Forbes: American Eagle Outfitters Moves The Needle On Sustainability And More With First ESG Report

By: Sharon Edelson | Link to article

American Eagle Outfitters Inc. has unveiled its inaugural environment, social and governance report, dubbed “Building a Better World 2021,” which outlines the progress the retailer has made and sets a series of new goals.

For example, the retailer is committing to setting a long-term net-zero target by 2024; reducing water use per jean by 50% by 2025; sourcing 100% renewable energy for all owned and operated facilities by 2030, and sourcing 100% of cotton, 50% of polyester and 100% of man-made cellulosic fibers more sustainably.

The report comes after last month’s quarterly loss of $42 million, which has been attributed to excess inventory, price increases throughout the supply chain and changing consumer shopping patterns.

The Real Good label, which has sustainability in mind for all facets of design and production, encompasses 95 percent of jeans and more than half of American Eagle and Aerie styles. “We’ll continue to elevate our requirements as we increase our Real Good product styles,” said Michael Rempell, chief operations officer. “Real Good was created to be dynamic – evolving as we work to lessen our impact on the environment and in response to what’s most important to our customers.”

The AE brand will require that jeans are made with a majority of sustainable fibers, such as recycled or sustainably-sourced cotton beginning with the 2023 back-to-school season. This is in addition to jeans being made in factories that meet AEO’s water standards.

“Working to build a better world for future generations is an extremely important component to how AEO does business,” said Jay Schottenstein, executive chairman and CEO. “We’ve always led with purpose, optimism and a commitment to doing the right thing for associates, customers and communities. We’re continuing to take bold actions within our operations and are using our influence to help drive meaningful change across our own business and within the retail industry.”

Apparel production is one of the most egregious industries in terms of pollution and negative environmental impact. The global fashion industry generates 20% of all wastewater and over 8% of all greenhouse gasses annually — higher than the combined impact of all international flights and maritime shipping, according to the United Nations.

After several years of environmental action, AEO established comprehensive climate goals in 2019. In 2021, the company formalized its ESG strategy and established a cross-functional ESG working group and steering committee overseen by the board of directors.

AEO established robust water and greenhouse gas reduction goals several years ago. The retailer achieved its water goals two years earlier than planned. “We’re extremely pleased with our progress so far, including surpassing our water goals ahead of schedule,” Schottenstein said.

In 2013, the company created the AEO Wastewater Management Standard to provide factories with guidance on how to properly manage water and launched the Water Leadership Program in 2017 to set water use standards for its jeans factories and mills.”

AEO is focused on its goals for ongoing improvement, while highlighting its progress to date, which includes reducing water usage per jean by 36%. It also recycled 45% of water in denim factories, saved 3.5 billion gallons of water in jeans factories since 2017, and saved 5 billion gallons of water through sourcing with Better Cotton.

The Better Cotton Initiative is a non-profit organization that works with cotton farmers to grow cotton using more sustainable farming techniques, and is one of the programs that makes up a large percentage of AEO’s sustainable cotton. AEO in 2015 joined the group, which helps improve the livelihoods of cotton farmers.

Protecting the planet, caring for employees and maintaining the best business practices has been integrated within the fabric of AEO for decades, Schottenstein said. “Our ESG strategy is intentionally connected to the growth of our industry-leading brands, corporate strategy and culture in order to generate shareholder returns with a purpose,” he said.

AEO is working on sustainable denim washing, the last step in the manufacturing process that gives its jeans their signature look. The company’s laundries have new washing machines that use a fraction of the water used by typical washers. Many of the laundries use environmental impact monitoring software to assess the environmental impact of the garment finishing process in the areas of water consumption, energy consumption, chemical use, and worker health.

AEO also developed a limited denim collection, the AE x Jeans Redesign collection, using guidelines as a part of the Ellen MacArthur Foundation’s Jeans Redesign project. The guidelines were developed by the foundation’s Make Fashion Circular team with more than 80 denim experts. It encompasses the principles of a circular economy where clothes are made with limited impact, are recyclable and are long-lasting to be kept in use.

A set of initiatives dubbed Planet, People and Practices for two decades has touched many aspects of the organization. “Building on them is key to our business success,” Schottenstein said. “We established climate goals several years ago. We continue to take meaningful action to operate more sustainably and preserve our planet. We’ve expanded our environmental targets and will continue to enhance our ESG initiatives in order to successfully meet current and future goals.”

The AEO board of directors is nearly half women and ethnically diverse. Reaching near gender parity in the executive leadership ranks has been a key facet of the company’s strategy. Today, 47% of the board of directors identifies as female.

“Empowering women, investing in women through health, life skills and gender equality training, and increasing women’s access to leadership opportunities are key priorities for AEO,” said Marisa Baldwin, chief human resources officer. “It’s extremely important to us that we maintain near gender parity to ensure diversity of backgrounds, experience and thought.”

Baldwin also cited the active community within AEO and associate engagement with resource groups like Women@AEO, whose goal is to inspire and engage associates to help them reach their full potential and to give back to support women and girls in need within local communities.

AEO is changing the name of its $5 million Real Change Scholarship for Social Justice, which was launched in 2020. The scholarship funds educational opportunities for AEO employees in the areas of anti-racism, equality and social justice initiatives. The name change of the scholarship was revealed in the ESG report. It will be called The Steven A. Davis Scholarship for Social Justice in honor of late AEO board member Steven Davis, who in July died unexpectedly.

The retailer over the past two years has also donated 40 million meals to Feeding America, and more than $46 million since 2012 to organizations that promote mental health, youth empowerment, education and the environment.