CHALLENGES AND OPPORTUNITIES<\/p>\n
To capture the impact of climate change on the fashion industry, I will focus on the world\u2019s largest fashion retailer, Inditex, the owner of Zara. I expect climate change to affect Inditex through 4 types of forces:<\/p>\n
- \n
- First, global warming is affecting the way fashion operates and in specific impacting the launch calendar (longer summers are postponing start of winter season) and composition of its fashion collections (introduction of transitional collections with lighter materials[iii]<\/a>); as well as forecasting and margin results (2015 record high temperatures led to excessive inventory in winter-related apparel, and subsequent heavily discounted promotions[iv]<\/a>). Inditex is very well positioned to react to these rapid changes, thanks to its ability to design, manufacture and deliver product to stores in three weeks[v]<\/a>, significantly faster than its competitors.<\/li>\n
- Second, climate change is affecting the availability and price of key raw materials used for the production of garments (for example, cashmere[vi]<\/a> and cotton), which poses additional pressure on retailers` margins. Due to lower availability of water from depleting aquifers and increases in temperatures the industry has seen cotton prices increase by 5-6% over the past 2 years[vii]<\/a>.<\/li>\n
- Third, consumer demand is shifting towards brands known for their sustainability attributes, driven by millennials` increased awareness of environmental issues[viii]<\/a>. This trend has pushed Inditex to launch in September 2016 a new line (\u201cJoin Life collection\u201d) made using environmentally friendly materials[ix]<\/a>, which presents an opportunity for Zara to better engage with a growing market segment.<\/li>\n
- Last, Inditex will increasingly face regulatory risks, given its prominence in a highly polluting industry, and its HQ base out of Spain. Even if the COP21 Climate Agreement signed in December 2015 will only come into effect in 2020[x]<\/a>, Inditex may be affected more than its competitor by local (EU and Spanish) environment regulations, known to be more stringent than elsewhere[xi]<\/a>.<\/li>\n<\/ul>\n
INDITEX ENVIRONMENTAL GOALS<\/p>\n
Inditex has reacted to the climate change challenges by introducing goals across 2 dimensions. The first initiative of Inditex’s Global Sustainability Strategy commits to eliminate toxic chemicals from its supply chain by 2020[xii]<\/a>. The second commitment is to reduce by 2020 (vs. 2012) by 15% the energetic intensity per garment of own operations, and to decrease the use of energy in stores by 10% per garment[xiii]<\/a>. Inditex will pressure its broad network of manufacturing partners, most of which are based in developing markets where environment law are lax, to comply with Inditex\u2019s own standards[xiv]<\/a>, thereby positively influencing key suppliers that feed the global fashion industry.<\/p>\n
The sustainability policies that Zara has put in place in the past have been offset by the impact on resources consumption generated by rapid growth (see exhibit 1[xv]<\/a>).\u00a0 Inditex should take its Global Sustainability Strategy one step forward and match some of the innovation that other companies in fashion have introduced:<\/p>\n
- \n
- Kering, a luxury conglomerate, publishes yearly its own Environmental Profit and Loss account to identify where are most carbon emissions coming from; for Kering in specific, they occur in raw material production and initial processing stages[xvi]<\/a>; H&M, Zara`s main competitors, estimated that 25% of energy footprint is generated by customers, after the product has been sold[xvii]<\/a>. Based on this insight, Inditex could educate consumers to take care of their clothes with \u201clow-impact\u201d solutions, or invest in the development of new fibers that will require minimal care.<\/li>\n
- As the number of clothing that consumers keep decreases significantly[xviii]<\/a> , H&M has introduced a program that encourages customers to drop off old clothes across its stores, which the company then recycles.[xix]<\/a>. Alternatively, Inditex could tackle the waste issues by engineering apparel that can be recycled more easily.<\/li>\n
- Inditex should minimize the environment and financial cost of transporting goods around the world, thereby reaping savings. For instance, opening a DC in China, a fast growing market where the number of Zara`s stores has doubled in 4 years, could end the current costly move of garments from Asian factories, to Spain, back to Asian stores.<\/li>\n<\/ul>\n
As industry leader, Zara has the responsibility of demonstrating to the fashion industry that climate change challenges can become opportunities to innovate, reduce costs and engage with consumers.<\/p>\n
(796 words)<\/p>\n
<\/p>\n
![\"image-2\"](\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/image-2-300x210.png\")
<\/a>EXHIBIT 1<\/figcaption><\/figure>\n [i]<\/a> http:\/\/www.reuters.com\/article\/climatechange-summit-fashion-idUSL8N13S2EN20151203<\/a><\/p>\n
[ii]<\/a> http:\/\/www.mckinsey.com\/business-functions\/sustainability-and-resource-productivity\/our-insights\/style-thats-sustainable-a-new-fast-fashion-formula<\/a><\/p>\n
[iii]<\/a> http:\/\/wwd.com\/business-news\/business-features\/climate-change-impact-fashion-apparel-10525390\/<\/a><\/p>\n
[iv]<\/a> http:\/\/wwd.com\/business-news\/business-features\/climate-change-impact-fashion-apparel-10525390\/<\/a><\/p>\n
[v]<\/a> https:\/\/www.businessoffashion.com\/articles\/intelligence\/inditex-agile-fashion-force<\/a><\/p>\n
[vi]<\/a>http:\/\/www.kering.com\/sites\/default\/files\/document\/bsr_kering_report_climate_change_implications_and_strategies_for_the_luxury_fashion_sector.pdf<\/a><\/p>\n
[vii]<\/a> http:\/\/wwd.com\/business-news\/business-features\/climate-change-impact-fashion-apparel-10525390\/<\/a><\/p>\n
[viii]<\/a> http:\/\/www.mckinsey.com\/business-functions\/sustainability-and-resource-productivity\/our-insights\/style-thats-sustainable-a-new-fast-fashion-formula<\/a><\/p>\n
[ix]<\/a> http:\/\/www.glossy.co\/rise-of-streetwear\/zara-launches-first-sustainable-fashion-line<\/a><\/p>\n
[x]<\/a> https:\/\/www.businessoffashion.com\/articles\/intelligence\/what-the-cop21-climate-agreement-means-for-fashion<\/a><\/p>\n
[xi]<\/a> http:\/\/www.economist.com\/news\/finance-and-economics\/21637411-environmental-regulations-may-not-cost-much-governments-and-businesses<\/a><\/p>\n
[xii]<\/a> https:\/\/www.businessoffashion.com\/community\/voices\/discussions\/can-fashion-industry-become-sustainable\/inditex-agile-fashion-force<\/a><\/p>\n
[xiii]<\/a> https:\/\/www.inditex.com\/en\/sustainability\/environment<\/a><\/p>\n
[xiv]<\/a> https:\/\/www.businessoffashion.com\/community\/voices\/discussions\/can-fashion-industry-become-sustainable\/inditex-agile-fashion-force<\/a><\/p>\n
[xv]<\/a> https:\/\/www.businessoffashion.com\/community\/voices\/discussions\/can-fashion-industry-become-sustainable\/inditex-agile-fashion-force<\/a><\/p>\n
[xvi]<\/a> http:\/\/www.kering.com\/en\/sustainability\/epl<\/a><\/p>\n
[xvii]<\/a> https:\/\/www.businessoffashion.com\/articles\/intelligence\/what-the-cop21-climate-agreement-means-for-fashion<\/a><\/p>\n
[xviii]<\/a> http:\/\/www.mckinsey.com\/business-functions\/sustainability-and-resource-productivity\/our-insights\/style-thats-sustainable-a-new-fast-fashion-formula<\/a><\/p>\n
[xix]<\/a> https:\/\/www.businessoffashion.com\/articles\/intelligence\/what-the-cop21-climate-agreement-means-for-fashion<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"
Inditex, the leading player of the second most polluting industry in the world, has the responsibility to demonstrate to the fashion world that the challenges posed by climate change can become opportunities that encourage innovation, costs reduction, and consumers engagement.<\/p>\n","protected":false},"author":2409,"featured_media":0,"comment_status":"open","ping_status":"closed","template":"","categories":[],"class_list":["post-11273","hck-submission","type-hck-submission","status-publish","hentry"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/climate-change-challenge-2016\/","yoast_head":"\n
INDITEX: FROM \u201cLOOK GOOD\u201d TO \u201cDO GOOD\u201d - Technology and Operations Management<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/inditex-from-look-good-to-do-good\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"INDITEX: FROM \u201cLOOK GOOD\u201d TO \u201cDO GOOD\u201d - Technology and Operations Management\" \/>\n<meta property=\"og:description\" content=\"Inditex, the leading player of the second most polluting industry in the world, has the responsibility to demonstrate to the fashion world that the challenges posed by climate change can become opportunities that encourage innovation, costs reduction, and consumers engagement.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/inditex-from-look-good-to-do-good\/\" \/>\n<meta property=\"og:site_name\" content=\"Technology and Operations Management\" \/>\n<meta property=\"article:modified_time\" content=\"2016-11-04T14:36:27+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/image-2-300x210.png\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data1\" content=\"5 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/inditex-from-look-good-to-do-good\\\/\",\"url\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/inditex-from-look-good-to-do-good\\\/\",\"name\":\"INDITEX: FROM \u201cLOOK GOOD\u201d TO \u201cDO GOOD\u201d - Technology and Operations Management\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/inditex-from-look-good-to-do-good\\\/#primaryimage\"},\"image\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/inditex-from-look-good-to-do-good\\\/#primaryimage\"},\"thumbnailUrl\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/wp-content\\\/uploads\\\/sites\\\/4\\\/2016\\\/11\\\/image-2-300x210.png\",\"datePublished\":\"2016-11-04T14:34:52+00:00\",\"dateModified\":\"2016-11-04T14:36:27+00:00\",\"breadcrumb\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/inditex-from-look-good-to-do-good\\\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/inditex-from-look-good-to-do-good\\\/\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/inditex-from-look-good-to-do-good\\\/#primaryimage\",\"url\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/wp-content\\\/uploads\\\/sites\\\/4\\\/2016\\\/11\\\/image-2.png\",\"contentUrl\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/wp-content\\\/uploads\\\/sites\\\/4\\\/2016\\\/11\\\/image-2.png\",\"width\":855,\"height\":598},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/inditex-from-look-good-to-do-good\\\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Submissions\",\"item\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/\"},{\"@type\":\"ListItem\",\"position\":3,\"name\":\"INDITEX: FROM \u201cLOOK GOOD\u201d TO \u201cDO GOOD\u201d\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/#website\",\"url\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/\",\"name\":\"Technology and Operations Management\",\"description\":\"MBA Student Perspectives\",\"potentialAction\":[{\"@type\":\"性视界Action\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"INDITEX: FROM \u201cLOOK GOOD\u201d TO \u201cDO GOOD\u201d - Technology and Operations Management","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/inditex-from-look-good-to-do-good\/","og_locale":"en_US","og_type":"article","og_title":"INDITEX: FROM \u201cLOOK GOOD\u201d TO \u201cDO GOOD\u201d - Technology and Operations Management","og_description":"Inditex, the leading player of the second most polluting industry in the world, has the responsibility to demonstrate to the fashion world that the challenges posed by climate change can become opportunities that encourage innovation, costs reduction, and consumers engagement.","og_url":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/inditex-from-look-good-to-do-good\/","og_site_name":"Technology and Operations Management","article_modified_time":"2016-11-04T14:36:27+00:00","og_image":[{"url":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/image-2-300x210.png","type":"","width":"","height":""}],"twitter_card":"summary_large_image","twitter_misc":{"Est. reading time":"5 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"WebPage","@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/inditex-from-look-good-to-do-good\/","url":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/inditex-from-look-good-to-do-good\/","name":"INDITEX: FROM \u201cLOOK GOOD\u201d TO \u201cDO GOOD\u201d - Technology and Operations Management","isPartOf":{"@id":"https:\/\/d3.harvard.edu\/platform-rctom\/#website"},"primaryImageOfPage":{"@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/inditex-from-look-good-to-do-good\/#primaryimage"},"image":{"@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/inditex-from-look-good-to-do-good\/#primaryimage"},"thumbnailUrl":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/image-2-300x210.png","datePublished":"2016-11-04T14:34:52+00:00","dateModified":"2016-11-04T14:36:27+00:00","breadcrumb":{"@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/inditex-from-look-good-to-do-good\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/d3.harvard.edu\/platform-rctom\/submission\/inditex-from-look-good-to-do-good\/"]}]},{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/inditex-from-look-good-to-do-good\/#primaryimage","url":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/image-2.png","contentUrl":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/image-2.png","width":855,"height":598},{"@type":"BreadcrumbList","@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/inditex-from-look-good-to-do-good\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/d3.harvard.edu\/platform-rctom\/"},{"@type":"ListItem","position":2,"name":"Submissions","item":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/"},{"@type":"ListItem","position":3,"name":"INDITEX: FROM \u201cLOOK GOOD\u201d TO \u201cDO GOOD\u201d"}]},{"@type":"WebSite","@id":"https:\/\/d3.harvard.edu\/platform-rctom\/#website","url":"https:\/\/d3.harvard.edu\/platform-rctom\/","name":"Technology and Operations Management","description":"MBA Student Perspectives","potentialAction":[{"@type":"性视界Action","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/d3.harvard.edu\/platform-rctom\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"}]}},"_links":{"self":[{"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/hck-submission\/11273","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/hck-submission"}],"about":[{"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/types\/hck-submission"}],"author":[{"embeddable":true,"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/users\/2409"}],"replies":[{"embeddable":true,"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/comments?post=11273"}],"version-history":[{"count":0,"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/hck-submission\/11273\/revisions"}],"wp:attachment":[{"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/media?parent=11273"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/categories?post=11273"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}} - As the number of clothing that consumers keep decreases significantly[xviii]<\/a> , H&M has introduced a program that encourages customers to drop off old clothes across its stores, which the company then recycles.[xix]<\/a>. Alternatively, Inditex could tackle the waste issues by engineering apparel that can be recycled more easily.<\/li>\n
- Second, climate change is affecting the availability and price of key raw materials used for the production of garments (for example, cashmere[vi]<\/a> and cotton), which poses additional pressure on retailers` margins. Due to lower availability of water from depleting aquifers and increases in temperatures the industry has seen cotton prices increase by 5-6% over the past 2 years[vii]<\/a>.<\/li>\n