Radical Transparency? H&M and Zara Are Actually More Transparent Than Everlane

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image: Everlane

Everlane’s go-to is transparency. Pricing transparency – in particular – has garnered the San Francisco-based brand a lot attention since its launch in 2011, including a spot on Fast Co.’s 20146 “50 Most Innovative Companies” list. It also earned Everlane “$12 million in revenue in 2013, and double that in 2014,” according to Bloomberg. Buzzy company slogans, like “Radical Transparency” and easy-to-read infographics that chart the production cycle of its popular garments have made the e-commerce startup a go-to for hip millennials with money and a conscience when it comes to their clothes.

In an industry famous for shrouding the connection between what it costs to manufacture garments and accessories, and the price that consumers pay for those items, Everlane seemingly fills a void; hence, its success. Price transparency aside, on the heels an array of garment manufacturing-related tragedies in recent years and amongst a larger call – particularly from millennials – for more ethically sound garments, Everlane founder and CEO, Michael Preysman, a former Investment Associate, saw a business opportunity in ethically made clothing.

In addition to offering appealing basics – such as cashmere turtlenecks, cotton crewneck sweaters, striped t-shirts, and modern oxfords – Everlane has won over consumers with its openness. Appealing to consumers is its “disruption” of the fashion industry, which comes in the form of supply chain transparency. From the design phase to transport, Everlane shines a light on the costs of its business model, thereby highlighting the differences between its model and the “traditional retail” model, which includes middlemen and retail, which drive up the price. Additionally, the company boasts its utilization of world-class factories, “the very same ones that produce your favorite designer labels.”

However, despite such seemingly straightforward dealings, Everlane is cloaked in quite a bit of mystery, itself. As retail-focused website Racked noted in an article last year, “For all its talk of transparency, Everlane is extremely tightlipped about internal goings-on. Preysman was the only Everlane employee offered up for this story, and no one from the design or creative teams was made available to be interviewed. Repeated requests to visit the brand’s New York office were declined.”

So, just how transparent is Everlane really?

TRADE SECRETS OR JUST SECRETS?

A closer look at Everlane’s website and marketing materials – complete with enormously vague language in place of definitive facts to support its claims of transparency and ethical production – reveals that there is almost certainly more at play in the Everlane model than meets the eye. In accordance with Everlane’s motto – “Know your factories. Know your costs. Always ask why.” – one of its core missions is enabling consumers to know the factories in which their clothes are being made. With this in mind, there is a major red flag at issue when it comes to Everlane: Its factory list.

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Everlane does a nice job of listing the location cities of its factories, how many individuals each factory employs, the year that each factory was established, what garments are produced there, and the weather in each of the given cities where these factories are located. All of this information is contained in a concise summary for each of Everlane’s supplier factories. The factory descriptions also include lovely photos of the factories’ interiors and their smiling laborers.

What Everlane fails to do, though, is list the names of its factories. Instead, it opts to label them according to the products they produce for the brand, such as “The Specialty Knits Factory,” “The Travel Bag Factory,” and “The Casual Wovens Factory.” In this way, H&M is more transparent than Everlane. As you may know, the Swedish fast fashion giant identifies 98.5% of its first tier factories/suppliers by name and address, and even lists some of these factories’ suppliers.

In accordance with Everlane’s motto, we ask: Why would a brand based on transparency not list its factories? Preysman has a seemingly rational answer, of course. He told the Wall Street Journal in 2013 that the company withholds the names of its factories for trade secret purposes. He says that Everlane does not name names in order to prevent competitors from utilizing the factories that he and his team have “spent months finding.” Preysman says he simply “doesn’t want competitors moving in on his turf.”

On its face, Preysman’s reasoning seems rather judicious, particularly because supplier lists – just like customer lists, sales and distribution methods, advertising strategies, and manufacturing processes – are a textbook type of asset for which businesses rely on trade secret law to protect.

However, it is worth acknowledging there is at least one very glaring and extremely critical missing link here: Some of Everlane’s suppliers publicly identify their connection with the retailer, thereby destroying any potential protections afforded to the brand by trade secret law.

For the uninitiated, in order for an individual or company to successfully claim trade secret protection in court, he must show that he has met a number of recognized measures to ensure that such information was, in fact, properly managed and kept secret. For instance, courts have held that in order to prove that a trade secret holder has met his burden, he must establish – among other things – that he made sure that only those necessary were privy to the secret info.

Secondarily, the party claiming trade secret protection must show that all of those who did have access to the secret information were made aware that it was confidential information, and that he utilized confidentiality agreements with employees and with business partners whenever disclosing confidential information to them to prevent the spread of the information. For Everlane, this would mean requiring that its factory partners – among others – not disclose their manufacturing relationships, and it would be Everlane’s duty to monitor that such information is not made public.

Such monitoring should not be terribly difficult for Everlane considering that it lists only seventeen factories as within its supply chain – a very small number compared to H&M’s network, for instance, which consists of 342 first-tier suppliers in China, alone. Moreover, given Everlane’s claims that it maintains close relationships with its factory owners – per the Everlane website, “We visit [our factories] often, and build strong personal relationships with the owners – such monitoring and any necessary modifications should be relatively easy.

Yet, judging by Nobland Vietnam – which is just one example of a supplier that publicly lists Everlane as a client on its website – Everlane is not relying heavily on trade secret protection at all. Given that Nobland Vietnam lists Everlane as a client on its own website, trade secret protection concerns are almost certainly not even an option for Everlane, as it does not appear to be monitoring such “secrets,” which, as previously indicated, is a legal pre-requisite for claiming trade secret protection.

As such, one could argue that there is the very real possibility that Everlane’s supplier factories simply are not as ethical or sustainable as Everlane is portraying them to be, and that is why the brand relies on citing trade secret concerns as a means of avoiding disclosing them.

Consider that Level Style, Inc. – which, according to U.S. import records, provides Everlane with an array of shirt styles, including its Slim Fit Oxford and Slim Fit Denim shirt –  has come under fire within the past year or so for labor-related issues. A Hong Kong-based company that owns the Shenzhen Artigas Clothing and Leather factory, among many other sub-suppliers, Lever Style, Inc. was accused by the Hong Kong Confederation of Trade Unions (“HKCTU”), a pro-democracy labor and political group in the Hong Kong, of retaliating against garment workers who were seeking severance payments and the payment of social insurance in arrears following the abrupt and unannounced closure of at least one Lever Style-owned factory in Hong Kong.

According to HKCTU, Everlane was an existing client of Shenzhen Artigas Clothing and Leather factory at the time of the factory closure and subsequent striking (Around 900 employees began striking in June 2015 at the company’s Shenzhen Artigas Clothing & Leather factory over severance pay and relocation of the factory. This follows a strike by almost 1,000 workers in 2014 over unpaid social insurance and housing contributions at the same factory). Maybe instances like this are why Everlane opts to shield the names of its factories from consumers.

VAGUE CLAIMS, NOT FACTS

Speaking to Racked last year, Preysman said: “Retail isn’t a space where there’s a lot of information. It’s very obfuscated.” It is unclear how, exactly, though, Everlane is any different in this respect. While Everlane makes praising claims about its factory partners and the working conditions upon which they operate – which certainly sound impressive to a consumer quickly skimming its site – the company does not actually provide any substantive information in support of its claims … at all.

For instance, in discussing how it decided to partner with Level Style, Inc., Everlane claims it selected the Chinese company “[a]fter a rigorous vetting process to find the best tailored shirting vendor.” Yet, Everlane neglects to provide information for the consumer about what its “rigorous vetting process” consists of and how Lever Style, Inc. met it.

Moreover, in providing information on its website about one of its suppliers, Everlane asserts: “We assess every potential factory through a stringent ‘compliance audit’ —which helps us evaluate the work environment.” It similarly does not elaborate on what its “stringent compliance audit” looks like.

Making vague and unsubstantiated claims in lieu of providing cold hard facts is a common trend that runs through the Everlane model. When asked about wages paid to laborers within its supply chain , Everlane told Project Just, a New York-based non-profit organization devoted to helping consumers shop in a more informed manner: “The workers at each of our factories are paid, on average, a higher wage than their peers. Having said that, we can’t explicitly state how much each worker is compensated due to confidentiality agreements with our manufacturing partners.”

An Everlane spokesman did, however, tell Project Just that the company maintains a “Vendor Code of Conduct” and that “each factory is subject to a yearly semi-announced audit by a third-party company, with this visit focusing in on our 13 compliancy standards.” Everlane failed to provide any specific information on its “13 compliancy standards” and its auditing system.

In fact, a bit of research reveals that Everlane does not actually publicize any detailed information about its “vetting process,” “Vendor Code of Conduct,” auditing system or the results of such audits at all. In this way, Zara is more transparent than Everlane. Zara’s parent company, Inditex lists its “Code of Conduct for Manufacturers and Suppliers Inditex Group” in full on its website.

Similarly, Fast Retailing, Uniqlo’s parent company, is also more transparent than Everlane, as it provides information identifying its auditing processes, as well as information regarding steps taken to address any failures to meet the company’s established standards. According to one summary from the company’s 2015 Annual Report, “Poor storage management of dangerous chemicals (China): On discovering this problem at a fabric supplier in China , members of our CSR department immediately offered guidance and training. The fabric supplier concerned also appointed an external manager and introduced on-site safety management training.” Inditex provides similar information.

Finally, in conversing with a Project Just editor, an Everlane spokesman asserted that it “does not use any subcontractors,” which may not be entirely true. Unauthorized subcontracting to an unapproved factory is “very, very common,” according to Gary Peck, founder and managing director of the S Group, a design and sourcing company based in Portland, Oregon. Though almost all retailers prohibit the practice in their contracts, a significant number of suppliers still do it to save money, speed production and meet high-volume orders.

While physical audits can certainly help in determining the actual places of productions, in many cases it is very difficult to determine when a contractor or subcontractor produces products at an approved or non-approved site. With this in mind, such an assertion by Everlane might suggest that it does not know the true extent of its supply chain . Per Project Just, “It is unclear if the brand can trace its entire supply chain.”

With quite a few seemingly loose ends and an array of very elusive and unverified claims, it is best to think twice about Everlane. Experts in the field of ethical sourcing and trade still encourage skepticism, no matter how warm and fuzzy a website makes one feel. “There is a lot of consumer concern, and there is a tendency for smaller companies to want to exploit it,” says Scott Nova, Executive Director of the Worker Rights Consortium. “That can be a very positive motivation, but the concern is that there are people who, out of cynicism or lack of understanding, are not making verifiable claims.”

 

This story first appeared on The Fashion Law

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One thought on “Radical Transparency? H&M and Zara Are Actually More Transparent Than Everlane

    […] Know more about transparent supply chains and Everlane’s ‘Radical Transparency’ here […]

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