(Tiểu luận) business ethics group assignment case studyis zara fast fashion or ethical and sustainable

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NATIONAL ECONOMICS UNIVERSITY

Instructor: Dr Nguyen Bich Ngoc

Class: Advanced Accounting 63

Students: Nguyen Thi My Anh – 11210625

Le Chi Mai – 11219088Hoang Thanh Thao – 11215372Nguyen 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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A Abstract

Zara is the leading fashion brand for children and adults of the Spanish companyInditex Zara isn’t just producing the most elevated overall revenues for associationyet in addition, is the most renowned and perceived by clients in the market Zara isheadquartered in La Coruña, Spain and was founded in 1975 by Amancio Ortega.The marketing concept of Zara is to offer for sale, at prices typical of the mid-range,items of this same range in an environment resembling high-end shops Zara is able

to successfully sell their brand by promoting fast fashion rather than high fashion,which allows them to quickly adapt to changing fashion styles and market theirproducts more efficiently to their customers The collections are renewed everyweek In this project, we will also talk about ethics Ethics are the moral principlesthat govern a person’s behavior or the conduct of an activity We will first discuss theway to make the articles and then in the second part, analyze the ethical problemsposed 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 companywas founded in 1975 by Amani Ortega and Rosalía Mera It is the main brand of theInditex group, the world's largest fashion retailer The fashion group also owns brandssuch as Massimo Dutti, Pull and Bear, Bershka, Stradivarius, Oysho, Zara Home, andUterqüe Zara has both men's and women's clothing, as well as children's clothing (alsoknown as Zara Kids) Zara products are designed and manufactured based on consumertrends The highly responsive supply chain brings new products to the store twice aweek 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 areinspected, 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 themost prime locations and the most expensive locations to open its main store Zara hasmain stores on Fifth Avenue in New York, Oxford Street in London, Calle Serrano inMadrid, Via del Corso in Rome, Champs-Elysees in Paris, Corso Vittorio Emanuele in

Milan, Nevsky Prospect in Saint Petersburg, GUM in Vladivostok, Shibuya andGinza in Tokyo, Myeong dong in Seoul, and others.

Figure 1: Zara’ s stores global presence

C Company’s ethics issue

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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 brandused LanzaTech’s technology to create new fabrics from carbon emissions instead

of using virgin materials Zara claimed that the capturing and using of carbonemissions would lower the release of these emissions into the atmosphere and alsoreduce the amounts of virgin materials But in fact, their current offerings still largelyconsist 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 comesfrom 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 foroverconsumption and with this collection that does not lessen Conversely,collections like these can even lead to more consumption because consumersbelieve the products to be “good”, and thus feel like they can buy more

Zara also has been criticized for making grand sustainability claims without providingevidence of their actions There is no evidence the brand minimizes textile waste whenmanufacturing its products And, although Zara has set an absolute target to reducegreenhouse gas emissions generated from its operations and supply chain, there is noevidence it is on track to meet its target For example, they claimed to have reduced theircarbon emissions by 20% but did not share specific details about how they achieved thatreduction 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 theenvironment, 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 itsproducts, 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 polyestercomes from, what controls are established to verify the recyclable fibers, and does notgive the customer the information to verify any of its supposed sustainable practices.Though the retailer does show some progress towards sustainability, its entire businessmodel goes against these sustainability goals An NPR article calling out Zara’sgreenwashing 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'susing 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-fashionretailers in the world, and the fast-fashion industry itself is notoriously harmful to theenvironment 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 companysaid it is planning to slow down production, critics feel Zara is still not doing enough to

address its current business model and the consequent heavy carbon footprintcaused by its supply chains.

Additionally, Zara has been accused of not being transparent about their supplychain, which makes it difficult to verify their sustainability claims In particular, theyhave not shared details about the working conditions in their factories or theenvironmental impact of their production methods While Zara has made someefforts towards sustainability, it is up to consumers to decide if they believe thoseefforts are genuine or simply a form of greenwashing no evidence that the brandminimizes textile waste when manufacturing its products And, although Zara hasset an absolute target to reduce greenhouse gas emissions generated from itsoperations 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-trendstyles and regular new arrivals This business model is inherently harmful to theenvironment, and energy-efficient stores can’t change that

Overall, Zara has made some attempts to be more sustainable, but they havebeen accused of greenwashing through vague or exaggerated claims, lack oftransparency, and continuing to engage in practices that are harmful to theenvironment So, unless Zara and many other brands start actively working onreducing 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 oppositestorytelling, of the dramatic reality generated

• Hiding Huge Environmental Impact: Greenwashing has become a

business model itself, maximizing profits while polluting, and hiding realenvironmental impacts

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

with a more green showcase, intoxicating language and messages Making theconsumer believe plastic is sustainable and eco-friendly material, while helpingdiminishing other natural materials and helping to erase the knowledge and realinnovation 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 theenvironmental crisis, acting as a carnivorous business environment The moreprofit plastic based fashion companies make, the more they invest to controllogistics, communication and traffic, to destroy the traditional or/and sustainablesectors 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 thebrands look cool, trendy, and elegant Great investments in all social media to makeplastic 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 onconsumer demand It can take just a few weeks for consumer feedback to reachdesigners and for the product to then make its way to the retail floor As trends changefaster than ever with the prominence of social media and fashion influencers, fast fashioncompanies 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 ofclothing production in the past couple of decades.

The promotion of over-production and mass consumption leads to environmentaldamage For example, Zara uses viscose in its production: a material made of wood pulpfrom sometimes endangered trees It has been found that viscose production in countrieslike India has led to water contamination from untreated waste and air pollution Otherplants 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 yeardirectly translates into excessive water usage, energy usage, air pollution, and more.These effects are disproportionately felt in the Global South, where plants are generallylocated to exploit cheaper labor compared to the countries in Global North

2.1 Situation

But underneath these low prices and fashionable items, Zara has ways of producingthat 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 52collections 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 importantproduction 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 findthemselves dried up and lose wealth such as fishing Then, a part of this water isrejected in the water tables and in the rivers Loaded with enzymes, dyes, and otherchemical products, this discharge causes environmental pollution and the death offauna and flora Moreover, these products are irritating for the skin

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 large-scaletransport causes pollution of the atmosphere and contributes to global warming.Even if the working conditions are improving, the employees are still underpaid Forexample, Bangladesh has a poverty rate of around 250% while France has a rate ofabout 13% In Brazil, the company is accused of practicing modern slavery.Insalubrious factories, housing of employees within the factories, child labor, Zara isunder the spotlight for its working conditions

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, andtrendy fashion To achieve a balance between growth in sales, environmental impact andsocial performance, the fashion industry must employ sustainable methods and redesignits supply chain (Clarke & Clegg, 2000) One of the factors driving the development of thefast fashion industry is the high demand of consumers (Barnes & Lea-Greenwood, 2006).According to Hammer and Plugor (2019), in the fast fashion industry, working conditionsare not ethically satisfactory, factory workers must work long hours a day, low wages,unhealthy working environment and hazardous Most garment factory employees indeveloping nations are young, underpaid, and exposed to unhealthy and harmful workingconditions (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

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chain The workers must work 11 hours straight and only have one day off a week withmeager wages of $3.50 to $4.75 per day and they were forced to work in a crampedfactory 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 mustwork 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 athigh risk of being discriminated against and exploited for working overtime with lowwages (Ichimura, 2011) It is estimated that fewer than 2% of the roughly 75 millionfactory 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 qualifiedfor a good working environment for workers and have been seriously degraded Thegovernment discovered that there were children in the factory and that caused Zara toviolate the law and ethics by employing underage workers These cases demonstrate thatZara and the retail industry continue to engage in unethical practices that violate basichuman and labor values

2.3 Stakeholders relevant

For Inditex (Zara), stakeholders are the key to enable Inditex to create sustainable valueand form a fundamental tool to face the challenges and opportunities that arise in theprocess, therefore, they need to maintain a transparent and dialogue relationship withstakeholders 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 acorporation in an efficient way (Freeman, Wicks & Parmar 2004) "Any group or individualwho can affect or is affected by the achievement of the organization’s objectives" is howFreeman defines stakeholders (Freeman 1994)

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Brazil have reflected that suppliers are not prioritized in terms of businessethics and human rights, workers are forced to overwork and children have towork instead of being educated.

2.3.2 Employees

Consisting of in-store consultants, management staff and logistics centers, theirduties are to communicate with customers and handle tasks assigned by thecompany to earn a living As claimed by Inditex (2018), employees should begiven fair and decent treatment and their Human and labor Rights respected.Also, if we consider the egoism theory, we can see that supporting decentworking conditions for Zara's staff translates into productivity, which is thepurpose of the decision makers, which is to increase sales and profits

2.3.3 Community

This is the stakeholder that includes the civil society community around the world.The community is directly affected by Zara's unethical practices, so this stakeholdershould be prioritized as they are the ones who report and condemn Zara's unethicalpractices and behavior and offer solutions to change into positive things

2.3.4 Shareholders

They have a direct influence on the growth opportunities of the business.Shareholders and investors play a key role in the company because withouttheir trust, the company will not be able to maintain and develop, leading tobankruptcy and factories, production facilities and work being forced to stopworking, causing wealth loss in hundreds of countries and many people willlose their jobs Their primary objective is to produce money for themselves, thenations in which they pay taxes, and the businesses in which they invest

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 todetect 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 adeveloped 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, Zarawill not be able to operate However, this is the stakeholder with the leastinfluence because they are the ones who always want to change the product tomatch 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 fashionindustry “Consumers – especially younger consumers – seem to be more aware of thesevere environmental impact of the fashion industry,” wrote Veronica Bates-Kassosystem, an analyst in The Great Greenwashing Machine report for UK sustainabilityorganization 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 aZara clothes shop on Wednesday (December 4, 2021) in central Madrid, host city of theUnited Nations COP25 summit, to protest greenwashing and carbon emissions in thetextile industry Extinction protesters on Wednesday said they were also protesting

"greenwashing," the method by which a company provides misleading information abouthow its products are more environmentally sound Around 30 XR protesters occupied abranch of Zara with people glued to the windows inside the store and holding bannerssaying, "We are stuck" and "Green words, toxic truth" The two-week "Conference of theParties", or COP, as it is known, comes as extreme weather events around the world arebeing linked to man-made global, putting pressure on the summit to strengthen theimplementation of the 2015 Paris Agreement on limiting carbon emissions and the rise inglobal temperature In 2018, total greenhouse gas emissions

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