Ralph Lauren: An Analysis of Sustainability and Supply Chain

Macroeconomic trends impact businesses, in both the long and short term, in a multitude of ways as these trends often indicate the degree of a company’s risks and securities which thereby impacts stability. A significant and recent trend, in both the American and global economy, centers on sustainability from a supply chain perspective. As business entities strive to manage the socio-economic and environmental impact of business practices throughout the life cycle of their products and services, these organizations encounter both opportunities and obstacles for their particular business model. Over the past two years, the fashion industry has directly experienced supply chain and sustainability issues prompting companies to evaluate their business missions and practices. The Ralph Lauren corporation is one fashion brand that is directly addressing sustainable fashion and supply chain practices in both overall company goals and tactical strategies. Ultimately, Ralph Lauren corporation is addressing sustainability and supply chain by implementing vast and aggressive guiding goals and actionable steps to reduce negative impacts of fiber production and textile processing in an effort to improve the company’s social and environmental impact.

Company Background

The Ralph Lauren Corporation is a multinational luxury fashion corporation that evolved from a singular business venture into a multinational organization. Fundamentally, Ralph Lauren, founder of Ralph Lauren Corporation and current Executive Chairman and Chief Creative Office, formed the precursor to this corporation in the 1960s when he created Polo Fashions, Inc. which was a company that solely designed and produced mens’ clothing, namely ties. Lauren’s private company expanded as a brand with limited business success until the 1980s when a change in partnerships and operational management ignited company growth; the company subsequently evolved to include design items including fragrance, luxury, home decor and even brand-focused retail outlets. The private company shifted to a public corporation in 1997 when Ralph Lauren sold 18 million stock shares (Colvin). With this growth, the dynamic company now follows an omni-chain business model, a multichannel approach that intentionally integrates the physical and technological aspects of business management, to effectively compete in today’s interconnected market (Robinson). The corporation, over time, has experienced both market gains and losses; for the fiscal year 2021, the company reported $4.4 billion in revenue with a 28.56% decrease in growth for a reported overall loss of $121 million as compared to 2020 (“WSJ”). Despite the current downward economic trend, the corporation holds eight brand names and continues to develop product and international markets (“Ralph Lauren Supply”).

Company Position Statement and Supply Chain and Sustainability

Ralph Lauren Corporation states in the company’s supply chain and product sustainability statement, which is included in its overall 2019 Design the Change business initiative, that the collective company “believes'' in broad industry collaboration as the primary means to positively balance these interests. Accordingly, the statement reveals that this overarching goal prompted partnerships with “leading initiatives” to better align the company’s approach with best business practices to make both their manufacturing and products more sustainable. Specifically, the company states they will intentionally apply these practices to manufacturing, product and material selection, traceability concerns and generalized sustainability factors by establishing a “clean electricity standard, putting a price on carbon emissions, creating incentives for investment in renewable energy and investing in electric transmission infrastructure (“Ralph Lauren”). The company has most shared this sustainability commitment with both stakeholders and interested consumers via their 2020 Citizenship and Sustainability Report which highlights overarching goals, specific interests, and tactical strategies.

Background on Supply Chain and Sustainability

Supply chain sustainability largely concerns companies’ efforts to address the environmental and human impact of their business practices. Fundamentally, this issue focuses on companies’ efforts to consider a product’s journey from “raw materials sourcing to production, storage, delivery, and every transportation link...to minimize environmental harm in energy usage, water consumption, and waste production” while also positively affecting impacted communities (Luther). A fundamental issue with this subject is practical application in a business environment reliant upon profit. Relatedly, directly because of difficulties in implementation, concerns arise over unethical practices and direct violations of both goals and business standards (Govindan et al.) Specifically, as environmental scholars Veronica Villena and Denis Gioia write in their 202 Harvard Business Review article “A More Sustainable Supply Chain,” there is often a tension between multinational corporations who pledge to follow sustainable strategies and first-tier suppliers’ capabilities to realistically comply with these standards. For example, the authors acknowledge there is a “cascading” problem as first-tier suppliers rely on second and third tier suppliers who might not be able to “realize in practice” larger environmental goals. Accordingly, lower-tier suppliers often make conditions “worse” and expose the corporation to “serious financial, social and environmental risks” (Villena and Gioia). Thus, this issue remains a fundamental concern in today’s fashion market.

Specific Sustainable Supply Chain Goals and Implementation Strategy

Ralph Lauren Corporation has several specific and stated goals connected to their supply chain and sustainability position. Fundamentally, as noted in a 2021 position statement, the company will comply with all national and local environmental regulations as well as the UN Fashion Industry Charter for Climate Change. Most aggressively, the company aspires to achieve “net zero global greenhouse gas (GHG) emissions from its operations and its value chain by 2040” which is a (Glover) lower absolute emissions across the supply chain by 30% before 2030, reduce water consumption by 20% across the supply chain by 2025, only utilize chemicals that have zero discharge of hazardous waste, source 100% of sustainable materials for all “key” materials by 2025, require all suppliers to establish a sustainability strategy, and seek “preferred” fiber supplies (“Ralph Lauren Sustainability”). The company also has sustainable supply chain directives for fabric sourcing materials including cotton, cashmere, nylon, wool and down.

To accomplish these goals, the company has taken direct steps. First, Ralph Lauren Corporation partnered in 2021 with Indigo Ag, an American-based agriculture technology company that works with plant microbes in an effort to increase sustainability and human health, to scale investments in “credible, nature-based carbon removals” and support farmers with “purchase of verified agricultural carbon credits” (“Indigo Ag”). Second, the company is directly working with suppliers “...through collective action programs to accelerate the standardized approach to setting carbon targets and low-carbon action plans at the factory level” (Ralph Lauren Sustainability”). With regard to reaching its water goals, the most direct action is the company’s introduction of their Color on Demand program on March 22 of 2021: this innovation “dramatically reduces the amount of chemicals, dye, time, water and energy used in the cotton dyeing process” (Leahy). In an effort to eliminate waste connected to supply chain and sustainability issues the company invested in a sustainable material startup, Natural Fiber Welding, to facilitate “upcycling natural fibers such as cotton waste into performance materials;” Ralph Lauren Corporation is helping to “scale up this process and create sustainable apparel from it” (Danigelis). Relatedly, the company relies on the use of the “circular and responsible” design principle that intentionally concentrates on the use of a product from “ideation to sourcing to the end of life” as well as modernized technology to reduce waste and negative environmental impact (“Ralph Lauren Sustainability”).

Ralph Lauren Corporation’s Competitors and Related Supply Chain Sustainability Approaches

lthough a dynamic international company, Ralph Lauren Corporation has several key competitors that challenge the company’s market share. Primarily, companies such as Chanel, Burberry, Richemont, Hermes, Kering and Tapestry Inc. form their primary competition base. Among these companies, the company’s biggest competitor is PVH Corporation, formerly referred to as Phillips-Van Heusen Corporation, which sells brands such as Arrow, Tommy Hilfiger and Calvin Klein. These corporation, although they all differ in tactical approaches, have collectively agreed to join the 2020 Fashion Pact, a multinational corporate science-based effort among the fashion community to take steps to combat environmental harm and supply chain obstacles (Roberts-Islam). Within this agreement, “all of the pact signatories committed their businesses to science-based targets and to ensuring operational changes to meet the goals of the Paris Agreement on containing global warming” (Roberts-Islam). Thus, although these companies are diverse in their approach to this topic, they are all organized under broadly shared goals.

Bottom Line

Innovation and stewardship do require a financial commitment on the part of corporations which necessarily impacts profits. To this end, Ralph Lauren Corporation vowed in 2021 that the company would invest $5 million to produce sustainably grown cotton; (Neumann). These expenditures are magnified by losses, many magnified by the pandemic, between 2019 and 2020; Ralph Lauren Corporation profits dropped in 2021 from 2020, cost of goods sold dropped, per share value dropped and gross income growth fell; by comparison, several of the company’s biggest competitors including PHV Corporation, Tapestry, Inc., and Burberry are all experiencing current increases in their rates of change. Accordingly, Ralph Lauren Corporation cut 15% of its workforce after COVID to offset declining stock prices and increases in outputs (“WSJ”) .

Conclusion

Ralph Lauren Corporation is a multinational firm committed to creating luxury designs within a sustainable mindset. Recognizing the need to support and create sustainable supply chain models, the company has intentionally set broad and aggressive goals to reduce its environmental imprint; the corporation has likewise engaged in tactical strategies to meet these goals such as making shifts in corporate practice and pledging to invest in the development of innovative and sustainable technologies. Based on research and analysis, to remain a relevant and profitable company with a focus on sustainability, the company should remain committed to innovation; the creation of technologically advanced practices and equipment can help to reduce costs and improve production over time. Additionally, based on the company’s published sustainability report, it seems the company would benefit from simplifying its organizational structure which could also help to reduce supply chain waste by limiting the unnecessary use of resources. Fundamentally, based on the unanticipated consequences of Covid, the company could eliminate many of its physical locations and concentrate on enhancing its online presence; this step would have the combined benefit of reducing both output and environmental harm. Ultimately, the company will have to endure shifts in the market and make necessary intra- company adjustments to achieve its long-term goals.

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