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Christian Weber EOI Madrid - Escuela de Negocios Analysis of the Corporate Social Responsibility at the INDITEX Group Final Thesis within the International Master in Sustainable Development and Corporate Responsibility in 2007/08 Presented by: Juan Carnicero Gomez, Jorge Martínez Ortuño, Gonzalo Velasco Perez and Christian Weber Supervising Tutor: Jorge Serrano Paradinas Table of contents General Introduction – Proposition of the Thesis…………………………………..5 I. Study of the Evolution of the Group since the year 2000 1. Early History of Inditex…………………………………………………………..8 2. Financial and Economical performance……………………………………..10 2.1. Evolution of the Sales……………………………………………………… 2.2. Group‘s Turnover…………………………………………………………11 2.3. The Net Income…………………………………………………………….. 2.4. Number of Employees…………………………………………………...12 2.5. Stock Performance ………………………………………………………… 2.6. Business Diversification of the Inditex Group ……………………….. 13 2.7. International Expansion of the Inditex Group …………………………19 2.8. Evolution of the International Sales.……………………………………24 3. Market Analysis of the Garment Industry worldwide ………………………26 3.1. Market Definition …………………………………………………………… 3.2. The Global Apparel Chain ………………………………………………27 3.3. Production ………………………………………………………………..28 3.4. Cross-Border Expansion ………………………………………………..29 3.5. Retailing Strategies ……………………………………………………...30 3.6. General Apparel Market and Customer Trends ……………………...31 3.7. The European Apparel and Textile Market……………………………32 3.7.1. The EU quota limits for Chinese Textile Imports………………36 3.8. The Asian-Pacific Apparel & Textile Market…………………………..39 3.9. The U.S. Apparel Retail Market ………………………………………..40 3.10. The Spanish Apparel Retail Market ……………………………………41 4. Key International and National Competitors of Inditex……………………..44 4.1. Hennes and Mauritz……………………………………………………...45 4.2. The Gap…………………………………………………………………...47 4.3. Benetton Group ………………………………………………………….48 4.4. Grupo Cortefiel …………………………………………………………..50 5. Inditex …………………………………………………………………………...51 5.1. Zara‘s Business Strategy ……………………………………………….52 5.1.1. Close the Loop and create Exclusivity…………………………53 5.1.2. Stick to a Rhythm ………………………………………………..58 5.1.3. Leverage your Assets…………………………………………...60 5.2. SWOT Analysis of the Inditex Group ………………..........................62 II. Study of the Social Pressure on the Apparel Industry through the Clean Clothes Campaign and other Initiatives 6. The origins of workers‘ movements …………………………………………..66 7. Women and Child Labour……………………………………………………….68 7.1. Child Labour………………………………………………………………… 7.1.1. Campaigns against Child Labour……………………………70 7.2. Women Labour…………………………………………………………...71 8. The Different Inititatives …………………………………………………………72 8.1. The Clean Clothes Campaign ……………………………………………. 8.1.1. Urgent Action Appeals………………………………….….73 8.1.2. Commission Studies and Reports………………………..74 8.1.3. Actions taken by the CCC…………………………………… 8.1.4. Structure of the CCC ………………………………………76 8.2. Setem Spain………………………………………………………………77 8.3. Fair Wear Foundation……………………………………………………78 8.4. The Maquila Solidarity Network…………………………………………… 8.5. The International Trade Union Confederation………………………...79 8.6. The International Textile, Garment & Leather Workers' Federation….. 8.7. The Ethical Trading Initiative……………………………………………80 8.8. Global Compact……………………………………………………………. 8.9. Oxfam International………………………………………………………81 8.10. Business Social Compliance Initiative…………………………………82 9. The Pressure executed upon the Stakeholders ……………………………...83 9.1. Governments……………………………………………………………….. 9.2. Multinational Companies………………………………………………...86 9.3. Consumers………………………………………………………………..88 9.4. International institutions………………………………………………….89 10. Results of the Clean Clothes Campaign………………………………………90 10.1. National Level……………………………………………………………… 10.2. International Level ………………………………………………………91 11. Impacts on the Inditex Group ………………………………………………….94 11.1. National Level…………………………………………………………….. 11.2. International Level ………………………………………………………95 III. Study of the Corporate Social Strategy at Inditex 12. Social Dimension ………………………………………………………………..97 12.1. The Supply Chain in general……………………………………………… 12.2. The Supply Chain Strategy……………………………………………..99 12.3. Code of Conduct……………………………………………………….105 12.3.1. Internal Code of Conduct…………………………………….. 12.3.2. External Manufactures and Workshops………………….106 12.4. Programmes of Social Investment……………………………………107 12.4.1. Creation of Corporate Capital Programmes…………….107 12.4.2. Community and Development Programmes……………….. 12.5. Sponsorship and Patronage………………………………………….113 12.6. Transparency of Information………………………………………….115 12.7. Dialogue Platforms…………………………………………………….119 12.7.1. The ―Multifiber Agreement‖ Forum ………………………120 12.7.2. The Ethical Trading Initiative and Inditex ……………….123 12.7.3. Other Initiatives …………………………………………….124 13. Environmental Dimension.……………………………………………………126 13.1. Environmental Management System …………………………………… 14. Human Resources ……………………………………………………………130 14.1. Inditex‘s Commitment to its employees……………………………..131 14.2. Inditex Commitment to equal gender opportunities …………………… 14.3. Continuous training and internal promotion ………………………..132 14.4. Employment conditions ………………………………………………133 15. Personal Opinion ……………………………………………………………..135 Bibliograhpy ………………………………………………………………………...136 “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you'll do things differently". Warren Buffet Introduction – Proposition of the Thesis The perception and the necessity of Corporate Responsible behaviour has dramatically changed in the last decades. Until recent years Corporate Social Responsibility (CSR), from the corporate point of view, was more likely seen as a fulfilling of legal obligations, or the most as a necessary marketing tool. With the beginning of the ―technology age‖ and the globalisation of markets and industries, where medial coverage and the new information technologies - such jas the internet- are increasingly influencing the day to day business in companies, has changed the perception of CSR. The ―global players‖ are conscious about the high volatile markets and the increasing consumer awareness, which can destroy the reputation of a well established brand very quick, if they do not act responsible as a company that delivers goods or services or has a relation with the different stakeholders, such as governments, Business partners, NGOs, international Institutions, society as a whole, etc. Even though a lot of businesses are still focusing on the tension between society and business, rather than on the possible shared value (benefits for both sides) between them, the most businesses try to improve their corporate performance increasingly, regarding CSR. It is evident that today it is inevitable for any company, to manage all the intangible assets that are referring to their business actions and beyond them. Thus, to integrate a sustainable Strategy in the core business in order to meet the current and future needs of all your stakeholders that are engaged in your company and act responsible by finding a balance between the social, environmental and economical issues in the company‘s daily business, the triple bottom line. The Analysis of the Corporate Strategy of Inditex – as one of the fastest growing apparel retailers worldwide- was from the beginning a very appealing challenge for us, considering that -at a certain degree- the core business of the Inditex group affects almost everybody‘s daily life decisions. Thus, from the workers in the fabrics in developing countries, the business partners of Inditex, the competition in the apparel retail sector, even governments that try to attract big global companies to their country, until the consumer at the end of the supply chain that buys the designed clothes everybody is more or less affected by the way how Inditex implements a socially responsible Strategy in his core business or not. Furthermore, the textile sector is one of the most controversial in the global economy markets, when it comes to the issues of basic human rights and labour conditions at suppliers‘ factories in development countries. Many of the most known and powerful companies in the textile and sports wear industry, such as Adidas, Nike, Benetton, H&M or Zara were already dealing with scandals about working conditions in factories, too low wages or similar urgent complaints by workers or trade unions in development countries. In the following approach we analyse the Corporate Social Responsibility Strategy at the Inditex Group. The analysis is structured into three parts: The first part treats the economical and financial evolution of the Inditex group since the year 2000. Beginning with a short introduction about the history of the Inditex group the analysis of the Group‘s financial and stock performance follows. The Business diversification and the international Expansion build the bridge to the main focus in this part, the competition and market analysis in the garment industry. This section begins with an introduction of the global apparel chain, from the producers to final consumers and continues with the analysis of the different important apparel market regions Europe, Asia-Pacific, US and a more detailed analysis of the Spanish market, as the domestic market of Inditex. After the (inter)national competition analysis, this part concludes with a deep analysis of the business strategy of Inditex, illustrated by the system of Zara, the most lucrative concept of the Inditex group. It is to be mentioned that, due to
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