Stella McCartney

LONDON — Stella McCartney has published its first environmental profit and loss account, which places a monetary value on the impact of its sourcing, manufacturing and selling practices, as the company confirmed separately that 2015 was its best financial year yet.

This story first appeared in the October 3, 2016 issue of WWD. Subscribe Today.

Although Stella McCartney has been carrying out an environmental audit for the past three years, this is the first time it has published a Global Environmental Profit and Loss Account, which quantifies its annual contribution to damaging factors such as waste, water consumption and greenhouse gas emissions that come from producing and selling fashion collections.

The result is a “loss” of 5.5 million euros, or $8.4 million, for the 2015 calendar year, and the company said its goal is to reduce that number as much as possible.

Over the past three years, the Stella McCartney brand’s “negative” impact on the environment has actually grown 7 percent as sales have increased in the double digits at the designer’s 47 stores worldwide and grown across all channels and markets.

The company added that changes in its sourcing methods have meant that over the past three years, it’s been able to reduce by 35 percent the average environmental impact, per kilo, of the materials it uses.

Stella McCartney has already switched from virgin to regenerated cashmere — or fibers that would normally be considered waste — and is looking into how to reduce the environmental impact of synthetic leather alternatives by swapping them with recycled and bio-based materials.

“So here we are, and this is the start of our journey, and as you can see we are not perfect, but something is better than nothing. I’m hoping to share and encourage the industry to join in and evaluate its environmental footprint for our future,” said McCartney, whose family is vegetarian and who has built her brand on a no-fur, skins or feathers platform.

“Fashion is an industry that makes a significant impact on the planet. It’s not just cool clothes and trends,” said McCartney, adding that she and her team want to challenge themselves — and the industry — on a daily basis. “What can we do better? Can we be responsible and accountable for what we make and how we make it? Our dream is to improve, but we have to start somewhere in order to progress,” she said.

Frederick Lukoff, the company’s chief executive officer, said the current report can “most accurately be described as an account of our ‘losses’ — since all businesses have negative impact on the environment. We are striving to balance our accounts. We are working toward projects and sources that would account for profits while delivering real benefits for the environment.”

Stella McCartney’s 50-50 joint venture partner Kering issues an Environmental Profit and Loss Account annually for the whole group. Stella McCartney is the first Kering brand to break out its numbers.

Lukoff added that the annual audit is helping the company to manage better the impact of its activities across all areas of the business. “We’re looking at the process all the way from beginning to end — from the raw material to the final sale,” he said, adding that he hopes the publication of this first report would encourage other brands to take a similar look at how their businesses impact the environment.

The Environmental Profit and Loss Account looks at six specific categories: greenhouse gas emissions, air pollution, water pollution, water consumption, waste disposal and changes in ecosystem services associated with land use change. The most highly concentrated area of environmental impact at Stella McCartney at the supply chain level, with the highest concentration at the raw material stage. Stella McCartney’s own direct operations represent 10 percent of its environmental impact.

“Over the past three years we have focused heavily on reducing our environmental impact, we are not perfect, but we will continue this effort,” McCartney added. “In addition to researching new ways to reduce impacts, we are also beginning to move toward transitioning away from merely doing less bad, to doing measurable good. We have many exciting projects in the pipeline and are looking forward to sharing them in the future.”

Separately, Stella McCartney has also released its 2015 financial figures for the U.K., which Lukoff said were not reflective of the robust performance of the business worldwide.

According to documents filed at Companies House, the official register of U.K. businesses, profits in the 12 months to Dec. 31, grew 12.2 percent to 4.9 million pounds, or $7.5 million, on the back of sales that were broadly flat against the previous year at 31.8 million pounds, or $48.7 million.

All figures have been converted at average exchange rates for 2015.

Those numbers refer solely to Stella McCartney’s U.K. business and worldwide licensing revenue. They do not take into account wholesale sales or turnover from the brand’s directly operated stores outside the U.K. Kering does not break out the full financial statements for its individual businesses.

Stella McCartney Ltd. has three directly operated stores in the U.K., two in London and one at Bicester Village, the luxury discount outlet center in Oxfordshire, England. It also has partnerships with Adidas for a sports line, Bendon for lingerie, Procter & Gamble for fragrance and Kering for eyewear.

In 2014, profits were up 22.7 percent while sales grew 11.2 percent. Lukoff said the slowdown in sales and profit growth in 2015 was reflective of a “very strong pound” and reduced tourist traffic to the U.K.

He added that 2015 was “by far our best year, the best performance of the brand since its launch [in 2001]. It was one of those years when everything went our way,” with growth across all regions and product categories. “We were firing on all cylinders. I will always fondly remember 2015.”

Asked about the current year’s performance, he said the first half was “very healthy.” Later this year, Stella McCartney will launch a men’s collection with an event in London in November, while flagship stores are set to open on Rue Saint-Honoré in Paris, at South Coast Plaza in California and on Madison Avenue in New York.

Worldwide, Stella McCartney has 47 freestanding stores in cities including London, Paris, Milan, New York, Los Angeles, Tokyo, Hong Kong, Beijing and Shanghai, and more than 600 wholesale accounts.