Fast Retailing: How to move faster towards a sustainable business model?
- Marco Mak
- May 8, 2021
- 4 min read
As the world’s third-largest manufacturer and retailer of private-label apparel, Fast Retailing is a global company that operates multiple fashion brands including UNIQLO, GU, and Theory. Their vertically integrated value chain spans from procurement, design, and production to retail sales. In FY2019, they brought in a 2.29 trillion JPY of revenue with 3,500+ stores and 137,000+ employees in 20+ countries globally. However, they adopt a “fast fashion” business model that depends on the sales of a large volume of products that are made with a large amount of natural resources. With Fast Retailing enormous success and scale, they are a big brand that needs to be transformed at its pace to meet the stakeholders’ expectations on sustainability.
In this essay, I will study the current state of Fast Retailing’s sustainability and suggest areas that Fast Retailing can improve upon so that they can move faster towards a sustainable business model.
What are things that Fast Retailing are doing great?
1. Robust sustainability framework
Figure 1: Fast Retailing’s Sustainability Framework (Fast Retailing Sustainability Report 2020 https://www.fastretailing.com/eng/sustainability/report/pdf/sustainability2020_en_interactive.pdf#page=1&pagemode=thumbs&zoom=80 )
Fast Retailing has developed a robust sustainability framework (Figure 1) that identified 3 impact areas of People, Planet and Community with 6 materials issues. The six material issues are highly relevant to their business strategy and stakeholders, which are namely:
Create New Value Through Products and Services;
Respect Human Rights in Our Supply Chain;
Respect the Environment;
Strengthen Communities;
Support Employee Fulfillment; and
Corporate Governance.
As Fast Retailing is already a well developed “big brand”, it is difficult for them to “reinvent the wheel”, which is overhauling their fast fashion business model into a sustainable or circular one. Instead, they focus on developing robust management approaches, policies and practicing tackling different material issues of their business.
Material issues | Examples of management approaches and policies | Examples of practices and initiatives |
Create New Value Through Products and Services |
|
|
Respect Human Rights in Our Supply Chain |
|
|
Respect the Environment |
|
|
Strengthen Communities |
|
|
Support Employee Fulfillment |
|
|
Corporate Governance |
|
|
Table 1: Examples of management approaches and policies, and examples of practices and initiatives against 6 material issues of Fast Retailing
Various targets and goals are also set to help track and guide their sustainability strategy. Progress towards their goals are reported on their sustainability website and report. Examples of the goals are:
Procure all cotton from sustainable sources by the end of 2025
Eliminated PFC use by the fall/winter season of 2017
Eliminated all real animal fur from our products across all brands by 2018
Prohibit the use of mohair in any products by the year 2020
Achieve a target of a 30% greenhouse gas (GHG) emissions reduction by 2030, including the supply chain
Reduce water consumption by 15 percent of the 2016 levels by the end 2020
Eliminate hazardous chemical substance discharges from production processes and products by the year 2020
2. Forging partnerships for sustainable changes
Fast Retailing actively forms partnerships with NGOs and industry associations to leverage on their expertise in different fields of sustainability to drive changes collaboratively. This also allows them to be monitored and scrutinised by their stakeholders as they move forward in their sustainability journey.
Material issues | Examples and areas of partnerships |
Create New Value Through Products and Services |
|
Respect Human Rights in Our Supply Chain |
|
Respect the Environment |
|
Strengthen Communities |
|
Support Employee Fulfillment |
|
Table 2: Examples and areas of partnerships against material issues of Fast Retailing
How can Fast Retailing move faster towards a sustainable business model?
1. Business model innovation
Figure 2: IIRC Value Creation Framework (Source: https://integratedreporting.org/wp-content/uploads/2015/03/13-12-08-THE-INTERNATIONAL-IR-FRAMEWORK-2-1.pdf)
To help Fast Retailing move away from a linear fast fashion business model, I would suggest them adopt the International Integrated Reporting Council (IIRC) Value Creation Framework (Figure 2). Instead of focusing on the sustainability of their financial capital like a typical business, the IIRC framework guides Fast Retailing to consider the process of value proposition, creation and capturing of their six capitals, namely financial, manufactured, intellectual, human, social and relationship, and natural. This framework provides them with a more balanced approach that takes the economic, environmental and social pillars of development into account for their long term growth strategy.
2. Accelerate Towards Circularity and Sustainability
Figure 3: Current business model of Uniqlo (Source: https://www.fastretailing.com/eng/group/strategy/uniqlobusiness.html)
Fast Retailing should move towards “closing the loop” and achieving a higher level of circularity. Although the current business model of Uniqlo (Figure 3), the main brand of Fast Retailing, appears to be in a circular form, the loop is “closed” by its marketing strategy spanning across its sales and design process. The business model actually neglects the end-of-life of its products or how materials can be recycled in the whole business process.
Nevertheless, Fast Retailing has been inching towards circularity with Re-uniqlo, which is a Japan-only initiative consisting of:
Collecting used clothes from customers;
Sorting through the clothing materials;
Recycling down and feather for new clothes; and
Turning other materials into fuel or soundproofing materials for automobiles.
Fast Retailing can consider expanding such programme to other locations.
Fast Retailing may also consider adopting a “buy-back and resale” circular business model, which involves offering an incentive like coupons for their customers to return their used garments (bought from that retailer) to a store and reselling them after some maintenance or repair. According to a report by WRAP (2013), the “buy-back and resale” model is the most financially viable with "good" resource savings in 10 years, amongst 5 models examined. Adopting such business model can help Fast Retailing maintain business growth while achieving resource sustainability.
Other than closing the loop, they can shift towards more eco-friendly and ethical materials. For instance, they should look into using organic cotton in their popular classic cotton t-shirts and reducing the usage of less-desired materials like polyester and spandex in some of their stretchy jeans. Also, they may consider obtaining vegan accreditation from organisations like PETA. They currently banned the use of real fur across all Fast Retailing brands but only certain lines would go an extra mile. The Good Wool by Theory collection, for example, is produced in consideration of both the ethical treatment of animals and the environment. This kind of pilot projects can be introduced to other Fast Retailing brands.
Conclusion
In conclusion, Fast Retailing might be on the better end among fast fashion companies but lots more could be done moving towards a sustainable business model given its scale and power in the industry. They can move faster and further by innovating their business model, and working towards circularity and sustainability.
Learn more
Fast Retailing Annual Report 2019
https://www.fastretailing.com/eng/ir/library/pdf/ar2019_en.pdf
Fast Retailing’s response to Xinjiang human rights issue
https://www.fastretailing.com/eng/sustainability/news/2008171600.htm
UNIQLO sustainability webpage
https://www.uniqlo.com/en/sustainability/#:~:text=UNIQLO%20has%20adopted%20a%20sustainability,on%20planet%2C%20people%20and%20community.
ReUniqlo
https://www.uniqlo.com/en/re-uniqlo/
UNIQLO business model
https://www.fastretailing.com/eng/group/strategy/uniqlobusiness.html
WRAP
https://wrap.org.uk/sites/default/files/2021-03/WRAP-evaluating-financial-viability-resource-implications-new-business-models-clothing-sector.pdf
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