Environmental Profit & Loss: A Love Story

Environmental Profit and Loss (EP&L). It sounds a bit scary, doesn’t it? When I hear this term I think of pernicious CEO’s making money (profits) by chopping down trees (loss) without considering long-term costs. I also think of my time working in retail when we had to conduct our annual P&L. This meant spending our surplus so it wouldn’t be deducted from next year’s budget. Either way, it doesn’t sound great. In truth the EP&L is a phenomenal tool (albeit as complex as a traditional P&L) that carries with it the possibility of changing the fashion industry forever.

Fashion is one of the most polluting industries in the world. According to Sustain Your Style, it’s the 2nd largest polluter after oil. From hazardous chemical dyes to over-production, climate scientists are concerned over the devastating impact the industry has on our planet.

It’s easy for us to measure traditional garbage because it has a volume and a weight to it. Waste management companies calculate how much trash you create and charge you a certain amount for it. If you litter, you can be charged a fine that is dependent upon how much litter you’ve created. Measuring pollution, on the other hand, isn’t so simple. Companies pollute the water and air every day with harmful chemicals and toxic gases, but aren’t charged a dime for it. They essentially dump garbage with no repercussions. Why is this happening?

One reason is pollution in our air and water is difficult to measure. How can the city charge you for littering if they can’t measure the amount of litter you created? Another reason is we don’t have the right measurement systems in place. There are no sanitation workers flying around in airplanes cleaning up the pollutant gases companies release from factories. Why is it against the law to dump garbage on land but perfectly acceptable to dump it into the air or the ocean?

Fashion’s leading conglomerate the Kering Group decided there must be a better way. In 2011 they pioneered change in the fashion industry by developing their first Environmental Profit and Loss, a tool that calculates environmental footprint throughout the supply chain and converts it into monetary value. 

Image Source: Kering

Why is the EP&L so important?

The EP&L is the first report of its kind to take the comprehensive structure of LCA (Life Cycle Assessment) software and bring it into the mainstream. The EP&L helped Kering significantly reduce their environmental impact. It also shed much needed light on the waste and pollution issue rampant throughout the industry. In their 2019 report, Kering announced their goal of reducing their Environmental Profit and Loss account by 40% by 2025. They also committed to a 50% decrease in carbon emissions by 2025. This aggressive approach helped Kering set a new standard for luxury fashion.

The EP&L sets truly sustainable brands apart from others who believe small greenwashing efforts are enough to maintain their credibility. For too long we’ve seen companies slap a “sustainably made” or “eco-friendly” label on clothing tags and gain praise from consumers for being a sustainable brand. Yes the cotton they use for that t-shirt might be organic, but if they use toxic chemicals to dye it, grow it in an arid region and construct it in a factory that doesn’t pay their workers a living wage, is it still sustainable? Perhaps not. The creation of the EP&L puts the pressure on companies to be transparent.

What are the benefits?

The EP&L methodology is open source, which makes it of great importance to the future of fashion. The information potentially saves companies thousands of dollars on expensive LCA software programs. The EP&L is by far the most comprehensive of the free sustainability analysis tools out there. It measures data specifically and precisely, increasing accuracy (unlike many of the free carbon emission calculators you can find online). LCA programs like GaBi and SimaPro can cost upwards of $20,000, and are not very user-friendly.

The tool is specific to the fashion industry, eliminating irrelevant database clutter present in other LCA software programs. Kering also created a My EP&L app to allow companies to make calculations quickly and easily on their phones. The app is currently available to download for free, but the usability is still limited.

Drawbacks of the EP&L

One drawback of the EP&L is you have to collect and calculate the data yourself. This allows for a lot of inaccuracies and ambiguity in the calculation. Other LCA tools have systems and data in place to make calculations for you, like the breakdown of energy costs and water usage. Another obstacle is it’s specificity to the fashion industry. Fashion brands can look very different depending on where they are located and the size of their business. If you’re not in the fashion industry you can still use the methodology, but it could be very confusing and time-consuming to try to adapt it to your needs. Kering does provide suggestions on how to customize your EP&L to fit your business, however if you are not a sustainability expert and do not have the funds to hire one, this may be quite an undertaking. 

Adding to the ambiguity are countries’ lack of regulations requiring transparency on the manufacturing and distribution of products in the United States. Clothing brands can choose to adopt the EP&L methodology but only disclose information that is pleasing to their customers and stakeholders, leaving out important information that might make them seem less environmentally-focused.

For example, let’s say a company uses recycled plastic bottles to make shoes. The environmental footprint of the raw materials would theoretically be very low as they are not using virgin products. However, if you take into account the chemicals, water and processing involved in turning a bottle into fabric for shoes, the environmental impact suddenly becomes much higher. However, most governments do not require clothing brands to disclose any of this information, even if they call themselves a sustainable brand. So companies are able to cherry pick what information from the report they wish to share, and what they choose to keep quiet.   

Should you create one for your business?

The EP&L is an invaluable tool for companies looking to take a deep dive into their impact on the planet. However, the results depend greatly upon the accuracy of the information. Obtaining information about your factories’ energy usage, water consumption and waste can be difficult. Most countries do not require companies to even track this information, let alone share it with their clients. Therefore the best thing to do is to see how far you can get with collecting the necessary information. If you have enough to create a pretty accurate EP&L, then go for it. If you find yourself guessing or estimating, it might be better to start with a simple carbon footprint calculator

Getting some guidance on where to start can also be very helpful. Hiring a Sustainability Consultant, like me 😀, can help you get your footing on your current impact and how to make better decisions going forward.

Once you gain some familiarity with your company’s environmental impact, you can slowly work your way up to the EP&L. If you hit roadblocks along the way (which you will), don’t get discouraged. Keep moving forward. Consumers are starting to demand the tracking and reporting of carbon footprinting data. The more brands, consultants, agencies, and legislation we have, the easier it will be for us to all mitigate fashion’s impact on the environment and not talk in terms of profits and loss but in wins for the planet.

Full disclosure, my sustainability consulting firm Stormo & Co. Sustainability Design specifically seeks to help those of us who are new to the sustainability conversation. We look to turn novices into industry leaders and can help you do the same.