Fashionably sustainable or sustainably fashionable? : a case study about how fashion companies communicate environmental sustainability based on green-highlighting

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Fashionably Sustainable or Sustainably Fashionable?

A case study about how fashion companies communicate

environmental sustainability based on green-highlighting

Annika Elisabeth Björkholm – 11186569 Master Thesis – Final version

Business Administration – Marketing UvA Faculty of Economics and Business Supervisor: Lars Moratis

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Statement of originality

This document is written by student Annika Elisabeth Björkholm who declares to take full responsibility for the contents of this document.

I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it.

The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.

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ABSTRACT

Social issues connected to labour rights have been the dominating cause for concern in most CSR research conducted in the last few years. In the globally dispersed clothing industry this trend is mainly due to the many CSR scandals that have occurred and attracted media attention. Although the fashion industry also has a significant impact on the environment, there is much less research done on environmental sustainability. Also, there has been little research done on efficient CSR communication in this dispersed and polluting trade. This is surprising since CSR scepticism can have a big negative impact on brands, especially in the highly competitive apparel industry.

This study focuses on green-highlighting (Walker & Wan 2012), which highlights the importance of communicating both past and present substantive CSR activities and symbolic future aspirations. The comparative multiple case study explores how three fashion brands operating on different market levels in the fashion industry communicate environmental sustainability through content analysis of corporate websites and publicly available reports. Both the drivers behind CSR activities and the practices (products, processes and supply chains) of the chosen low-end, mid-range and high-end case brands are identified, analysed and compared.

The analysis shows that the CSR communication of the low-end case brand is most in accordance with green-highlighting, whereas the high-end brand is the least. The results also include the identification of seven new sub-types of green-highlighting (weak symbolic, strong symbolic, weak substantive, strong substantive, unspecified, weak green-highlighting and strong green-highlighting). Two new drivers behind CSR activities that have not been mentioned by scholars before were also found: brand heritage and market leader aspiration.

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1. INTRODUCTION 1.1 Primary elements

Imagine yourself as a fisherman in Indonesia. You have lived and worked by the Citarum River all your life, but the natural paradise of your youth has become a pollution paradise in the last two decades. The water is muggy, there is hardly any fish in the river anymore and the surrounding rice fields don’t yield crop due to the toxic water they’ve been watered with. Also, many of your neighbors and relatives have fallen ill with cancer and there are not many wild animals left in the area (Susanti 2016). The Citarum is considered one of the most polluted waterways in the world, and you know that the reason for this is the toxic wastewater discharged from the many clothing factories along the river, producing textiles for a worth of €17B a year (Setayati 2015). Your family, neighbors and the natural environment around you are not the only ones to suffer from the toxified river – the economic damage from the water pollution in the last ten years is estimated to be around €750M (Greenpeace Indonesia 2016). Since you can’t fish in the river anymore but you have to provide for your family in some way and your options are limited, you decide to apply for a job at the clothing factory that toxifies the river. Picture yourself in another scenario: you’re a Bangladeshi garment worker in one of Dhaka’s overcrowded factories. The building has cracks in the walls, the air is heavy to breathe and working hours are way too long compared to the salary you earn. The neighboring factory building, Rana Plaza, collapsed three years ago and killed several of your closest friends, among the 1138 victims in total. Although you see the cracks in the walls and ceilings every day and you have problems with your lungs from the polluted air, the factory owners and the government officials don’t seem to care. Another thing that worries you in your workplace is that the eight-year-old girl who usually works next to you hasn’t come to work for a few days, and you suspect that it’s because she had the courage to comment on the cracks in the walls and why nobody fixed them. Maybe she was abused, or maybe even killed. You decide to keep your mouth shut and keep on sewing – you don’t want to get into trouble and nobody would listen to you here anyways. (Abrams 2016; Butler 2016)

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7 A few of the ethical issues in the apparel industry were illustrated in the two scenarios above. The apparel industry is heavily dependent on resources such as water, chemicals and fossil fuel that pollute and toxify the environment throughout the supply chain and product life-cycle of a garment; from growing and manufacturing the fiber to dyeing and printing the fabric to transporting and selling the garment to finally washing and disposing it (Walker 2008; Shaw et al 2006). Swiftly shifting trends and planned obsolescence are common practices in the industry spurring these unsustainable behaviors. Environmental pollution is a big problem in the globally dispersed apparel industry, but so are social issues such as sweatshops, employee abuse and child labour in unregulated labour markets, where manufacturing has moved in search of the lowest production cost. The highly competitive apparel industry is one of the most globalized industries in the world with production and distribution lines spread out across the globe. This comes with huge variations in governmental regulations, employment and environmental protection and salary levels as a consequence (Laudal 2010). Clothing companies therefore have several legal and moral standards to manage at many levels and locations in their supply chains. Considering the impact that this multibillion-industry has on both the planet and the people living on it, the fashion industry lends itself for a critical investigation of the sustainability of its business.

Corporate Social Responsibility (CSR) has become an important standard term in most forms of business in the last years and can be defined as the voluntary integration of social and environmental concerns in business practices and interaction with stakeholders of companies while taking future generations in consideration (Aguinis & Glavas 2012). Companies are expected to do good for the society and are put under external pressure by their stakeholders, who demand more transparent, responsible and sustainable ways of doing business (Bromwell & Powell 2012). Many companies participate in CSR programs in order to reduce the negative impact they have on the environment and society and thus be positive actors for social change, but they are also motivated to engage in CSR in order to boost their own business returns through better reputation, higher levels of sales and

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8 investment, customer loyalty, employment interest, a strengthened corporate image and better overall stakeholder relationships (Du, Bhattacharya & Sen 2010). In order to reap these strategic benefits of CSR, a company has to be able to communicate its efforts efficiently. In order to do this, it has to tackle the two key challenges of efficient CSR communication; raising stakeholder CSR awareness and minimizing stakeholder CSR scepticism. Thus, managers need to both understand how to perform the actions in business practices regarding products, processes and supply chains, and how to communicate these practices in a resourceful way to raise stakeholder awareness and trust.

The term greenwashing is often used to describe the inconsistency between “talk” and “walk” of CSR initiatives (Walker & Wan 2012) and has in general been considered to be bad for the reputation of a firm. However, more recent research has examined if some forms greenwashing, in fact, can have positive effects on an organization. Green-highlighting means that a company communicates both existing and previous substantive CSR actions but also future symbolic CSR ideals and goals (Walker & Wan 2012). CSR as aspirational talk is CSR communication as merely aspirational ideals for a company’s future actions (Christensen, Morsing & Thyssen 2013). A company can thus communicate its CSR efforts from three main time aspects; the past, present and future practices that are either substantive or symbolic. Past and present actions need solid proof of impact and effectiveness in order to be perceived as credible. Future intentions are aspirational ideas of what the firm wants to do in the future that need a clear plan of action to happen and convince stakeholders.

The company should emphasize the underlying social reasons for why it engages in particular issues in order to further improve the trustworthiness of its CSR communication, such as the company’s commitment to a cause, the impact it has and the CSR motives together with the company fit (Du et al. 2010). The drivers behind engaging in certain CSR issues are according to Caniato et al (2012) either internal, market- or context-driven. According to the scholars, CSR practices involve redesigning products to be more environmentally friendly through the choice of materials, components or

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9 packaging; improving manufacturing processes throughout the value chain and managing the supply chain channels and relations.

There is a lack of empirical studies done on CSR communication in the fashion industry. Also, green-highlighting and the underlying drivers for companies to involve in responsible practices are not much researched topics. No previous studies have been conducted with a focus on how different clothing brands in different market levels communicate responsible efforts on their corporate websites and publicly available documents, such as CSR and annual reports. This leaves a research gap for this study, and the following research question aims at filling it.

How do fashion brands communicate environmental sustainability on their

corporate websites and publicly available documents based on green-highlighting?

The research question will answer following sub-questions:

1. What are the underlying drivers for the brand to engage in sustainable practices?

2. What past, present and future CSR practices are communicated and how are they addressed?

3. What are the differences and/or similarities in CSR communication between the three case

companies?

The focus of this exploratory multiple-case study is to analyse how fashion companies communicate environmental sustainability efforts on their corporate websites and publicly available documents on them. The CSR content of three fashion brands that operate in three different market sectors of the industry are analysed and compared. The three different sectors of the apparel industry are low-end fast fashion, mid-range premium fashion and high-end luxury fashion. The chosen case companies that represent the sectors were selected because they have a global presence and claim to engage in socially responsible activities. Content analysis is done in order to trace the drivers and practices behind environmental CSR initiatives the three case companies participate in.

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1.2 Academic and managerial relevance

This study contributes to the existing academic research done in the field of CSR communication in multiple ways. It presents a new framework based on existing research and new findings on how fashion companies communicate sustainability and the differences between the three different market levels. This is based on content analysis of three case companies operating in three different sectors of the industry. It empirically tests the concept of green-highlighting by Walker and Wan (2012) by analysing past, current and future CSR activities communicated by the case companies. It furthermore builds on current literature by extending the theory of green-highlighting by adding seven new sub-types to the concept. This is done by examining the different forms green-highlighting can take in CSR communication and how it is operationalized. Both symbolic and substantive green-highlighting is investigated in order to trace evidence of past, present and future efforts. The concept is critically evaluated on the basis of consistency in communication and by comparing it with CSR as aspirational talk. Green-highlighting has not been used to analyse CSR communication in multiple-case studies before, especially not in the apparel industry, although it is a very resource-intensive and polluting trade. Also, two new drivers behind CSR activities have been discovered that build on theory presented by several scholars and further broadens the scope of current literature (Hur et al 2014; Aguinis & Glavas 2012; Du et al. 2010; Skarmeas & Leonidou 2013).

Since it is very important for managers to understand why, what, how, when and where to communicate responsible actions in an efficient way in order to benefit from CSR strategically, this paper also offers an important managerial implication. The implications of untruthful CSR communication are widespread because consumers are sceptical about which products actually are good for the environment. Due to higher rates of consumer scepticism, legitimate attempts by companies to be more environmentally friendly might lose competitive advantage because consumers see environmental claims as simple marketing tricks without any real positive impact. Untruthful environmental marketing and communication does thus not only hurt the consumers and firms, but also the

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11 environment in the end. When a consumer is sceptical about a product and what it claims, she is more likely to ignore all environmental claims, also claims about products that actually are better for the environment. (Polonsky et al 1998) This managerial implication is not only helpful for managers in the apparel industry but can be applied in the CSR communication of any company.

1.3 Structure of the thesis

The structure of this paper follows with a literature review where the key concepts in corporate social responsibility and CSR communication are presented. Also, sustainability issues in the fashion industry are discussed and the three chosen market sectors are presented. In the same chapter, the research gap in existing research is highlighted and a preliminary conceptual framework formulated. Following this, the methodology chapter gives an explanation of the research methods, procedures and data analysis used in the study. The results from the document analysis are presented in the fourth chapter. Finally, the empirical findings based on the obtained data are discussed and the revised conceptual framework presented. Also, limitations of the study and suggestions for future research are given. The final conclusion of the research can be found in the last chapter of the paper.

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2. LITERATURE REVIEW

The literature review will discuss different terms in CSR communication especially related to greenwashing and green-highlighting. Furthermore, an insight to the fashion industry will be given and the three sectors – fast fashion, premium fashion and luxury fashion – will be analysed together with a discussion about sustainable environmental practices in the clothing manufacturing industry and existing research in the field. Finally, the preliminary research framework is presented.

2.1 Corporate Social Responsibility

The way humanity lives today is pushing our Earth’s planetary boundaries and the alarming growth of global environmental problems, such as climate change, resource scarcity and pollution that is caused by human - and mainly business - activity is something we no longer can ignore (Pacala & Socolow 2004; Rockström et al 2009). The negative externalities of environmental degradation come in various forms and exist in almost every industry; ground water is polluted by mining operations, land is contaminated by the vast use of chemicals in agriculture and waterways are toxified by the excesses from textile dyeing processes (Cohen & Winn 2007). Companies in all trades therefore need to make drastic changes in the ways they conduct business.

Corporate social responsibility (CSR) has become “a mainstream, highly visible and commonplace practice” for most businesses today, with focus on applying ethical standards to business practices, but also on the benefits it brings to the reputation and goodwill of a company and the employee and customer satisfaction and loyalty (Skarmeas & Leonidou 2013: 1831; Du et al. 2010). Companies are expected to do good for the society and are put under external pressure by their stakeholders, who demand more transparent, responsible and sustainable ways of doing business (Bromley & Powell 2012). However, the ideals, standards and goals in the area of CSR exploration are constantly evolving and expanding, which results in quite an unstable concept that often is criticized (Gilbert et al 2011; Banerjee 2008). CSR can therefore be defined in many different ways, but a well-established definition by Aguinis and

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13 Glavas (2012) would read: CSR is the voluntary integration of social and environmental concerns in business practices and interaction with stakeholders of companies while taking future generations in consideration. Corporate responsibility is thus about establishing long-term intergenerational justice in business practices.

Aguinis and Glavas (2012) state that companies engage in CSR practices because of instrumental reasons connected to profit and performance; normative reasons connected to company values; non-financial effects such as better product quality, operational efficiency and more investor interest and for image-protection reasons. Du et al (2010) and Skarmeas and Leonidou (2013) highlight the business benefits a company can enjoy from CSR activities communicated in a reliable manner, for example more sales, higher investment rates and more interest in employment deriving from more positive stakeholder attitudes, but also a stronger corporate image and better relationships with stakeholder. Also Ambec and Lanoie (2008) claim that responsible companies attract young, well-educated people who never would work for a firm with a bad social and environmental reputation. Hur et al (2014) claim that CSR has a direct positive connection with corporate brand credibility and corporate reputation and the way CSR is communicated to stakeholders is therefore very important. Also, more and more consumers think about ethics when shopping and Jobber (2006: 217) describes ethical consumption as “the taking of purchase decisions not only on the basis of personal interests but also on the basis of the interests of society and the environment”. It therefore has a close link with CSR and how companies should communicate it in a reliable manner in order to avoid consumer scepticism.

2.2 CSR communication and consumer trust

Du et al (2010) highlight that in order for a company to benefit from CSR efforts, it has to communicate its responsible actions in an efficient way by raising stakeholder CSR awareness and minimizing stakeholder CSR scepticism. Chaundhri and Wang (2007) argue that transparency is the key to successful CSR communication. It is thus very important for managers to understand how why, what, when and where to communicate responsible practices in a truthful and resourceful manner. As presented

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14 in figure 1 below, CSR communication consists of the content of the message and the channel it is communicated through. The message content is what the company actually communicates about and can be divided into the importance of the issue for the company and the involvement in the initiatives. The scholars claim that a high fit with the cause is important - there should be coherence between the company’s core business and the cause. Nan and Heo (2007:72) define fit as “the overall perceived relatedness of the brand and the cause with multiple cognitive bases”. Du et al (2010) further propose that the company has to assure its stakeholders that it is committed to a CSR issue, clarify the underlying reasons and the impact of the CSR activities in order to communicate in a transparent and proactive manner. Elving (2013) agrees that the degree of skepticism regarding the underlying CSR motives of a firm can predict how successful the performance of the CSR initiatives will be.

This study will focus only on the CSR communication part of the presented framework (framed with a dashed line), which consists of the message content - drivers and practices - communicated through the

message channel - corporate websites and public reports - of three chosen case companies. Both channels

are managed by the company itself and the content is therefore subjective and lacks objective critique (Du et al 2010). However, these sources are ideal to compare what the three chosen case companies want to convey to their stakeholders about their sustainable actions.

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15 Caniato et al (2012) agree with Du et al (2010) and Elving (2013) on that the drivers behind CSR involvement are important aspects of successful CSR performance, as seen in figure 2 below. The scholars divide the underlying motivating drivers into internal, market and context driven. Internal drivers are related to efficiency objectives and company values. Market drivers on the other hand are connected to stakeholders, whereas context-specific drivers are regulatory reasons for change such as laws and restrictions. CSR communication mostly consists of the responsible practices a company is involved in in the present, have been involved in in the past or want to be involved in in the future. These practices involve enhancing the product design features such as material, components or packaging; improving the process design throughout the value chain of a product (for example manufacturing) and managing the relationships within the supply chain.

This study will focus on these two parts of the framework; the drivers behind CSR initiatives and the actual practices communicated by the three case companies (framed with a dashed line).

Figure 2: Environmental performance in fashion supply chains. Reprinted from Caniato et al. (2012:

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16 CSR legitimacy is described as “a generalized perception or assumption that the actions of an entity are desirable, proper, or appropriate within some socially constructed system of norms, values, beliefs, and definitions’’ (Suchman 1995: 574). Corporate brand credibility is linked to CSR legitimacy since it shows how likely a stakeholder is to trust the information communicated by a brand and that it can consistently deliver what it has promised (Erdem et al 2002; Newell and Goldsmith 2001). Corporate brand credibility is important for companies because a low rate of credibility perceived by their consumers is likely to have a negative impact on triggering demand, being the brand of choice and generating effective and trustworthy advertisements (LaBarbera 1982). CSR legitimacy is hard to measure because the ideals, standards and goals in the field of CSR are constantly developing and there is no single truth for what sincere CSR communication actually is (Gilbert et al 2011). However, it can be assumed that a company that communicates both underlying motivational drivers for CSR efforts and practices in products, processes and supply chains in a transparent manner, regarding both past, present and future actions, can be considered as legitimate.

2.2.1 Greenwashing and consumer scepticism

The rising number of companies engaging in CSR and the fact that many are caught for fraud or scams by causing social transgressions and environmental disasters, lead to consumers having trouble distinguishing sincere companies from irresponsible ones (Parguel, Benoît-Moreau & Larceneux 2011). According to a global public tracking only 38 percent of the respondents believe that firms communicate honestly about social and environmental issues (GlobeScan 2012). However, it is interesting to note that 72 percent of these respondents are very interested in learning about CSR. This is a serious problem for companies since they might miss an important chance to engage with consumers that are ever more receptive to social and environmental communication. There is thus a serious credibility gap in companies’ CSR communication which can be seen as the fundamental problem in CSR itself and communication about CSR.

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17 Consumer CSR scepticism occurs when a consumer is not convinced of the true social awareness of a company and expresses doubts about its ethical principles and social responsibility (Skarmeas & Leonidou 2013). Szykman et al (2004) further discuss consumer scepticism as a result of a company’s unclear CSR motives and intentions, which can make CSR actions backfire. CSR scepticism is influenced by a bad corporate reputation which in turn can influence the purchase behavior negatively (Elving 2013). Another reason behind CSR scepticism is consumers’ dependence on company written reports on environmental practices, such as CSR reports. Since consumers usually have limited knowledge about the issues discussed in the report and do not have a possibility to control whether or not the communication is truthful, they become more critical towards CSR communication in general and see it as a marketing trick with no real impacts (Polonsky et al 1998; Furlow 2010). It can be assumed that CSR scepticism is especially important in highly competitive industries, such as fashion retail, where brands play a key role and consumers have many alternatives to choose between.

The CSR efforts of several companies have been criticized due to a gap between their CSR communications and actions which lead to stakeholder scepticism. Walker and Wan (2012) describe this phenomenon as greenwashing - an inconsistency between CSR communications and CSR activities, or a discrepancy between “talk” and “walk”. Lyon and Maxwell (2011: 5) define this umbrella term as the “selective disclosure of positive information about a company's environmental or social performance while withholding negative information on these dimensions”. Marquis and Toffel (2012) further elaborate on selective disclosure as the act of shaping an impression of transparency while masking the company’s true actions. This misalignment is also known as decoupling and can be either policy-practice decoupling or means-end decoupling, where the policies are thoroughly implemented but don’t connect with the core task of the company (Bromley & Powell 2012). This is what Nan and Heo (2007), Du et al (2010) and Elving (2013) call company-cause fit.

Although most articles about CSR communication criticize this misalignment between communication and actions, it can also be seen as a positive and inspirational message for the future efforts of a company,

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18 moving the entire CSR field towards higher goals and standards. Christensen et al (2013) name two types of hypocrisy in CSR communication: hypocrisy as duplicity, which is when a firm is involved in fraud by hiding an inconvenient truth behind pretty words, and hypocrisy as aspiration, when it imagines a wished-for future already partly is true and lets it serve as a positive inspiration for the future. The scholars argue that the unstable and evolving nature of CSR actually is a positive thing and that CSR communication is fundamentally aspirational to its nature and therefore does not perfectly mirror a company’s practices. The scholars describe CSR as aspirational talk as the CSR ideals that a company strives for in the future, without necessarily mentioning substantive past or current actions. Aspirational CSR communication has according to the scholars the potential to act as a resource for positive social change and stimulate CSR improvements, even when a company doesn’t live up to these aspirations yet. Christensen et al (2013) further argue that this discrepancy can even increase the company’s principles, practices and goals and act as a driver for change by motivating employees to quicker implement these aspirations.

The critique against CSR as aspirational talk is that consumers perceive the CSR actions as more substantial than they actually are, which leads to a distorted and critical view of the CSR activities of all companies, even the ones that are truly sincere about CSR (Parguel et al. 2011). Aras and Crowther (2009) further argue that CSR is purely about doing something that is good for the society, not only talking about it. Also Banerjee (2008: 51) suggests that only talking about CSR only is a symbol of an ideological effort that intends to legitimize and further strengthen the power of large corporations. Bowen and Aragon-Correa (2014) stress the importance of aiming at the material impacts of voluntary environmental initiatives in the firms themselves, but also in cross-sector partnerships and entire industries, instead of merely symbolic communications.

2.2.2 Green-highlighting and greywashing

Walker and Wan (2012) argue that only talking about CSR is harmful to both the company’s reputation and financial performance. They developed the term green-highlighting - CSR actions of a company

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19 that align with the communication by combining “talking the talk and walking the walk”. This is done by both communicating environmental responsibility in what they are doing currently or what they have done in the past, called substantive actions, and having clear CSR goals and plans for the future - symbolic actions. The difference between greenwashing and green-highlighting is that the symbolic actions are supported by substantive ones in green-highlighting and that it doesn’t harm the firm financially, whereas greenwashing does. The key to successful and sincere CSR communication is according to the scholars a combination of symbolic and substantive actions, which is beneficial both for the company’s finance and reputation. This term focusing on both past, present and future aspects of CSR communication and action is an accurate tool for this study to analyse the CSR drivers and practices communicated by three case companies operating in the clothing industry.

The last form of greenwashing is called greywashing, which means that a company behaves in a responsible manner but does not communicate these actions. Thus, even though greywashing actually does more good than harm, it is still not in line with the CSR claims of an organization since it does not say anything about them. This type of greenwashing has increased due to companies being afraid of greenwashing accusations (Furlow 2010).

This study will focus on the drivers behind CSR activities and the actual practices in CSR communication presented in figures 1 and 2 earlier in this chapter. These factors are coherent with the theory of green-highlighting presented by Walker and Wan (2012) about the symbolic and substantive CSR efforts the company communicates in past, present and future tense. The communicated symbolic and substantive drivers and practices in the past, present and future are analysed on the base of how well they are illustrated with evidence (for example facts, numbers, charts or listings) and how consistent the communication is.

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2.3 The apparel industry

The focus of this study will be CSR communication in the apparel industry. The fashion industry, as many other industries, is making use of more resources than our planet allows. As the demand for clothes increases, the amount of waste and pollution follows while resources become more and more scarce. With ever shorter product life cycles, higher global competitive pressure and increased social and regulatory demands on companies to act environmentally conscious, manufacturing principles that focus on environmental sustainability and social responsibility have become increasingly important (Ellram et al 2008). However, environmental requirements are many times seen as a burden that slows down or adds costs to product development and are sometimes even added to the product after it has been developed to give the company a better image (Handfield et al 1997; Angell & Klassen 1999). The clothing industry is a globally dispersed multi-billion dollar business; the total value of the clothing industry was $483 billion in 2014 and it accounted for 2.6% of all total global exports (World Trade Organization, WTO 2015). The industry is very resource- and labour-intensive, but also one of the most polluting industries in the world especially in comparison to its global volumes (WTO 2015). Pollution from manufacturing, transportation and waste, the use of toxic chemicals, non-renewable resources and planned obsolescence together with unethical working practices such as employee abuse are some of the big CSR issues in the industry (Turker & Altuntas 2014; De Brito et al 2008; Barnes & Lea-Greenwood 2006). The supply chain of a garment is very long and includes several steps and processes. Water is needed not only to grow the fibers, but also to dye and print the fabric and wash it. Chemicals are used as pesticides when growing natural fibres, but also in the different treatments of the garments, such as dyeing and washing. Cotton, which many garments are made out of, is seen as the world’s most valuable crop, but also the dirtiest; cotton production alone makes use of 16% of all global insecticides (54% of pesticides used in India), which is more than any other individual crop (Environmental Justice Foundation 2007). Due to the lack of pollution control systems and knowledge of the harms, chemicals used in the different production processes get in our soil, air and waterways.

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21 The environment gets toxified, which is harmful to all living organisms living in and around it. Furthermore, some very commonly used synthetic fabric materials are made from fossil fuels, such as polyester, which consist of both coal and petroleum. Also running the factories producing the yarn, fabric and clothing are mostly running on fossil fuels. (Walker 2008; Shaw et al 2006)

The industry does not only have a negative impact on the environment. Due to the huge amount of clothes produced, the need for manpower for manufacturing them is equally huge. The sector is still one of the most labour-intensive industries, although technology and workplace practices have advanced (International Labour Organization 2014). Due to globalisation and ever lower clothing prices, factories have been moved to countries where production is as cheap as possible and working conditions usually are poor. Production costs are pushed down while efficiency is pushed up. The apparel industry is one of the most globally dispersed industries, with manufacturing and distribution lines spread around the world, which naturally comes with consequences such as huge variations in governmental regulations, employment and environmental protection and payment levels (Laudal 2010).

The textile, clothing, leather and footwear (TCLF) industries are characterized by low predictability and low profit margins due to swiftly shifting trends and high competition that bring production costs down. The industries are furthermore clearly divided into high-end and low-end producers and brands. Usually high-end production makes use of factories with better equipment and a more skilled workforce, whereas low-end production has a strong low-price focus and frequently bad working conditions. Also, the employees of the clothing industry consist on average of 68% (in some countries up to 90%) young uneducated women, who are vulnerable to exploitation, violence and inequalities. (International Labour Organization 2014) However, the clothing industry also provides millions of low-skilled workers in developing countries with jobs and can thus help both individuals and nations rise from poverty and make economic progress.

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22 A company is not only responsible for environmental and social scandals it causes with its own direct actions, but is also held accountable for problems caused by suppliers and partners. Pollution and immoral actions of suppliers and manufacturers have a direct effect on the reputation of a brand and CSR has thus become a necessary part of the globalization strategy also of fashion companies (Li et al. 2014). Due to the high rate of outsourcing in the apparel industry, many clothing brands that produce their collections in external factories try to play innocent when a CSR scandal occurs (Spar & La Mure 2003). The scholars mention the labour condition scandal of Nike as an example, where the brand value, reputation and stock price sunk significantly due to the revelation of the sweatshops the company used to produce products, where children worked under immoral conditions. Nike finally capitulated due to strong NGO activism and set monitoring systems to control the factories better. The greater the importance of a brand is for a company, the more likely it is to capitulate to activist pressure. CSR scandals have a huge impact on fashion companies, since a brand often is the central feature distinguishing one apparel brand from another (Spar & La Mure 2003).

2.3.1 Sustainability in the fashion industry

Ruthless treatment of both employees and the environment in the fashion industry has gained much media attention in recent years. This has opened the eyes of many consumers to reveal how harsh the highly competitive fashion industry can be, but also put pressure on clothing companies to act more responsibly and transparently. A well-known example of this is the collapse of Rana Plaza that killed 1138 garment workers in Bangladesh in 2013 (Abrams 2016; Butler 2016). Such scandals cause uproar towards the brands producing garments with negative social or environmental consequences and result in boycotts and activism pressure. This in turn leads to many brands publishing supplier lists and making changes in their products, processes and supply chains in order to appear more responsible and act proactively.

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23 The many multifaceted social and environmental issues that can be found in the fashion industry have also given birth to new clothing brands and collections with sustainability as a core feature, as the demand for “fair fashion” increases. Sustainable fashion can be found in both small-scale ethical clothing brands but also in sustainable practices of big retailers, focusing on cleaner production principles throughout the value chain, sweatshop-free Fair Trade labour conditions, usage of materials that are recycled or organic and higher quality to make garments last longer (Goworek 2011; Joergens 2006).

Due to the many legal, moral, social and environmental standards that clothing companies have to manage at different levels and locations in their supply chains, but also the impact it has on both the planet and people, the apparel sector is a suitable industry to conduct a CSR study upon. This study focuses on how sustainability is communicated in three different market levels of the fashion industry; low-end fast fashion, mid-range premium fashion and high-end luxury fashion. Three case companies have been chosen in order to investigate how they communicate environmental CSR efforts in their sustainability reports and on their websites. The message content is analysed and compared in order to find out what their underlying motives are; what past, present and future CSR actions are communicated and how they are addressed; and how these three different market levels differ from each other when it comes to sustainability. Figure 3 below presents the luxury, fashion and premium positioning triangle adapted from Kapferer (2012: 32) to fit the fashion industry.

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Figure 3. Luxury, fashion and premium positioning triangle. Adapted from Kapferer (2012: 32).

2.3.2 Existing research

Caniato et al (2012) have investigated sustainability in fashion supply chains in an exploratory manner by identifying the drivers (market, internal and context), practices (product, process and supply chain) and environmental performance of five different fashion companies (classified as either “green international brands” or “small alternative firms”) that devote significant attention to environmental issues through qualitative interviews. They conclude that big companies focus more on products and process improvements, whereas small companies have been able to reshape their entire supply chains. This study is also an exploratory case-study on sustainability drivers and practices in the fashion industry, but data will be collected through content analysis instead of interviews and the case companies operate in three different market levels of the apparel industry and are all big multinational brands. The framework presented by the scholars (figure 2) is used as a base for the conceptual framework for this study.

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25 Turker and Altuntas (2014) have investigated sustainable supply chain management in the fast fashion industry by analysing and comparing the contents of corporate responsibility reports of nine different brands. They have based their analysis on five different dimensions: firm objective, performance, risks, improvement, communication and criteria for suppliers. They conclude that it becomes increasingly difficult for these firms to manage and monitor the activities in their decomposed worldwide supply chain, but that all investigated firms pay substantial attention to reporting their sustainability activities. The nine fast fashion companies compared particularly focus on integrating their suppliers into adapting sustainable practices by setting codes of conduct and monitoring systems. Li et al (2014) have done a similar study with focus on the fast fashion supply chain and apply the sustainability governance mechanisms via a case study based on the seven sustainability commitments of H&M, communicated in the company’s sustainability report. They conclude that the sustainable development of H&M is substantial and well-functioning, by engaging the entire supply chain and through dialogue, control and long-term partnerships. The scholars claim that “H&M can have the power to influence the entire fast fashion supply chain by sharing best practices and developing ways to take sustainability further” (Li et al 2014: 833). Their gap for future research suggests a comparative analysis between multiple focal companies in the fashion industry.

Mann et al (2013) have focused on the CSR communication of 17 apparel specialty retail companies by analysing corporate website content over a period of one year. They replicated the study one year later to see if there had been an increase in CSR communication. Research done on CSR communication through corporate websites are scarce and no study has been found that focuses on CSR communication by fashion brands operating in different sectors.

There is not much research done on CSR communication in the luxury market. Thus there is a research gap for this comparative study. However, Achabou and Dekhili (2013) have investigated if there’s a match between luxury goods and sustainability and conclude that recycled materials in luxury products affects consumer preferences negatively and show that there is a mismatch between recycling and

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26 luxury products. Also Janssen, Vanhamme & Lindgreen (2014) have investigated the fit between luxury and CSR and claim that luxury is a seldom investigated topic and therefore call for more research in the area of “responsible luxury”. Davies et al (2012) have analysed consumers’ ethical perceptions in the production of luxury goods and their findings suggest that there is a lower tendency to consider ethics when purchasing luxury than commoditized goods. Also they highlight the lack of CSR literature in the field of luxury.

2.3.3 Low-end fast fashion

Fashion sells being fashionable, which commands the way fashion is produced, distributed and marketed (Kapferer 2012). Since fashion changes swiftly and shops have to get rid of their inventory before the new collection comes in, prices are cut significantly at the end of a season. In order for fashion brands to stay profitable and maximize the gross margin, production costs are lowered as much as possible.

Planned obsolescence is another unsustainable practice that is very deeply rooted in the fashion industry, especially low-end fashion. Companies use this strategy in order to deliberately make products unfashionable or no longer usable, with the purpose of encouraging continuous consumption and thus increasing the rate of sales growth (Guiltinan 2009). This is evident in the case of garments quickly becoming unfashionable, but also in that many fast fashion chains and large retailers design products of poorer quality that last only a limited amount of washes to get customers to shop more frequently to replace the obsolete garment. Obsolete garments often end up in landfills and contribute to the ever-growing mountains of waste. However, several fashion companies have also taken a stance against such unethical consumerism by encouraging customers to bring back their obsolete clothes to the shop so they can be recycled into new clothes. However, there are still claimed technological barriers to produce new products of recycled garments.

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27 The term “fast fashion” comes from shortened lead-times in design, production and delivery, a faster inventory turnover and higher order fulfillment, as a response to swiftly shifting trends and consumer preferences in fashion (Barnes & Lea-Greenwood 2006). Fast fashion is also characterized by chain stores with low prices and planned obsolescence occurs frequently. Kapferer (2012) describes ephemerality and social imitation as typical aspects of products that quickly go out of fashion or become obsolete. Fast fashion is often bought impulsively because consumers get “seduced” by the looks and the price of the products. The process cycle from designing the garment to a ready-to-sell product has been minimized to a matter of weeks, which brings up the question of how sustainable the production and supply chain processes actually are (Choi et al. 2014). Some fast fashion chains introduce a new collection of clothing every week in order to keep consumers interested and shop more often. Fashion has in general become disposable: consumers buy cheap clothes, wear them a few times and throw them away when they become unfashionable or unusable, whereafter they replace them with new garments instead of fixing them. ILO (2015) states that low-end manufacturers often use unsafe technology in the factories and have poorer working conditions for their laborers in order to keep prices as low as possible.

Hypothesis 1: Low-end fashion brands focus on communicating process and supply chain

aspects more than product aspects.

2.3.4 Mid-range premium fashion

Premium fashion brands are in between fast and luxury fashion brands and the premium business model is built upon best-in-class products that communicate style and a proof of quality (Kapferer 2012). Such brands tend to offer garments of higher quality due to better materials or craftsmanship and can thus be sold for a higher price. Also a well-known and established brand contributes to that mid-range fashion brands can take a premium price. Premium brands tend to have a narrower target customer

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28 group than fast fashion and present fewer collections a year. These brands can both have own retail stores and be sold through department stores. Premium fashion is bought as a lasting investment, compared to fast fashion that often is bought impulsively to fit certain trends on the short term. According to the ILO (2015), high-end brands tend to use factories with higher pollution control, safer technology and better working conditions.

However, due to lack of controlling possibilities in the dispersed fashion supply chains, it could also be assumed that fast and premium fashion garments are produced in the same external factories for the same cost, but premium brands take a higher margin because of higher brand equity. To illustrate an example, Ralph Lauren is a well-known premium brand with a strong brand image and high brand equity. It is successful in creating an illusion of a privileged lifestyle brand from the glamorous 1920s through its skillful branding, even though the brand was established in 1968 and the garments are produced at a low cost in China. This illusion together with the exclusive looks of the flagship stores makes it possible for the brand to take a premium price (Kapferer 2012). Thus, we can assume that a premium image does not always guarantee higher rates of sustainability.

Hypothesis 2a: Mid-range fashion brands focus on communicating product aspects more

than low-end brands.

Hypothesis 2b: Mid-range fashion brands focus on communicating product aspects as

much as high-end brands.

2.3.5 High-end luxury fashion

Kapferer (1998) describes luxury as a scarce, hedonic object of very high quality that is sold at a price far beyond its functional value as a source of self-reward, image and status accessible only for a small amount of people. Phau and Prendergast (2000) further state that luxury brands compete based on exclusivity, a distinguished and exclusive brand identity, high brand awareness and perceived quality

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29 and loyal customers. Premium products can also be sold for a very high price and bring the owner a feeling of prestige, which diffuses the difference between the two terms. The distinction between a premium and a luxury brand is that luxury products signal the ability of the buyer to exceed functional and objective needs and benefits and bring the buyer the highest form of social distinction and prestige (Phau & Prendergast 2000; Hagtvedt & Patrick 2009; Kapferer 2012). Thus, if everyone could afford to buy a specific brand, the prestigious and exclusive luxury aspect would be eroded. Several luxury brands have delocalized their production for cost-cutting reasons by reducing the production cost of the products, instead of setting ever-higher retail prices. This is a frequently occurring practice and can harm the luxury image of a brand by eliminating one of the main sources of true luxury brand incomparability: cultural and historical heritage (Kapferer 2012).

According to Kapferer (2010:42), durability is the opponent of the fashion industryand of the entire mass market industry, due to the idea of planned obsolescence. Luxury on the other hand is the business of long-lasting worth and is hence the enemy of the throw-away society. Although luxury products often are resource dependent and rely on rare and exclusive materials, luxury and sustainable development can be seen to go hand in hand because of the urge to protect these limited resources in the long term by restraining the demand through high prices.

Traditionally high-end brands have not been seen walking hand in hand with sustainable practices due to the use of scarce resources, unethical manufacturing practices and social stratification, but also many luxury brands have started to feel the pressure for more sustainable actions and truthful communication (Achabou & Dekhili 2013; Janssen et al. 2014). This has accelerated especially after well-known high-end brands have found themselves in negative media attention after CSR scandals, such as when Louis Vuitton had a poor compliance with supply chain requirements and Prada used illegal immigrant employees to produce bags in Italian sweatshops (Davies et al 2012). Davies et al (2012) further comment that despite many ethical scandals in the high-end fashion industry have occurred, there are not many NGOs controlling this sector, few labelling and certification systems to keep track of

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30 responsible luxury and little research on how consumers view ethics when purchasing luxury. A study by two prominent luxury organisations, the Luxury Institute and Positive Luxury that work together with several luxury brands, state that sustainability and corporate responsibility are new requirements also for luxury brands. These findings are based on following key pressures: laws and regulations on supply chain transparency are changing; social norms and celebrity taste-makers are changing; expectations on companies’ way of doing business are changing; investment requirements are changing and resource scarcity is becoming a fact (Positive Luxury 2016).

Hypothesis 3: High-end fashion brands focus on communicating process aspects more than

low-end and mid-range fashion brands.

The three above stated hypotheses are related to different brand types and focus areas, which is why the relationship between them is presented in table 1 below for a clearer overview. The focus area is on the y-axis whereas the brand type is on the x-axis of the table. The hypothesised performance of the CSR communication ranges from the lowest evaluation - - (very bad) to the highest + + (very good).

Table 1. Hypothesis-performance relationship.

2.4 Research framework and objectives

The aim of this exploratory case-based study is to analyse how low-end, mid-range and high-end fashion companies communicate environmental sustainability based on green-highlighting on their corporate websites and publicly available documents and reports. Two different factors are identified:

Low-end brand Mid-range brand High-end brand

Product aspects - - + + + +

Process aspects + + + +

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31 the drivers that motivate companies to pursue responsible practices and the different practices they use that are communicated in the identified sources. Due to the complexity and high heterogeneity of the fashion industry, this study has chosen to focus specifically on environmental sustainability, which is an increasingly important and contemporary issue within all layers of the industry.

This study will have both managerial and theoretical implications for further studies about this highly contemporary issue, not only within fashion, but across all fields of mass-production. A review of the existing literature reveals that there is very limited research conducted on the different aspects of how companies communicate sustainability, especially in the apparel industry, although the industry has a considerable impact on both society and environment due to its globally spread and complex supply chains. Exploratory multiple-case studies analysing the CSR content of both sustainability (or annual) reports and corporate websites of fashion brands have not yet been conducted.

Based on an analysis of existing literature presented in this chapter, the different elements of CSR communication in the fashion industry are detailed in the research framework below in figure 4. Due to the exploratory nature of this study, the figure below is preliminary and will be revised in the discussion section. The model is based on the research framework presented by Caniato et al (2012) in figure 2. The two variables are the drivers behind CSR activities and the actual practices in CSR communication. Drivers can be either internal (based on efficiency-seeking, cost-benefits or corporate values) context-based (laws and regulations) or market-based (stakeholder pressure and competition). Practices are based on product features, material, design, components and packaging; the entire production process from raw material to finished garment and the supply chain (outsourcing, logistics, suppliers and customers). The framework of the Global Reporting Initiative (GRI) is an overarching performance standard that monitors a firm’s overall environmental impact. This study will focus on main dimensions of the GRI framework in order to trace the environmental impacts of the companies’ practices. Following categories are observed in the CSR communication of the three case companies:

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materials, energy, water, biodiversity, emission and waste, transport and business integration (GRI

2013:52-63). A detailed table of the selected dimensions can be found in the methodology chapter. The aspect of time has been added as a moderating factor in this study. The time aspect is adapted from Walker and Wan’s (2012) theory about green-highlighting, which states that CSR communication about both past, current and future actions are seen as a strength for a company. Also, whether the communicated activities are perceived as symbolic or substantive acts as a further moderator of the outcome.

Thus, this research will analyse the CSR messages communicated by three different fashion brands through the message channels corporate websites and publicly available documents and reports, such as CSR and annual reports, with a focus on the past, current and future CSR drivers and practices. The future aspect is based on what the companies say they will do in the future. These aspects aim at answering the research question and the sub-questions regarding why, how, what and when clothing companies communicate their CSR efforts.

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3. METHODOLOGY

This research is a qualitative, interpretive multiple-case study with a focus on the in-depth exploration of how three unique fashion companies communicate their CSR efforts. This chapter explains how the empirical part of the study has been done in order to answer the purpose of the study stated in previous chapters. An explanation of chosen methods is given, how case companies and documents were selected, how data was collected, how the data was analysed and how credible the end result is based on these criteria.

3.1 Research method

A qualitative approach was selected for this research for several reasons. This study takes an exploratory approach in discovering how the chosen case companies communicate CSR drivers and practices due to lack of previous research in the studied topic. This research adds to existing literature by presenting fresh insights, asking new questions and assessing the topic of CSR communication in a new light (Saunders & Lewis 2012).

The approach of this research is a combination of a deductive and an inductive approach, since the codes used for the data analysis are derived from existing theory collected before the fieldwork, but the research is also open to new themes and codes along the process and modifications of existing codes. The codes are led by the theoretical framework presented in the previous chapter, however these can change during the data collection and analysis process. A preliminary conceptual model together with a number of hypotheses is created before the actual research and is concluded into a new or modified theory which is presented in the discussion of this paper. This is done by analysing, measuring and observing patterns and often occurring scenarios during the research, in order to reach propositions to turn into theory. An inductive approach is more flexible and more tolerable for change than a deductive one, which is convenient when researching a fairly new phenomenon that hasn’t been much studied before. (Saunders & Lewis 2012)

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3.1.1 Sample

In order to avoid criticism and scepticism of having “all eggs in one basket”, which would be the case if only one company was investigated, a multiple-case methodology approach was chosen for exploring the contemporary subject of this study (Yin 2014: 64). The sample consists of three case companies that were chosen through purposeful sampling, which means that cases were selected on the basis of suitability to answer the research question (Marshall 1996). The strategy for the selection of sampled case companies is according to Flyvbjerg (2006) a paradigmatic case selection, since this thesis aims to develop a metaphor or establish a norm for the domains that the case companies represent, which in this case concern low, mid and high-end fashion. The chosen cases were selected since they are suitable for understanding the relationships between the analysed concepts and since they offer a representative sample pool of different kinds of companies (Eisenhardt 1989). According to Yin (2009:57) the selection is based on theoretical replication, which predicts contrasting results for anticipatable reasons, which in this study is based on the different market levels the case companies operate in.

The case companies are split in three different categories based on the market level they operate in within the fashion industry. This means that each case represents one market level. The three case companies were chosen on the basis of following criteria:

- Well-established international brands with focus on design and retail.

- Delocalized production that relies on external manufacturers for production activities. - Strong sustainability focus and strive to be market leader.

- Separate “sustainability”-section on the corporate website.

- Publicly available CSR report, annual report with strong sustainability focus or other documents communicating CSR initiatives.

- Member of following NGOs:

o Sustainable Apparel Coalition (SAC) which is an alliance for sustainable production in the textile industry. SAC has developed the Higg Index, which is a standardized supply

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35 chain measurement tool for understanding the environmental and social impacts of producing and selling products (apparelcoalition.org).

o Better Cotton Initiative (BCI) for more sustainable cotton production by training farmers on practices that cut consumption of water and chemicals while increasing yield and profitability (bettercotton.org).

o ZDHC (The Zero Discharge of Hazardous Chemicals Programme) with aim to implement sustainable chemistry in the textile and footwear industries (roadmaptozero.com).

The three chosen case companies are presented below. Rivals that were considered were Zara and Mango for fast fashion, Ralph Lauren and Tommy Hilfiger for premium fashion and Chanel and Louis Vuitton for luxury fashion. The initial idea was to choose three companies that use the Global Reporting Initiative (GRI) as a base for CSR communication, but it was difficult to find three comparably globally prominent brands that use this standard and highlight sustainability efforts in marketing and communication. Thus, the selection below was considered to have the best match with each other and with the requirements presented above.

3.1.1.1 Case company 1: H&M Hennes & Mauritz AB

The Swedish fashion group H&M Hennes & Mauritz AB (hereafter H&M) was chosen to represent the fast fashion sector in this study as the company is one of the biggest fast fashion retailers in the world and has been used as an example in several previous studies (Turker & Altuntas 2014; Li et al 2014; Mann et al 2013). The H&M brand is globally well-known and has currently 4100 stores in 64 markets, with 148 000 direct employees and 1.6 million indirect employees in the supply chain (H&M 2016b). The company has been on the market since 1947 and had a revenue of €18,985B in 2015 (H&M 2016c).

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36 The brand has a sustainable clothing line “H&M Conscious” and is loudly communicating its CSR efforts both in ads and by sponsoring and even hosting sustainability events, such as the Copenhagen Fashion Summit and a Circular Fashion event (together with KPMG in Amsterdam in September 2016). The H&M Group, which also includes the brands COS, Weekday, & Other Stories, Cheap Monday and Monki, has its own non-profit global foundation, the H&M Foundation, that invests in “education, clean water, strengthening women and protecting the planet” (H&M 2016a). The group furthermore claims to have several collaborations and partnerships with NGOs and is listed on several indexes and rankings, such as Dow Jones Sustainability Index, Global Compact 100 Stock Index, FTSE4Good Index and awarded with the RobecoSAM Sustainability Award and as one of the World’s Most Ethical Companies 2016 (H&M 2016c).

The corporate website of H&M has been analysed in the section of “sustainability” (H&M 2016a). Furthermore the group’s CSR report of 2015 called “Conscious actions” which consists of seven sustainable commitments communicated on 130 pages has been analysed (H&M 2016b). The supplier compliance levels (H&M 2015) and parts of the annual report from 2015 (H&M 2016c) have also been analysed.

3.1.1.2 Case company 2: Levi Strauss & Co.

Levi Strauss & Co. (LS&Co.) has been chosen to represent the mid-range sector of premium fashion. The company sells apparel labels Levi's, Dockers, Signature by Levi Strauss, and Denizen and is globally active in 110 markets with a net revenue of €4,306B in 2015. The total number of employees was 12,500 in 2015. (LS&Co. 2016b)

The company claims to be the first worldwide clothing company to found a comprehensive “workplace code of conduct” and global guidelines for water quality standards for their manufacturing suppliers (LS&Co. 2016a). Levi Strauss & Co. highlights the durability of their products as a cornerstone of their business practices. The brand has further invested in production processes and collections using

Fashionably sustainable or sustainably fashionable? : a case study about how fashion companies communicate environmental sustainability based on green-highlighting