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Growth vs sustainability: Zalando makes “compromise on economics” for new environmental goals

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Zalando has signalled a new direction on cutting emissions and reducing plastic waste, with its co-CEO admitting this will involve a trade-off with growth.

 

Rubin Ritter announced the pledge at a press event today (30 October) in Berlin themed on the overall theme of balancing growth and sustainability.

 

“Less bad isn’t good enough,” he said, saying that offsetting carbon was essential to meet the Paris accord goals of limiting global warming to 1.5 degrees Celsius.

 

From today the German fast fashion company will offset all emissions from delivery and returns through carbon credit programmes. It will also make use of alternative fuels, as it is doing in its trial in Hamburg of electric vehicles.

 

Zalando will also be eliminating single-use plastics by 2023. By the same year, the retailer plans to extend the life of at least 50 million fashion products. The company has already done this with over 1 million items in 2019 by collecting them from customers and reselling them through Zalando wardrobe.

 

Zalando also wants to generate 20% of its gross merchandise volume (meaning total sales across its platform, including by third parties) from more sustainable products. It has made a looser commitment to increase its sourcing standards and only work with partners who align with them.

 

Ritter admitted that the journey would involve an economic trade-off. He said while it is inevitable that companies will have to take such steps, he said “being sustainable will make us a stronger business.”

 

The event came just days after H&M CEO Karl-Johan Persson complained to Bloomberg that shaming consumers into reducing consumption would have a damaging impact on the economy and hold back the fight against poverty.

 

There is another key contradiction at the centre of the debate: consumers routinely profess interest in sustainability but there is as yet little evidence they are willing to pay more for it.

 

Zalando is doing its best to bring the consumer on board. Co-CEO David Schneider said there had been an uptick in both active interest, with last year seeing a 66% rise in online searches around sustainable fashion, and passive interest, with consumers opting for more sustainable options when placed side by side.

 

The fast fashion retailer has trialled allowing consumers to pay to offset the carbon of a delivery at checkout in Austria and is now rolling this out to more markets.

 

There are other ways Zalando is trying to reduce emissions without a cost to the customer. Stacia Carr, director of engineering explained how her size and fit team is using machine learning to offer fitting recommendations to customers in order to reduce returns, a third of which are generated by fit issues.

 

She talked about a “virtuous cycle” in which customer and product data both feed into the algorithms in order to give customers more information when choosing a size.

 

At the moment this is based on standard customer data. Carr said the next stage will be directly collecting data from customers by asking them how well sized their last item was. In the future it may even be possible to feed this information to manufacturers.

 

The company is also reducing the amount of packaging it sends to customers who order multiple items by aggregating orders from different warehouses in a single one before sending to customers. Only 5% of orders are now shipped in multiple packages.

 

Zalando hopes it can minimise the trade-off between growth and sustainability as much as possible.

 

“The bad news is it will be a lot of work,” said Ritter. “The good news is Zalando is good at transforming itself.”

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