16 July 2019
Pablo Isla sets out Inditex's global sustainability commitments
- Isla highlighted the fact that "the culture of diversity, innovation and creativity that is shared by the entire Inditex team is driving the forward-looking values of sustainability and innovation”.
- Pablo Isla focused his speech at today’s Annual General Meeting on two key strategic elements: the company’s digital transformation and its sustainability transformation.
- The executive chairman announced that by 2025, 100% of the cotton, linen and polyester used by all eight of its brands will be organic, sustainable or recycled.
- By 2020, Inditex commits to fully eliminate the use of plastic bags, a milestone already attained at Zara, Zara Home, Massimo Dutti and Uterqüe. And by 2023, all single-use plastics will have been totally eliminated for customers sales.
- The number of garments featuring the Join Life environmental excellence label is set to more than double in 2019 and will account for over 25% of all garments in 2020.
- "Sustainability is a never-ending task in which everyone here at Inditex is involved and in which we are successfully engaging all of our suppliers", said Isla.
- The shareholders voted in favour of the new dividend policy. The dividend from 2018 profits will total €0.88 per share, year-on-year growth of 17%. The dividend per share has increased by 83% during the last five years.
At today’s Annual General Meeting at its headquarters in Arteixo (La Coruña), Inditex’s shareholders ratified the Group’s 2018 financial statements. In 2018, Group revenue amounted to €26.15 billion, underpinned by growth in all the regions in which it does business, as well as in online sales, which accounted for 12% of the total, having increased by 27% last year. Net profit totalled €3.44 billion. These results paved the way for the payment of a dividend of €0.88 per share, a growth of 17% year-on-year and of 83% in the last five years.
During his presentation at the AGM, Inditex’s executive chairman, Pablo Isla, shared with Inditex’s shareholders some of the key targets set out by the company for and the period up until 2025.
“Our digital transformation and determined progress towards the most demanding sustainability standards are complementary and underpinned by the efficiency of our long-standing business model, which is based on offering our customers the best in quality fashion”, said Pablo Isla. He also highlighted that “sustainability is a never-ending task in which everyone here at Inditex is involved and in which we are successfully engaging all of our suppliers; we aspire to playing a transformational role in the industry”.
Among those targets, he stressed that by 2025 Inditex will only use cotton, linen and polyester that is organic, more sustainable or recycled. Use of cotton, linen and polyester –together with viscose, which will reach this target by 2023- constitute 90% of the raw materials purchased by the Group. In addition, 80% of the energy used in the Group activities (stores, logistic centres and offices) will be renewable.
The first milestone, set for 2019, is for all of the Group’s platforms and head offices to meet the highest green building certificates and for 100% of Zara stores to be eco-efficient (which is one year ahead of the original target). In addition, the at-home used clothing collection service currently operating in several cities in Spain and China will be extended to Paris, London and New York by September.
Another of the more ambitious programmes being announced today by Inditex, is that the entire eco-eficient store platform will be complete by 2020. Zara will achieve this target in 2019, the rest of the brands will follow suit in 2020, assisted by the company’s effort to fine-tune and digitalise its sales footprint.
- Also this year, the Group’s Join Life garments will account for one-quarter of the total. Join Life is the label used by all of the Group’s retail formats to single out the use of more sustainable raw materials such as organic cotton, recycled polyester and Tencel and the prioritisation of more water and energy friendly processes.
- The volume of clothing featuring the Join Life label has already increased by 85% in 2018 to 136 million garments. The Group is anticipating further significant growth in 2019 - of 110% - and that by 2020 one in every four items of clothing put on sale will qualify for this sustainability label.
- Also in 2020, all of the Group’s brands will have eliminated the use of plastic bags, with Zara, Zara Home, Massimo Dutti and Uterqüe already having done so. In 2018, only 18% of all bags were made from plastic.
- Next year, all of the Group’s stores will have been fitted with containers for collecting used clothing for subsequent charitable purpose reuse or recycling. The Clothing Collection programme is one of the cornerstones of Inditex’s circular economy effort.
- That programme’s reach –in collaboration with a number of non-profit organizations- has increased to 24 markets; the 1,382 containers installed in the Group’s stores are complemented by the 2,000 street containers set up throughout Spain in collaboration with Caritas and the at-home pick up service operational nationwide in Spain. Since its launch, over 34,000 tonnes of garments, footwear and accessories have been collected through the dedicated containers placed in the company’s stores, offices and logistics platforms.
- Complementing this programme is the strategic commitment to researching new technologies for developing new recycling processes. On this point, Inditex’s chairman referred to the expansion of the collaboration agreement with the Massachusetts Institute of Technology (MIT) under a $4 million plan designed to tackle global challenges in operational and sustainability matters and support research into better ways of recycling clothing and recovering fibres using clean technology.
By 2023, the company will have fully eliminated single-use plastics from customer sales and 100% of the waste generated at the Group’s head offices, logistics platforms and stores will be sent for recycling or reuse, framed by the Zero Waste programme.
Currently, the company is recycling or reusing 88% of the waste. It will continue to introduce collection and recycling systems for all of the materials used in its package distribution and hanged garment operations (mainly FSC-certified cardboard boxes, recycled and recyclable plastic, alarms and hangers) for reuse within the supply chain itself or for recycling under the so-called Green to Pack programme.
Also in 2023, another of the most widely used raw materials, viscose, will be 100% sustainable, and in line with the target shared with Changing Markets, enabled by the fact that, by then, the supply chain will have finished implementing the recommended best environmental practices.
DIGITAL AND SUSTAINABILITY TRANSFORMATION
“Our digital and sustainability transformation is only possible thanks to the solid business model performance, which is generating the funds needed to reinvest in the company’s future”, Isla told the company’s shareholders. He recalled that the company has invested over €9 billion during the last six years, over €2 billion of which has been earmarked to introducing technology designed to enhance the customer experience.
The sales footprint increased by 5% in 2018, once again accompanied by the strategic commitment to larger stores equipped with new technology to enable online integration and eco-efficient operations. During the last six years, the company has overhauled its store portfolio, a process marked by 3,364 newly opened stores, 2,374 store refurbishments, 1,019 expansions and the absorption of 1,401 older and smaller-sized units in overlapping catchment areas. “Thanks to this effort, we are now offering our customers an integrated and unique experience in which they can swap the store for the online platform, and vice versa, at any stage in the process to best suit their needs”, Isla added.
EXPANSION OF THE ONLINE PLATFORM
The constant updating of the physical store network has been accompanied by significant expansion of the online platform, underpinned by the announced target of having all of the Group’s brand fashion propositions available to purchase anywhere in the world by 2020. Indeed, following the launch of its global online sales platform, www.zara.com/ww, in 106 markets in which the chain does not have physical stores, Zara’s collections can now be purchased in over 200 markets. Massimo Dutti, Pull&Bear, Stradivarius, Oysho, Zara Home and Uterqüe have also already launched their global stores, lifting the number of markets where their fashions can now be shopped by over 100.
The work done to further the integration of the physical and online store platforms, tangible in the introduction of next-generation, customer-oriented technology and services, set the backdrop for Isla’s explanation of the Group’s “solid model”. This model has yielded sales growth of 56% during the last five years, with positive results in all regions.
At the end of the year, the worldwide Group was made up of over 174,000 people of 154 different nationalities. Its chairman described that workforce as one that embraces sustainability as an end goal and a cross-cutting value, underpinned by the “culture of modesty, diversity, creativity, innovation and refusal to settle that characterises the entire team”.
Inditex paid its employees €619 million of bonuses and variable remuneration from its 2018 profits in addition to their base salaries, lifting total employee remuneration to €4.14 billion.
That figure was topped up by a further €32 million corresponding to the second cycle of Inditex’s 2017-18 extraordinary profit-sharing plan which was paid out last April to the approximately 92,000 people who had been working for the Group for at least two years as of 31 March 2019. In all, the Group has paid out €152 million in the four years these plans have been in place. 2019 has been marked by the introduction of new plans with targets tied to sales growth in each specific store in the case of store staff and to profitability in the case of personnel working in the central services and logistics departments.
Isla mentioned the Group’s contribution to the Spanish economy in particular, driven by the activities carried out at its head offices. In 2018, Inditex’s total tax contribution topped €6.17 billion, €1.69 billion of which was paid in Spain. Its effective corporate income tax rate once again exceeded 22%.
In addition, in Spain, nearly 7,500 suppliers invoiced Inditex for more than €5 billion of goods and services in 2018. Total invoicing by Spanish suppliers to Inditex over the last five years therefore stands at over €23 billion.
Lastly, Inditex’s executive chairman highlighted the more than 2,400,000 direct beneficiaries of the community investment programmes the Group collaborated with in 2018, contributing €46.2 million.
In addition to the 2018 financial statements, Inditex’s shareholders ratified the re-election of the Group’s executive chairman Pablo Isla as director. Also, approved the re-election as directors of Amancio Ortega, José Luis Durán and Emilio Saracho and the appointment of Carlos Crespo as director. Afterwards, The Board of Director appointed Carlos Crespo as Chief Executive Officer (CEO).
They also approved the creation of the new Sustainability Committee within the Board of Directors and agreed to increase the number of directors to 11, paving the way for the appointment of a new independent director in the future.
They also voted in favour of the new dividend policy. As a result, the ordinary payout will increase from 50% to 60%. In addition, the company will pay out a bonus dividend totalling €1 per share against 2018, 2019 and 2020 profits.
Framed by the new policy, they also ratified the motion to pay out a dividend of €0.88 per share from 2018 profits (up 17% year-on-year), €0.44 of which was already distributed on 2 May, leaving the remaining €0.44 to be paid in the form of an ordinary final dividend and bonus dividend on 4 November 2019.