Zara: Corporate Social Responsibility (CSR) and Sustainability

Subject: Case Studies
Pages: 11
Words: 3019
Reading time:
11 min
Study level: Bachelor

Introduction

The impact of a company’s operations on the environment and communities has become a topic of discussion in recent years. According to Cui and Fan (2020, p. 1), ‘businesses are taking social responsibility more seriously.’ This is happening because buyers have become more conscious, paying more attention to the business CSR strategies. The main concern is the carbon footprint that these fast-fashion retailers produce as they use manufacturing methods and materials that affect the environment negatively (Brewer, 2019). This report will evaluate and critically analyze Zara’s CSR strategy and approaches to sustainability and compare the retailer’s efforts to those of their competitor H&M. Zara is a fast-fashion retailer that manufacturers and sells clothes, bags, shoes, and accessories. This brand was established in 1963 as a dress workshop, and now Zara has over 7,000 stores globally (Our story, no date). Moreover, Zara’s management made the environmental consciousness a part of its development strategy back in 2006 when the CEO introduced the 2007-2010 Environmental Strategic Plan (Our story, no date). Integrating sustainability and CSR has become important for companies. However, fast-fashion retailers such as Zara face a number of issues linked to these strategies.

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Current Issues Affecting CSR and Sustainability

A serious concern of recent years is the impact of the businesses’ operations on the environment, including pollution, carbon footprint, and the use of non-renewable resources. Unfortunately, as Brewer (2019) notes, the laws in many states fail to be up to date with the recent issues, which allows companies to take advantage of the cheap yet harmful methods of production. However, the consumers have become more conscious in recent years, paying more attention to the brand’s attitudes towards sustainability, which prompted the creation of fashion retailers that are solely focused on selling sustainably produced goods, and existing companies had to add sustainability to their strategic development plans.

From a theoretical perspective, the Research Unit on Sustainability and Climate Policy (2018, para. 1) describes sustainability as a “form of economy and society that is lasting and can be lived on a global scale.” This new form of economy and approach to business is becoming focal, considering the emerging issues with the climate, pollution, and the use of resources. Moreover, a focus on sustainability can be seen as something that enables justice between generations because the following inhabitants of Earth will not have to face problems with resources if sustainable practices are used by the current generation. However, sustainability requires input from society, businesses, and the governments because it is challenging to achieve a balance between the short-term profitability of companies and the long-term resource use issues.

CSR Strategies

Prior to the emergence of the sustainability concept, businesses, including retail companies, were focused solely on the profits generated from their operations. However, attention to sustainability has led to the development of the triple bottom line concept, where the financial performance is evaluated alongside the environmental and social impact (Harvard Business School, no date). Hence, the CEOs have added the goals that relate to the businesses’ responsibility before the society and the planet to their development initiatives, which are the CSR strategies.

According to Harvard Business School (no date), there is a classification of businesses depending on their impact on the society and environment: B Corporations, Social Purpose Corporations, and Low-Profit Limited Liability Companies. Hence, there is a variety of sustainability strategies and options available for businesses that want to ensure that their processes do not harm the environment and societies.

CSR’s are created and declared as a businesses’ self-regulation as there is no legal requirement to have such a strategy. However, Lin (2020) states that some states consider implementing legislation that would make CSR mandatory, although enforcing such policies would be a challenge. For a customer, a CSR shows that this company cares for the society it operates in, which helps build brand image and enhance the loyalty of the customers. Some countries require companies to report their CSR efforts publicly, which provides the consumer with a way of checking the business’s actual efforts (Lin, 2020). Still, the voluntary use of CSR and the adherence to the claimed efforts is an issue as not all companies are truthful in their reports. Lin (2020) states that some governments consider innovations such as “mandatory CSR due diligence, mandatory corporate philanthropy, mandatory governance structure, and a mandatory CSR duty under corporate law” to address this issue and make CSR an integral part of operations. Hence, for retailers having a CSR and adhering to it may become mandatory in the nearest future.

Philanthropy

When CSR was first introduced, it was synonymous with charity and philanthropic projects that a business supported. Now the definition of CSR and its scope goes far beyond philanthropy and encompasses operations of the business as a whole and the responsibility of the company before the society. However, philanthropy is still an important element of CSR (Lin, 2020). Still, many companies choose philanthropy as part of their CSR and donate to charitable causes, non-profits or set up their own charity organizations.

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Environmental Responsibility

Nowadays, CSR is synonymous with environmental responsibility, and it is the most common form of CSR. The common goals of environmental CSR include reducing pollution, including the pollution of air and the emission of harmful chemicals as a result of manufacturing (Harvard Business School, no date). The next option is ensuring that the manufacturing process is completed using renewable sources of energy instead of using oil, gas, and energy derived from uranium. The final option of environmental CSR targets the ways of addressing the damage that has already been done by this company or other businesses or offsetting the consequences (Harvard Business School, no date). Examples of this include planting trees, donating to support research or projects that target environmental impact, and working on projects with related purposes.

Ethical Responsibility

As the name of this CSR element implies, the ethical responsibility of companies relates to the fairness of the business’ operations. The ethical strategies of CSR allow the organization to ensure that stakeholders, investors, employees, customers, and other individuals affected by operations are treated fairly. Examples of this approach include setting a higher wage for the employees when compared to the one that is set up by the government as a minimum livable salary (Harvard Business School, no date). Additionally, businesses may create their own procurement and sourcing standards to ensure that their materials are manufactured and delivered in an ethical manner, for instance, without the use of slavery or child labor.

Benefits of CSR

CSR has been a topic of discussion among consumers and policymakers, which prompted many firms to adopt their own CSR strategies. Hence, CSRs are often used as a way of marketing a brand and creating an appeal for the consumers (Harvard Business School, no date; Lee and Lee, 2018). With fast fashion companies such as Zara, CSRs become important as these businesses are often blamed for unethical sourcing, using low-paid labor and raw materials that pollute the environment. Therefore, by creating and communicating their CSRs, retailers such as Zara can reassure the consumers that they are concerned with the impact that their operations have on the environment and society.

Next, CSRs also help businesses have more appearances from regulators and investors. Moreover, there is evidence suggesting that in companies that have CSR’s the employees are more engaged and satisfied with their work (Harvard Business School, no date; Nguyen et al., 2021). Therefore, there is a direct impact on the work productivity and outcomes of work from the CSRs. Another benefit for the business is the value that a company brings to the consumer since CSRs prompt the management to reflect on how their company delivers value to their customers and the nature of this value. This can result in innovations and new discoveries regarding the consumers’ needs and new trends, contributing to the development of the business.

Greenwashing

Among the attention and efforts that are paid to CSR by companies and consumers, some brands were accused of greenwashing. This term describes the efforts to portray a business as sustainable and focused on environmentally conscious operations, while in reality, the company dedicates no actual efforts towards sustainability (Kopnina, 2019). Greenwashing is done through advertisements and marketing campaigns to create a good brand image; however, many fast-fashion retailers, including Zara, were accused of employing this unfair practice (Księżak, 2017). Evidently, with the attention towards sustainability from the consumers, greenwashing harms the brand image of a retailer.

Zara’s CSR

Zara is a fast-fashion retailer, which means that the strategy of this business is manufacturing and selling clothes at a low price and bringing new collections of clothes every two weeks. This results in substantial use of resources and a number of environmental issues such as pollution through harmful chemicals, use of plastic and non-recyclable materials, depletion of non-renewable resources.

Zara’s sustainability efforts have been recognized by international evaluation organizations. In 2016, Zara was “named as group leader for the retailing industry in the Dow Jones Sustainability Index and top Greenpeace’s Detox Catwalk” (Our story, no date, para. 50). The award was provided since the retailer achieved zero discharge of harmful chemicals during the production of its clothes.

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As a retailer, the brand Zara belongs to the Inditex Corporation, which owns several fast fashion brands and has its own CSR strategy. Some examples of Zara’s CSR goals include the elimination of plastic bags from the stores, which was achieved in 2020, and not using single-use plastic (Gheorghe and Matefi, 2021). Moreover, the cotton, polyester, and wool used by Zara and other brands from Inditex will be fully organic by 2025. Hence, the company addresses sustainability issues by using organic materials, which by definition should be less harmful when compared to their non-organic variants.

When analyzing Zara’s sustainability efforts, it becomes apparent that the business is responding to the consumer’s demands, which may be a big challenge for a large retailer such as Zara. In comparison, smaller and newer brands, for example, Reformation, were established as sustainable from the beginning, which means that their supply chains and operations are already designed in a way that supports sustainability. Still, Zara’s efforts need to be recognized, as the company’s management not only announces the changes that will contribute to the brand’s sustainability but has already shown some great results, such as the elimination of plastic bag use.

Sustainability Analysis

The COVID-19 pandemic has had an effect on the sustainability efforts and practices of brands. More specifically, research by Shabir and AlBishri (2021) reveals that consumers’ behavior patterns and choices have changed over the course of the pandemic. Hence, how consumers shop and what they buy has changed, requiring retailers including Zara to alter their supply chain networks and dedicate efforts towards online stores and deliveries. From a sustainability perspective, the sudden outbreak of this disease has had a negative effect on this retailer as the stores were closed, the profit targets could not be reached, and the overall sustainability and CSR became of lesser importance to the management.

“Greenwashing” at Zara

Zara has been under criticism in recent years because of the company’s “greenwashing” efforts (Morrison, 2021). The term “greenwashing” is a way of describing the falsification of evidence or untruthful claims in advertising campaigns that aim to target the consumer’s expectation about eco-friendliness and sustainability of brands. Greenwashing is a highly harmful practice for the brand’s image as the other efforts of Zara that truly target sustainability may be perceived as an effort to redeem the brand’s name by the consumer.

According to Tomaszewska (2021), Zara, as part of Inditex, does not publish a dedicated CSR and sustainability report. This creates an issue with transparency and does not allow the stakeholders and consumers to check the brand’s dedication to sustainability. Still, Zara achieved a 43% transparency score in the sustainability rating, with an average being 23% for fashion businesses (Tomaszewska, 2021). Apart from the efforts that directly target the production of clothes, Zara’s management also tries to address sustainability within the logistics and across its offices by lowering the carbon emissions and consumption of energy (Księżak, 2017). Hence, Zara is dedicated to operating sustainably and not only producing and selling sustainable clothes.

As for the sustainable materials out of which the retailer manufactures its clothes, Zara currently has a “Join Life” collection, specifically distinguishing items that are made out of ecologically friendly materials. Another initiative is Join Life Care for Water in collaboration with Water.org, which included items manufactured in a way that requires less water when compared to traditional practices (Tomaszewska, 2021). The Denim for Denim collection includes items made out of recycled denim. Hence, Zara’s focus is dedicated towards sustainable production as opposed to efforts dedicated to teaching consumers how to prolong the life cycle of clothes.

Comparison to H&M

A fashion retailer with similar strategies to that of Zara is H&M. The latter has also adopted CSR and sustainability strategies similarly to Zara. According to Tomaszewska (2021, p. 85), “H&M is considered to be one of the most sustainable fashion companies in the world.” Hence, in terms of sustainability, it is difficult for Zara to compete with H&M. H&M has also ranked as the first fashion retail company in the Dow Jones 2019 Sustainability World Index and received an A list rating at CDP 2019 (Tomaszewska, 2021). Thus, these awards show that H&M’s sustainability and CSR actions have been effective and are recognized by international organizations and evaluators.

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One reason why H&M has been very successful with its sustainability efforts is that the company declares leading the action towards combating climate change and sustainability issues as its vision (Tomaszewska, 2021). To achieve this, H&M invests in innovation, transparency, and rewarding sustainable actions. For example, in its CSR strategy, this retailer cites collecting and recycling customers’ clothes, and in 2019 57% of H&M’s clothes were from recycled or sustainably produced materials (Tomaszewska, 2021). This is achieved by communicating the CSR values across the supply chain, which means that the procurement process has to align with H&M’s CSR strategy. Apart from this, to change the lifecycle of clothes, which is typically linear and includes manufacturing, selling, using, and disposing of items, H&M has launched several initiatives. For instance, this brand has designed a line of clothes that is more durable in comparison to traditional fast fashion items. Additionally, the “Take Care” program is encouraging consumers to wash their clothes at lower temperatures and hang dry them, which prolongs the life cycle of items (Tomaszewska, 2021). Finally, in selected locations, H&M offers free sewing and repair services, which allows buyers to use their clothes for longer.

When critically analyzing H&M’s approach, one can conclude that this business has been successful in its CSR and sustainability efforts both in theory and practice. The company has a CSR strategy, has launched several sustainability initiatives, and has a sourcing system that requires the contractors to approach manufacturing ethically, which proves that this business views sustainability as essential for its future.

Evaluation

Both Zara and its competitor H&M have done a lot to address the sustainability and CSR issues. The analysis of Zara’s current CSR shows that the retailer is dedicated to manufacturing clothes from organic materials and illuminating the use of plastic in its stores. One issue with sustainability that Zara has not addressed is the ethical labor practices from its suppliers and contractors. While the use of cheap labor from developing countries allows Zara to manufacture clothes at low prices, the CSR standards and theory require fast fashion companies to review their supply chain management practices and focus on working with contractors that pay fair wages to their employees. The current approach to CSR that Zara demonstrates appears to be instrumental, meaning that this business uses CSR as a way of branding and promotion as opposed to making sustainability a core value of the brand. Hence, Zara needs to pay more attention to sustainability, similar to its main competitor H&M.

Recommendations

Based on the current market conditions and consumer expectations, Zara has to take the issue of sustainability more seriously. Considering the greenwashing controversies that Zara has faced in the past, the retailer has to be careful when communicating its CSR and sustainability efforts (Księżak, 2017). Consumers nowadays have access to information and can check whether the businesses’ claims are true, and therefore, it is recommended that Zara provides as much verifiable information in its sustainability reports as possible. Tomaszewska (2021, p. 80) distinguishes between instrumental and strategic CSR, defining the first one as a “minimal commitment CSR” that companies adopt because it is the latest trend. This approach to CSR can harm firms in the long term because consumers will lose trust and loyalty towards the brand if they see that the efforts of the retailer are not making a true impact. Instead, committing to the strategic SCR, which is the actual effort towards making a change, is what contributes to both business development and consumer loyalty (Tomaszewska, 2021). Moreover, although Zara has been successful in many aspects linked to sustainability, the lack of a CSR report makes it difficult to communicate the value of these efforts to the consumer. Hence, it is recommended for the business to prepare annual CSR and sustainability targets and publish the result report at the end of the year.

Conclusion

In summary, this report discusses the issues of CSR and sustainability using the example of Zara and compares the brand’s efforts to those of H&M. Both Zara and H&M are fast fashion brands, which inherently are considered not sustainable as they produce cheap clothes and use unethical sourcing practices. However, both companies have made efforts towards sustainability in recent years, recognized by Dow Jones 2019 award. However, H&M has more initiatives dedicated to prolonging the lifecycle of clothes and teaching consumers how to care for their items. Although Zara has also invested in reducing energy consumption and greenhouse emissions and manufacturing clothes from ecologically friendly materials, the brand has to invest in communicating these efforts to the consumers. Additionally, Zara currently does not publish a CSR report or targets, which harms the transparency of this brand.

Reference List

Brewer, M. K. (2019) ‘Slow fashion in a fast-fashion world: promoting sustainability and responsibility, Laws, 8(4), p. 24.

Harvard Business School (no date) Types of corporate social responsibility to be aware of. Web.

Gheorghe, C.A. and Matefi, R. (2021) ‘Sustainability and transparency—necessary conditions for the transition from fast to slow fashion: Zara Join Life collection’s analysis,’ Sustainability, 13, p. 11013.

Kopnina, H. (2019) ‘Greenwashing or best case practices? Using circular economy and Cradle to Cradle case studies in business education, Journal of Cleaner Production, 219, pp. 613-621.

Księżak P. (2017) ‘The CSR challenges in the clothing industry’, Journal of Corporate Responsibility and Leadership, 3, pp. 10-15.

Lee, J. and Lee, Y. (2018) ‘Effects of multi-brand company’s CSR activities on purchase intention through a mediating role of corporate image and brand image’, Journal of Fashion Marketing and Management, 22(3), pp. 387-403.

Lin, L.-W. (2020) Mandatory corporate social responsibility legislation around the world: emergent varieties and national experiences. Web.

Nguyen, H.T. et al. (2021) ‘Enhancing sustainability in the contemporary model of CSR: a case of fast fashion industry in developing countries, Social Responsibility Journal, 17(4), pp. 578-591.

Morrison, R. (2021) Major high-street brands accused of ‘greenwashing’ eco-credentials, Mail Online. Web.

Our story (no date) Web.

Research Unit on Sustainability and Climate Policy (2018) Theory of sustainability. Web.

Shabir, S. and AlBishri, N. (2021) ‘Sustainable retailing performance of Zara during COVID-19 Pandemic’, Open Journal of Business and Management, 9(3), pp. 1013-1029.

Tomaszewska, M.( 2021) ‘CSR practice in the clothing industry. The experience of H&M and Zara’, Nasze Studia, 11, pp. 81-90.