LONDON, United Kingdom — In a nondescript building tucked away on a quiet street in West London, Stella McCartney and her team are comparing the properties of a real leather shoe to the various non-leather swatches being considered for her brand’s Winter 2015 shoe collection. McCartney is wearing a cream blouse, open at the neck, with faded blue jeans and non-leather boots. Pinned up against the wall are boards labeled: “Heels,” “Mules,” and “Cutouts.” A large white table is scattered with moulds, lasts and uppers – as well as scissors, ID cards, empty glasses and a partially-eaten package of organic dark chocolate.
Women of differing ages, ethnicities and body types come in and out of the room with a constant flow of new ideas and creative references while McCartney acts as a kind of real-time editor, deciding what colours, materials and shapes feel right for the upcoming season. An assistant is frantically taking notes to capture McCartney’s feedback while snapping digital photos of the things that catch her eye.
“That non-leather thing was doing a bit of a leather thing,” McCartney declares obscurely, at one point, caressing one of the samples and then draping it on top of her foot. “With our pull-ons, there’s always been a bit of a fit issue. So I what I found really exciting about Autumn was that they fitted.”
She is speaking in Stella McCartney code, but her team seems to understand exactly what she means. They go on to debate the shape of the toe, the size of the heel and whether this particular shoe shape would work best for day or evening. But soon, talk returns to the materials. According to the brand’s stated values, Stella McCartney does not use any animal products — no leather, no fur, no skins, no feathers.
At this point, McCartney turns to me, a fly on the wall. “We always have this conversation about our non-leathers. We are, of course, the most ethical and loving company in the fashion industry,” she says half-joking, almost mocking herself, “but at this stage I always have to apologise to my designers and creative team for the limitations [this creates].”
“It has the texture of a real leather,” says one team member, examining a new fabric sample brought in by one of the junior designers. Even now, almost 15 years after the Stella McCartney brand was born, there are still limited non-leather materials suitable for making high-fashion accessories.
“Material is hard,” says McCartney, in her office, after the design meetings have concluded. “Clearly leather is a great material. It wears well. It moves. You can wash it. It's real. One of the hardest things is to design something that is desirable and then to take that design and make it in a way that is not conventional. We’re sourcing our own material, developing our own material — we’re not using PVC.”
McCartney’s business was launched in 2001 in a 50/50 joint-venture with Kering, the French luxury conglomerate formerly known as PPR and, before that, Gucci Group. Kering does not break out Stella McCartney’s revenues and profits, but recent growth in the brand’s UK business is an interesting proxy for the company’s overall momentum. Between 2010 and 2013, top line revenues at Stella McCartney Ltd, which includes two directly-operated stores, grew by more than 60 percent to £28.4 million (about $44 million), with profits of £3.4 million (about $5 million), according filings at Companies House in London.
But this represents only a fraction of the total Stella McCartney business, operated through several other companies incorporating 30 directly-operated stores, 20 franchised stores and 600 wholesale accounts in more than 70 countries around the world. Market sources estimate annual global revenues at around $150 million to $200 million, though the annual retail value of Stella McCartney products is likely significantly more, through branded collaborations with Procter & Gamble for beauty, Adidas for sportswear and Bendon for lingerie.
In January of this year, the Stella McCartney business was the subject of a Harvard Business School case study, a prestigious honour reserved for companies employing innovative business models that the world’s top business students can learn from.
In short, McCartney has built the world’s first sizable global fashion brand rooted in sustainability. But how did she do it?
IN THE BEGINNING
At first, McCartney’s approach was not well understood by the fashion industry, nor fully defined as a business model. It was based simply on instinct and the personal values that she, a life-long vegetarian, had grown up with.
“I was brought up feeling like there were no limitations and that you didn’t need to be safe,” McCartney says. “I grew up with parents who got reviewed. It could be the media review or a human review, and that was brought to my attention from day one. So I guess for me, I thought, oh what’s the worst that could happen? People can form an opinion about you that’s not positive. I can handle that.”
As it turned out, the worst thing that could happen was that the fashion industry attributes your success to advantages given to you by your famous (and wealthy) father, dismisses your sustainable model as being idealistic and the antithesis to luxury, and pans your first collection.
“Yes, early in my career I was blatantly ridiculed for it. I always felt that leather and fur are the conventions of our industry. It’s not new and it’s not sustainable. None of it turns me on,” she says, getting more animated.
But the industry’s lukewarm response to both her insistence on animal rights and her design skills was not the only challenge she faced. Adhering to McCartney’s deeply held values made it even harder for the business to scale and turn a profit.
“We all know that the majority of luxury brands are driven by accessories. They don’t sell ready-to-wear. You walk into any major brand’s store and you will find two rails of ready-to-wear and the rest is bags, shoes and small leather goods. That’s what pays their wages,” says McCartney. Indeed, Kering megabrands Gucci and Bottega Veneta make most of their revenues and profits from leather-based products. In 2014, Bottega Veneta earned 93 percent and Gucci earned 73 percent of their respective revenues from leather goods and shoes, according to the group’s latest annual report, released in February. Without leather goods to build on, McCartney would need to make money from ready-to-wear and other categories.
The early years were tough. In 2004, new Gucci Group chief executive Robert Polet issued an ultimatum to McCartney (and Balenciaga and Alexander McQueen, two other fledgling brands in the group’s fashion portfolio): the business would have to turn a profit within three years, or risk losing financial support from the group.
That year, McCartney announced the first in a series of external partnerships, beginning with Adidas, and the business started earning licensing royalties which helped to bolster the bottom line. A wildly successful capsule collection for H&M in 2005 projected the Stella McCartney brand to the masses, while the core ready-to-wear business continued to tick along. By 2006, Gucci Group announced that Stella McCartney had eked out its first small profit, one year ahead of the deadline.
A TURNING POINT
In 2007, a report published by Dr. Rajendra Kumar Pachauri, former chair of Intergovernmental Panel on Climate Change (IPCC), found that the livestock industry accounted for 18 percent of the world’s greenhouse gas emissions, more than the entire global transport sector. Pachauri would go on to win the Nobel Peace Prize, along with former US vice president Al Gore, for their individual efforts to tackle climate change and the risks of climate change began to settle into the wider public consciousness.
The link between killing animals the climate crisis motivated the team at Stella McCartney to think more broadly about the company’s mission. “The dots connected between animal rights and sustainability,” recalls Stephane Jaspar, the company’s chief marketing officer, who has worked with McCartney for more than 12 years. “We felt very motivated by it. Every magazine did a green issue. It was a real turning point.”
“I find it interesting to link it all to food,” says McCartney. “The consumption of animals — whether you’re wearing them or eating them — is extraordinarily damaging to the planet. There are over a billion animals killed a year for food, half of which don’t even get eaten. And there’s over 50 million animals killed just for fashion.”
“If you're mindful of how you're approaching your life, then you see the connection. You can’t avoid the connection,” she urges. “The connection between food, illness, environment. I want to see everything as a whole, so that's how I approach life, and that's how it comes into my business.”
Sustainability is now enshrined in the company’s values, embedded in its culture and reflected in the team of experts that McCartney has built. They shape the company’s sustainability policies, its underlying business model and its brand message in line with her mission.
“Humanity is consuming the resources of five planets, but we only have one,” says Claire Bergkamp, head of sustainability at Stella McCartney who joined the company in 2012 after studying sustainable fashion and upcycling at the London College of Fashion. “All we're trying to do is to stay within the one, which is the right thing to do if you want to build a business for the long term. But it is built into our entire company, across all our departments, across everything.”
Bergkamp helped develop the company’s sustainability manifesto, which is posted on the company’s website and makes clear commitments to being more sustainable across all business activities. But this kind of discipline comes with additional costs.
“It can cost up to 70 percent more. We absorb that in our margin. We don’t price the products up,” says McCartney. “It is a matter of the construction and it’s more time consuming. We don’t use horse glues or pig glues or fish glues. It’s just like a making a bag of cereal. When you make a conventional bag of granola and you sell it in Walmart, it’s cheaper than the homemade ones.”
But the company’s president and chief executive Frederick Lukoff says they make it up in other ways. “You know, in the fashion business, there are lots of ways in which you can spend money and people spend it in different ways,” says Mr Lukoff, who joined Stella McCartney six years ago from Lanvin.
“They'll put on a more elaborate show, or they'll use more embroidery, or there's a million different things that you can put into your product. But that has an effect on the cost. We've put a certain set of choices into our product and then maybe we don't make some of the other choices. At the end, it balances out. It is very much built into our model, so at the end, it doesn't feel like a constraint. It's just part of the reality,” he says.
One way the business has benefited from the focus on sustainability has been that it has become a big part of the brand story, something that McCartney avoided in the beginning.
“When we first started, I wouldn't do interviews like this. I wouldn't sit and do interviews about eco and non-leather: I'd do fashion interviews,” she recalls. “Now, more and more, that's my point of difference. I don't just have to talk about the nice colour and the silhouette on the runway. We have something else to offer, and that is now so clearly the DNA of us as a house and as a business.
This clear sense of business purpose has also made Stella McCartney an attractive place to work, for designers, executives and experts who share McCartney’s views on sustainability and climate change.
“When I met her, she impressed me a lot,” recounts Mr Lukoff. “Outside of her talents, which were obvious, she also has tons of drive and ambition and she really wanted to build something. I thought, as a business person, that's a feeling. It was her as a person, her own drive, her own ambition.”
“For a lot of companies, it's just this shiny bit of extra. Or it's risk management. They do it because they don't want to get in trouble,” Bergkamp explains. “To work somewhere like this where it's actually part of the business, where you have a CEO who cares about it, where Stella cares about it, where Stephane [Jaspar] cares about it — that's really unusual.”
But perhaps McCartney’s most valuable contribution to the cause of animal rights and sustainability in fashion has been her ability to effect change outside her own business. In her business relationships with some of the biggest players in global fashion and beauty, including Kering, Adidas, Gap, L’Oréal, Procter & Gamble and H&M, McCartney has held steadfast to her values.
While designing the collection for H&M, McCartney realised first-hand the impact she could have on how larger corporations relate to sustainability.
“We insisted on things. We insisted on guidelines. We insisted that it was organic and sustainable,” she says. “I don’t think that had happened to them before so that was brought to their attention, and the success of it – the desirability was a nice eye opener for them, to be able to see that it sold out in 4 seconds, regardless of whether it was an organic t-shirt or not.”
The learnings go both ways. Through her partnership with Adidas, McCartney has benefited from the company’s investment in research and development around new, more sustainable materials and garment technologies, which she says are essential to solving the sustainability conundrum.
“The things I do for Adidas, they're more lightweight, they're more insulative, they're more refined. When working with sportswear at that level, there are very few players and they are playing on a technical front. They’re driven by technology,” says McCartney. “I wanted access to that technology. These days if you want to get a better look, you can also do it in a better way.”
Last year, she participated in the launch of H&M’s new Clevercare labeling system, educating consumers on how to take care of their clothes with less washing. (According to H&M, more than 30 percent of a garment’s climate footprint occurs after it leaves the store, something which can be easily reduced.)
And, of course, there were also the seeds of change she helped to sew at Kering, her long-term partner, which has set ambitious sustainability targets for 2016 in the key areas of raw materials sourcing, paper and packaging, water use, waste and carbon emissions, and hazardous chemicals and materials. This year, the group will complete its first E P&L, or environmental profit and loss statement, covering all brands and taking into account the environmental impact of business activities.
“You need creativity to design a product that has a lighter footprint,” Kering chairman and chief executive François-Henri Pinault said, speaking on the night of the official announcement of a five-year partnership with the Centre of Sustainable Fashion at the London College of Fashion. “Take for instance, Stella McCartney. As a leader in sustainable fashion, the brand perfectly demonstrates that creativity is linked to sustainability.”
Though she declines to take any credit for Kering’s new strategic focus on sustainability, McCartney’s proof-of-concept — showing that a sustainable luxury brand can be commercially viable — has clearly been noted in the executive suite at Kering. It may have been a longshot at the start, but it now looks like a most canny strategy indeed.
In 2010, McCartney finally hit the equivalent of fashion pay-dirt with the Fallabella: an unstructured tote with a heavy chain that went from it-bag to timeless staple, and is now one of the brand’s best selling products.
“I still love that bag, and I go off things quicker than the general public,” says McCartney. “You can clutch it, you can hold it, you know, that's a great piece of design and it's timeless.”
The company declined to provide specific figures, but ready-to-wear at Stella McCartney still accounts for well over 50 percent of the business today. But accessories, led by the Falabella, are growing fast, nearing one-third of total sales.
“I’ve had many people in my career, close to me, say you will never have an accessories business. You’ll sell clothes and you can make a good solid business out of that, but you will never have the two. I just think it’s exciting that we do and we can,” she adds.
Looking ahead, McCartney is sanguine about her sustainability strategy, noting that consumer preferences are rapidly shifting. “There’s no way that a consumer is not being more informed on that level every day and I don’t think that designers can [be sure] that women are going to keep buying the same old shit. The next generation are not going to have it. I don’t think they will.”
Meanwhile she is still talking about finding that perfect non-leather leather. “We have challenge in drape, in softness. When I want to make a soft bag for a season it's harder to get the softness. But we will find it one day.”
A version of this article first appeared in a special print edition of The Business of Fashion, which highlights ‘7 Issues Facing Fashion Now,’ from sustainability and the human cost of manufacturing clothing to untapped business opportunities in technology, Africa and the plus-size market. Join the discussion on BoF Voices, a new platform where the global fashion community can come together to express and exchange ideas and opinions on the most important topics facing fashion today.