The luxury fashion house's pioneering accounting has contributed to the Natural Capital Protocol and enabled the group to work out where to focus its sustainability efforts. Angeli Mehta reports
Kering, the French home of luxury brands like Gucci and Saint Laurent, pioneered environmental profit and loss (EP&L) accounting with its former sportswear brand, Puma, in 2010. The following year, the group chief executive decided to apply it in detail to all operations and brands in the stable, which generated €15.5bn in revenue in 2017. When development began on the Natural Capital Protocol, Kering contributed the work it had already done to build a methodology.
“It’s not just a tool. It’s also a mindset change. We engaged all our brands in developing the tool,” explains Michaël Beutler, director of sustainability operations. The “EP&L is the key cornerstone of our targets to reduce [our] footprint.”
No one was looking deep in the supply chain before
Effectively the brands have a business intelligence and analytics platform that allows then to do “what if?” scenarios and calculate, on a product level, the impact of a new design. Raw materials sourcing is complex: Kering brands have an EP&L for 15 different kinds of wool, for example.
Having an EP&L has enabled Kering to work out where to focus its sustainability efforts. Almost 50% of the group’s footprint is in raw materials, another 25% is converting those raw materials to products. “No one was looking deep in the supply chain before this,” says Beutler.
Kering’s impacts were valued at €857m in 2016, compared to €773m in 2013. Leather is the major driver. Its 2016 EP&L report points out that it is still expanding the scope of its analysis and that “leveraging changes across the supply chain is a long-term process, and in many cases will not yield immediate results”. As the company is growing, Beutler says, “we look at our efficiency in terms of the materials we use to produce an equivalent amount of product”. On that measure, the impact per kg or m2 of product has fallen from €74 per €1000 of revenue in 2013 to €69 in 2016, after it took currency fluctuations into account.
Kering’s 2025 strategy is to drive a 40% reduction in EP&L, relative to its business growth. Half of that is intended to come from implementing best practices in its supply chain. The Kering standards, published earlier this year, cover sustainability certifications, traceability of raw materials and preferred sourcing countries for raw materials like fur and skins. The EP&L shows that organic cotton has up to 80% less environmental impact than conventional cotton, so it encourages suppliers to use as much certified organic cotton as possible. Thinking about where and how it sources raw materials may help create some benefits through more sustainable herding practices, and better management of pasture lands.
The aim is to raise awareness about the different impacts that material choices can have on end products
The other 20% cut in EP&L will come through the use of innovative new materials, like “lab-grown” leather, and regenerated cashmere, and re-using cuttings waste. Since 2015, it’s also been exploring chemical recycling of cotton and polyester blends with UK start-up Worn Again.
Kering has developed an app that’s very simple to use. “It’s one of the easiest ways to understand natural capital,” asserts Beutler. The aim is to raise awareness about the different impacts that material choices and agricultural (or mining) practices can have on end products, to help designers make more informed choices.
Kering pioneered EP&L accounting with its former brand, Puma. (Credit: Aizuddin Saad /Shutterstock)
Designed with international universities, including Stanford in the US and China’s Tsinghua, the current version has 4,000 data points from Kering’s global data set. In the next version it will be closer to one million.
The app has been shared with competitors and at UK and EU government levels. Beutler stresses that the app is in its infancy, but one can’t help but wonder if consumers could play a part: they now have some information at their fingertips to make more sustainable choices.
This article is part of the in-depth briefing Natural Capital: See also:
Accounting for change: the drive to put a dollar figure on natural capital
Birmingham's approach to creating a liveable city
Earth Genome using big data to zero in on water scarcity
Yorkshire Water’s plan to plant 1m trees for flood protection
AkzoNobel puts a price on its impact across four capitals
How Nestlé is collaborating in building a business case
The restoration economy: why trees are the next growth opportunity
Kering clothing supply chain Sustainable fashion Gucci Puma luxury brands sustainable leather