As with everyone else in the retail sector and more broadly across industries, sustainable apparel brands and start-ups are being forced to take it day by day.
While reverberations are being felt upstream — with, for example, the Bangladesh Garment Manufacturers and Export Association alone citing $2.87 billion in canceled or suspended orders from apparel brands — the cruel reality is that many employees are to be let go or furloughed, which is all the more reason to investigate how sustainable brands are weathering the crisis.
How long exactly can sustainable brands afford to act ethically and do the right thing, if that’s even fair to say?
“There’s ethics and then there’s financial reality. If you compromise your financial reality to a point, ethics don’t matter because you’re not going to be around,” said Stacey Widlitz, founder of SW Retail Advisors.
Sustainability, after all, does not negate the bottom line, as sustainable brands have shown surging growth alongside their missions. Los Angeles-based Reformation is said to be expanding revenues at 50-plus percent annually; Patagonia has seen revenues quadruple since current chief executive officer Rose Marcario joined the company in 2008 (she became ceo in 2013), and San Francisco-based Everlane claims to double sales annually.
Of course, that was before the pandemic hit, but in any case, sustainable brands have moved quickly to adapt to the crisis.
Last week Reformation began mobilizing the Los Angeles garment district to jointly produce some 5 million masks through the L.A. Protects Initiative — all while still balancing online order fulfillment (with delays), extended returns and the launch of its spring swimwear line to its web site.
Not to mention, the brand is compensating “all of our teams,” as noted in a statement on its web site and compensation will come only “for as long as we possibly can.”
Keval Desai, general partner at InterWest Partners, said the “magnitude” of the historic $2 trillion CARES relief act passed by Congress foreshadows the belief that policymakers expect significant layoffs on the horizon as the pandemic continues to unfurl.
Already tens of thousands of employees have been furloughed by leading U.S. retailers — a week after the weekly unemployment filings had already reached a record level.
Simply put, “If you can’t pay them, help them get on the unemployment payroll,” added Widlitz, who believes government stimulus packages need to center around employee retention and landlord and tenant relations.
Loans are an obvious choice for brands and retailers apt to hold on for now, but once at the end of their ropes, even sustainable brands may be forced to let go — of staff, that is.
Despite repeated assurances of job security, Everlane laid off and furloughed hundreds of retail and backend employees last week.
But the difference is in how it’s handled, according to Karla Mora, managing partner at Alante Capital. “Not all tough business choices equate to compromising ethics. If you end up having to let go of your staff, you need to communicate it. Otherwise, it will come out and there will be backlash like what happened to Everlane,” said Mora.
It’s not compromising ethics per se, but Marigay McKee, general partner at Fernbrook Capital LLC, believes businesses will have to compromise “their intention” in these times in order to survive.
Despite all its North American stores, offices and operations being closed, including online orders (along with a global list of closures), Patagonia stands firm in its commitment to its employees, who will “continue to receive their regular pay during these closures,” as per a statement from Marcario.
Being benefit corporations, companies like Patagonia and Eileen Fisher (having answered the call to produce medical gowns and masks) are held to certain “legally binding fiduciary responsibilities,” as well as annual fees.
WWD reached out to B Lab, the nonprofit that has offered B Corp status since 2006, to determine how best practices change during a global crisis.
“Because both the legal requirement language and the benefit corporation statute require companies to consider the impact of their decisions on stakeholders, including employees and the local community, in times of crises, B Corps are able to respond in a multistakeholder way instead of being entirely driven by shareholder concerns,” said Holly Ensign-Barstow, director of stakeholder governance and policy at B Lab.
B Lab is creating additional resources in the coming months as well. According to data shared by the organization, B Corps were 63 percent more likely to survive the Great Recession because of what experts believe is a matter of trust.
With immediate cost pressure and strain on resources, Widlitz believes three to six months without revenue while still paying employees would be — for the majority of companies — an “impossible situation.”
For start-ups or smaller companies, which is what most sustainable brands are, she gives them a mere one to two months to operate without revenue.
Christy Dawn is one such L.A.-based sustainable brand that is being forced to make difficult decisions to remain agile during these times of crisis. The brand is selling online and fulfilling orders with reduced facility access.
“We have had to cancel some orders, adjust team member salaries, and let go of some of our staff. It’s been really challenging. At the end of the day, if you want to keep going, the numbers have to add up, but these aren’t numbers. These are people with lives and families who love their jobs and rely on the income that these jobs provide,” said Aras Baskauskas, ceo of Christy Dawn.
In a not-so-distant past, survival was a game for Baskauskas, who won season 12 of reality show “Survivor.” Now, it’s the reality faced by brands like his and his wife’s.
But even in survival mode, Christy Dawn isn’t putting sustainability initiatives like its Farm to Closet regenerative agriculture project on the back burner.
Newbies Chloe Songer and Stuart Ahlum cofounded sustainable footwear brand Thousand Fell last year and are weathering the challenges. They are working closely to protect their global production supply chains and partnering with logistics partner Ohi to handle e-commerce fulfillment, having had to move inventory out of New York to warehouses in New Hampshire and L.A. “in order to hedge against shutdowns.”
“Survival is definitely top-of-mind. We have spent a lot of time strategizing with our investors and with other founders on how to weather a potential 12- to 18-month downturn. Everyone is being overly cautious,” said Songer.
Desiree Buchanan founded L.A.-based premium label Poplinen in March and describes the situation as “a huge upset for a brand like ours,” which relies heavily on in-person pop-up shops, craft fairs and holiday markets.
As these unprecedented times have confirmed, there simply isn’t demand for discretionary apparel purchases — even ones focused on sustainability — which is the logic that Patagonia uses in directing online visitors to peruse its food business, Patagonia Provisions (shelf-stable eats while in quarantine).
However, in their actions, sustainable brands and experts aren’t asking for martyrdom, but rather for thoughtful consideration of everyone in the supply chain, real transparency and creativity in the coming weeks and months.
The latter may come in the form of executive pay cuts, forward purchases or gift cards and commitments to suppliers, as in the case of pivoting to the production of personal protective equipment, as many have done.
“How brands treat their workers and show up during this pandemic will greatly impact how their brand is perceived by customers after we emerge on the other side,” reiterated Mora.
To which Desai added: “The demand shock caused by the crisis will only accelerate the trend of ‘fewer, better’ consumption that sustainable fashion brands have led.”
McKee highlighted again the importance of sustainable production and transparency to today’s consumer, especially post-pandemic. Which is complicated given that the majority of brands may be forced to shelve sustainability investments after it’s all over.
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