The share price of the owner of discount retailer Penneys/Primark has dropped after it rolled out a new sustainability strategy that it admits will increase costs, while it is also promising that prices will be kept the same.
Faced with criticism that its “fast fashion” business model increases waste and leads to pressure on working conditions at its suppliers, Primark is promising that 100 per cent of its clothes will be made from recycled “or more sustainably sourced” materials by 2030. Currently, just 25 per cent of its range meets this description, the company said.
The retailer is also promising that all of its clothes will be recyclable by 2027. It says that over the next year all of its cheapest men’s, women’s and children’s cotton t-shirts will be made from sustainably sourced cotton. Penneys t-shirts costing as little as €3 each are seen as a staple of its retail offering.
Primark says too that it will in future make clothes that last longer to reduce waste. The company also says it will halve carbon emissions in its supply chain over the next nine years, and it will “pursue a living wage” for all workers in its supply chain by 2030.
Paul Marchant, Primark’s chief executive, said the retailer had already been working on making its businesses more sustainable but it is now “accelerating” the plan. He admitted the company does not yet know how it will achieve some of the targets it has set for itself.
“We don’t have all the answers and we know we can’t do it alone. We’re committed to work in partnership with the industry to drive real change at scale,” he said.
A separate stock exchange announcement from Associated British Foods (ABF), Primark’s parent group, said the changes would lead to a “modest” increase in costs for the business. It promised there would be “no material impact” on its profit margins in the short term and no “significant movements” in its margins over the longer term.
The strategy to reduce waste and boost the living standards of workers in its supply chain is known by the company as “Primark Cares”. ABF has told its investors that the strategy could attract new customers.
By lunchtime, ABF’s share price had fallen by 1.8 per cent as investors digested the news from Primark, which operates a business model that is highly sensitive to cost increases. ABF said it would hold an investor briefing on Friday to explain the new strategy.