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  • Getting to Green

    An administrator pushes, on a shoestring budget, to move his university and the world toward a more sustainable equilibrium.

Internalities
May 17, 2011 - 10:00pm

Puma, the German sports shoe maker (I'm sorry, I meant "Sportslifestyle company"),has just published an Environmental Profit & Loss report, making it perhaps the first firm to quantify the environmental impacts of its products. Brief analyses of this event are available here and here. What they say, in a nutshell, is that "this changes everything".

I'm not sure it does. What I am sure is that Puma's report raises some interesting questions.

First, there's the fact that it was issued in the first place, which could be interpreted as setting a new standard, but not necessarily a trend. A trend line requires at least two points, and so far we only have one.

Second, there's the fact that Puma's report (at least, this iteration of it), only addresses impacts in the forms of carbon dioxide emissions and water usage. While these are two of the largest and most common areas in which businesses impact the environment, they're far from the whole story.

But third, and most importantly, the Puma report estimates that even this partial view of costs born by the environment -- which is to say, by you and me and every living thing on this planet -- equates to about one-third of the corporation's annual net profits. About one euro in three that ends up in Puma stockholder pockets (either by way of dividends or in the form of increased book value and, indirectly, market capitalization) is not so much created as transferred from a public account.

Puma's accomplishment is to start to put some numbers -- financial numbers -- on that public account. The incompleteness of their estimate (which they clearly state) is a nit in comparison to the fact that the company is willing to do the estimate, and to publicize the results. Kudos are clearly in order.

What catches my interest most profoundly, however, is the question of how a more comprehensive estimate might compare to net profits. The elements -- CO2 and water -- which are included, Puma has attempted to address on a lifecycle basis -- from raw material production to final assembly, including both outsourced operations and overhead (non-production) functions. But what about other environmental costs -- soil depletion, fertilizer runoff, particulates, etc.? What about indirect environmental costs, such as those created by moving people into (or out of) agricultural areas? What about environmental impacts of necessary infrastructure -- roads, harbors, shipyards, warehouses, stores?

Now, I'm not saying that Puma should have figured all this stuff in -- you've got to walk before you can run, and Puma's done an extremely creditable job of walking the talk in the financial language that Wall Street (and the City, and the Deutsche Boerse) understand. All I'm doing is asking -- what if a complete accounting of environmental costs were to come to 80% of profits? Or 90%? Or 110%? Would that efffectively equate "gross domestic product" with something along the lines of "gross environmental depletion"?

That's the sort of question that's likely to deter other companies -- even ones which want to portray themselves as environmentally responsible -- from doing what Puma has done. Puma, I believe, still has a strong family presence in its senior management structure. As a result, it may still have a degree of entrepreneurial flair and willingness to accept risk. But will other, more "professionally" managed companies be willing to follow suit? I'd like to believe so, but I certainly have doubts.

(Of course, I also have Adidas. It's a decision I may have to revisit at some time in the future.)

 

 

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