Lecture Review: When the retail industry chooses for sustainability

The retail industry is often described as a big environmental and social troublemaker because of the extensive proportion of chemicals in its products, the minimum wages it pays to its labour force, and ultimately, the worldwide negative impact of the former two. Do these accusations still hold or do we see a change in the global corporate retail mindset?

Already prior to the financial turmoil that started in 2008, the global market observed an increase in environmental, social, and governance spending, commonly known as ESG. At that time, however, corporate social responsibility was still perceived as an alternative, exotic field, way out of the comfort zone of traditional investors.

Today, it seems that companies on the global scale are making an effort to make up for previous mistakes and to minimize future ones not just by investing in short-term social projects to improve their public image, but by redesigning and adapting their entire production process into a sustainable manner of working. Surprisingly perhaps, an example of a  large-scale sustainable investor is the clothing industry.

C&A: making a clear choice for sustainability

There is barely a country in Europe without at least one C&A store. The company, which employs more than 30,000 people in Europe, has expanded to China, Latin America, and recently Russia as its only franchise market. Its plans for future growth are even more impressive. C&A will spend a good part of the EUR 11 billion it made in sales in 2012, on building 50 new stores on an annual basis, and strengthening its brand recognition by retaining its lead role on the bio cotton market.

Top managers of the clothing retailer C&A shared some insights during  a recent talk SCOPE Economics at the Maastricht University School of Business and Economics on how their company and the retail industry have been increasingly investing in sustainable development to make up for previous damage cost.

“We did this in response to C&A’s customers’ loyalty and trust,” said Andreas Seitz, Chief of Staff of the retailer’s Global Leadership Council. Seitz differentiated between the three types of apparel markets – the premium, mid- and price markets, and explained that through its affordable but still qualitative production, and its increasingly sustainable working policies, C&A positioned itself in the “value” market, or “the higher end of the price market, but below the mid-market”.

C&A distinguishes itself from other global retail-holdings in the ownership structure of the company, which is entirely privately held. Seitz explained that the “generation aspect” was extremely important for C&A’s shareholders, who want to hand over a healthy and sustainable business to the next generation. As a result, the company focuses on a long-term outlook instead of maximum quarterly performance.

This reminded of Geert Hofstede’s theory on the importance of the long-term perspective for sustainability. C&A is successfully implementing its sustainable policy with a large stake of its capital being spent on green and solar energy and on promoting education in developing nations, where many of its factories are based.

Seitz stressed the value of proactive social responsibility strategies for the core business. “In recent years, customers have become increasingly cautious about the origins of the materials used for the goods they purchase, as well as for companies’ labour policies,” Seitz pointed out. “In that sense,” he argued, “sustainable practices pay off through higher customer recognition and affiliation with the brand’s values.”

He admitted, however, that the chemicals used for colouring and other purposes, which seem inevitable in the mass clothing industry, are a serious issue. To decrease its pesticides use and to produce according to legislations for permitted chemical cocktails, C&A has established a special chemistry department for testing and supervision of safety standards. It addresses risks for both the end customers of the company, as well as risks of soil and water pollution.

CottonConnect

Philip Chamberlain, Head of Sustainable Business Development at C&A elaborated on C&A’s long-run strategy to promote organic cotton production in emerging markets, with its main focus on India. Currently, 99% of the cotton used worldwide is not organic, but by 2020, Chamberlain said, C&A will aim at exclusively working with either certified organic cotton, or with more sustainable forms of the material, the production of which would require less water input.

“The role of senior management is crucial to make promises become reality,” Chamberlain said. Next to support from the board, key success factors include having a clear target, and developing an integrated supply chain from farmers, field workers, suppliers and other stakeholders to improve efficiency levels.

In the global initiative to support organic cotton producers, some of the biggest players in the clothing market such as Puma, Nike, H&M, and C&A have put their rivalry for market-share aside and joined forces to found CottonConnect – an organisation investing in sustainable cotton production to improve the economic, environmental and social situation in producing countries.

C&A is both a shareholder and a customer of CottonConnect. “We wanted to share our knowledge on organic cotton production with our peers, because one company cannot change the world by itself,” Chamberlain said. At the same time, CottonConnect, and indirectly C&A, plays a vital role for local farmers in developing countries, as it grants them access to the world’s cotton market and other networks. This results in better net profits for the producers and generally helps to improve their living standards. “C&A’s shareholders invest a great deal of money to ensure that the positive social impact of their efforts is sustained,” Chamberlain added.

Both Seitz and Chamberlain stressed the importance of further cooperation among companies in the industry to increase levels of sustainability.

As the retailer sector is booming all over the world and expected to expand to Japan, Pakistan, India and South America, the impact of all actions undertaken on the environment and on societies will be even bigger than before. A more responsible and sustainable approach is therefore needed to ensure long-term economic and social benefits.

 

By Darina Bacheva

Darina Bacheva is a Project Team Member at the Service Science Factory and a master’s student in Financial economics at Maastricht University.

 

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