Philips reports its Environmental Profit & Loss enabled by Ecochain

Roel's Environmental Update
Roel Drost

by Roel Drost, PhD​

Philips - Environmental Profit and Loss

Philips wants to make the world healthier and more sustainable through innovation. Since 2016 the company has been running a program to deliver ambitious sustainability goals by 2020 for the company’s products, operations and supply chain. In the 2017 annual report, Philips released for the first time, an Environmental Profit & Loss (EP&L) statement – including a monetary valuation of the environmental impact that – calculated and presented using Ecochain tools and technology.

“At Philips, we fully embrace sustainability because of the benefits for societies, and because we believe that it is a driver for economic growth. That’s why we have sustainability incorporated in our company strategy”, says Frans van Houten, CEO Philips. Ecochain has been developed specifically to help realize this vision, not only for multinationals like Philips, but for any company that wants to contribute to a prosperous, sustainable future while running a successful business.

Philips - Environmental Profit and Loss
Philips – Environmental Profit and Loss

The EP&L concept is recently getting more and more traction with businesses.

Following the idea of Puma Chairman Jochen Zeitz and the first EP&L was conducted by them in 2010. The concept soon became the benchmark for what might seem a mountainous task for any company that wants to calculate their sustainability performance. The EP&L concept helps companies to put their environment in financial perspective. Philips is now taking the concept to the next level by a technology enabled methodology, powered by Ecochain. Philips states: “The EP&L account is a logical next step to extend the scope from individual product value chains to Philips’ complete value chain. It will support the direction of our sustainability strategy by providing insights into the main environmental hotspots from an overall business point of view.”

What made Philip’s EP&L statement so unique?

The Philips EP&L is, to our knowledge, the first EP&L statement to achieve full reasonable independent external assurance. The audit was performed by Philips’ external auditors EY. The external assurance provides the users of the information with trust in the assumption used, and the scope and validity of the data collected.

The Philips EP&L account is based on a Life Cycle Assessment (LCA) methodology which assesses environmental impacts associated with the entire product’s life cycle, including the footprint of the products’ use phase, Philips’ operations, its suppliers all the way back to the production of the initial raw materials. Traditional approaches to LCA use a complex ‘bottom up’ approach, which requires specific skills and tools to carry out and is only usable on an individual, product-by-product basis. As a result, it’s a time consuming, costly and rigid process that is almost impossible to execute without consolidating technology. With Ecochain, Philips was able to deploy Activity Based Footprinting (ABF) a unique approach resulting in fast, accurate, implementable insights into all products, simultaneously.

Next steps for Philips

By giving managers such a clearly comprehensible metric, EP&L becomes a means to identify the environmental hotspots of a company, enabling managers to invest time and effort where it really matters. Moving forward, Philips plans to work with their supply chain by showing them how to gather actionable data from their operations. Moreover, the Philips EP&L statement (re-)confirmed that energy consumption in the use phase remains a key focus area for innovation.
On one hand this data will help Philips to continuously finetune its sustainability performance on the other it will provide the incentive for their supply chain partners to do the same. Simultaneously reducing impact and increasing value for all stakeholders.

Environmental Profit & Loss Services

Ecochain Technologies provides companies with a comprehensive framework – all the necessary services and tooling – to arrive at Environmental Profit & Loss accounting.

About the Author

Roel Drost is Ecochain’s Chief Value Officer. He leads our team of Environmental Specialists and has more than 20 years of experience in creating sustainable value through LCA, Sustainably Supply Chain Management and Natural & Social Accounting. Previously, he worked for Philips and EY.

In his column, Roel regularly writes about current developments in sustainable business practice.

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