Fast-fashion giant Zara faces a huge challenge in the climate crisis. Can its heiress-turned-leader make the brand fast, cheap, and green?
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On the vast design floor of Zara, the world’s biggest fashion retailer, banks of gleaming white desks stretch as far as the eye can see. Designers and cutters sit at their posts, poring over patterns and huddling in groups to discuss the day’s business. Models hover, waiting to be summoned for fittings.
But some of the most crucial action takes place on a computer monitor fixed to a wall in a far corner. Its screen features blurry photos of garments, with numbers that flash upward precisely every three minutes, like times on an airport departure board. The figures—real-time data—have zipped in from hundreds of stores worldwide, ranking each garment by sales so far that day. “Every morning, everybody, no matter what job they do, the first thing we do is check the sales,” says Annalisa Conti, a design team head at Zara Woman. “Everybody arrives, gets a seat, and we sit together and look at the sales.”
That stream of data is key to keeping Inditex—Zara’s parent company, a $33-billion-revenue juggernaut—atop the industry it helped invent in the 1970s: fast fashion. Founder Amancio Ortega launched Zara in A Coruña, a small port city on Spain’s windswept Atlantic coast, picking the new company’s name at random. Decades on, the brand accounts for nearly 74% of Inditex’s mammoth revenues and has made Ortega (who owns about 59% of Inditex) one of the world’s richest people.
These days, the data seems to defy reality. No matter that Europe faces a winter of power shortages and sky-high prices or that the pandemic has mangled the world’s supply of raw materials. On the rainy September morning when Fortune visited Conti’s design team at Inditex headquarters in Arteixo, just outside A Coruña, execs gathered in the same building and announced that net income for the first half of 2022 had shot up 41% over the year-earlier period, to $1.9 billion, and that gross profit margins were the highest for the period in seven years. They would have been even higher had Inditex not shut 502 stores in Russia and 84 in Ukraine after Vladimir Putin sent troops into Ukraine; those two countries contributed 9.6% of earnings before interest and tax. “We have complete confidence in our ability to grow our unique business model,” CEO Oscar García Maceiras cooed to analysts.
The confidence may be justified. Zara, which has 1,946 stores in 95 countries, could yet tap other markets, despite nearly doubling its revenue since Fortune last visited 10 years ago. Its campus, too, has doubled in size, and features a giant crater where a new wing is being built. By some estimates, Zara sells a head-spinning 450 million items a year—about 856 every minute, round the clock, with Conti’s teams creating about 1,000 designs a month. (The company does not disclose those figures publicly.)
Inditex eschews the term “fast fashion,” preferring “affordable fashion.” But this is affordable fashion at warp speed: More than 90% of the clothes Zara sells are created here, on the design floor, by Zara’s 350 designers and 160 patternmakers. Conti (who calls Zara a “fast-fashion brand”) says designers scour Instagram, the streets, and nightclubs, and quiz store managers around the world to discern what people are wearing, then whip up patterns “in a couple of days.” Within days after that, cutters sew prototypes, testing them on real live models. Then a batch is ordered from Inditex factories, with final garments shipped about three weeks later. New styles arrive at stores twice a week, which draws millions to walk inside simply to look at the ever-changing show, or perhaps for impulse purchases at modest prices. So how important is the fast turnaround? “For us, it is the core,” she says. “It is why this company survives.”
But that core—high speed, big volume, low prices—is also deeply damaging to the planet in the view of environmentalists, labor activists, climate scientists, and a growing number of governments. Arguing that fast fashion’s explosive growth has exacerbated the climate impact of apparel in general, they have begun pressing for change.
Until now, the industry’s huge success has made far-reaching shifts seem unlikely. But the arrival of new leaders—both women—at its two biggest companies suggests a turning of tides. In April, Amancio Ortega, now 86, handed the Inditex reins to his youngest daughter. Just 38, Marta Ortega is now nonexecutive chairperson, after 15 years working within Zara. (She debuts on the Fortune Most Powerful Women list at No. 33.) Inditex’s nearest competitor, Sweden’s H&M, in 2020 appointed its first-ever woman CEO, Helena Helmersson (No. 40 on the list), who, tellingly, had overseen its sustainability strategy.
Even strident critics detect glimmers of hope. “They jointly have the ability to change so much,” says Ineke Zeldenrust, international coordinator for the Clean Clothes Campaign in Amsterdam, which has pressured fashion companies for more than 30 years to improve conditions. “I would expect, hope, both of them to lead these two companies from promises and theory into actual practice.”
Such improvements are growing more urgent. Between 2000 and 2015, the apparel industry doubled production, from 50 billion to 100 billion garments a year, while consumers have worn each item less, according to the Ellen MacArthur Foundation, a U.K.-based environmental research organization. It says a generation of shopaholics are hooked on cheap clothing from retailers like Zara, H&M, China’s Shein, and L.A.-based Forever 21—often made possible by ultralow factory wages in places like Bangladesh, Pakistan, and Myanmar. Inditex, whose other brands include Pull&Bear, Massimo Dutti, and a new homewares division called Zara Home, makes half its goods in factories close to home, in Europe, Turkey and Morocco; it owns nine factories in A Coruña alone. Even so, its manufacturing and shipping consume massive quantities of water, chemicals, and fossil fuels.
There are also roiling questions about the destination of the world’s fashion glut. About 87% of all clothes produced are incinerated or landfilled, according to the World Bank. The U.S. estimated in 2018 that Americans alone sent more than 11 million tons of clothes a year to landfills.
These days, few dispute the disastrous environmental consequences. Yet Ortega and Helmersson face an almost existential question: Can their companies maintain such prodigious growth while reining in their climate footprint? And can they innovate more sustainable manufacturing without torching their profits?
Inditex, under Marta Ortega, is banking heavily on innovation. The new chair said when she was appointed last November that she would be “looking to the future, and learning from the past.” After earning a business degree, she cut her teeth as a sales assistant at a Zara store on London’s King’s Road—a fact the company highlights in publicity materials, as if to stress the modest beginnings of its heiress chair. Ortega, too, likes to cast herself as one of the team. When I encounter her in a passageway at Arteixo, she tells me she has just emerged from a board meeting, but that despite her new position she has no intention of moving to an executive office. “It is very boring up there,” she jokes. She says she prefers staying in her (literal) chair on Zara’s open-plan design floor—just as her father did for decades. “I am not interested to go anywhere else,” she says.
Such modesty belies Ortega’s power. She has said little publicly, and rarely gives interviews. (Inditex stressed our encounter was simply a welcome greeting.) But she is credited with having infused Zara with higher-end style. That is clear in the brand’s black-and-white ad campaigns, shot by renowned photographer Steven Meisel and featuring top runway models. Spain’s Queen Letizia—a personal friend of Ortega’s—wore the same Zara dress to UN meetings in New York in September that Ortega had worn in the city two weeks earlier. Unlike her octogenarian father, Ortega closely reflects the demographic of her employees and customers: 76% of Inditex employees are women, with an average age of 28, and women’s wear is Zara’s top revenue generator.
Marta (as she’s known throughout Inditex) represents a bridge from the company’s extraordinary rise to a future where it will have to reckon with the epic environmental crisis from which her father was largely spared. Industry critics believe that to halt the damage, she may need to implement a drastic overhaul—including being less competitive on price. Inditex plans to raise prices this winter to offset inflation—a short-term brake on consumption. But the issue of how to pull off a lasting transition remains unresolved.
Ortega comes from an incomparably more climate-conscious generation than her father—and if that generation acts on those values, it might compel Zara to change. Regulators could have the same impact: The European Union, for example, is weighing whether to force apparel companies to change production methods. For Inditex, the conundrum is how to green the company without slowing its blistering growth. “I find it very hard to believe you can really improve your sustainability credentials, at the same time as dramatically increasing the number of garments sold,” says Adam Cochrane, retail analyst in London for Deutsche Bank. “Mathematically, it is hard to reconcile the two.”
The effort to solve that math problem is underway at Inditex’s Sustainability Innovation Hub. The hub is charged with sourcing, from startups and research institutions, the best lab-grown, carbon-neutral fibers—materials that resemble silk, cotton, and polyester, but can be made without the same pollutants and giant consumption of natural resources.
In May, weeks after Ortega became chair, Inditex signed a deal valued at more than €100 million (about $96.5 million) with Finnish startup Infinited Fiber, to buy 30% of its Infinna fabric, which is made from textile waste and recycled natural fibers, beginning in 2024. And in July, it joined a $30 million investment in Circ, a biotech company in Danville, Va., that has reverse-engineered polyester-cotton blends—half the world’s textile waste—to turn it into cotton and PET polymers, each fully reusable. For fast fashion, that could be a game changer. “Technology is going to play a key role in this transformation,” says Sham Sharif Sokker, who runs the sustainability hub. She shows me swatches of fake silk and cotton, which feel close to the real thing. “Things we have not been able to do until today, with technology, we’ll be able to do.”
Even so, as innovation scales up, Inditex will be competing for supplies with other companies racing to meet climate targets. As a result, eco-friendly clothes could continue to be more expensive, slowing down any transition. Already, shoppers’ devotion to ultracheap fashion is an obstacle: In Zara stores, most choose $7 T-shirts made of virgin poly-cotton over $20 ones made of organic fibers. “It will really change when customers demand that change,” says Cochrane of Deutsche Bank.
Inditex is not waiting for consumers. It plans to zero out carbon emissions companywide by 2040, to cut water consumption 25% by 2025, and to run all stores on renewable energy by the end of this year. (It claims 91% of stores worldwide are now powered that way.) Also by the end of 2022, it aims to have half its clothes on its Join Life label—indicating that they include some recycled, organic, or “more sustainable” fiber; Inditex does not disclose the exact mix. Join Life is similar to eco-labels created by H&M and other companies, and environmentalists are skeptical. The Changing Markets Foundation, a London-based NGO, calls the labels “a case of brands marking their own homework without … third-party verification.” Overstating one’s green credentials can be legally perilous: Authorities in the U.K., the Netherlands, and Norway have accused fashion companies of greenwashing, and in July a lawsuit in New York alleged that H&M had falsely labeled garments sustainable. (So far, Inditex has avoided such legal action.)
Inside Inditex, the sustainability team believe their actions could hugely impact the industry. “Being this big player, we can really transform the supply chain and raw materials production,” says Germán García Ibáñez, Inditex’s head of circularity, over coffee in the technology building. “We know the industry is not going to be the same in five, 10 years. That is for sure.”
To glimpse the future of Marta Ortega’s empire, there are few better places than Madrid’s grand Plaza de España. In April, the company opened the world’s biggest Zara store there, steps from a statue honoring Don Quixote. It is not so much a store as an 82,000-square-foot, four-story temple to Zara fashion, the latest being a collection by New York designer Narciso Rodriguez, again reflecting Ortega’s push into higher-end looks. With soaring ceilings and pristine white surfaces, the emporium is both a company boast—look how far we’ve come!—and a meticulously honed prototype for where it is going.
Algorithms are busy from the moment you enter, according to Álvaro Morón, head of Inditex’s digital technology. Sensors count the number of visitors at any given time; on the rainy Thursday morning I visited, about 200 people wandered the floors. Every price tag provides a gold mine of data. Each is embedded with a radio-frequency or RFID tag, recording its sale in real time—information that’s relayed to headquarters, eventually appearing on the monitor on the design floor. Madrid is Zara’s test site for hyper-digital in-store shopping. (Unlike Shein, say, only 25% of Zara sales are online.) “This is an experiment in the new things,” a sales assistant tells me; she says company reps visit daily to watch the system at work.
QR codes on price tags allow customers to check items out themselves, using a digital reader. If you cannot locate the item you want, the Zara smartphone app will guide you, with a floor map, to the precise shelf or rack—collecting more data along the way. Morón says the company has become “better and better” at dissecting mountains of data, allowing it to make snap decisions from headquarters, like switching colors or styles, or restocking popular items. “We are feeding the whole system in real time,” he says. “We have information from every single garment.”
At the back of the store sits a less successful experiment: a hatch where customers can drop used clothes to be recycled, regardless of whether Inditex made them. Inside, just five small bags show the previous day’s collection; staff think it may have all come from a single person.
Zara has rolled out recycling hatches in every store (as has H&M). And Inditex has partnered with numerous recycling organizations to cut textile waste, “so that they do not end up in a landfill,” it says in its annual report. And yet it is hard to know what share of its own garments are ultimately recycled or discarded. For all its big-data prowess, Inditex cannot yet predict whether eco-friendly fashion habits will catch on—nor how Marta Ortega will leave a greener company to the next generation.
There’s a fierce tech race to invent fibers that can rein in fashion’s dire environmental impact. Here are a few sustainable materials that could occupy your closet someday:
Fishing nets and carpets
Italy’s Aquafil spins 100% re-cycled nylon, made of discarded fishing nets from Chile and Norway and old carpeting from Arizona and California.
Pro: Nets and carpets can be reused rather than dumped in oceans and landfills.
Con: Nylon itself is still made from fossil fuels.
Israeli startup Algatech grows seaweed in vertical farms and mixes it with plant fiber to make yarn and textile dyes.
Pros: Avoids the climate impact of nylon or cotton, and ocean ecosystems aren’t disrupted.
Con: Seaweed-based yarn is far pricier than regular fabric.
Companies are harvesting tough pineapple skins for fiber to make clothes, bags, shoes, and furniture. H&M and Hugo Boss have begun sourcing the material, and Dole markets pineapple waste from its Philippine farms.
Pro: Reduces the 15.5 million tons of pineapple waste dumped each year.
Con: It takes 16 pineapples to make one yard of fabric.
Leather without animals
Leatherware companies are making bags, shoes, and wallets from apple and orange skins, Mexican cacti, and Himalayan nettles.
Pros: Helps cut mammoth agricultural wastage, while generating a much smaller carbon footprint than cattle farming.
Cons: Still small-scale, and highly fragmented.
This article appears in the October/November 2022 issue of Fortune with the headline, “Can Zara be fast, cheap—and green?”