How Kering Hopes to Turn Environmental Losses Into Financial Gains
"Numbers are boring," says a British-accented narrator on a video introducing a long-awaited environmental-impact report from the Kering luxury group this morning. "Data is dull."
What about $861 million? That’s kind of interesting, right?
Over the last decade, consumers have become far more concerned about the environmental and ethical impact of their fashion purchases, looking for solid information about the way their clothes are made since the apparel industry is one of the biggest polluters in the world, using enormous quantities of water and chemicals in the raw production of fabrics. Smart designers have made sustainability a priority, but it’s not always clear to customers what difference that really makes. Kering, the conglomerate that owns Gucci (pictured, above), Saint Laurent, Bottega Veneta, Stella McCartney, and Alexander McQueen (as well as Puma and many other brands), is taking a novel approach by treating its environmental footprint much as it does its financial results. That is, as a number.
Its environmental profit-and-loss report, or EP&L, measures its collective impact on natural resources from the production of raw materials through the delivery of finished designs to consumers, including its operations and stores. While it is filled with numbers, the most significant one is $861 million (converted from 773 million euros), which is the overall cost to the environment, for the year 2013, of producing all those designer goods if you added up all the greenhouse gasses, water usage, and waste pollution they caused along the way.
While eye-popping, that number is actually about 40 percent lower, the Kering report said, than what the impact would have been if its designers and executives had not taken the steps they already had to improve sustainability. Some examples Kering has cited include featuring LED lighting in Saint Laurent stores, investing in a new leather tanning process that reduces the use of heavy metals for its Gucci and Bottega Veneta handbags, and everything made by Stella McCartney.
"As businesses, we have responsibilities," said Francois-Henri Pinault, the chairman and chief executive of Kering, at a press conference where the results were released. "If we want to thrive and be ready for the future, we need to think, and we need to act, differently. We have no choice. The business model of the future must be one that is sustainable."
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As part of the report, Kering released the methodology its executives used to come up with that figure, with the hopes that other companies will use those accounting methods and similarly release such numbers. The goal is not to create a competition as to which designers are the most environmentally friendly, but rather to establish benchmarks to measure their performance going forward. Kering’s first report was based on its 2013 performance, and within a few months, Pinault said the company will release numbers for 2014 to see whether its activities have created any improvement.
One surprise from Kering’s report is that its executives found that of that $861 million, 93 percent of that impact resulted from processes along the supply chain, with more than half the costs associated with the production of raw materials. This means to improve its performance in the long-run, Kering will be dependent on changes made by its suppliers of fabrics, leather and metals used for jewelry, as well as how those products are transported around the world. Pinault noted that its future will also depend on collaborations with those suppliers to address the biggest environmental polluters, most notably the production of leather for luxury goods.
At the end of its report, Kering, as a publicly traded company, noted that its environmental impact numbers do not impact its financial results. In a way, that’s a shame—it’s one area in which it would be good news next year to see a loss, rather than a gain.