Puma has been busy developing an integrated report and now calculates its environmental profit and loss, and isn’t shy about letting everyone know about it
Puma, the German “sports lifestyle” giant, has been a brand to watch this year. Its PR team has been working overtime to ensure the company’s sustainability efforts don’t go unnoticed, both in CR circles and the mainstream press. But does the company’s 2010 integrated annual report mark a genuine union of business and sustainability?
Initial signs are good. It has introduced some innovative elements of sustainability reporting, such as a separate environmental “profit and loss account”. The supply chain section of the integrated report is comprehensive and shows a commitment to industry collaboration, and a new sustainability scorecard provides solid environmental and social goals. However, as is often the case, the report is not quite as integrated as it seems at first glance.
The company claims that “sustainability is key to Puma’s long-term progress”, yet its “Back on the Attack” business plan is seemingly unconnected to the “Puma.Vision” sustainability plan. Moving from the sustainability section into the management report is like watching a DVD that skips a few scenes – you’re left feeling that you’ve missed something. The split is even apparent in the chief executive’s letter which, whether by chance or design, discusses business strategy and performance on one page and sustainability on the second, with little to link the two.
One would assume that Puma has built a business case for sustainability robust enough to warrant the kind of investment apparent from its comprehensive supply chain management programme, yet the company remains shy about making an explicit connection. The section on risk management is a good example. Despite identifying “brand image” and “sourcing” as key risks, these four pages contain just one short paragraph on sustainability.
Puma’s environmental and social programme, Puma.Safe, is an evolution of the company’s original factory audit function, and supply chain remains a prominent feature of the approach. The company’s detailed and transparent reporting of its supply chain management is a key strength of the report.
Puma has widened the scope of its audit programme to include more third- and fourth-tier suppliers, leading to a significant increase in the number of audits undertaken in 2010. Puma’s commitment to supply chain transparency is also having an impact beyond its own reporting. Following the company’s participation in the GRI-GTZ “Transparency in the Supply Chain” project, from 2011 onwards 18 key suppliers, which account for two-thirds of Puma’s products, will publicly report their sustainability performance.
Wages within the supply chain remain one of the most high-profile issues for the garment industry and it is one Puma does not shy away from. In 2010, wages were a key theme at the company’s annual multistakeholder talks and the report includes a range of balanced third-party quotes validating Puma’s efforts and providing guidance on where the company still needs to improve.
Puma can be commended for reporting on areas of non-compliance from its factory audits and for providing detailed information on its training and compliance work with suppliers. However, there is no discernible link between the two. Shouldn’t the training programmes be designed to tackle these areas of weakness? Also there is no discussion of the process by which the company takes action for persistent infringement. How long can a non-compliant supplier remain before it is replaced?
Long-term goals
Puma has introduced a new sustainability scorecard with hard targets for 2015. There are specific targets relating to the company (offices, stores and warehouses), factories (suppliers) and products (design, packaging, processes and logistics). These targets set out Puma’s commitment to measurably improving performance, such as a 25% reduction in CO2 emissions by 2015. Ambitiously, this goal applies to suppliers’ factories as well as the company’s own facilities. However, longer-term goals beyond 2015 are still lacking.
The quality of data reported against key performance indicators has also improved, though the range of environmental measures remains limited. For example, the company’s environmental profit and loss account includes total water use, but no discussion of water quality or scarcity. Water is a local resource, and volume alone is an inadequate measure of the impact of using it. It would be good to have a discussion about why the KPIs that are reported are the most material to Puma in order to better understand their relevance.
Puma’s internal management of sustainability is something of a mystery. In 2010, the company gave its legal structure a serious overhaul, and it would be useful to be told whether this has any implications for the way sustainability is governed and managed. Will it still be down to influential chief executive Jochen Zeitz to promote sustainability from his new role as head of the recently created sport and lifestyle division of Puma’s parent company, the French luxury brands group PPR?
No review of Puma’s reporting would be complete without considering the company’s environmental profit and loss account, released just a month after the integrated report. Through some clever modelling and an amount of guesswork, the P&L estimates the economic cost of Puma’s environmental “pawprint” to be €94.4m.
The methodology has its limitations, but Puma should be congratulated on this attempt to translate environmental (and eventually social) impacts into a financial measure. This is the clearest sign yet that the company is serious about embedding sustainability into core business – the integrated annual report alone would not convince us. We wait with interest to see whether the P&L approach generates results across Puma’s triple bottom line.
Snapshot
Follows GRI? Yes A+.
Assured? Yes
Materiality analysis? No
Goals? Yes
Targets? Yes, new sustainability scorecard.
Stakeholder input? Yes
Seeks feedback? Provides contact details but doesn’t explicitly request feedback.
Key strengths? Pushing for supply chain transparency.
Chief weakness? Lack of real integration.
Pleasant surprise? Innovative environmental profit and loss account.
Luke Jones is a consultant at Context.