PUMA Update on Incident in Cambodia

Sportlifestyle company PUMA will cover the costs for the medical treatment of a female employee of its footwear supplier Kaoway Sports Ltd., who was injured by a gun shot during labour unrest on Monday, February 20, 2012 in Cambodia.

PUMA officials and representatives of the Cambodian non-governmental organization CLEC visited an injured employee of Kaoway Sports Ltd., who is currently hospitalized in Phnom Penh, on Tuesday and Wednesday. Upon PUMA’s request, the patient has been transferred to a medically-better equipped division of the hospital to ensure that she gets the appropriate treatment her injuries require. PUMA will cover the costs of this treatment until the employee has recovered from her injuries.

PUMA can also confirm that its supplier Kaoway Sports Ltd. had agreed last Friday – prior to the unrest taking place outside the premises of Kaoway Sports Ltd. – to meet the collective demands of workers in this Cambodian region. According to this agreement, Kaoway Sports Ltd. will provide a monthly transportation subsidy of USD 10 and a daily subsidy of USD 0.50, effective March 1, 2012.

PUMA is currently in the process of hosting several meetings with other non-governmental organizations and trade unions this week to discuss solutions for the ongoing conflict in the country so that the safety and well-being of the employees in its supplier factories is ensured and working conditions meet PUMA’s mandatory standards.

Kaoway Sports Ltd. will resume work on Friday after all personnel have been evacuated from the compound to ensure the employee’s safety and workers were sent home.

2012_02_21_PUMA_Statement_Cambodia

In September 2010, the government of California approved a new law, which will require retailers and manufacturers operating in the state to make public the steps they have undertaken to eradicate slavery and human trafficking from their supply and distribution chain. PUMA acknowledges the levels and types of risks related to each country where PUMA’s materials and goods are sourced and produced. In line with the California Transparency in Supply Chains Act (SB 657), PUMA recognizes the pervasiveness of practices that could be construed as slavery and human trafficking and is committed to addressing the issues within PUMA’s supply chain using best practice approaches where possible.

PUMA.Safe is the supplier social and environmental compliance program established over 10 years ago to ensure compliance to PUMA’s Code of Conduct. Our Code of Conduct covers issues such as maximum working hours, basic wage, respect, equality and restriction of forced labour, amongst others. The factory compliance monitoring system is the core operational activity of PUMA.Safe, along with capacity building projects, regular consultation and outreach with stakeholders and factories to improve compliance, particularly in our major production markets.

At present, the PUMA.Safe audit process is the primary mechanism to ensure that PUMA’s social, health, safety and environmental standards are observed at our direct contract factories as well as the contract factories of PUMA’s subsidiaries and licensees, as well as in a proportion of known subcontractors. All official PUMA.Safe audits are announced, unless there is information or justification provided in advance that warrants an unannounced visit to a factory. During the audit, workers are interviewed and amongst other topics they are asked how they obtained their job, if they had to pay any fees, if general wages & deductions against wages are fair and if they were given back their identification documents. Migrant workers’ working permits, whether foreign or domestic, are also reviewed. If there are employee accommodations in the factory these are also checked and the working hours records are thoroughly reviewed. All of these actions aim to verify that there is no human trafficking and slave labor.

Furthermore, within our manufacturing agreements, every factory which manufactures PUMA products is obligated to be audited by PUMA or a designated third party for compliance with all PUMA standards and the relevant national and local laws – including those related to anti-slavery and human trafficking. Where such laws do not yet exist or are milder compared to international standards, PUMA strives to engage with all relevant stakeholders to come up with policies and actions to address the issue. Within these agreements contract factories are required to disclose subcontractors as defined by PUMA and failure or negligence to provide such information would be grounds for a variety of commercial penalties. PUMA conducts regular annual mapping exercises to validate subcontractor information provided by contract factories, and these are supplemented with engagements with stakeholders.

PUMA’s contract factories are also subjected to independent external monitoring by the Fair Labor Association (FLA), which at present are all unannounced visits. The FLA is a is a collaborative effort of socially responsible companies, colleges and universities, and civil society organizations to improve working conditions in factories around the world. The FLA has developed a Workplace Code of Conduct, based on International Labour Organization (ILO) standards, and created a practical monitoring, remediation and verification process to achieve those standards. The FLA is a brand accountability system that places the onus on companies to voluntarily achieve the FLA’s labour standards in the factories manufacturing their products. The main component of both the PUMA.Safe and FLA audits is the remediation of the areas of failure. To achieve sustainable compliance, our factories are obliged to address not only the immediate areas of failure but the root causes of the failures. Where such root causes go beyond the factory walls PUMA encourages suppliers to engage with stakeholders that can help address these root causes on their own or in partnership.

PUMA also supports Better Work Programmes active in its major production markets. Better Work, a partnership between the International Labour Organization and the International Finance Corporation, brings together governments, employers, workers and international buyers to improve compliance with labour standards. The Better Work programme is active in the following countries: Cambodia (as “Better Factories Cambodia), Haiti, Indonesia, Jordan, Lesotho, Nicaragua and Vietnam. Better Work provides assessment, advisory and training services to registered suppliers, whose participating buyers have access to assessment reports and improvement updates. Assessments measure compliance with national labour law and core international labour standards, including those relating to forced labour. In assessing forced labour, Better Work looks at employer practices relating to recruitment (including the use of employment agencies), document retention, freedom of movement, payment of wages, forced overtime, threats or intimidation, termination, and prison labour, among others. When necessary, Better Work staff work with suppliers to address practices that may contribute to conditions of forced labour. In addition, each country programme produces public compliance synthesis reports, which report aggregate non-compliance data—including data on forced labour—from participating factories.

In the event that a case of human trafficking or slavery would be detected in PUMA’s supply chain, the PUMA.Safe team together with the factory management would seek to eradicate the practice and launch a fair remediation for the affected parties. Through its affiliation with PPR Home, PUMA is strengthening its own internal awareness of social issues such as human trafficking and slavery and the impact of our business operations on society, particularly those operations that may seem removed from the supply chain.

Stakeholder engagement and partnership building at the local, regional and global levels in order to identify and act on solutions to a variety of risks and issues in the supply chain is an integral component of the PUMA.Safe program. PUMA strives to engage and work with local actors in areas with known risk of human trafficking and slavery to support initiatives that would mitigate and correct impacts in a systemic fashion. PUMA also works with its peers locally, regionally and globally through initiatives like the Sustainable Apparel Coalition to ensure environmental sustainability initiatives are aligned with mitigation of social risks.

In accordance to the new law SB 657, PUMA is dedicated to expand its standards and take measures to cover the necessary scope and beyond in efforts to eradicate slavery and human trafficking in our immediate supply chain and eventually beyond. This includes strengthening and making more explicit PUMA’s workplace standards and policies for contract factories in accordance with best practices and more stringent international standards.

The new law, SB 657, will go into effect on January 1st, 2012.

revised original statement, 28 December 2011

Within the context of publishing a worldwide unprecedented Environmental Profit and Loss Account (EP&L), PUMA and PPR HOME, the PPR Group‟s sustainability initiative, released on November 16, 2011, that the environmental impact for the key areas of greenhouse gas emissions (GHG), water use, land use, air pollution and waste, generated through the operations and supply chain of PUMA is valued at € 145 million in 2010. Furthermore, in acknowledging the PUMA EP&L today as an innovative sustainability approach, the PPR Group, PUMA‟s majority shareholder, announced that this groundbreaking economic valuation methodology for a company’s environmental impacts will be implemented across its Luxury and Sport & Lifestyle brands by 2015.

After publishing an economic valuation of € 94 million of GHG emissions and water consumption in May this year, PUMA has now finalised its 2010 E P&L by adding € 51 million caused by land use change for the production of raw materials, air pollution and waste along its value chain. Only € 8 million of the € 145 million total derive from PUMA’s core operations such as offices, warehouses, stores and logistics while the remaining € 137 million fall upon PUMA’s supply chain. These costs, which will not affect PUMA’s net earnings, will serve as an initial metric for the company when aiming to mitigate the footprint of PUMA’s operations and all supply chain levels.

“The unprecedented PUMA Environmental Profit and Loss Account has been indispensible for us to realize the immense value of nature’s services that are currently being taken for granted but without which companies could not sustain themselves,” said Jochen Zeitz, Executive Chairman of PUMA and Chief Sustainability Officer of PPR. “At PPR HOME, we view the PUMA EP&L as an essential tool to help drive PPR’s sustainability development across its Group of brands because analysing a company’s environmental impact through an E P&L and understanding where environmental measures are necessary will not only help conserve the benefits of ecosystem services but also ensure the longevity of our businesses. The results of the PUMA E P&L underpin the urgency for a paradigm shift in the way we all currently do business and I have been pleased to also see that the release of PUMA’s first results has generated widespread interest among governments, corporations, NGOs and academics.”

The PUMA E P&L and the associated methodology were developed with the support of PricewaterhouseCoopers LLP and Trucost PLC, using recognised ecological and economic techniques and building on a large volume of work in the fields of environmental and natural resource economics. The valuation of the overall results shows:

- PUMA’s supply chain is responsible for 94% or € 137 million of its total environmental impact.

- Over half (57% or € 83 million) of all environmental impacts are associated with the production of raw materials (including leather, cotton and rubber) in Tier 4 of PUMA‟s supply chain4.

- Only 6% or € 8 million derive from PUMA’s core operations such as offices, warehouses, stores and logistics; a further 9% (€ 13 million) occur in Tier 1, with the remaining 85% (€ 124 million) in Tiers 2-4.

- GHGs make up 90% of the total impact of PUMA’s offices, stores and warehouses.

Alan McGill, partner, Sustainability and Climate Change, PwC, said: “These values are enough to make any business pay attention. The PUMA E P&L offers a real insight into the environmental consequences of commercial decisions and at the same time highlights potential commercial consequences of the environmental realities unfolding around the world. This will make many companies consider how they can apply similar analysis in their own organisations. Companies – big and small – are now reliant on global supply chains, making their environmental footprint much larger than many realise. Assigning economic values to the environmental impact of a company‟s operations enables a business to tackle vital questions now, not just about environmental impacts, but business risk, costs savings and finding new ways to become more effective. Without measuring them, the impacts cannot be managed, or reduced.”

E P&L Results Break-Down

Water Use and Greenhouse Gas Emissions

The impacts of water use and GHGs were found to be roughly equal, together making up just under two thirds of the overall impact (around € 47 million each). (For more details, please refer to the press materials of PUMA’s May 2011 announcement on http://about.puma.com/?p=6644)

Land Use

Negative impacts on biodiversity and ecosystem services as a result of land-use for agriculture and buildings in PUMA‟s supply chain are valued at € 37 million or 26% of the total E P&L. More than any other impact these costs are concentrated in Tier 4 with just 1% arising in PUMA‟s operations and Tiers 1-3. Because leather is used extensively in footwear – PUMA’s dominant business line – and it is the most land extensive raw material that PUMA sources, the use of leather is the greatest single factor contributing to impacts on land-use. As a result, footwear accounts for € 34 million or 91% of the overall land-use impact.

Air Pollutants

The environmental damage caused by air pollution (particulates, ammonia, sulphur dioxide, nitrogen oxide, Volatile Organic Compounds (VOCs) and carbon monoxide) amounts to € 11 million, representing 7% of the E P&L total. Tier 4 is responsible for the lion’s share of the air pollution impact, valued at just over € 4 million. The single most significant contributor to this impact is ammonia emissions from animal waste and fertilisers used in agricultural processes.

Waste

The environmental impact caused by waste generation (landfill and incineration) is valued at € 3 million, representing 2% of the total PUMA E P&L. More than half of this derives from Tier 1 with some 21,000 tonnes of waste, followed by Tier 2 suppliers with some 8,000 tonnes and PUMA Operations with some 6,000 tonnes of waste. The vast majority of PUMA’s overall waste is produced in Asia / Pacific where most of PUMA’s suppliers are located.

Dr. Richard Mattison, Chief Executive Officer, Trucost said: “The current era of volatile resource prices, growing consumer and investor interest and greater regulatory standards mean that environmental issues are increasingly core to the business strategy. Water supplies, access to raw materials, a stable climate and clean air are vital to business operations, but many companies struggle to assess these issues due to their long and intricate supply chains. The Environmental Profit and Loss Account approach provides a robust framework to help companies unlock this complex challenge and embed sustainability at the heart of business decision making. PUMA has demonstrated that accounting for the environment is no longer a ‘holy grail’ objective, but simply makes good business sense.”

Responses to the PUMA 2010 Environmental Profit and Loss Account

The PUMA E P&L findings from 2010 have revealed that the lion share of PUMA’s environmental impact occurs within its supply chain of external partners, which the company has limited control over. In order to reduce the environmental impact at the lower end of the supply chain, PUMA is dependent on the cooperation of other industry players. To tackle this issue, PUMA has already started to gain support from national governments, environmental organizations, and representatives of science and industry to push for a shift in the current business paradigm towards a more sustainable approach; one that acknowledges the indispensible services provided by healthy ecosystems and respects their limits. The first step to achieving this change requires the services to be given monetary values in order to account for them when doing business.

At the same time, PUMA has started to implement solutions at its Tier 1 suppliers and within its own operations, where the company is able to provide support for change, independently.

Jochen Zeitz commented: “Reducing the environmental impacts that derive from PUMA’s supply chain represents a real challenge for us, as we have limited control over these activities and on further Tiers, suppliers can be shared by thousands of companies. However, we recognise that in order to make a real change we, along with our industry peers, have to work responsibly to help reduce the impacts of external supplier factories and raw material producers. In addition to driving innovation in various areas along our own supply chain and with our consumers, we also need the support of policy makers and the engagement of the whole industry to implement a new model for businesses that works with nature rather than against it and ultimately supports social and economic sustainability.”

Raising Awareness Among National Governments, the Industry and Science

The release of the initial E P&L results in May generated extensive media coverage and attained significant interest among governments, industry peers and international organizations.

Having been nominated as a co-opted member of the German Council for Sustainable Development, which advises the German government on sustainability issues, Jochen Zeitz presented the results and benefits of the PUMA E P&L to 15 Council members and a representative of the Federal Government last month. As a result, the council will launch a project that aims at implementing standards for PUMA’s environmental accounting statement and will promote the E P&L approach as an innovative practice in public debates.

The UK government featured PUMA’s groundbreaking analysis as a best practices case study for sustainable business in the Department for Environment, Food and Rural Affair (DEFRA) Natural Environment White Paper in June 2011. White papers are documents produced by the UK government setting out details of future policy on a particular subject, often forming the basis for legislative reform.

Also, the Co-Chair of the Investment Commission and Treasurer for the UN Environment Programme Financial Initiatives referred to the PUMA E P&L when speaking at the 2011 UNEP Financial Initiatives Global Roundtable in Washington last month. Further references have been made by sustainability experts Pavan Sukhdev and John Elkington, the Harvard Business Review8, the Stanford Social Innovation Review and the World Business Council for Sustainable Development to name but a few.

Stepping up internal Resources at PPR and PUMA

In support of these findings, PPR and PUMA have stepped up their internal resources, hiring additional staff on a group level as well as within the PUMA.Safe team in order to address the challenge of reducing the environmental impact. On a corporate level, PPR is adding an Energy Management Specialist to its sustainability team, who will immediately begin to investigate opportunities for reducing Greenhouse Gas emissions. PPR has also hired a Conservation and Ecosystem Services Specialist who will be investigating the development of broadly-accepted definitions of sustainable cotton and rubber and internal standards for their sourcing.

To better target and focus its efforts, the PUMA.Safe team, which ensures that supplier factories adhere to PUMA’s social and environmental standards, has created both a Humanity and an Ecology team. Five additional environmental and social auditors will be joining the existing 13 employees in the PUMA.Safe team, so that environmental impacts at PUMA’s Tier 1 and Tier 2 suppliers can be better addressed and solutions for their reduction more rapidly developed. PUMA is also hiring a Chemical Engineer to look at solutions to identify more sustainable materials as well as supporting PUMA in phasing out harmful substances within the supply chain.

Developing synergies and partnerships

PUMA and PPR HOME have shared the results of the E P&L with other industry players and corporations to leverage adopting a new business model that takes the costs of using natural resources and eco-system services within corporate supply chains into account. Furthermore, PUMA has collected information on the environmental performance of suppliers which can be used to provide benchmarks for supplier performance targets and the sharing of best practice. PPR HOME will also leverage the lessons learned during PPR‟s Group EP&L implementation stages in order to provide case studies across the Group‟s companies and brands to assist in broader adoption among businesses.

Building Capacity to Penetrate the Supply Chain

PUMA has already stepped up its capacity building programme for its suppliers such as the CONSERV project at apparel and footwear factories in Vietnam. The project, which was launched in cooperation with the German investment and development organization DEG and international capacity building organization Assist Asia, will support the factories of Tier 1, Tier 2 and Tier 3 suppliers to reduce greenhouse gas emissions, secure availability of natural resources and minimize the risks from waste and pollution through the implementation of resource efficiency practices.

Innovating for the Development of Sustainable Products

PUMA has also looked into opportunities to address the impact of Tier 1 to Tier 4 suppliers through the innovative development of more sustainable products and introduced its iconic style PUMA Suede to sustainability, creating the PUMA Re-Suede made for the environmentally conscious consumer. It has been developed using the latest materials and processes through eco-friendly product innovation. It is comprised of 100% recycled polyester fibers, produced by a chemical recycling process that reduces both the energy consumption and the CO2 emission by 80% compared to the production of virgin materials. The recycled polyester is scrap waste from manufacturing processes that is repurposed to create the synthetic material. With the development of the Re-Suede PUMA has come a little step closer to achieving its goal of manufacturing 50% of the international collections using more sustainable materials by 2015. Further information is available in the press kit on www.about.puma.com

The PPR Group E P&L Press Release is available on www.ppr.com.

With the announcement of initial results from the developing Environmental Profit & Loss Account (E P&L), the Sportlifestyle company PUMA and the PPR Group’s sustainability initiative, PPR HOME, have disclosed that raw material production accounts for the highest relative impacts of Greenhouse Gas Emissions (GHG) and Water Consumption within PUMA’s operations and supply chain. As the first company to provide such details, PUMA has published an economic valuation of the environmental impacts caused by GHG emissions and water consumption along its value chain. Ultimately, PUMA’s undertaking will see the inclusion of further environmental key performance indicators in Stage 1, followed by social and economic impacts in later stages of development.       

As part of PUMA’s long-term sustainability plan, the analysis was commissioned in recognition that producing and selling PUMA products has a wide impact along the entire supply chain. By identifying the most significant environmental impacts, PUMA will develop solutions to address these issues, consequently minimizing both business risks and environmental effects. PUMA’s E P&L statement provides an unprecedented and detailed level of understanding, sets a new benchmark in corporate environmental reporting and will hopefully serve as a catalyst for others to join an industry-wide engagement.       

Results from PUMA's Environmental Profit and Loss

The first results of PUMA’s E P&L have revealed that the direct ecological impact of PUMA’s operations translates to the equivalent of €7.2 million of the overall impact valuation. An additional €87.2 million falls upon four tiers along the supply chain. In total, this leads to an overall environmental impact of GHG and Water Consumption of PUMA’s operations and the supply chain of €94.4 million. By putting a monetary value on the environmental impacts, PUMA is preparing for potential future legislation such as disclosure requirements. These costs will serve as a metric for the company when aiming to mitigate the footprint of PUMA’s operations and all supply chain levels and will not affect PUMA’s net earnings.       

“The E P&L statement is a milestone in PUMA’s mission to become the most desirable and sustainable Sportlifestyle company in the world. It is an essential tool and a shift in how companies can and should account for and, ultimately, integrate into business models the true costs of their reliance on ecosystem services and PPR HOME will encourage and collaborate with the industry to adopt this tool,” said Jochen Zeitz, Chairman and CEO of PUMA and Chief Sustainability Officer PPR. “Gaining a better understanding of the source of the natural goods and services PUMA relies on and the declining availability of the basic resources required for our business growth, will help PUMA build a more resilient and sustainable business model and ultimately better manage its impacts on the environment.”        

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Under this banner, we are bringing together all of our longstanding work on environmental issues and decent work in decent workplaces, and combining it with new initiatives that will drive us to cleaner, greener, safer and more sustainable systems and practices. Imaginative solutions are found in every aspect of production for our Sportlifestyle products, from the sourcing of raw materials through the CottonMadeInAfrica campaign, which has seen excellent results for subsistence farmers in Africa, to the development of fully biodegradable packaging and carry bags that replace existing plastics. In addition, transparent and constructive dialogues with stakeholders, supplier partners, and non-governmental organizations (NGOs) such as the Fair Labor Association have ensured that our PUMA Code of Ethics and Code of Conduct are observed and audited in workplaces worldwide. The puma.safe program will continue to work toward reducing our carbon footprint, developing new sustainable products, and raising work and production standards worldwide.

Encompassing issues of human rights, product safety and ecological concerns, the puma.safe concept (Social Accountability and Fundamental Environmental Standards) is articulated as a set of internal standards in effect throughout the supply chain. True to the adage that “responsibility starts at home”, these standards are primarily upheld by the puma.safe Audit Team, a group that monitors partner manufacturers and works with the rest of the company in promoting the initiatives of the puma.safe program.

The development of the “SAFE” concept originated 10 years ago when we came up with five core pillars as the basis for our program, representing a milestone for PUMA’s Corporate Social Responsibility policy: Transparency, Dialogue, Evaluation, Social Accountability and Sustainability. For details please take a look at our Sustainability Reports:

Insights Environmental and Social Report 2001

Perspective  Sustainability Report 2003

Momemtum  Sustainability Report 2004

Sustainability Report 2005/2006

PUMAVision Sustainability Report 2007/2008

For PUMA, social accountability means responsibility to all of our stakeholders, including direct and indirect employees, shareholders and consumers. PUMA continuously seeks an active dialogue with these stakeholders and interest groups such as non-governmental organizations, academia and others.

The social standards, which have been laid out in our Code of Conduct, contain the most important social principles, which respect the rights and practices relating to the employees at all of our supplier factories. These social standards are further expounded in our Handbook for Social Standards and Handbook for Health and Safety. The Handbook of Environmental Standards aims to reduce any negative environmental impact from PUMA’s business activities and guarantee that our products are free from hazardous substances.

For more information about our standards please see our Workplace Standards/Policies.

At PUMA, we take responsibility for everybody involved in the production process, whether they are a PUMA employee or not, and work towards ensuring a community of inclusivity, fairness, and openness. We have been improving the social and working standards in the factories of our suppliers and manufacturers for ten years now and are proud to report that in during this time, since we carried out our first factory audit in 2000, PUMA has achieved significant milestones.

Introduced in 2005, PUMA’s Code of Ethics outlines our basic values, ethical principles, and ethical standards which guide our behavior and interaction amongst all of PUMA’s stakeholders (our customers, employees, suppliers, shareholders and the communities we live and work in).

Our Code of Ethics applies to everyone who works at PUMA. It communicates our standards of conduct and is a vital information tool that is provided to all new starters on employee “Welcome Day”.

In conjunction with the 4key principles of PUMAVision—Fair, Honest, Positive, and Creative—the Puma Code of Ethics expresses our commitment to supporting responsible corporate and individual citizenship.

Read our Code of Ethics

Another key document is PUMA’s Code of Conduct which expresses our commitment to human rights and fair labor. The puma.safe program executes training and compliance along the lines of the principles in our Code of Conduct not only in our own workplaces but in those of our suppliers, as well, ensuring positive work practices.

Read our Code of Conduct

Charity Cat is a registered association founded by 20 PUMA employees in early 2004. The purpose of the organization is to activate PUMA’s products and the company’s worldwide infrastructure in order to raise money in support of people in need. Charity Cat donations are largely a combination of private and commercial donations of money and goods. The members of Charity Cat are volunteers and donate their free time in support of realizing a diversity of charitable goals.

Charity Cat projects are based on the following principles:

• Donations are only made to institutions which have a well founded need, after Charity Cat members have determined the individual requirements on site.
• Charity Cat does not want to restrict its aid to money donations. Support also includes donations of clothes, shoes, toys and other goods.
• Local PUMA employees ensure that donations for projects in the corresponding countries reach the people in need.
• Charity Cat is informed about the progress of the projects in order to verify and experience the activities and the success.
• Charity Cat’s efforts are deliberately not being used for advertising purposes.

Charity Cat projects are spread across the world. To see examples of where and which projects are supported, please visit the Charity Cat feature in our latest Sustainability Report and also the Charity Cat’s website.