CALVIN KLEIN CORPORATE SOCIAL STEPS TOWARDS RESPONSIBILITY SUSTAINABILITY

SEMESTER 2, PROJECT 1 Calvin Klein, a world-famous luxury brand steps towards sustainable packaging design.

Calvin Klein switches its shopping bags and gift boxes to recyclable materials, choosing only Forest Stewardship Council certified paper.

In collaboration with FSC, Calvin Klein would be able to get their products and actions certified and marked as eco- friendly and socially responsible which would improve company’s corporate image and perception.

Money saved in the production process of Calvin Klein’s packaging will be donated to the FSC in order to support and

protect forest communities and

fight deforestation.

JURATE KUKLINYTE WEBSITE LINK PETYA KAZAKOVA http://pkazakova.com/CSR/ MALENE THOMING calvin-klein-sustainability- csr.html 2016 FEBRUARY

Index 2 Project Planning and Process 3 Corporate Social Responsibility - Sustainable Packaging 4 Collaboration with FSC, Certified Paper and Positive Outcomes 5 Design Brief & Packaging Mock Ups 6 Design Manual and SEO 7 Appendix 1 8

P.S. Appendix is attached as a text document, but is not a part of written report.

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Project Planning and Process

Shortly after given the assignment we started planning the process of the project and setting up the milestones (see img 1). We considered different companies and settled down on Calvin Klein due to their scandalous advertisement history and the lack of CSR in the environmental area.

Project Timeline, Milestones and Deadlines (img 1)

Work Breakdown Structure (img 2)

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Work breakdown structure (img 2), yet another tool that helped us along the way of planning and organizing our tasks. After the tasks were delegated it was the time to look closely into the company’s reports, descriptions and articles and analyse the external and internal surrounding factors (see img 3).

We did a thorough analysis on company’s profile and competitors, their customers and stakeholders, considered the positive and negative aspects of a business model and market segment. 1

Most importantly we looked at the possible harms for the company and from there developed new strategies, tactics, and action that the company could start taking. Having all that information researched we came to take new concept of the Corporate Social Responsibility into action. Threats-Opportunities-Weaknesses-Strengths Matrix (img 3)

Corporate Social Responsibility – Sustainable Packaging

Calvin Klein, a world-famous luxury brand steps towards sustainable packaging design. As the industry moves into a period of mass-industrialisation, luxury

1 Appendix 1 The in-depth TOWS analysis

4 conglomerates are having a more significant global impact on energy use, CO2 emissions, alongside water consumption, deforestation and pollution.2

Sustainable packaging is beneficial, safe and healthy for individuals and communities throughout its life cycle. It meets market criteria for performance and cost, optimizes the use of renewable or recycled source materials, it is sourced, manufactured, transported, and recycled using renewable energy, clean production technologies and best practices.3

Although it is often considered that nature luxury is durable but not trendy, sustainable packaging can also be luxurious and maintain brand image and identity. Environmentally conscious consumers might be willing to spend more to buy a product that uses less energy and fewer natural resources to produce.

Calvin Klein’s action plan focuses on the reduction of carbon-dioxide emissions, waste, and water; sourcing of raw materials; dangerous chemicals and materials. Specifically, 100% of the packaging paper will be sourced from certified sustainably managed forests (sourcing a minimum 50% of recycled content).

Collaboration with FSC, Certified Paper and Positive Outcomes

FSC is an independent, non-profit organization that sets standards under which forests and companies are certified and that protects forests for future generations. FSC guarantees that animals and plants are protected and that the people who work in the forest are guaranteed education, safety and a fair wage. The principle is to cut down trees in a rain forest without damaging the forest.

FSC provides a connection between the forest and the end user, ensuring that products with the FSC label uphold principles and criteria which bring the highest social and environmental benefits.

FSC certification can positively impact workers and communities, shift governance processes globally and change economic and environmental conditions in the forest.4

2 http://luxurysociety.com/articles/2014/01/gucci-steps-towards-sustainability

3 http://sustainablepackaging.org/uploads/Documents/Definition%20of%20Sustainable%20Packaging.pdf

4 https://ic.fsc.org/en/our-impact/importance-of-forest-stewardship

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With its 'FSC-Certified' label, the Forest Stewardship Council defines a strict set of standards that paper products must meet in order to prove that they are truly environmentally and socially responsible.

FSC does not solve all problems but is a step in the right direction. Deforestation in tropical forests is a complex problem which can only be solved by working on many fronts at the same time - FSC label is one of them.

In a collaboration with FSC, Calvin Klein would be able to get their products and actions certified and marked as eco-friendly and socially responsible. Moreover, the money saved on cutting the costs of production would be reinvested in supporting FSC and forest communities. This way, Calvin Klein would not only reduce waste and pollution, but also donate to save the environment and have a certificate to prove its contribution.

Differentiating the company using recycled materials would make it stand out amongst its competitors, also, would attract new socially and environmentally conscious customers,

World demand for green packaging – including recycled content, reusable and degradable packaging – is projected to rise 5.7% per year to US$212 billion in 2015.

Using fewer packaging materials ranks high among the crucial steps companies can take to reduce their carbon footprint. By reducing the layers of packaging, Calvin Klein Inc. would on average reduce 32% of the weight of shipping, resulting in saving up to US$20 million a year. 5

Recycling of the materials would not only be environmentally-friendly but also would save around 40% of company’s production expenses.

Design Brief and Packaging Mock Ups

Calvin Klein’s visual identity is a central element in communicating to their customers. Calvin Klein’s font, made especially for the brand, is very simple, yet very sophisticated due to its brand identity. Signature colors of the

5 Preliminary numbers, see Appendix 1

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Calvin Klein differ between, black, grey, white and navy.

Product description

The new packaging is made using FSC-certified paper, composed of virgin tree fibres rather than pre- or post- consumer recycled materials. The design itself is very true to the Calvin Klein’s brand, simplistic and aesthetic, with naturally extracted colors and objects that represent the idea.

The packaging is inspired by Calvin Klein’s original packaging design, however it is now modelled to meet the FSC requirements while still maintaining the brand’s identity.

The back of the boxes also has the FSC sign that assures the stakeholders that the brand is using only eco-friendly materials.

Design Manual for the Website and SEO

Design Manual for the Website:

The original website was well-structured therefore we didn’t make major changes. Instead, we decided to focus on the CSR and package design development. We put a banner made with Photoshop, description of our CSR strategy and the partnership with FSC. In the end, we put our package design mock-up. We used the same colour palette, image style and font; we saved the same header and footer.

Search Engine Optimization (SEO):

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In order to improve the functionality of our webpage, we first added a title, alt attribute and meta description using few words that highlight the main subject. The structure of content is clear, including headings, paragraphs, links, etc. Moreover, we optimized the URL, making it user-friendly and wrote Google Analytics script. Considering our Google Trends research, we chose some relevant keywords – “CSR, Calvin Klein, sustainability, eco- friendly, sustainable packaging, corporate social responsibility, fashion, strategy, environment, brand design, FSC and forest stewardship council”.

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Appendix 1 - TOWS analysis (authors Malene Thoming, Jurate Kuklinyte, and Petya Kazakova)

Step 1.The Enterprise Profile

The Kind of Business

What is our business?

Calvin Klein Inc. is an American based, one of the leading fashion design and marketing studios in the world. It designs and markets women’s and men’s designer collections, apparel and a range of other products that are manufactured and marketed through an extensive network of licensing agreements and other arrangements worldwide.

Who are our customers?

Urban upper class youth and business executives.

What do our customers want?

Customers looking for high end best products, fashion conscious rich and quality products. Brands/lifestyles include Calvin Klein Collection, Calvin Klein Platinum Label, Calvin Klein Jeans and Calvin Klein Underwear. Product lines under the various Calvin Klein brands include women’s dresses and suits, men's dress furnishings and tailored clothing, men’s and women's sportswear and bridge and collection apparel, golf apparel, jeans wear, underwear, fragrances, eyewear, women’s performance apparel, hosiery, socks, footwear, swimwear, jewellery, watches, outerwear, handbags, small leather goods, and home furnishings (including furniture).

What should our business be?

A luxurious, high-end brand selling unique, comfortable youth clothing. Focus on brand management and consistency, as we seek to ensure that our products, quality and distribution reflect Calvin Klein’s premium designer status worldwide.

We believe our expertise in brand management, product design, sourcing, and other logistics provides us with the ability to successfully expand product offerings and distribution under the Calvin Klein brands while preserving the brands’ prestige and global presence. As a result, we believe we have the opportunity to realize sales growth and enhanced profitability.

Geographic Domain

Where are our customers?

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Calvin Klein’s “advertising spans 21 countries and reaches and estimated 98 million people globally” (Warnaco Group, Inc.). Primarily based in Canada and America, has expanded to European and Asian markets.

Where are those who should be our customers but are not at present?

Countries in South-Eastern Asia. More countries in Europe that are in demand of such brand’s products.

Competitive Situation

Main competitors – firms operating in the same market, within the same product value and brand recognition. Influential trendsetter, high price, high-end products. Examples include Tommy Hilfiger, Ralph Lauren, Jockey, Hugo Boss, Donna Karen, Giorgio Armani etc.

Key success factors – advertising using famous models and celebrities (#mycalvins) modern underwear appealing to younger generation worldwide.

The management orientation

The organizational climate and the reputation is positive. Management is committed to expanding across channels of distribution, with a particular focus on e-commerce, retail, wholesale and opening additional travel retail locations. Also, three main CSR focus areas are:

 Empowering people - protecting human rights, fostering safe and secure working conditions, celebrating diversity, and enriching the associate experience.

 Preserving the environment - reducing our environmental impacts through efficient resource use, and more sustainable product development, manufacturing, and packaging.

 Supporting communities – creating better futures through philanthropy, volunteerism, and partnerships with charitable organizations.

Step 2. External Environment

Economic Factors

After a near-bankrupt situation back in the 1992 Calvin Klein Inc. has recovered after partnerships with PVH and has become one of the most influential clothing brands now spreading in European and entering Asian markets.

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Overall, worldwide retail sales of products sold under the Calvin Klein brands were approximately $7.6 billion fiscal 2013.6

The company reported the revenue of Calvin Klein business for the quarter increased 5% to $653.9 million on a constant currency basis from $665 million in the prior year’s first quarter. For the second quarter of 2015, the revenue will be relatively flat on a constant currency basis.7

According to employee reviews, Calvin Klein creates a rather positive work environment 4 out of 5 starts, taking compensation/benefits, life/work balance, job security, management and culture into consideration. 8

As a high-end fashion brand Calvin Klein has above the average prices this way making it more unique and accessible to more exclusive target group.

Social and Political Factors

Calvin Klein has a controversial past due to sex in jean advertisement, plus size identification and the like.

Public opinion is mostly positive despite the scandals, the brand is recognized as high-end, non-racist, striving to empower people, and somewhat saving the environment.

Age profile is mostly aimed at young people, but the target group was widened and the sizing range increased which attracts a wider group of potential customers worldwide.

Calvin Klein sub-unit does not express a lot of concern about the environment saving, they are more focused on people and covering the areas that are mostly highlighted by media and scandals.

Demographic

The US is New York-based Calvin Klein's largest market, accounting for about 60% of its annual sales. Europe contributes about a quarter of the company's total. Calvin Klein retail stores are located primarily in premium outlet centres in the US and Canada. 9

6 http://www.vault.com/company-profiles/general-consumer-products/calvin-klein,-inc/company-overview.aspx 7 http://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapid=25992

8 http://www.indeed.com/cmp/Calvin-Klein/reviews 9 http://www.vault.com/company-profiles/general-consumer-products/calvin-klein,-inc/company-overview.aspx

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Products and Technology

The company is up to date with the latest technologies and very focused on e- commerce due to lack of official Calvin Klein units around the world. Moreover, Calvin Klein was bought by PVH in early 2000s, the biggest shirt making company which made it easier for the company to be up to date with latest technology and focus on worldwide acquisition and brand-building.

Market and Competition

Who are our competitors?

As mentioned above, main competitors are similar price and quality range brands including Donna Karan Inc., Levi Strauss & Co., Ralph Lauren Corporation and the like. In fashion industry, companies that have high demand for their products, usually have many fake mass-produced copies appearing for lesser price. The competition could also appear with lower-end brands that try to imitate Calvin Klein’s designs indirectly for lesser price too.

What are the strengths and weaknesses of our competitors?

Strengths include lower production prices and saving money on research and development which has already been tested by Calvin Klein. Weaknesses include lower quality, lower customer demand, unrepeatable design etc.

How do we best compete?

Calvin Klein has established a strong base worldwide taking most of the market share for exclusive underwear and jeans. They best compete by presenting the already-established brand name on their clothing.

Step 3. Prepare a forecast. Predictions for the future. As a brand Calvin Klein aspires to evolve and keep its popularity. It wants to keep growing and expand to other countries in the world, such as India. Making bigger campaigns and keep having big stars advertise for them. They want to expand on the market and become one of the biggest clothing brands in the world.

Step 4: Internal environment - SW: a) Management and organization – CK job sections include Retail, Sales, Marketing, Administration and Art, Design & Entertainment (58 positions overall). Average hourly pay ranges from approximately $8.00 to $17.50 per hour. The

12 average salary ranges from approximately $15,000 to $80,000 per year – fairly satisfying.10 b) Operations - Calvin Klein's operations are divided into two businesses: CK Apparel -more than 60% of sales, and CK Licensing - it has about 50 licensing and other arrangements. Beyond the wardrobe, CK has boosted its selection of home furnishings with the goal of extending its home lifestyle products.11 c) Finance - Much of Calvin Klein’s profit comes from licensing its name for items such as shoes, jeans, underwear, watches, furniture etc. In fiscal 2013 CK Licensing rang up $425 million in sales, while CK Apparel brought in $750 million. Overall, worldwide CK sales were $7.6 billion fiscal 2013.12

Step 5. Strategic alternatives: Calvin Klein proved that licensing and diversification of categories can be an effective strategy. By 1999, 90% of the company's revenues came from licensees, which produced the brand in more than 40 different categories. Using social media for popularizing the brand is a well know strategy of CK. The company remains notorious for its highly sexualized ad campaigns for decades.

Step 6. Consider strategies, tactics, and action Calvin Klein has always been known for using well-liked celebrities such as Brooke Shields, Mark Walberg, Kendall Jenner and Justin Bieber to advertising their brand. This has worked very well for them and has given them more attention over the years. The target group has dropped down to 14 years old, after Justin Bieber and Kendall Jenner have begun to advertise, thus meaning that there are more consumers to the brand. Calvin Klein is also known to make provocative commercials, campaigns and photoshoot that works in their favour, since everyone knows sex sells.

Step 7. Consistency & Contingency Planning

Possible harms for the company

Politics and economies are primary sources of threats to a brand in the fashion industry. Trade embargoes, political unrest in an area of raw material supply and economic downturns that lead to restricted consumer spending are all threats to

10 http://www.indeed.com/cmp/Calvin-Klein 11 http://www.vault.com/company-profiles/general-consumer-products/calvin-klein,-inc/company-overview.aspx 12 http://www.scmp.com/lifestyle/fashion-watches/article/1448719/calvin-kleins-social-media-strategy-reminds- its-classic-ad

13 the accessibility of raw materials, brand exposure and name recognition, distribution and consumer purchasing. Particular problems that might occur for Calvin Klein include:

1. Customer needs and changing perception. 2. Global factors like high tax implications, High inflation which affects buying behaviour of consumer. 3. Customers look for high quality with low price hence high chances of brand switching.

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