Etailer Zalando is investing heavily in its sustainability strategy. Drapers headed to its headquarters in Berlin to learn more.
Sustainability has been on Rubin Ritter’s mind for quite some time. Towards the end of last year, the co-CEO of German etail giant Zalando sat down at his computer and began to calculate his carbon footprint.
He had read in a newspaper article that people like him – who care about environmental issues, but are well educated and well paid, and therefore more likely to travel widely – are among the worst carbon offenders.
The article was proved correct: Ritter’s carbon footprint was three times the European average. He has since focused on cutting his carbon emissions, and the approach is trickling down into the business he runs.
Last month, the etailer unveiled a raft of ambitious sustainability targets as part of its new “Do More” strategy. Comprehensive and wide ranging, the strategy marks the start of Zalando’s ambition to become a “sustainable fashion platform with a net-positive impact on the people and the planet”.
Ritter outlined the plans to journalists gathered at Zalando’s headquarters overlooking the river Spree in achingly cool east Berlin. Sustainability stakeholders from within Zalando and external environmental experts took to the stage to outline the etailer’s plans, and discuss the wider issues facing fashion.
The business pledged to go carbon neutral across its own operations, deliveries and returns from 30 October. This will be driven by operational improvements such as renewable energy, order bundling and green delivery options, as well as carbon offsetting. Customers will be given the option to pay (around 20p per order) to help offset the carbon impact of their delivery at checkout.
Zalando also promised to eliminate single-use plastic by 2023 and for 20% of its gross merchandise volume (GMV) to comprise sustainable products by the same year. The etailer aims to extend the life of 50 million garments by 2023 through measures such as selling second-hand items via its Zalando Wardrobe platform, and educating customers on recycling and how to use products for longer.
Companies that have a compelling business model, appeal to the customer and are sustainable have a bright future
Rubin Ritter, Zalando
The new strategy builds on existing commitments to cleaner fashion. Last year, Zalando rolled out a flag icon to denote sustainable products on its website to help customers make ethical choices. There are more than 15,000 sustainable items from 240 brands, including Veja, Patagonia and Mother of Pearl, available via the platform.
“As a start-up, the first few years of Zalando were about surviving, raising money and building a business that that would be there for a long time,” Ritter said. “We weren’t thinking about sustainability other than making sure the company would exist for the future. That changed in 2015, when we created our first targets and started laying the groundwork. With 2020 approaching, it seemed the right time to revisit our strategy and shift up a gear in our approach to sustainability. The question we asked ourselves was: have we been doing enough?”
Sustainability is in vogue across the fashion industry. Increased scrutiny from consumers and governments alike has sent environmental concerns rocketing up many retailers’ agenda. Pressure to act makes becoming more sustainable the “right” thing for retailers, but Ritter stressed the tangible commercial benefits of going green.
“Taking these steps will make us a stronger business. Being more sustainable will make us more relevant to the consumer of the future. Companies that have a compelling business model, appeal to the customer and are sustainable have a bright future. Any that don’t do these three will not exist.”
We need Zalando to be transparent and disclose its carbon emissions throughout the supply chain
Sienna Somers, Fashion Revolution
Sienna Somers, policy and research co-ordinator at sustainable fashion campaign group Fashion Revolution, praised Zalando’s commitment to extending the life of clothes, but added its commitment to carbon reduction could go further: “Making our clothes last as long as possible, either through purchasing second-hand clothing or by taking better care of our clothes, is one of the key ways we can reduce the impact that fashion has on the planet. Second-hand clothing platforms, such as Zalando’s, have the ability to change public perceptions around the value of used clothing and enables us to reduce the impact our clothes have on our planet.
“Estimates suggest that at least 50% of fashion brands’ carbon emissions comes from their supply chain, with the supply chain accounting for up to 90% of carbon emissions for some brands. However, Zalando’s net-zero carbon footprint commitment only applies to its own operations, so the running of offices, warehouses and [deliveries]. In order to hold brands accountable to its commitments, we also need it to be transparent and disclose its carbon emissions throughout the supply chain, as well as from its own operations, so we can understand how much of an impact its supply chain has on its overall carbon emissions and whether it is reducing this impact year-on-year.”
Zalando is currently flying high. Revenue grew by 26% to €1.5bn (£1.3bn) in the three months to 30 September 2019, and its website hit a record 1 billion visits during the period. The number of active customers grew by 17.5% to 29.5 million and the company achieved an adjusted EBIT of €6.3m (£5.4m), compared with an adjusted EBIT loss of €38.9m (£33.6m) in the same period in 2018.
Making fashion more sustainable means grappling with a difficult contradiction: retailers may want to go greener, but they also want to grow their businesses – which ultimately means they want customers to continue buying clothes. Rubin admitted that Zalando’s sustainability drive may well result in short-term sacrifices, although he stressed his belief that the new strategy will contribute to Zalando’s long-term growth.
“These are areas we are prepared to make a stand on, and where we are willing to make short-term compromises on economic growth and profitability,” he said. “Long term, we know sustainability has to be part of our strategy or our company will be at risk.”
Zalando is repositioning one of its 11 own labels, Zign, as a sustainable brand. From 2020, all Zign products will be made from at least 50% sustainable materials or 20% recycled content. All Zign products will also be manufactured in the top 50% of Zalando’s most sustainable suppliers. Around 40% of the collection will be made in European countries, including Spain and Portugal.
As well as changing its own label, one of the most attention-grabbing pillars of Zalando’s new sustainability strategy is the etailer’s claim that it will improve its minimum ethical sourcing standards by 2023 – and jettison brand partners that fail to comply. This could include ending relationships with commercially successful labels, Ritter said.
“We will increase our ethical sourcing standards. We have to be part of the solution in the challenges the industry is facing, and we will address the topic in partnership with brands. If we find brands don’t live up to the minimum standards we set, we will end these relationships.”
Dropping brands that fail to commit to sustainability – especially commercially successful big hitters – is a bold stance. However, this is the kind of hard-hitting step necessary to force the hands of reluctant partners. Lasting change will only be achieved if the industry acts in unison, something rival Asos has also recognised. The UK etailer held a sustainability conference for its 90 top-selling brands last year in a bid to work together to deliver systematic change.
Zalando co-founder and co-CEO David Schneider added: “We can’t make 20% of our GMV more sustainable on our own – we need our brand partners. We have to get the right information and the right commitments from them because we cannot do it alone. That is a challenge, but if not us, who will take it on? We have the scale and reach to pull everybody along.”
Sara Diez, Zalando’s vice-president of womenswear, agreed: “We are saying to brands: we need you to get on board [with sustainability.] We will help you get there, but we need you to get involved.”
The Drapers Verdict
Zalando’s new sustainability strategy is bold and wide ranging. Ritter and his senior leadership team seemed genuinely enthused about going greener, while also recognising that the road ahead will not be easy. The etailer will need to ensure sustainability remains a key focus across all of its departments if it is to meet its public promises. Zalando’s biggest impact will be if it can encourage its 2,000-plus brand partners to also embrace sustainability.