Richemont’s carbon footprint is relatively small compared to that of energy-intensive industries. Whilst we do not* see climate change as a significant area of direct risk for the Group at present, we recognise that managing the issues arising from climate change helps us to reduce our energy and travel costs. Accordingly, our policy is to focus on reducing our own carbon emissions and those of our logistics service providers and in 2013 we set ourselves long-term targets regarding carbon intensity. (* Watch straps manufactured from alligator-leather may be exposed to changing rainfall and flood patterns in Louisiana.)
We measure our emissions each year and aim to reduce them. As the business continues to grow in absolute terms, we purchase carbon offsets. That has been our practice since 2008. We raise awareness of the cost of these offsets by re-invoicing the cost of carbon credits to each Maison. This approach allows a financial cost to be placed on carbon, which helps drive performance improvements, as does the motivation of employees in general.
We continue to carry out robust energy audits across our businesses and seek to respect the most demanding environmental standards when building new manufacturing facilities. In this way, we play our part in minimising our energy consumption, provide agreeable working spaces for our employees, and thus contribute to the long-term sustainability of our business.
Overall, the Group’s activities have a very low direct exposure to the impact of climate change. The production of high quality goods is concentrated in Switzerland and their distribution is spread around the world. Nevertheless, the Group CSR Committee considers this matter annually and has not identified weaknesses in our business model which would be worsened by gradual temperature changes, cases of extreme weather conditions or growing water scarcity. Similarly, the supply of precious materials, which is largely controlled by international mining enterprises, metal recyclers and refiners, and gemstone cutters and polishers, is not expected to be disrupted by gradual changes in the natural environment.
Richemont welcomes the work done by the Task Force on Climate-related Financial Disclosures (‘TCFD’) to help drive transparent and consistent reporting on business risks and opportunities from climate change. We will endeavour to increasingly align our climate-related governance, management and reporting practices with the Recommendations made by the TCFD in their June 2017 report. Initially, this will involve understanding where there are gaps in our current disclosures and highlighting specific actions to address these. Richemont has not quantified the financial risks associated with climate change.
In March 2017, the Group decided to change the twelve-month period for data capture from April-March (financial year) to January-December (calendar year). That decision reflected the ease of data collection from service providers such as energy utilities. No change has been made to previous years’ data.
We calculate our carbon footprint based on the internationally recognised Greenhouse Gas (GHG) Protocol of the World Business Council for Sustainable Development (WBCSD).
The data covers our subsidiary companies where the Group has financial control, defined as a shareholding of at least 50%. Data has been collected as an integral part of our approach to business reporting. Data is not always available for some smaller retail outlets, in particular where we operate from shared sites. Richemont uses energy estimations (per m2) to estimate the impact of these locations. The scope of our measurement is estimated at covering operations representing more than 90% of full time equivalent employees (FTE) and includes retail outlets, offices, research and manufacturing sites, and distribution centres.
In the year under review, excluding logistics our global CO2 emissions decreased by 11% to 119 Ktons. The 11% decrease comprises:
- Updated emissions conversion factors, reflecting the beginning of our CSR 2020 Plan. We believe that a baseline measurement, which applies updated factors and measurement criteria, will make any subsequent target-setting plan more compelling for our operations.
- Buildings emissions decreased by 21%, partly due to the growing number of entities which have switched to ‘green’ or renewable electricity. Green electricity now accounts for 55% of our overall electricity consumption (53% in FY17) and we seek to further increase that proportion each year. The standard electricity consumption decreased by 2%.
- Business travel emissions decreased by 11% and the total distance travelled by air increased by 9%. We saw an increase in total distance travelled by air in connection with to the rollout of Group-wide projects in markets far away from our base in Switzerland.
In the same period, our logistics emissions (scope 3) increased by 31%. The growth in the scope of reported data is described in more detail below
We have internalised a growing proportion of the Group’s supply chain in fine jewellery and watchmaking. Such manufacturing processes consume more energy per person than assembly processes. The expansion of our boutique networks in both floor area and count, and the energy consumed in lighting, heating and cooling such premises, has contributed to overall emissions in recent years. However, as a consequence of our efforts to promote good environmental practices, the average CO2 emissions per employee (average FTE) on a comparative basis has decreased by 11% during the year under review: from 4.8 CO2t/FTE to 4.28 CO2t/FTE, while our average FTE has decreased by only 0.2%.
With respect to renewable energy, in-house solar energy production has increased by 2%. Nevertheless, at some 0.8 GWh, this represents less than 1% of the electricity consumed by the Group as a whole.
We aim to reduce our emissions as much as possible and neutralise the rest by participating in certified offsetting projects. Our 2017 CO2 emissions will be offset by one major project and a variety of minor projects:
- The major project (57 Ktons) relates to forest preservation in support of transfrontier conservation areas (‘TFCAs’) facilitated by Peace Parks Foundation. Specifically, the ‘Lower Zambezi REDD+ Project’ and ‘Luangwa Community Forests Projects’. This tranche of 57’000 carbon credits, purchased by Richemont in 2018, represents the first in a seven-year agreement with BioCarbon Partners, a leading African developer. By buying directly from the developer, the communities protecting these forests and Peace Parks Foundation will derive greater long-term security and financial benefits, thus enabling sustainable conservation efforts at scale. For more information about Peace Parks Foundation, which Richemont has supported for two decades, please follow this link.
- Minor projects include our continued support of forest conservation in Peru, energy efficient cook stoves in China, and water kiosks in Cambodia. The choice of Cambodian water kiosks stems from Baume & Mercier’s support of 1001 Fontaines.
To raise awareness, the centrally-purchased carbon offsets are re-invoiced to Richemont’s individual Maisons based on their own GHG emissions. The CSR Committee selects the offset projects, deepening our engagement and promoting both internal and external communication.
As indicated below, our Scope 3 Logistics emissions are currently not offset. However, the Group is keeping this position under review as both the measurement scope increase (see below) and as the quality of measurement data improves year-on-year.
Since 2011, an independent assurance report has been provided on the Group’s consolidated CO2 emissions. The 2018 report, from SGS, has been issued on 18 July and includes Scope 3 Logistics.
The Group participates in the CDP annual data collection process. Richemont’s 2017 submission received a C rating by the CDP’s assessors (2016: C rating). In 2018, CDP has revised its annual questionnaire and it is uncertain whether Richemont’s answers will continue to receive a C rating.
|CO2 emissions||Units||2014/15||2014/15*||2015/16||CY 2016||CY 2017|
|Total||1 000 tCO2||202.4||171.8||171.5||179.4||179.0|
|Scope 1||1 000 tCO2||20.0||18.0||13.6||15.4||13.4|
|Scope 2||1 000 tCO2||65.5||60.1||57.3||62.8||55.3|
|Scope 3||1 000 tCO2||51.2||50.2||56.9||55.6||50.6|
|Scope 3 Logistics||1 000 tCO2||65.6||43.4||43.7||45.6||59.7|
2014/15* - Re-presented results, excluding The Net-A-Porter Group, a discontinued operation.
Scope 1: Direct GHG emissions from sources that are owned or controlled by the company. It includes energy use from buildings and emissions associated with the vehicles we operate.
Scope 2: Indirect emissions associated with purchased electricity, heat and steam.
Scope 3: All other indirect emissions that are a consequence of the activities of the reporting company but occur from sources owned or controlled by another company. We have measured emissions resulting from the usage of private cars for professional purposes and the mileage from the use of commercial airlines for business travel.
Scope 3 Logistics: Since 2014, our Scope 3 emissions data for freight logistics has been progressively measured. What began as a limited scoping exercise, encompassing only our Jewellery Maisons and Specialist Watchmakers, from their European manufactures to their international network of boutiques and wholesaler partners, has continued to grow. The chart below indicates the year-on year scope progression. In 2017 the scope included all relevant logistics, from Tier 1 suppliers to downstream retailers and for all Maisons. This approach to measurement enables us to better manage our environmental impacts. The 2017 scope continued in 2018.
Other emissions and discharges
The Group does not collect data regarding ozone depleting substances, NO, SO or other significant air emissions as these are not material to the Group’s businesses. The Group’s own manufacturing facilities are located in Switzerland and elsewhere in Western Europe, where environmental controls are rigorously enforced.
No significant spills have been brought to the Group’s attention in the context of either the environmental or health and safety reporting processes. Similarly, the Group has not been subject to any material fines or non-monetary sanctions for non-compliance with environmental laws and regulations.
Following the findings from a 2014 Screening Life Cycle Analysis of certain watch and jewellery products, Richemont has a better understanding of its overall carbon footprint, i.e. the emissions generated by the so-called upstream and downstream activities of our business partners, including the extraction or recycling of raw materials. That initial analysis has focused our Maisons’ attention on the emissions generated by mining activities in general, and that lower-impact alternatives to newly-mined gold and platinum group metals exist. In particular, recycled precious metals. More information may be found here.
Our key energy usage relates to fuels, natural gas, electricity and heat that the Group consumes for the buildings and vehicles it operates. Electricity continues to be the most significant energy source. Our energy use in the year increased by 1.8%.
In the context of the Group’s wider energy policy, the Maisons and distribution platforms are encouraged to switch to so-called ‘green’ electricity whenever possible, i.e. electricity generated from renewable sources such as hydro, solar or wind. In the year under review, 57% of the Group’s purchased electricity was ‘green’ (2017: 53%; 2012: 23%). In absolute terms, the Group’s green electricity and alternative energy consumption increased to 113 GWh. We continue to prioritise renewable energy procurement in all of our operations.
|Units||2014/15||2014/15*||2015/16||CY 2016||CY 2017|
|Total energy consumption||GWh||238||229||227||245||236|
|Direct energy consumption||GWh||31||30||28||32||32|
|Indirect energy consumption||GWh||207||198||196||212||203|
2014/15* - Re-presented data excluding The Net-A-Porter Group, a discontinued operation.
‘Direct energy’ and ‘Indirect energy’ emissions refer to the GHG Protocol: Direct is defined as ‘emissions from sources that are owned or controlled by the organisation’; and Indirect Energy is defined as ‘emissions from the consumption of purchased electricity, steam, or other sources of energy generated upstream from the organisation’.
The Group has published an internal guide on LED lighting for its worldwide operations, in particular its boutiques. The aim of the guide is to enhance product display and employees’ working conditions. In the longer term, Richemont intends to use only LED lighting. Richemont does not seek to consolidate the proportion of LED lighting as this will follow the pace of local refurbishments, which typically occur on a seven-year cycle. Nevertheless, replies in the 2018 CSR Survey indicate that progress in most cases is either ‘good’ or ‘complete’. The main exceptions were Group operations in rented office space where ‘the owner decides’.
Our Maisons have taken measures to limit their energy consumption. The reported consumption levels above reflect both the level of trading, business acquisitions and the construction of new manufacturing facilities in Switzerland, partly offset by energy-saving initiatives.