business ethics group assignment case study is zara fast fashion or ethical and sustainable

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

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A Abstract

Zara is the leading fashion brand for children and adults of the Spanish company Inditex Zara isn’t just producing the most elevated overall revenues for association yet in addition, is the most renowned and perceived by clients in the market Zara is headquartered in La Corufia, 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 their products more efficiently to their customers The collections are renewed every week In this project, 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 Rosalia 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

Uterqiie 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

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

XS

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

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Commitments To Environmental

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

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”

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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

address its current business model and the consequent heavy carbon footprint caused by its supply chains

Additionally, Zara has been accused of not being transparent about their supply chain, which makes it difficult to verify their sustainability claims In particular, they have not shared details about the working conditions in their factories or the environmental impact of their production methods While Zara has made some efforts towards sustainability, it is up to consumers to decide if they believe those efforts are genuine 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 ”

e 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

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 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 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 large- 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

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

2.3.2 Employees

Consisting of in-store consultants, management staff and logistics centers, their duties are to communicate with customers and handle tasks assigned by the company to earn a living As claimed by Inditex (2018), employees should be given fair and decent treatment and their Human and labor Rights respected Also, if we consider the egoism theory, we can see that supporting decent working conditions for Zara's staff translates into productivity, which is the purpose 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 stakeholder should be prioritized as they are the ones who report and condemn Zara's unethical practices 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 without their trust, the company will not be able to maintain and develop, leading to bankruptcy and factories, production facilities and work being forced to stop working, causing wealth loss in hundreds of countries and many people will lose their jobs Their primary objective is to produce money for themselves, the nations 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 to detect and protect their people from labor abuses because they are the only party that

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