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 Eco Impact Report 2018/19
We believe that if you do not measure your impact, you cannot manage or improve it. We continue to use natural capital accounting in order to put more sustainable actions into place and create a business that works with Mother Earth rather than against her.
In our latest report, we detail the changes we have made to our impact methodology, detail our approach in managing the social impacts of our business and discuss how we will address our impacts going forward.
- The results
- In 2018, our global EP&L was €8.22 million. It decreased slightly to €8.21 million in 2019. 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.
- Our main environmental impacts are driven by the production of raw materials that we use – accounting for 74% of our total impact in 2019.
- Of the 6 impact areas measured, land use and greenhouse gas emissions were our most significant environmental impact areas.
- We acknowledge that our use of animal and plant fibres contributes the most impact in our supply chain due to the land required and the greenhouse gas emissions released during animal rearing or cultivation.
- We want to harness the potential of nature-based solutions to address both of our land use and greenhouse gas impacts related to raw materials, moving from impact reduction to finding ways to restore and replenish natural capital.