AMDP: Everlane

To: Clark Hansen, CEO, AMDP

From: Tammy Kongboonma, R&D, AMDP

Date: October 18, 2022

Subject: Investment Analysis of Everlane

As requested, here is an analysis of a potential candidate of Anima Mundi Development Partners sustainability fund. Upon further review, I would advise against investing in Everlane in the near future. This memo will outline:

• Investment Standards

• Everlane Company Overview

• Environmental sustainability

• Employees and Unions

• My Recommendation

Investment Standards

Triple bottom line states that in addition to financial performance, businesses should also focus on their social and environmental impact as well. The triple bottom line includes the three p’s: profit, people, and planet (“The Triple Bottom”).

Corporate Social Responsibility or CSR is a business model that ensures companies are being held accountable for their actions, people, and the public. CSR typically encompasses: environmental, ethical, philanthropic, and financial responsibility (Jorgensen). 

Social Enterprise is a business with objectives other than profit, usually for a socially minded goal such as people empowerment or being environmentally friendly. They typically generate funding and receive grants to continue business operations and create more impact (Barone). 

Carbon Footprint is the amount of greenhouse gases that are produced as a result of our actions. Greenhouse gases are gases absorbed and emitted in the Earth’s atmosphere that trap heat. The key contributors of a business’ carbon footprint are: the uses of electricity and fuel and their raw materials extraction (“Everything You Need”). 

Company Overview

Everlane is a privately held American clothing company founded in 2010 and currently headquartered in San Francisco, California. The clothing retailer sells both men and women timeless, everyday basics clothing. The brand has a positive reputation as a mainstream “ethical” clothing brand that is often praised by influencers. They have inclusive sizing (XXS - XL) and are known for ethically sourcing raw materials and offering high quality products (Jorgensen). 

Radical Transparency

The company is best known for their transparent pricing model whereby they disclose the costs and pricing of their goods. They “believe our customers have the right to know what their products cost to make.” The cost of making a garment is broken into: material, hardware, labour, duties, and transportation costs. Additionally, Everlane provides information about the factories and the sourcing of materials (Robson). 

Financials

Since 2010, Everlane underwent 8 funding rounds, receiving $142 million in funding. As of 2020, they are valued at $635 million dollars (Privco). The company has steadily grown over the years until 2020 when the pandemic hit. Since then, the company has been recovering, the company brought $330 million dollars in revenue last year in 2021 (Privco), a 10% increase from the previous year. 

Environmental Sustainability

Everlane’s products are timeless and of high quality allowing these pieces to be in the consumer’s wardrobe for a long period of time, contrasting to the short life span of fast fashion pieces. They also intentionally underproduce their apparel to prevent overproduction and divert waste from landfills (Robson).

Everlane has set goals to achieve better environmental sustainability. In 2018, they committed to removing the use of virgin plastic in their supply chain and instead use recycled plastic from plastic bottles. If they are able to execute this they would process about 100 million water bottles that would have gone to landfill (Robson). By 2023, they committed to use certified organic cotton (Testa et al). The company reported that they are on track to meet both these goals. 

 

Employees and Unions

Everlane has been accused of being anti-union and unsupportive of their employees. The customer experience team of 57 announced their unionising efforts and a few months later, 42 of those members were laid off. Employees of the team claimed to feel like “second class citizens” while working at Everlane. Many members did not see opportunities for career advancement in this company (Testa et al). 

The company has also faced criticism for being anti-black. Black models only started to regularly appear in Everlane’s marketing in 2016 (Testa et al). An investigation revealed that models of colour were referred to using inappropriate terms. This culture was also palpable in the office as many new hires of culture did not feel welcomed. To make matters worse, there was no formal complaint system where employees could report harassment and discrimnation incidents (Robson). 

My Recommendation

Even though fast fashion continues to grow at an alarming rate, sustainable fashion has gained more interest over the past few years. Everlane is one of the most popular “ethical” fashion brands as seen in their impressive financials. They have clear sustainability missions Additionally, Everlane has proven to be environmentally sustainable with quantifiable goals.

However, it still needs to improve its efforts in being socially responsible with their employees. Everlane needs to make changes in their internal culture to better support their employees, especially those of colour. Until Everlane takes steps towards tackling diversity, equity, and inclusion, I would advise against this investment. 

Works Cited

Barone, Adam. “Social Enterprise Definition.” Investopedia, Investopedia, 8 July 2022, https://www.investopedia.com/terms/s/social-enterprise.asp.

“Everything You Need to Know about... Calculating Your Carbon Footprint.” Courier, MailChimp, 8 Sept. 2020, https://mailchimp.com/courier/article/calculating-your-carbon-footprint/. 

Fernando, Jason. “Corporate Social Responsibility (CSR) Explained with Examples.” Investopedia, Investopedia, 27 May 2022, https://www.investopedia.com/terms/c/corp-social-responsibility.asp.

Jorgensen, Taite. “The Future of Fashion: Corporate Social Responsibility and Essential Marketing Strategies.” Claremont McKenna College, CMC Senior Theses, 2021, Accessed 19 Oct. 2022.

Privco. (n.d.)  Everlane. Company profile. Retrieved 18 Oct. 2020 from https://www.marshall.usc.edu/library/resources  

Robson, Karen, Matthew Wilson. “Transparency and Ethics at Everlane”., Harvard Business Publishing, 2021

Testa, Jessica, et al. “Everlane's Promise of 'Radical Transparency' Unravels.” The New York Times, The New York Times, 26 July 2020, https://www.nytimes.com/2020/07/26/fashion/everlane-employees-ethical-clothing.html.

“The Triple Bottom Line: What It Is & Why It's Important.” Business Insights Blog, Harvard Business School, 8 Dec. 2020, https://online.hbs.edu/blog/post/what-is-the-triple-bottom-line.