“PPR Group (EPA:PP)Sustainability Initiative PPR Home To Set New Standard

Our comments about the following Article

http://www.abnnewswire.net/press/en/66692/PPR_Group_%28EPA:PP%29_Su...

“PPR Group (EPA:PP)Sustainability Initiative PPR Home To Set New Standard In Luxury, Sport, Lifestyle, and Retail Sectors”.  ABN Newswire 24 March 2011.The article touches on a few topics that were covered in the first ever Sustainability, Luxury and Design class held at Instituto de Empresa (IE Business School) in Madrid. These topics are organizational change, corporate social responsibility versus sustainability, and the environmental P&L.

The CEO of PPR, Francois-Henri Pinault, says PPR HOME will give a more novel, more sustainable approach to their brands, but, will customers respond?  We believe so! Customers have expressed a strong desire to be more sustainable and to buy into products that have a deeper meaning. But, how will PPR effectively manage these changes given the economic crisis affecting sales and the increasing consumer expectations of luxury brands? PPR has the opportunity to define what sustainability means for the luxury industry.  The company has already dabbled with sustainability issues through its production of the movie HOME and now it is time for them to put those beliefs to the test.
 
Just how exactly will the interactions transpire between Jochen Zeitz, PPR Chief Sustainability Officer and Mr. Pinault go? While Mr. Zeitz is a very capable man and has been responsible for the PUMA brand for quite some time, however, implementing sustainability policies is not an easy business.  What we have learned during a class lecture about Burberry’s efforts is that it could be an uphill battle between the creative, business and sustainability minds. Mr. Zeitz will have to act as a change agent that needs to be deeply involved in every step of the product development process. But how would that fair for Gucci, Puma and other PPR brands? We know that there is a latent customer demand for greener products so this may be the secret to unlocking PPR’s future success.

Moving from CSR to Sustainability shows PPR is moving in the direction set forward by their production of HOME. PPR is going beyond the CSR practices. Just implementing CSR initiatives was not enough  and so with PPR HOME  which includes actions such as: Creative Sustainability Lab – based on innovation, sustainability and creativity, and, the Ecological Footprint – measuring and costing of its ecosystems. This is a different approach compared to what other companies are doing (which is not enough!) because the initiatives go through Leadership, Humanity (beyond Human Resources responsibilities), Ecology and Creativity. These four pillars will support PPR HOME, in such way that the companies will “breathe” Sustainability at all levels.  A good part of PPR products will address environmental and social concerns which will another way to take to deliver the PPR HOME value to its customer base.

From a results tracking perspective, PPR should implement an environmental P&L to measure its efforts over time. An environmental P&L is an accounting system that attempts to collate and report, in a single statement, the total environmental expenditure and any associated financial savings achieved as a result of that expenditure over the particular accounting period.  PPR has set aside a €10 Million budget so it is very likely that investors will be interested in seeing results. We encourage PPR to proceed to a full scale valuation analysis to determine if the company’s initiative can be linked to shareholder value. PPR Home could give sustainability issues the place they deserve in the business strategy. As we learned in class, “luxury is precious and so is sustainability but not enough is being done by luxury companies” and we hope that PPR’s Home program is a step in the right direction.

Written by Youssouf Traore, Giulana Mizusaki and Mariela Sanchez
Sustainable Luxury and Design MBA Module 2011, IE Business School