WWD: How does a manufacturing-based business reconcile growth with sustainability?
Marissa Pagnani McGowan: This may sound canned, but we really don’t see them as mutually exclusive. We see sustainability as an enabler for a manufacturing-based industry. Happy to give you a few examples.
WWD: Please do.
M.P.M.: The first example is when you think about sustainability and driving a push toward transparency, or even a push toward efficiency, when you get more transparent, you understand your manufacturing base better so you know your mills, you know what processing units. If you want to make improvements on those things, you need to know them. That helps enable the strategic relationships with suppliers that lead to new innovations, to solutions and the ability to co-invest in more sustainable solutions.
The second example is we have all sorts of KPIs that we track. If you look at our on-time delivery next to our quality, next to our CR scores, they are always consistent. You get good CR, you get good quality, you get good on-time delivery. The management systems are the same.
From a consumer-expectation perspective, they’re asking for value, values and wanting to trust the organizations and the brands they invest in.
WWD: A number of people have said consumers are increasingly asking about the supply chain. You’re finding that?
M.P.M.: Absolutely. It [comes out] especially in the consumer insights and listening sessions and social listening that we’re doing with the Gen Z audience. They want authenticity and they’re willing to look for it. They’re digital natives, they understand how to navigate the Internet and get good information, and they’re willing to take the time to do that.
Have we seen that they’re willing to pay more for that? I think that’s to come, but we certainly know they care. And some of the things that we thought of maybe even two years ago as progressive, they see as table stakes.
WWD: You’re more focused on Gen Z than on Millennials?
M.P.M.: I wouldn’t say that. But I do think that where we’re hearing this a lot more is in the Gen Z conversations. I think the Millennials definitely care. It just feels different with the Gen Zs. The key is there is a growing awareness. Whether you’re talking about Millennials or Gen Zers, there is a growing ability to navigate information in a new way, and the expectations have definitely changed.
WWD: In terms of the triple-bottom line, is it realistic to expect companies to weigh sustainability equally with profits?
M.P.M.: Again, we see them as fully integrated. When we look at responsible business practices, so buzzword of the day, “purchasing practices.” Really, what you’re talking about is good forecasting, calendar adherence, making sure that you’re doing what you say you’re going to do, not overloading your factories. This is just good business. If we talk about these things as separate from business, then they feel like maybe they conflict. But if you’re really thinking about creating a supply chain that’s going to last into the next 10 and 20 years, then it’s more easily understood how we see these connection points.
Another example: recruiting and retaining talent. There is a war for talent going on right now. We’re all a part of it, we’re all in the middle of it. We just had our financial controller tell us that his candidate asked him first about the CR report and then about the 10K. He was shocked. But we hear it over and over.
WWD: You’re not the first person to tell me that prospective hires want to know about a company’s corporate responsibility positions. Is that a relatively recent thing?
M.P.M.: I would say in the last two years. We’ve worked hard with our recruiting teams and talent development teams to make sure that the corporate responsibility platform is woven into the materials, talking about the company and also making sure it’s part of the curriculum for ongoing learning.
WWD: Overconsumption — most of us buy far more than we need or even use. Yet fashion is in the business of selling, and selling more. Can those two realities be reconciled?
M.P.M.: I think when you look at some of the brands that have been most successful in messaging about keeping your goods for longer and putting products in use at their highest value for the longest period of time — I’m thinking of some specifically mission-driven outdoor brands — they have been incredibly successful. They’ve been able to charge a higher price point because what they’re delivering has a value that is going to last for longer. I think the new business model conversation is going to take us in different directions. We have to see where they go.
Melanie Steiner (PVH’s chief risk officer): Sorry, I don’t mean to interrupt. But to elaborate on circularity — that’s the whole point of it. We’ve signed up to a whole bunch of pledges. This is critical to us as a company and to all of our brands. If we can actually achieve the ambitious goals set out by our circularity pledges, that’s going to take care of a lot of that. Because it keeps things in use for longer, at their highest value for longer, it just goes in a circle, so you’re getting rid of that linear take-make-dispose model that essentially will obviate the need for that question, because then you’re not buying and disposing anymore. That’s the whole goal. But it takes a lot to get to that point. And you need multiple stakeholders and industries at the table to effectuate that change.
WWD: You mention PVH’s ambitious goals. The Corporate Responsibility Report sets out several, including producing zero waste.
M.S.: Yes. That’s our stretch goal.
WWD: Ambitious to the point of unrealistic?
M.P.M.: We heard that a lot when we set out to do zero hazardous chemicals by 2020. We’re now seeing that the industry has eliminated 10 of the 11 most hazardous chemicals, which were the ones set out originally by Greenpeace. And it actually shocks us. We thought we would fail forward, but we didn’t realize how forward we would make it.
The last chemical class, I think we’re on the cusp. So hopefully by the end of 2020, we’ll be there. But I think the whole idea of forward fashion and this “Zero, 100, 1,000,000” [referencing PVH’s goal to have zero waste or emissions; 100 percent ethical and sustainable sourcing, and improve the lives of 1 million people across its supply chain] is really to set a new level of ambition for PVH and to put that out there in the industry. Transparency is a big deal for us. We want to communicate to our stakeholders in a way that is meaningful for them, whether they’re consumers or investors, and this framework will give us a way to do that.
At the Copenhagen Fashion Summit [May 15 and 16], Manny [Chirico, chief executive officer of PVH] will be announcing 15 smart targets, so specific, measurable, actionable, time-bound, for all of the priority areas including innovation for circularity, living wage, ethical recruitment, all of these areas. We have a data plan to report against those and make sure we’re holding ourselves accountable and trying to push the industry in the right direction, and ourselves.
WWD: Tell me more about the current goals.
M.P.M.: Through our forward fashion narrative we have the “Zero, 100, 1,000,000.” So you’ve got in broad strokes product-related, supply chain-related, community-related work, trying to be consistent and live your values throughout that. It could be through water stewardship, through inclusion, diversity internally. Whatever it is, those are our three buckets.
When you think about our day jobs that don’t fall as neatly under those categories, you think about stakeholder engagement, communicating and reporting. What we do from a reporting perspective looks like a nice, glossy report, but it’s mapped to eight different ratings, rankings, indexes, making sure we’re trying to give our stakeholders the information the way they want it, and be honest about what we’re doing.
Forward fashion has been a big push for the last year. Getting the company around all these targets, putting them out publicly and building into the business the data flows and the models necessary to make sure that everyone is delivering against them and that they’re excited about them and that they’re differentiators for our brands, It’s been fun but a little busy.
WWD: It sounds very busy. I spoke with a scientist and she maintains that in the big picture, self-governance doesn’t work, and we need more government intervention.
M.P.M.: I would say you need four things to be effective. You need the legislation and regulation. You need the systems and infrastructure to actually implement those regulations. Bangladesh had some of the strictest structural safety regulations and zero infrastructure to enforce them before Rana Plaza. So you need to have the regulations and legislation and you need the governmental infrastructure. Internally, you need strong voices at the top and then you need folks like us to buy into that and make sure we’re measuring against that.
M.S.: I agree. I think that legislation is never going to be the end-all, be-all in the sense that business also has a license to lead and we have been, whether there is legislation or not. We don’t let that hold us back.
WWD: What about sharing efforts, sharing research, sharing data with peers and competitors?
M.P.M.: We are incredibly committed to working as partners with other leaders in the industry. We are constantly either learning or hopefully bringing some knowledge to the table. We believe moving as an industry is very important. Our success is dependent upon it, and we don’t want to be inefficient in our quest to be more efficient.
WWD: I’m sure it’s been a process, but how long has this been a major focus for PVH?
M.P.M.: I joined about five years ago in this role. It’s been really interesting as the conversation changed. For a long period of time it was just about auditing, making sure children weren’t in your factory and you didn’t have obvious risks. It has grown into having a commitment to make sure that the workers in that factory came there in an ethical way, that their housing is good, even if it’s not on site; to make sure that issues like harassment and abuse [are dealt with]. Those are hard to find and hard to solve and they require a lot more than an audit to [eliminate].
I think with the growing commitment around human rights there is also an awareness that if you’re dumping chemicals in the water you are impacting those workers, you are potentially taking away their livelihoods, their clean water to drink from. So there is a connection point with the human rights story.