Posts Tagged ‘environmental profit & loss statement’

Will Sustainability Reach the Mainstream?

A key tenet of being a responsible company is to manage risk and create value for the long-term sustainability of the corporation. At Timberland, we believe the concepts of commerce (sustainable shareholder returns) and justice (operating sustainably, including social and environmental management) go hand in hand.  Our challenge is to not only demonstrate the business case for sustainability within our own company, but to ensure that others do too.

Earlier this year, former Timberland CEO Jeff Swartz and PPR Chief Sustainability Officer Jochen Zeitz engaged in spirited dialogue about PPR’s Puma brand initiating a new sustainability accounting measure: their Environmental Profit & Loss statement.  I am impressed with Puma’s effort to calculate and assign financial costs to environmental impacts – something that will help move the needle for mainstream analysts to incorporate “that type of sustainability” into financial valuations of companies.  We’ve seen few other companies proactively quantify sustainability impacts (Baxter Healthcare and SAP provide interesting examples; see also Timberland’s CSR Stakeholder Call from May 2011 – Reducing Environmental Impact & Improving Bottom Line Benefits), but clearly not a groundswell.

Could the needle be starting to move a little more? Last week Puma announced it would be taking its Environmental P&L to greater scale – the brand’s sustainability accounting work will be extended to other luxury brands owned by PPR, including Gucci, Stella McCartney, and Yves Saint Laurent.  Hopefully, this is an indicator of how one brands’ sustainability efforts can influence more than their individual operations and sustainability plans. (And before you ponder too much about the applicability of this point coming from an employee of a recently acquired brand, yes – we at Timberland are thinking about opportunities to scale our experience within a greater family of brands too. See more on that below).

Engaging the financial community

It’s not just corporations that need to push for greater inclusion of social and environmental issues in financial accounting. I believe the time has come for the financial community to explore the value of “non-financial performance” in meaningful ways.  There are many players working on such efforts. For example, Bloomberg now puts out ESG (environmental, social, and governance) data on its terminals, accessed by 300,000 customers – including Wall Street and other analysts. Last year, the SEC issued interpretive guidance for climate risk to be disclosed in financial filings. And a new reporting framework is being developed by the International Integrated Reporting Committee to bridge the gap between purely financial vs. purely sustainability reporting efforts. All of these efforts aim to put traditional ESG information in front of mainstream analysts. The argument is that if we can translate such issues into financial models, the “dual meaning” of sustainability may actually help drive investment decisions.  I agree with this sentiment – but there’s one player missing: the investors themselves. There’s too much talk of “us” (CSR practitioners) translating/ appropriating CSR data for “them.”  To truly drive the relevance of both financial and ESG information, we should be inviting analysts and investors to weigh in on sustainability accounting practices, standards development, and how to review issues like supply chain vulnerability (in the form of climate adaptation or labor unrest, e.g.) as components of a corporation’s short term and long term business viability.

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