In September 2023, Pascal Brun was appointed Vice President of Sustainability and Diversity & Inclusion (D&I), for the German etailer. With over 16 years of experience from H&M, where Brun most recently held the position of Head of Sustainability, he’s well-versed in sustainability and poised to make a transformative impact on Zalando’s commitment to sustainability. Besides his work at Zalando, Brun is also part of the Board of Directors of The Sustainable Apparel Coalition, IFC, and Circ.
The concept of ’fast fashion’ has faced scrutiny in recent years. Have there been noticeable shifts towards more conscious and ethical consumption patterns in the fashion landscape of 2023?
— About 60% of our customers say that they are willing to spend more on quality products, Brun shares. Therefore, the focus today needs to be on delivering the most relevant brands and assortments across categories coupled with localised convenience and a personalised, engaging online experience. Accordingly, our strategy is centred around quality. This includes assortment, delivery, digital experience, and sustainability. These are what differentiate us and this will become even more apparent in the future.
Innovation is at the forefront of the fashion industry. What technological advancements or innovations have significantly impacted the way Zalando operates?
— Technology is part of our DNA. In fact, we have more than 3.000 people working in this field. We have been using AI and Machine Learning for many years now, especially to offer a more personalised experience. This ranges from outfit suggestions with our Algorithmic Fashion Companion — which creates a whole outfit based on one ‘anchor’ item, meaning a product a customer bought, wishlisted, or showed interest in — to size advice, providing personalised recommendations based on customer feedback. Our size advice is having a great impact since ill-fitting products are the main reason customers return an item — we have been able to reduce size-related returns by 10%.
— We recently launched size recommendations based on the customers’ measurements, where they take two pictures and we offer advice based on their own body measurements. We are also piloting a virtual fitting room, where customers can create a 3D avatar of themselves and check how different sizes of an item will fit them. In addition, we are exploring the possibilities of Generative AI with our Zalando Assistant to offer a conversational experience and help our customers navigate through our assortment in a more natural and intuitive way, as you would do with a shop assistant.
According to Brun, customer behaviour is evolving in three key ways; a generational shift towards digital natives who prioritize emotional engagement, a technological shift driven by Generative AI enabling personalized experiences, and a sustainability shift as consumers increasingly prioritise brands aligned with their values.
”Generative AI is poised to revolutionise the fashion industry, comparable to the impact of the internet in the 90s”
— Based on these shifts we are adapting our B2C strategy around three main pillars. The first one is to differentiate through quality to drive customer acquisition and retention. The second growth pillar is to expand further as a lifestyle destination, following people’s lifestyle choices and building out more areas that address their lifestyle needs. The third pillar of B2C growth is based on integrating content into commerce and offering personalised inspiration and entertainment. We believe that our B2C strategy around quality, lifestyle, and inspiration clearly sets us apart from the competition and will continue to win us market share.
In 2019, Zalando launched its sustainability strategy called do.More. Spanning over a four year period and concluding in 2023, the company has now integrated the sustainability commitments into the overall company strategy.
— Whether in terms of reducing negative impacts or increasing positive ones, sustainability is an incredibly complex endeavour that neither we, nor any organisation, can progress meaningfully on without the help of peers, industry experts, collaborative partnerships, and active engagement with the wider community. That’s why we can’t look at it in isolation from our business model. Rather, sustainability must be woven into all aspects of what we do, both for impact and for accountability. Our understanding of this complexity will help us to take a more profoundly informed and holistic approach to goal-setting and execution focusing the majority of our energy and resources on a smaller number of strategic, high-impact areas. By aligning our ambitions with our unique capabilities and the realistic timeframes for scaling impactful solutions, we can ensure that our sustainability efforts are both strategic and effective. Our ultimate goal is to step up as an enabler for a more sustainable industry, driving transformation in our own operations but also for our brand partners and their value chains.
Since 2020, Zalando has extended the life of more than 6.3 million fashion products. The initial commitment was to extend the life of 50 million products, by 2023. Numbers which could be misleading due to stricter data requirements and a higher level of transparency being implemented. Zalando’s circularity initiatives span four stages: design and manufacture, use, reuse, and closing the loop. A particular focus has been placed on scaling the circular offerings within its private label brands, such as ZIGN Studio, which focuses on innovative materials and circular designs.
— When it comes to extending the usage of garments, we are currently gathering the valuable insights and data acquired through a pilot program, run for the past 3 years, to better understand what a leading, scalable care and repair business model should be. Our goal is to build on these learnings and offer viable solutions to our customers to extend the life of their items and adopt new ways of buying fashion, Brun explains. He continues:
— We continued to promote reuse via our assortment of about 270.000 pre-owned products, available to customers across 13 markets as well as in 10 of our outlet stores, with new items added daily. Pre-owned products undergo strict quality assurance processes and are offered to customers at the same level of convenience as from Zalando, including free deliveries and returns and multiple payment options. In 2023, we made significant strides in improving efficiencies of our operations and unit economics for the pre-owned assortment. To do so, we have leveraged the synergies of our operations, for example by using existing product data and imagery for items that had been previously purchased on our platform. We also integrated pre-owned into our existing logistics operations. Having done so, we have made tangible progress in optimising our customer experience and ensuring the right conditions for scaling up our service, for example by helping customers get their parcels faster and often bundling pre-owned and new items into one shipment.
The million-dollar question when it comes to fashion and environmental sustainability is to close the loop, turning a traditionally linear, reductive, business model into a circular and more sustainable one.
— Our efforts towards closing the loop of the lifecycle of garments include funding and partnerships to support innovation focused on collection, sorting, and recycling. We have previously invested in three textile-to-textile recyclers. In parallel, our private labels business is actively engaged in discussions for offtake agreements with innovators, including but not limited to Infinited Fiber Company, Ambercycle, and Circ. These agreements will help us secure long-term access to commercial volumes of recycled materials, positioning our private labels to support their materials-related sustainability targets and prepare for upcoming regulatory requirements such as the Ecodesign for Sustainable Products Regulation (ESPR). At the same time, offtake agreements can give the recyclers certainty of demand to support scaling. We also continue our participation in textile-to-textile cellulosic and polyester recycling trials with Accelerating Circularity, the footwear sorting and dismantling project Reshoes led by CETIA, and various programs with Fashion for Good, including an innovative recycling project co-led by FastFeetGrinded aimed at driving circularity in footwear.
Upcoming legislation within the EU suggests that fashion brands and companies need to, to a larger extent, become service providers rather than just selling products. This shift aims to increase the longevity of products and keep them in circulation for longer which, according to Brun, happens at Zalando on different levels.
— We encourage and welcome EU policymakers to establish a consistent regulatory framework that will enhance not only consumer trust and protection but also provide more legal guidance for companies. When it comes to circularity specifically, our efforts towards a more circular system involves, as mentioned, not only fostering partnerships and having our private labels business actively engaged in discussions for offtake agreements with innovators but also acting as enablers to support other brands and suppliers transition to a more sustainable, equitable, and accessible future for fashion.
When discussing sustainability, I perceive that one overlooked topic is overconsumption. In the book The Day the World Stops Shopping, author JB MacKinnon suggests that we need a sustainable decrease in consumption to address the ecological crisis and maintain a somewhat stable economy. From this perspective, the problem seems more sociological and connected to consumer habits than technical details such as emissions. How do you view your role as a major retailer in relation to this?
— Given Zalando’s place in the European fashion ecosystem, we are ready to embrace the role of an enabler, serving as a catalyst, convener, and connector to drive progress amongst these diverse stakeholder groups. We intend to do this by empowering customers to buy better and wear better, enabling brands and their value chains to become more circular and set and deliver on their sustainability ambitions. We want to do this by scaling industry innovators and providing access to customers, brands, and financing and pushing for regulations to ensure a level playing field against unfair competitive practices.
More transparency and knowledge regarding supply and value chains are necessary to become more ecologically sustainable. How does Zalando work with this? What is your view on the suggestion of the DPP legislation?
— We have been trailing the digital product ID since 2020 with our private label redeZIGN collection. We have scaled the amount of fashion items and tested two different customer experiences via the QR code. Whilst we see that customers are interested in the information, the data challenges pertain. We are eagerly anticipating guidance from the EU eco-design guidelines which include a DPP. For now, we continue to test and learn.
What standards do the brands you work with have to comply to sell? And how do you follow up on these standards?
— Our Code of Conduct sets out binding principles for ethical, fair, and sustainable practices, and is embedded in our contracts with business partners. We continually work on improving our internal tracking system to ensure a comprehensive overview of direct suppliers who have agreed to our Code of Conduct, allowing us to act swiftly where they have not.
— Our self-assessment questionnaire is sent to our direct suppliers with a high-risk profile in order to gain deeper insights into their due diligence approach. This helps us continue our risk management efforts in a more targeted way. We provide our direct suppliers with tailored recommendations on how to enhance their risk management within the identified areas. Through social audits, we continue to review compliance of our direct suppliers and Tier 1 suppliers, especially in high-risk areas such as our private label business. Tier 1 suppliers provide us with third-party social audits. Additionally, we initiate audits in fulfilment and customer care.
Lastly, what do you think will be Zalando’s biggest sustainability achievement in the near future?
— Taken together, the successes and learnings from do.MORE are a testament to our resilience and commitment. Our newly updated corporate strategy will also help us to be an enabler of positive change for the fashion industry. Customers will have access to a more sustainable and transparent assortment and we will enable them to make choices aligned with their values. With our ecosystem approach, we will also enable partners to work towards their sustainability ambitions and help them understand the rapidly evolving regulatory environment, Brun shares. He adds:
— We have formulated two sustainability ambitions in conjunction with our new ecosystem strategy. The first is to achieve net-zero CO2 emissions for our own operations and private label business by 2040, and across our business by 2050. The second is to empower workers through decent work by driving change in the industry with third-party partners such as Fair Wear Foundation.
