From The Guardian (UK) - Oliver Balch explores some of the assumptions and shortcomings behind Puma's environmental profit and loss announcement

Oliver Balch for the Guardian Professional Network Tuesday June 7 2011 guardian.co.uk

An accountant, the old adage runs, is someone who knows the cost of everything and the value of nothing. Following the recent publication by German sports giant Puma of an "environmental P&L", the saying might need some refreshing.

Puma's bold step adds a previously unquantified cost into the bean-counting equation ? namely, that of a company's footprint on the planet. The bottom-line result comes in at a very precise €94.4m (€82.6m) per year.

Groundbreaking though it may be, the final figure is not without its assumptions or shortcomings. First, it presumes an accurate record of the company's environmental impacts. As far as its direct operations go, the retailer is pretty confident. As with most large companies these days, it keeps track of major environmental data from its offices, stores and other direct operations.

Yet Puma claims to be taking account for its whole supply chain too. That's no small feat. Again, the numbers are comparatively easy to determine for its 60 or so main suppliers, many of which are huge businesses in their own right. But extracting similar information from smaller players further down its supply chain involves some calculated guesswork.

The quality of that guesswork is important because that's where the major impacts lie. Those furthest down Puma's supply chain − namely, the producers of its raw materials − account for over a third (36%) of its indirect greenhouse gas emissions and more than half (52%) of its water consumption.

The job of filling these gaps fell to professional services firms PWC and TruCost, which used sophisticated modelling techniques to come up with a final figure for carbon emissions and water use respectively. In terms of carbon emissions for Puma's raw materials, PWC used an economic input-output model based on government industry data.

For water, TruCost drew heavily on studies by the United Nations' Food and Agriculture Organisation regarding water scarcity. "It's not accurate to the nth degree, but it's in the right ballpark", says Alan McGill, partner in PWC's sustainability and climate change department.

Read the full article in the guardian.co.uk