLOGY Key elements of an E P&L Environmental footprint e KPIs Monetary impact X Valuation = Coefficients E P&L Measured across the value chain: Green House Gases Air pollution Water pollution Waste Water use Land use Impact on planet: Health & well-being Economic changes Agricultural productivity Loss of biodiversity & ecosystem services Analysis and opportunities: OUTPUTS t/nox t/co2e Ltrs/Water M 3 /Waste COST 6 Impact

7 E P&L drives business value 1.Strategic Tool Make more informed decisions 2. Risk Management Tool Manage your bottom line by managing your impacts Understand and respond to environmental shifts on the ground from climate change, land use shifts, water scarcity etc and how it can impact growth strategies Know better where to act, where to innovate and where to invest to mitigate impact and maximize results + Revenue: Sustainable supply ensures product availability - Cost: locking in sources buffers variability in costs = More consistent profitability Better predict environmental shocks to your supply Reduced variability to cash flows decreases risk portion of risk adjusted return which in turn increases valuation 3. Transparency Tool Know how your business runs and where the opportunities are Analysing our supply-chain down to the raw material level can highlight sourcing issues, process synergies and innovation opportunities. Categorising suppliers and volumes of materials sourced through them highlights opportunities, dependencies on raw materials and consolidation of supply opportunities. 7

8 What is the scope of an E P&L Raw Materials Processing Manufacturing Operations Retail Consumer use and endof-life CO2 Water use Waste Water quality Air pollution Land Use Deeper in the supply chain Traditional environmental reporting Expand reporting elements 8

9 Why measure and monetize? How does an E P&L differ from traditional approaches? Goes beyond LCA by comparing impacts and including land use and biodiversity Goes beyond EEIO with a focus on primary data What is monetization? A way to capture cost to society of environmental impacts at a ground level Externalities internalised over time to business as a proxy for environmental costs Why monetize? Provides an easy means to compare Impacts (CO2, water, waste etc.) Geographic differences Product categories, business units, companies, industries Speaks the language of CEOs/ CFOS and investors Represents societal costs (externalities) that can become financial costs in the future 9

10 PUMA E P&L case study 145 M Raw Materials Tier 4 Processing Tier 3 Outsourcing Tier 2 Manufacturing Tier 1 Operations 137 M 8 M 10

11 Expanded Broader Deeper Enhanced Key: Primary pollutant pathway Secondary pollutant pathway Immaterial, out of scope Scaling the E P&L From one brand PUMA Across all of Kering by 2016 GUCCI BOTTEGA VENETA SAINT LAURENT ALEXANDER McQUEEN BALENCIAGA BRIONI CHRISTOPHER KANE MCQ STELLA McCARTNEY SERGIO ROSSI BOUCHERON DODO GIRARD-PERREGAUX JEANRICHARD POMELLATO QEELIN PUMA VOLCOM COBRA ELECTRIC TRETORN + 6 indicators 6 indicators 3 indicators 17 indicators 1 indicator 21 indicators GHGs Air pollution Waste Land use Water use Water pollution 2x primary data across operations and supply chain 0% 20% 40% 60% 1 st E P&L (Puma only) Kering Group Rollout 80% 100% Impact driver Environmental outcomes Impact on people SO2 emissions SO2 concentration 1) Human health: Increases in respiratory or cardiac illness and premature deaths attributable to decreased air quality PM2.5 and PM10 emissions PM2.5 and PM 10 concentration 2) Visibility Costs for shipping and aviation as well as reductions in the recreation and residential amenity value Air Emissions NH3 emissions NOx emissions VOCs emissions Reduced air quality O3 concentration 3) Agriculture Change in crop yield attributable to change in air quality and acid rain 4) Forests and timber Changes in growth of forests and plantations attributable to changes in air quality and acid rain 5) Man-made materials The loss of material due to Increased corrosion CO and other emissions Other pollutant concentrations 6) Other ecosystem services The loss in recreation attributable to decreased air quality and increased acid rain 11 Analysis based on impact pathways More localization of valuation Experts recommendations embedded

12 Understanding the reach of our production & supply chain Key 0% <0.1% Leather: cow Leather: calf/cow : Leather: Sheep/goat: Leather: Sheep/goat: Leather: cow Metal: gold: Textile: cotton Textile: cashmere Textile: cotton: Textile: polyester: Textile: cashmere: Textile: cotton: Textile: polyester: 0.1%-0.5% % 1.5-3% 3-7% 7-11% >11% Leather: cow Leather: cow Leather: cow: Textile: cotton:

13 What materials we choose matters. Comparative impact estimate relative to adult cow leather Lamb/goat leather 55% Calf leather 66% Cow leather 100% 13 Does not include end of life impacts

14 New material choices can reduce footprint 3x Brass Recycled brass Plastic (polyamyde 6) Plastic (High Density Polyethylene) Ceramic comparative estimates of impact 14

15 Impact How we make our products matters % reduction in E P&L footprint by improving supplier efficiency to level of top 25 th percentile GHG Air pollution Waste Water pollution Waste Water consumption 5% reduction in E P&L footprint utilising available alternative energy for operations and supply chain 0 BASELINE solar pv nuclear hydro wind GHGs Air pollution 15 estimates

16 Financial Costs P&L cost per E P&L saving ( / ) Financial Savings A new way to prioritize investment decisions Taking environmental cost and estimated financial savings/costs into account, we can see quick wins and more impactful larger-scale projects to be implemented 1.0 Lower impact materials in fittings and hardware Increase Supplier energy efficiency suppliers Maximum use of recycled metals Total E P&L 10 m savings 20 m Increase Renew. Energy Change material type Change from higher to lower impact locations (1.0) Illustrative 16 This is a net positive adaption of the carbon abatement curve developed by Mckinsey and US EPA Creating a marginal environmental benefit curve.

17 17