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Zara Owner Inditex Considers Fund to Back Environmental Start-Ups

Zara store at the Manufaktura mall in Lodz, Poland
Zara store at the Manufaktura mall in Lodz, Poland (Shutterstock)

Inditex SA, which owns the Zara clothing chain, is considering setting up a vehicle to invest in start-ups and technologies that it hopes could help green its business, according to people familiar with the matter.

The project could see the fashion retailer create an in-house venture capital fund or become the anchor investor in a fund along with several other brands, the people said, asking not to be identified because the plan is confidential. The size of the investment would be relatively small, one person said. No decision has been made yet, and the company could decide not to go ahead with the plan.

A spokesperson for Inditex declined to comment.

Apparel makers are reckoning with criticism for their carbon footprint along with accusations of greenwashing. The industry produces 100 billion apparel items each year, about 14 garments for every person on Earth. Only about a third of unwanted clothes are collected, according to consulting firm McKinsey & Co. Of that, less than 1 percent is recycled into new fashion, according to the Ellen MacArthur Foundation, a UK nonprofit.

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Inditex has been investing lately in developers of new textiles. Last year the Spanish company joined a $30 million funding round by textile recycler Circ that was led by Bill Gates’s Breakthrough Energy Ventures. In April, Inditex and Circ launched a Zara collection of clothing made from a blend of recycled and virgin materials.

Inditex also has reached a €100 million deal to buy 30 percent of Finland-based Infinited Fiber’s future production over three years. The commitment is expected to help the recycling company scale its technology. Infinited is also backed by Hennes & Mauritz AB, Calvin Klein parent PVH Corp. and Patagonia.

Behind these initiatives is Inditex’s sustainability innovation hub, a unit launched four years ago that looks at new materials, technologies and processes which could improve the company’s environmental footprint.

While recycling initiatives have drawn the attention of big fashion brands recently, the industry will have to do a lot more if it’s serious about reducing its environmental impact. The processing of raw materials before fabrics or clothes are made only accounts for 15 percent of apparel production greenhouse gas emissions, according to the World Resources Institute, a Washington DC-based research organisation. The bulk of the industry’s emissions occurs in the manufacturing processes, which are often far from the companies’ main consumer markets, in factories owned by third-party providers.

Inditex has vowed to be net carbon neutral by 2040.

By Clara Hernanz Lizarraga

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