Business ethics group assignment case studyis zara fast fashion or ethical and sustainable

Zara has been accused of greenwashing in the past due to lack of transparency about their supply chain and sustainability practices... An NPR article calling out Zara’s greenwashing effo

NATIONAL ECONOMICS UNIVERSITY

-*** -

BUSINESS ETHICS GROUP ASSIGNMENT

CASE STUDY:

Is Zara Fast Fashion? Or Ethical and

Sustainable?

Le Chi Mai 11219088 –Hoang Thanh Thao 11215372 –Nguyen Hoai Thu - 11215540

Hanoi, 2023

Table of Contents

A Abstract 2

B Company introduction 2

C Company’s ethics issue 3

1 Green Washing 3

1.1 Situation 3

1.2 Danger of Greenwashing 6

2 Fast Fashion 7

2.1 Situation 8

2.2 Ethical issue in Zara’s supply chain and labor abuse 9

2.3 Stakeholders relevant 10

2.3.1 Supplier 10

2.3.2 Employees 11

2.3.3 Community 11

2.3.4 Shareholders 11

2.3.5 Government 11

2.3.6 Customers 12

D People's awareness and Zara's reactions 12

1 People’s awareness 12

1.1 Protest 12

1.1.1 Extinction Rebellion activists 12

1.1.2 “Zara detox your fashion" campaign 13

1.2 Customers movement on fast fashion 14

2 Zara CSR (Corporate social responsibility) 18

3 Zara positive movements 19

E Our opinion 21

F Conclusion 21

G References 22

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we will also talk about ethics Ethics are the moral principles that govern a person’s behavior or the conduct of an activity We will first discuss the way to make the articles and then in the second part, analyze the ethical problems posed by this situation After

a conclusion, we will discuss the solutions put in place by Zara to overcome these situations as well as what we could do in addition

B Company introduction

Zara is a Spanish clothing and accessories chain based in Arteixo, Galicia The company was founded in 1975 by Amani Ortega and Rosalía Mera It is the main brand of the Inditex group, the world's largest fashion retailer The fashion group also owns brands such as Massimo Dutti, Pull and Bear, Bershka, Stradivarius, Oysho, Zara Home, and Uterqüe Zara has both men's and women's clothing, as well as children's clothing (also known as Zara Kids) Zara products are designed and manufactured based on consumer trends The highly responsive supply chain brings new products to the store twice a week After completing the design, the product will be delivered to the stores in about 10-15 days The distribution center in Spain processes all clothes New products are inspected, sorted, labeled, and loaded into trucks In most cases, clothes are sent within

48 hours Zara produces more than 450 million products each year

There are more than 2249 Zara stores located in 88 countries Zara often chooses the most prime locations and the most expensive locations to open its main store Zara has main stores on Fifth Avenue in New York, Oxford Street in London, Calle Serrano in Madrid, Via del Corso in Rome, Champs-Elysees in Paris, Corso Vittorio Emanuele in

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Milan, Nevsky Prospect in Saint Petersburg, GUM in Vladivostok, Shibuya and Ginza

in Tokyo, Myeong dong in Seoul, and others

Figure 1: Zara’ s stores global presence

C Company’s ethics issue

1 Green Washing

1.1 Situation

Greenwashing is the practice of misleading consumers about the environmental friendliness (more natural, healthier, free of chemicals, recyclable, less wasteful of natural resources, etc.) of a product or company in order to increase sales Zara has been accused of greenwashing in the past due to lack of transparency about their supply chain and sustainability practices

In 2019, Zara announced their sustainability goals, outlining plans to use 100% sustainable fabrics and achieve zero waste by 2025 For this clothing line, the brand used LanzaTech’s technology to create new fabrics from carbon emissions instead of using virgin materials Zara claimed that the capturing and using of carbon emissions would lower the release of these emissions into the atmosphere and also reduce the amounts of virgin materials But in fact, their current offerings still largely consist of fast-fashion materials like polyester, which is harmful to the environment With the use

of LanzaTech’s technology around 20 percent of the polyester comes from carbon emissions So then does that mean that the collection is greenwashing? Similar to the other collections of Zara the collection still has a very short lifecycle, and it will end up

in a landfill creating more pollution The brand is responsible for overconsumption and with this collection that does not lessen Conversely, collections like these can even lead

to more consumption because consumers believe the products to be “good”, and thus feel like they can buy more

Zara also has been criticized for making grand sustainability claims without providing evidence of their actions There is no evidence the brand minimizes textile waste when manufacturing its products And, although Zara has set an absolute target to reduce greenhouse gas emissions generated from its operations and supply chain, there is no evidence it is on track to meet its target For example, they claimed to have reduced their carbon emissions by 20% but did not share specific details about how they achieved that reduction It is also important to remember that Zara has fast fashion traits such as on-trend styles and regular new arrivals This business model is inherently harmful to the environment, and energy-efficient stores can’t change that

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Zara’s Join Life Collection is all a big greenwashing lie Zara prints Join Life in some

of its products, claiming that 25% or 30% of the polyester used in these garments is recycled Zara does not give any clear information about where this supposed recycled polyester comes from, what controls are established to verify the recyclable fibers, and does not give the customer the information to verify any of its supposed sustainable practices Though the retailer does show some progress towards sustainability, its entire business model goes against these sustainability goals An NPR article calling out Zara’s greenwashing efforts summarizes it perfectly: “When a business is built on a fast turnover of styles, making those products still swallows a lot of energy, regardless of whether it's using organic cotton or selling products in more eco-efficient stores ”

Figure 2: Zara’s Join Life tags claim they use “ecologically grown cotton” but offer

no certifications to back up these claims

Critics point out that Zara's parent company Inditex is one of the largest fast-fashion retailers in the world, and the fast-fashion industry itself is notoriously harmful to the environment due to the high volume of clothing produced, the use of synthetic and non-biodegradable materials, and the exploitation of cheap labor Even though the company said it is planning to slow down production, critics feel Zara is still not doing enough to

or simply a form of greenwashing no evidence that the brand minimizes textile waste when manufacturing its products And, although Zara has set an absolute target to reduce greenhouse gas emissions generated from its operations and supply chain, there

is no evidence it is on track to meet its target It is also important to remember that Zara has fast fashion traits such as on-trend styles and regular new arrivals This business model is inherently harmful to the environment, and energy-efficient stores can’t change that

Overall, Zara has made some attempts to be more sustainable, but they have been accused of greenwashing through vague or exaggerated claims, lack of transparency, and continuing to engage in practices that are harmful to the environment So, unless Zara and many other brands start actively working on reducing consumption it is not unlikely to assume that they are greenwashing As Orsola de Castro, co-founder and creative director of Fashion Revolution, said “brands need to address the root cause of its impact, not just its effects…”

1.2 Danger of Greenwashing

• Toxic Profit: It is used to maximize profits by selling plastic or products and

services that have an environmental footprint that is toxic

• Huge Environmental Impact: It is a way to hide a non recyclable production,

that pollutes the planet for centuries, creating an opposite storytelling, of the dramatic reality generated

• Hiding Huge Environmental Impact: Greenwashing has become a business

model itself, maximizing profits while polluting, and hiding real environmental impacts

• Intoxicating Language And Messages: It has become a business as usual, with

a more green showcase, intoxicating language and messages Making the consumer believe plastic is sustainable and eco-friendly material, while helping diminishing other natural materials and helping to erase the knowledge and real innovation of other biodegradable and cheap materials

• Blocks Real Solutions With Less Profit: It hurts companies that offer products

and services that are truly sustainable, inhibiting real solutions to the environmental crisis, acting as a carnivorous business environment The more profit plastic based fashion companies make, the more they invest to control logistics, communication and traffic, to destroy the traditional or/and sustainable sectors in the industry

• Digital Greenwashing: Most of the greenwashing is made in the digital sphere,

hiding environmental crimes reports, sick people, or environmental damage, while paying newsrooms and influencers to market toxic products and make the brands look cool, trendy, and elegant Great investments in all social media to make plastic based fashion brands look green companies

2 Fast Fashion

Different from the traditional fashion retail model, Zara operates its own "fast fashion" business philosophy with three perspectives:

• Short Time: It takes Zara just two weeks to bring a design concept to the

consumers So, Zara always keeps up with the latest fashion trends

• Small quantity: Each model of Zara product will be produced in a minimum

quantity This both avoids inventory risk and creates a feeling of "exclusivity"

• Variety of designs: With a short lead time and small quantity, new Zara models

always receive immediate response from the market with minimal inventory From there, more new designs will increase Zara's chances of success

One of Zara’s main strengths is its agility in churning out new products based on consumer demand It can take just a few weeks for consumer feedback to reach designers and for the product to then make its way to the retail floor As trends change faster than ever with the prominence of social media and fashion influencers, fast fashion companies like Zara are forced to speed up its turnaround in order to keep up with ever-changing demand As a result, the number of times a clothing item is worn

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before it is thrown out has decreased by 36%, in turn leading to a doubling of clothing production in the past couple of decades

The promotion of over-production and mass consumption leads to environmental damage For example, Zara uses viscose in its production: a material made of wood pulp from sometimes endangered trees It has been found that viscose production in countries like India has led to water contamination from untreated waste and air pollution Other plants in China used by Zara have been found to pollute nearby residential communities

at three times the permitted level Zara’s desire to churn out thousands of designs a year directly translates into excessive water usage, energy usage, air pollution, and more These effects are disproportionately felt in the Global South, where plants are generally located exploit cheaper labor compared to the countries in Global North to

2.1 Situation

But underneath these low prices and fashionable items, Zara has ways of producing that lead us to question Zara practices "fast fashion" Clothes of average quality, produced in quantity, made to be replaced and new collections every week or 52 collections per year And to justify these prices and meet the demand for novelty, Zara manufactures its products in Asia and particularly in India, Bangladesh, China or Brazil

in South America And it is advantageous: low design costs for important production capacities But the regulations of these countries are imprecise and light Several problems appear as there on water consumption For example, 8,000 liters of water are necessary to manufacture a single pair of jeans Some villages find themselves dried up and lose wealth such as fishing Then, a part of this water is rejected in the water tables and in the rivers Loaded with enzymes, dyes, and other chemical products, this discharge causes environmental pollution and the death of fauna and flora Moreover, these products are irritating for the skin

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Figure 3: The amount of water necessary to manufacture some products.

And pollution does not only affect the production areas Produced on the other side

of the world, the goods are then transported to Europe This regular and scale transport causes pollution of the atmosphere and contributes to global warming Even if the working conditions are improving, the employees are still underpaid For example, Bangladesh has a poverty rate of around 250% while France has a rate of about 13% In Brazil, the company is accused of practicing modern slavery Insalubrious factories, housing of employees within the factories, child labor, Zara is under the spotlight for its working conditions

large-2.2 Ethical issue in Zara’s supply chain and labor abuse

With more than 3000 stores in 96 countries and over 300 designers (Jordan, 2021), Zara

is always favored by customers for its designs because of its low prices, materials, and trendy fashion To achieve a balance between growth in sales, environmental impact and social performance, the fashion industry must employ sustainable methods and redesign its supply chain (Clarke & Clegg, 2000) One of the factors driving the development of the fast fashion industry is the high demand of consumers (Barnes & Lea-Greenwood, 2006) According to Hammer and Plugor (2019), in the fast fashion industry, working conditions are not ethically satisfactory, factory workers must work long hours a day, low wages, unhealthy working environment and hazardous Most garment factory employees in developing nations are young, underpaid, and exposed to unhealthy and harmful working conditions (Turker & Altuntas, 2014)

Zara stores have been accused of abusing labor in the supply chain, subjecting workers

to degrading conditions The workers in Brazil suffer from poor working conditions Furthermore, in factories in Brazil, workers work in factories with fences in the supply

chain The workers must work 11 hours straight and only have one day off a week with meager wages of $3.50 to $4.75 per day and they were forced to work in a cramped factory in Sao Paulo and had their freedom of movement restricted (Impact International, 2021) With this salary, workers cannot afford to pay for life and medicine when they must work hard, moreover, when the Covid-19 pandemic, they could not afford living expenses to maintain their lives With this working model in the fast-fashion industry, workers are at high risk of being discriminated against and exploited for working overtime with low wages (Ichimura, 2011) It is estimated that fewer than 2% of the roughly 75 million factory employees employed by the fast fashion sector globally earn a decent wage (Yu, 2008) Not only that, in Argentina, Zara was accused

of forced labor on children (Osborne, 2013) Zara's manufacturing factories in Argentina are said to be not qualified for a good working environment for workers and have been seriously degraded The government discovered that there were children in the factory and that caused Zara to violate the law and ethics by employing underage workers These cases demonstrate that Zara and the retail industry continue to engage

in unethical practices that violate basic human and labor values

2.3 Stakeholders relevant

For Inditex (Zara), stakeholders are the key to enable Inditex to create sustainable value and form a fundamental tool to face the challenges and opportunities that arise in the process, therefore, they need to maintain a transparent and dialogue relationship with stakeholders When reporting its Sustainable Business Model in Annual Report (Inditex, 2020), Inditex demonstrated the key stakeholders that influence the business into groups: Employees, Suppliers, Community, Shareholders, Government, Customers An argument is made that the stakeholder theory creates value and explains how to manage a corporation in an efficient way (Freeman, Wicks & Parmar 2004)

"Any group or individual who can affect or is affected by the achievement of the organization’s objectives" is how Freeman defines stakeholders (Freeman 1994)

2.3.1 Supplier

Suppliers should be the company's first priority because they are the biggest stakes affecting the business's operation and have fundamental Human Rights The ethical thing to do in business management is to ensure that employees have safe working conditions, good facilities, wages and social insurance Cases of human rights abuses in

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Brazil have reflected that suppliers are not prioritized in terms of business ethics and human rights, workers are forced to overwork and children have to work instead of being educated

2.3.5 Government

Government is a stakeholder who has the authority to decide and manage the prevention

of unethical behavior in the business towards the people They have a responsibility to detect and protect their people from labor abuses because they are the only party that

has the power to change the lives of abused workers for the better A nation with a developed and visionary government that will help its people live in peace and safety

2.3.6 Customers

They are the people who have the demand to buy at Zara, without them, Zara will not

be able to operate However, this is the stakeholder with the least influence because they are the ones who always want to change the product to match their fashion trends and needs

D People's awareness and Zara's reactions

1 People’s awareness

There is growing consumer awareness of the wasteful and polluting levels of the fashion industry “Consumers – especially younger consumers – seem to be more aware of the severe environmental impact of the fashion industry,” wrote Veronica Bates-Kasso system, an analyst in The Great Greenwashing Machine report for UK sustainability organization Eco-Age “These fast fashion brands feel pressured to respond to them”

1.1 Protest

1.1.1 Extinction Rebellion activists

Extinction Rebellion climate demonstrators glued themselves to the glass storefront of

a Zara clothes shop on Wednesday (December 4, 2021) in central Madrid, host city of the United Nations COP25 summit, to protest greenwashing and carbon emissions in the textile industry Extinction protesters on Wednesday said they were also protesting

"greenwashing," the method by which a company provides misleading information about how its products are more environmentally sound Around 30 XR protesters occupied a branch of Zara with people glued to the windows inside the store and holding banners saying, "We are stuck" and "Green words, toxic truth" The two-week

"Conference of the Parties", or COP, as it is known, comes as extreme weather events around the world are being linked to man-made global, putting pressure on the summit

to strengthen the implementation of the 2015 Paris Agreement on limiting carbon emissions and the rise in global temperature In 2018, total greenhouse gas emissions