Jochen Zeitz has had a busy year. I recently caught up with the long-serving Chairman and CEO of PUMA, the sports gear company where Zeitz blended an evangelical commitment to sustainability with smart branding to return the nearly defunct brand to the top tier of global sports fashion.
As a business story, Zeitz’s success is nearly legendary: he pulled PUMA out of the basement and up to a podium position in the global sportswear market, while boosting share price by 4,000 percent.
Among sustainability watchers, Zeitz has won plaudits for his commitment to develop an environmental profit and loss (EP&L) statement. By estimating a dollar figure on the value of its use of ecosystem services — any resource provided by nature, from clean water, to crop production, wildlife habitat, storm surge protection and so on — PUMA is expanding on the precedent set by carbon footprinting efforts and other self-assessment techniques.
The tool can identify where in its supply chain these costs are highest, and help PUMA develop responses to address these hot spots.
The first results of PUMA’s effort were unveiled last May, when PUMA announced a price tag of $133 million for its toll from water use and greenhouse gas emissions.
As the company outsources the bulk of its manufacturing, it follows that PUMA’s direct operations accounted for about only $10 million of this total. Its supply chain made up the balance. By impact, greenhouse gases (GHGs) and water were split evenly. The top culprits: Cotton farming, cattle ranching for leather, and rubber production accounted for more than half of water use, and about a third of GHG emissions.
Shortly before PUMA released these landmark results, Zeitz revealed he was moving up at PUMA’s parent company. In March, after 18 years of service Zeitzpassed the mantle on to a 32-year-old successor, Franz Koch. Notably, Zeitz was even younger — just 30 in 1993 — when he took over PUMA’s top spot. The move made him the youngest-ever corporate chairman of a listed German company.
Now 48, Zeitz’s new post will let him focus on sustainability more broadly. Zeitz’s new joint role at PUMA’s owner, PPR SA, straddles two titles: He is both chief sustainability officer as well as head of the company’s sport & lifestyle group. PPR, a $19.4-billion apparel empire, includes a variety of luxury fashion brands such as Bottega, Gucci and Yves Saint Laurent.
As Zeitz’s focus shifts to a broader set of brands, his immediate challenge is whether he can repeat his successes at PUMA in developing sustainability practices and metrics. Developing the framework and practices for the EP&L at PUMA spanned a decade or so. “We wanted to get it right internally first before going public,” Zeitz told me. PUMA worked with PricewaterhouseCoopers and Trucost to develop the first version of the EP&L assessment.
Zeitz told me the challenges PUMA faced in developing its EP&L measurement were internal and external. Behind company walls, the process involved incremental, disciplined reinforcement of sustainability as a value.
“It needs to be clear that it’s must be a part of the everyday decision-making process,” Zeitz said. When people are accustomed to established practices, changes in workflow, remuneration, priorities and so on can be difficult, and can’t be rushed.
External aspects of the projects are complicated by a lack of direct control over trading partners and suppliers. To collect critical data from PUMA’s network of external suppliers, the exercise demanded similar shifts of business cultural and practices among PUMA’s partners. “Data collection is a challenge,” Zeitz says. Difficulties surfaced in terms of different standards in different markets, difficulty in securing cooperation from second and third tier suppliers.
With that foundation built, the next stages may come more quickly. Where the first EP&L measured water use and greenhouse gas emissions through PUMA’s supply chain, the next phase — due in 2012 — will include dollar assessments of social impacts as well as broader environmental measures.
In the third phase, sometime after that, “we want to look holistically, at the positives of business,” Zeitz said. Business brings benefits that aren’t well measured either, he added, such as improving health, education and quality of life. “That’s something we want to start valuing,” Zeitz says. “At the end of the day, we have a new method of accounting, really, that looks at the world more holistically.”
Zeitz concedes the process will take time. After all, it’s taken a half-century or so to evolve today’s accounting standards. “This may go quicker, with modern technology,” Zeitz said, but until then, this is one tool among many to help develop greener solutions.
Meanwhile, Zeitz is open to sharing the intellectual property — the methods, standards, and processes — behind PUMA’s EP&L with other companies, including other sports gear players. “Yes, absolutely. For those who are serious and want to associate themselves with what we are doing in an open manner, we will be open with this process,” he said. “We have already had a number of requests from the automotive, chemical and beverage industries, as well as from one of our competitors.”
Eco-initiatives are gaining momentum in the sports apparel biz. In September, Adidas joined PUMA and Nike in a commitment to “detox” its supply chain and production processes by 2020. BusinessGreen reported that Adidas has been negotiating with suppliers, rivals and peers to create an inter-industry standard for toxicity reduction, following Greenpeace’s “Dirty Laundry” report, which revealed the use of and pollution from hazardous chemicals in textile production.
Photo courtesy of PUMA.