Exploration Of The Ethical Implications Of Fast Fashion

Introduction and background

Forever 21 is an American fast fashion retailer with locations in the Americas, Asia, Europe, and the Middle East. Forever 21 is chiefly known for selling low priced clothing, as well as accessories, beauty products, and home goods. The organization was founded in 1984 by Do Won Chang and his wife Jin Sook Chang in Los Angeles, California. Zara is a Spanish fast fashion retailer with locations primary in the Americas and Europe, as well as Asia and the Middle East. Similarly to Forever 21, Zara is primarily known for selling apparel and accessories. Zara is owned by Inditex, a Spanish apparel retailer and the largest fashion group in the world. An analysis of Zara and Forever 21 allows for an exploration of the ethical implications of fast fashion on sustainability, human rights, and artistic integrity.

Both Zara and Forever 21 are fast fashion retailers that have experienced backlash for their fast fashion business model. Sustainability, human rights, and artistic integrity are the primary ethical issues associated with fast fashion businesses, as ethical considerations may be compromised in favor of lower costs and rapid, mass production. Fast fashion can be defined as the practice of rapidly adopting trends and designs, quickly transferring them into finished products through an expedited supply chain, and selling at lower prices. Essentially, fast fashion allows consumers to buy trendy clothing at lower prices. The lower prices result in compromised quality of clothing, ethics during the design and manufacturing process, and environmental impacts. Fast fashion is most controversial for its use of unethical labor practices such as underpaid workers and unsafe working environments and environmental degradation. Fast fashion creates large amounts of textile waste and greenhouse gases. Fast fashion retailers are also known to copy designs of higher end brands, often stitch-by-stitch. As more consumers have become conscious of how organizations approach corporate social responsibility, the ethical implications of fast fashion retailers have been under increasing scrutiny. While many organizations have made strides to improve sustainability and working conditions in their business models, fast fashion retailers have eschewed such measures to deliver lower prices, larger selection, and faster merchandise turnover instead.

The ethical implications of fast fashion are pertinent because they reveal shortcomings of the fast fashion business model. Fast fashion retailers are hugely successful if evaluated with the sole goal of profit-maximization in mind. However, it can be argued that businesses have more nuanced obligations to its consumers, stakeholders, and community in which it is located. With this perspective in mind, the fast fashion business model appears to make many ethical compromises that negatively impact consumers, stakeholders, and communities.

Zara business plan

An analysis of Zara provides insight into a fast fashion business plan and elucidates why fast fashion retailers may choose to make particular decisions. Zara’s marketing mix is generally representative of a universal strategy undertaken by a swath of fast fashion retailers. Like all fast fashion retailers, Zara has a low-pricing strategy to attract customers. Zara’s prices are specific to the country that the store is in. The prices are based on what the consumers in that area are willing to pay (market based pricing strategy). Zara budgets for production according to this target price which creates a somewhat fixed profit margin for every item. The owner of Inditex, Zara’s parent company, has a personal philosophy about clothing that regards clothes as perishable goods like bread or fruit. When these goods are first purchased, they are fresh and appealing, but after a certain amount of time, they need to be thrown out because they become stale. Zara and many other fast fashion companies adopt a similar attitude towards clothing. Zara’s products have three characteristics that allow for rapid production and adaptation to the trends of the moment.

Firstly, there is shorter time between the release of new products. New products are constantly being released, which creates more variety and incentivizes customers to keep coming back because there will always be something new. This also gives Zara the opportunity to always be on par with whatever is trending at the moment. Secondly, products are stocked in lower quantities that allow for clothes to be sold quickly, so that new products can come in. This creates a fast turnover rate that allows customers to always see new inventory. Lastly, there are more styles of every clothing type. Zara makes an abundance of different designs which increases the likelihood that customers will find at least one item that they enjoy. Zara has an entire design team in northwest Spain dedicated to identifying new trends. Zara does not attempt to predict trends or shape them. Instead, it moves in sync with pre-existing trends. New styles and changes in design can be produced instantly due to fast supply chain.

Corporate social responsibility definition

Corporate social responsibility can be defined as an organization’s social responsibility to consider the welfare of its community, employees, and environment. Corporate social responsibility often entails ensuring employees experience adequate standards of living and quality of life. These ethical considerations require organizations to balance the interests of stakeholders and members of the community in which the organization is located and operating. Corporate social responsibility is self-enforced and a way for organizations to show that they care about issues outside of creating profits. However, another aspect of corporate social responsibility is complying with labor, environmental, economic, and safety regulations.

Values and limitations of corporate social responsibility

Corporate social responsibility may not be a sufficient measure of an organization’s ethical contributions to its community. Sometimes by showing strong corporate social responsibility, organizations fail to deliver performance-related promises made to stakeholders. In addition, organizations may not be allocating its time and resources to issues that stakeholders believe are worthwhile causes. An organization’s commitment to corporate social responsibility is not always indicative of how the organization handles ethical issues. Corporate social responsibility improves company image and may draw more customers and potential shareholders, which result in more profits. Ethical actions can be taken with profit-maximization in mind, which could result in organizations delivering the bare minimum for what constitutes “corporate social responsibility.” Organizations can choose to not fully commit to their corporate social responsibility goals by not spending more time and money than what is necessary for securing a positive public image.

Corporate social responsibility and sustainability

Most fast fashion retailers are accused of having poor corporate social responsibility due to their manufacturing techniques that result in environmental degradation. Cotton and polyester are the 2 most widely used materials in clothing/textile manufacturing industry. Cotton crops make up a quarter of all pesticides used in the US. The production of cotton also requires large amounts of water, land, and results in pollution = impact on global environmental systems. Fashion industry, particularly fast fashion companies, use a lot of cotton and contribute to the negative environmental effects. Polyester uses energy and crude oil to produce and results in toxic emissions and releases acidic gases into wastewater around manufacturing facilities. Dying the textiles create more water pollution because the synthetic chemicals are disposed of in nearby rivers that eventually flow out to sea. The textile dyeing industry is responsible for 12-29 percent of water contamination every year. The chemicals used to dye textiles are also bioaccumulative (they can pile up in the water) and progress through the food chain up to human consumption. Environmental Protection Agency considers textile manufacturing plants as hazardous waste generators.

Sustainability and ethics

Fast fashion has also created a culture of frequently discarding clothing, crowding landfills with chemically treated textiles and non-biodegradable synthetic fibers. Unwanted clothing usually go to already crowded landfills or incinerators, where they fill release toxic fumes as they are being incinerated. According to the Environmental Protection Agency, the average American generates 82 pounds of textile waste per year. Fast fashion compounds this pressing issue by selling cheaply made clothing that must be thrown away after short periods of use.

Corporate social responsibility and labor practices

Corporate social responsibility in fast fashion is also compromised due to unethical labor practices. Many fast fashion retailers, Zara and Forever 21 chief among them, often choose to manufacture their products in lesser developed countries with looser environmental, safety, and labor regulations. In these manufacturing facilities, many workers are regularly exposed to dangerous chemicals in unsafe working conditions without receiving proper compensation. Due to lax labor laws, children with identification cards to appear older are often employed in factories. Most fast fashion manufacturing facilities are not in compliance with safety regulations, such as unsafe electrical wiring and inadequate fire equipment and exits. According to a report by the New York Stern Business School, the Bangladesh garment industry heavily relies on subcontracting to save labor costs. Subcontracting is the act of creating a contractual agreement with an outside organization to perform a certain amount of work. Although subcontracting allows organizations to save costs, it creates more human rights abuses in the fast fashion supply chain.

Labor practices and ethics

The garment industry subcontracts with informal factories that are not registered with the government, trade associations, or foreign brands. These informal factories operate through subcontracts with larger factories and focus on one aspect of the production process, like sewing, washing, dyeing, or printing. Informal factories are not financially stable because they have fluctuating order volumes and are sometimes in politically unstable areas. These factories struggle with access to electricity and ethical worker treatment due to tight profit margins. Workers are invisible to regulators due to the informal nature of these factories. These informal factories cannot afford basic safety equipment, training, machines, and processes that improve productivity. The workers are forced to use labor intensive production methods because most factories cannot afford machinery. Despite these negative qualities of informal factories and subcontracting, they are still being used to produce for some of the world’s largest fast fashion retailers. Both Forever 21 and Zara are known to use produce their clothing in manufacturing facilities that violate labor and safety regulations. Forever 21’s production facilities are mostly located in China, with a select few in Los Angeles. However, its production facilities that are located in the United States are not exempt from unethical labor practices. Forever 21’s production facilities in Los Angeles were paying workers 50% on average of the federal minimum wage. Inditex, Zara’s parent company, has both a local and global supply chain. Over 30% of the total production is done in China, Pakistan, Bangladesh, and India. Unethical production methods allow fast fashion retailers to generate higher profit margins at the cost of human rights and corporate social responsibility.

Legal repercussions and solutions

Between these Forever 21 and Zara, the former has received more negative media attention for its use of unethical labor practices. In 2001, Forever 21 was sued by the Asian Pacific American Legal Center for unsafe and unethical treatment of workers in a dispute that was recorded in an Emmy-winning documentary in 2008. Forever 21 was sued by the United States Department of Labor in 2012 for the company’s records of employee hours and wages after sweatshop-like conditions were discovered. Another investigation on the company’s manufacturing facilities was launched in 2016 by the Department of Labor which uncovered similar conditions and mistreatment of workers. In order to combat subcontracting, brands can map their supply chains to understand what happens beyond the first sourcing tier and see whether workers are treated ethically throughout the chain. Seeing whether or not workers are treated ethically throughout the chain means tracing the supply chain back to the facilities that produce the materials for producing the goods.

Intellectual property definition

Intellectual property rights allow people to benefit financially from and earn recognition for their work or creations. Intellectual property rights can be extended to any unique creation that originates from someone’s mind and intellect. These rights exist to ensure that creators are fairly recognized and compensated for their creations. Without these rights, other people or organizations could claim ownership of someone else’s creations and their profits. What constitutes intellectual property rights becomes less clear when discussing clothing designs. The United States allows clothing companies to trademark labels and logos and trade dress appearances of items. Trade dresses are given to products that have characteristics that indicate the brand or company that made them. Trade dresses are not necessarily given to protect the product itself, but rather an iconic quality that is representative of the brand that created it. For example, Christian Louboutin shoes have their iconic red soles trade dressed because all of the brand’s shoes have the same red sole. The red sole can be seen as a characteristic that is similar to a logo or label in that they indicate the brand/company that made it. Even with these legal protections, intellectual property rights in fashion are loosely protected, as fashion retailers can copy designs stitch-by-stitch without major consequence. Fashion companies are found to be guilty of trade dress infringement if their product is likely to cause confusion with another brand. Trade dress laws are difficult to enforce and it is even more difficult to determine when infringements have taken place.

Forever 21 and intellectual property

Forever 21 regularly copies the designs of Anna Sui, Diane von Furstenberg. Sui had been copied 20 times before she took legal action against F21. It has been speculated that Forever 21 continues to steal designs and prints because it is cheaper and easier to pay the fine after getting caught than creating original prints or licensing the prints. Forever 21 has settled over 50 disputes about copying designs. Most of the disputes end with Forever21 not admitting guilt, paying a fine, and then signing a confidentiality agreement. Forever 21 does not copy the designs of well-protected companies that are notorious for pursuing other clothing companies that have copied their designs, such as Chanel or Louis Vuitton. Instead, Forever 21 regularly copies designs from Anna Sui, DVF, Alexander Wang, and smaller brands, such as Trovata.

Intellectual property and ethics

Intellectual property rights are an ethical issue for several reasons. The lack of legal protection for designs in the US and regard for artistic integrity on the part of fast fashion companies results in more environmental degradation and disregard for sustainability in the fast fashion industry. Inadequate intellectual property protection in the fashion industry enables fast fashion companies to easily copy designs. Fast fashion companies make these designs and clothing easily accessible to younger consumers at cheap prices. The wide variety of designs and products available at cheap prices to younger consumers creates a perpetual need for new items and new designs, which further fuels the environmental crisis and worsens the environmental degradation caused by fast fashion companies. Furthermore, copying designs of smaller artists and brands allows larger companies like Forever 21 to profit off of what does not belong to them. Stealing designs compromises values like artistic integrity in the design process and does not give recognition to the rightful owners of a design. Lesser known designers and brands are not able to profit off of what they have created because they usually have less resources to market their products and a smaller pool of customers than large fast fashion retailers. Fast fashion retailers are able to profit off of the work of smaller brands with the help of robust legal teams and more financial resources.

Profitability analysis definition

Profitability analysis is a tool that provides insight into an organization’s profitability, such as where an organization generates its profit and how its profit is used. Ratio analysis, news articles, final accounts, and growth projections can be used to examine profitability. Ratio analysis entails using financial information from final accounts to find gross and net profit margins and more. Ratio analysis is helpful because it allows multiple companies to be compared with each other in a quantitative manner and shows trends over time. However, comparing companies with information from ratio analysis may be misleading because not all companies operate in the same environment. In addition, although ratio analysis shows trends over time, it cannot provide accurate projections for the future because it only uses information from past and current sources. Making judgments about businesses based solely on their financial data may lead to incorrect conclusions because final accounts are not always representations of a company’s performance and financial health. Financial information cannot provide insight into the context in which those numbers were created.

Forever 21 profitability analysis

Forever 21’s growth has begun to stagnate beginning in 2015 and 2016 when the unethical treatment of workers in the garment industry began to gain more publicity. In 2015, Forever 21 sought out a 150 million dollar loan from Wells Fargo and TPG after difficulties filling stores with merchandise. Reports of decreasing profitability began to circulate in 2016 after Forever 21 split from EZ Worldwide Express, a courier service that handled all shipping and deliveries for Forever 21. EZ Worldwide Express cited Forever 21’s drastically reduced profits as the cause for filing for bankruptcy protection in early 2016. It may be argued that Forever 21’s plateau and decrease in profitability is related to increasing scrutiny on its unethical practices. However, Forever 21 is a privately held company that does not release its financial information, so any conclusions about its performance are merely speculations.

Zara profitability analysis

However, Zara has appeared to have sustained its growth with increased profit margins and relatively stable sales in 2018. Zara’s parent company Inditex reported a gross profit margin of 59.8% in June of 2018, an increase from the gross profit margin of 58.2% in June of 2017. In addition, Zara has opened 524 new stores in 58 different markets in 2018, while Forever 21 has closing stores and decreasing square footage in existing stores.

Profitability analysis and ethics

Zara’s vastly different performance in comparison to Forever 21’s may be attributed to lesser publicized ethical issues or consumer apathy regarding the ethics of fast fashion. Zara and its parent company Inditex have received negative attention for unethical labor practices, but not to the extent that Forever 21 has. Zara’s continued growth could also be indicative of the fact that consumers are willing to ignore unethical business practices as long as products are satisfactory. Although both Zara and Forever 21 are guilty of engaging in unethical manufacturing, Zara has not been subject to the same criticism from the media and general public that Forever 21 has experienced. It is worth considering that consumer and media backlash, or lack thereof, can be used to evaluate the ethics of business practices.

Conclusion

The business models of fast fashion retailers like Forever 21 and Zara have created well-known and documented ethical issues. The ethics of fast fashion and its consequences on human rights, sustainability, and artistic integrity can be analyzed through the lens of corporate social responsibility, intellectual property, and profitability analysis. Fast fashion retailers can use unethical labor practices that stem from the need to employ cheap labor and the practice of subcontracting. Sustainability in fast fashion is an ever-burgeoning problem due to textile waste that crowds landfills, chemical waste that bioaccumulates, and pollution from the production of textiles. These existing issues are compounded by the lack of intellectual property protection in fashion, which allows fast fashion retailers to copy designs and sell cheaply made clothing that reflect the trends of the moment. However, it appears that these ethical issues have not deterred all fast fashion retailers, as can be evidenced by Forever 21’s weak performance over time in comparison to Zara’s robust growth.

Values and limitations of research

The research to support these findings are limited in perspective, as media bias seems to pervade all reporting of ethical issues in fashion. The most prominent weakness in the research is that the possibility of the benefits of fast fashion are not thoroughly explored. For example, articles that discuss the economic benefits that fast fashion production provides to lesser developed countries are far and few between while articles that demonize fast fashion retailers as negligent to human rights abuses abound. It appears that the negative ethical consequences of fast fashion takes precedence over its potential upsides. However, it is worth noting that the economic benefits of fast fashion are not directly related to the ethical implications of fast fashion. Fast fashion retailers may economically boost lesser developed states, but that does not mean that their operations are entirely ethical.

Disproportionately affected actors

The ethical issues of fast fashion disproportionately affects smaller and lesser developed countries, people, and organizations. The human rights abuses reported in fast fashion manufacturing usually take place in lesser developed states. Lesser developed states are usually the most vulnerable to problems arising from environmental degradation caused by fast fashion due to a reliance on the environment for sustenance, trade, and income. Smaller and lesser-known companies are more likely to have their designs stolen by fast fashion retailers. Small companies often lack access or funds to employ a strong legal team to ensure designs are not stolen.

Further questions and exploration

A new question that arises is what determines the backlash, or lack thereof, from consumers and media in response to ethical issues. Consumers of Zara and Forever 21 have displayed vastly different reactions to the fast fashion business model. While Forever 21 is experiencing stagnating and even decreasing growth in light of their ethical and environmental issues, Zara has been able to increase its revenue. Forever 21 and Zara are both fast fashion retailers that operate in the same market, most likely have similar operations and business model, and have been the subject of scrutiny regarding ethics. These differences in consumer reaction could be explored through a closer analysis of Forever 21 and Zara’s customer demography, marketing strategies, media influence, and transparency through the production process.