We use a breakthrough decision-making tool called the Environmental Profit and Loss (EP&L) to measure and understand our impact on the environment that goes far beyond traditional environmental reporting.
The EP&L is a ground-breaking tool, developed by Kering, to help companies understand their environmental impact. We use the EP&L to measure the impact of every part of our business, from the raw materials we use, to the way we make our clothes and sell them in our stores.
How the EP&L works
The EP&L is a form of natural capital accounting that measures our greenhouse gas emissions, water use, water pollution, land use, air pollution and waste across our entire global supply chain. Our impacts are then translated into a monetary value, which allows us to understand the hidden costs and benefits we generate from the way we operate.
This insight drives innovation and helps us make better, more sustainable decisions on everything we do, from the way we source our materials to the way we make our clothes.
- Natural Capital
- Natural capital can be defined as the world’s stocks of natural assets which include geology, soil, air, water and all living things.
- Natural capital is one of several other commonly recognized forms of capital. Other more familiar forms of capital include financial, human and intellectual capital.
- Every year our planet’s natural systems provide an estimated $72 trillion worth of ‘free’ goods and services (i.e. natural capital). This includes more obvious services such as our food, water, fibre, building materials and medicines as well as less visible services such as natural flood control, carbon sequestration and climate regulation.¹
- Like with financial capital, when we ‘spend too much’ natural capital we run up debt and similarly we need to find ways to pay it back. A couple of examples of how we can repay our natural capital debt is by replanting clear-cut forests or by supporting restorative farming practices.
- If we continue to use stocks of natural capital without allowing or encouraging nature to recover, we run the risk of local, regional or even global ecosystem collapse.
- While we not own or control significant stocks of natural capital, we benefit from the ecosystem goods and services that they provide and we are interested in how our activities impact natural capital.
- EP&L Methodology
- The development of the EP&L has been led by Kering, with the support of PwC, and has involved valuable input from a wide range of sustainability experts from within academia and business.
- An EP&L works by using welfare economics to place a monetary value on the changes to the environment caused by a business.
- There are three parts to this: 1) quantifying the environmental footprint of a business’ direct operations and supply chain through the 6 impact areas pictured above; 2) estimating the likely environmental changes that result from these emissions or resource use (eg. climate change); and 3) valuing in monetary terms the change in wellbeing of the people affected by these environmental changes (eg. health impacts, access to clean water).
- To measure our environmental footprint, we collect three types of primary data from within our business and our suppliers: 1) materials data: what materials we used, how much of each material we used, and from where we sourced our raw materials; 2) financial data: how much we spent with our suppliers; 3) environmental data: environmental data from our suppliers’ sites and our own direct stores, offices, and warehouses.
- This data is then combined with secondary data from Life Cycle Assessments (LCAs), Environmentally- Extended Input-Output (EEIO) models and industry statistics.
- EEIO analysis is combined with our financial data to model the impacts of activities required to support our core operations and manufacturing (e.g. the production of machinery).
- To estimate the changes to human wellbeing that result from our emissions and resource use, the EP&L valuation methodologies, developed by PwC, take into account the local context of our activities. This is important because a tonne of air pollution emitted in an urban setting will have a greater impact on people when compared to a tonne emitted in a rural setting – as it affects more people in densely populated areas.
- A more detailed explanation of how the EP&L was developed and the methodology behind it can be found in Kering’s 2013 EP&L Methodology and Report, which can be downloaded here >
Reducing our impact
We have been using the EP&L since 2012 which has enabled us to significantly reduce our environmental impact every year. Some of the following decisions we made outline how we made these reductions.
Our 2014 EP&L revealed that, even though cashmere represented just 0.1% of all the materials we used, it accounted for 42% of our total environmental impact at the raw material stage. This insight led to our decision to stop using virgin cashmere and instead use reengineered cashmere yarn. This change in our cashmere sourcing has reduced our environmental impact. For example, in 2014 our use of cashmere accounted for 28% of our total EP&L impact, despite making up only 0.1% of our material usage. By 2016 we were able to reduce this to 11% of our total impact despite using larger quantities of cashmere.
Recycled polyester has a 75% lower carbon footprint than virgin polyester and uses up to 90% less water. In 2016, we increased the amount of recycled polyester we use by 38% and introduced recycled nylon into our collections.
Our 2016 EP&L
We believe the way to be a modern business is to truly understand the impact we have on the environment. We will continue to use the EP&L each year so that we can put more sustainable actions into place to create a business that works with the environment rather than against it.
- The results
- In 2016 our global EP&L was €6.97 million.
- Our main environmental impacts are driven by the production of raw materials that we use.
- Compared to 2015, the total quantity of raw materials we used was 5% higher in 2016, but our total EP&L impact was only 2% higher than 2015 and the impacts of the raw material production stage of our supply chain actually decreased by 8%.
- We acknowledge that our use of animal fibres contributes the most impact in our supply chain due to the land required to raise animals, the greenhouse gas emissions released during animal rearing.
- We are addressing this impact in two ways:
1) Over the past two years we have been setting up farm specific projects so that we can ensure that the wool that we use comes from farms that meet the highest animal welfare standards.
2) Supporting and partnering with innovators creating new forms of these fibres. One example is our partnership with Bolt Threads, an amazing company that is creating a silk from yeast and sugar that at the molecular level is most similar to spider silk but made by human hands.
- This reduction in our raw material impact is a result of changes we have made in the types of materials we use and how we source them.