Investment Memo - DRAFT

AMDP Investment Proposal

Investment Recommendation Memo

To: Clark Hansen, CEO, AMDP

From: Elmira Yilham

Subject: Stella McCartney Investment Memo

AMDP Standards

• The triple bottom line -  The triple bottom line is a business concept that states that companies and businesses should commit to evaluating the impact their operations are having on the environment as well as on society while also focusing on financial performance (Alhaddi). The concept emphasizes that it is not important for the firms to focus solely on generating profits, which is regarded by many as the standard "bottom line." The triple bottom line is made of the three "Ps," which stand for profit, people, and the planet. Firms can make use of these three categories to think about their place in environment conservation as well as their contribution to any negative social impacts. 
• Corporate social responsibility -  This is a business model through which businesses operate to make sure that their operations are carried out in ways that enhance society and the environment instead of operating in ways that degrade the environment as well as harm society (Lindgreen). CPR is beneficial to both society and firms as it is crucial in improving a wide range of social aspects while also helping businesses build positive brands.  
• Social Enterprise -  A social enterprise is also known as a social business, and it is described as a type of business whose primary purpose is made up of social objectives only (Katz). Although social businesses usually seek ways to maximize profits like other enterprises, they focus more on maximizing benefits to society and the environment, and the profits that are made in such businesses are used to fund social programs. 
• Carbon Footprint -  carbon print is defined as the total of all greenhouse gas emissions that occurred during the entire process of producing a product or for a specific activity to occur (Wiedmann). Although it is hard to calculate carbon footprint, there are several ways through which we can reduce carbon footprint as this would help in reducing the amount of carbon dioxide released during daily activities such as consumption of various products or driving. Although carbon dioxide is important to the atmosphere as it plays a huge role in controlling heat waves, its oversaturation in the air may lead to an overfall that may result in the warming of our climate (Wiedmann). 

Stella McCartney

The purpose of writing this memo to you is to propose that our company invest in Stella McCartney, a leading company in the fashion industry. After conducting a thorough investment analysis, I have seen that Stella McCartney will not lead us to losses. As much as it will offer good rates of return, it will also benefit society and the environment. This is one of the reasons why we should consider this company as potential since it shares similar values with our company, mainly being socially and environmentally responsible. I therefore believe that Stella McCartney will also benefit beyond profits from this association. 

Company Background

The company is named after its founder, Stella McCartney, who was born in London and came from a family that was legendary in the public due to its legacy of having produced many creators. The brand was founded in 2001, and today, the company operates around the world, having over 17 freestanding stores (McCartney). Some of the places where the company has branches include Barcelona, Manhattan, London, Los Angeles, and Paris. Today, the company deals with women's headwear, accessories, lingerie, swimwear, kids' clothing, STELLA skincare, and a performance wear collaboration with Adidas, among others. Apart from the freestanding stores, the company’s collection is sold around the world in over 77 countries, with stores adding up to 863. The company also ships the collection to 100 hundred countries around the world online. 

Finances

The company has been financially stable for years. Although just like any other industry, the fashion industry was highly affected by the pandemic, Stella McCartney has been able to make a comeback, and it is currently reporting high-margin profits. In the financial year 2023, Stella McCartney’s revenues increased by a whopping 23%. The revenues of the company in the financial year 2022 were 32.5 million Euros and increased to 40 million Euros in the financial year 2023 (FW). The physical stores of the company also registered a huge profit as it rose by 18% from the previous fiscal year (FW).   The losses shrank in the last financial year, where the operating loss went down to 8.79 million Euros by around 22 million Euros. In the fiscal year 2022, it was at 30.3 million Euros. These improvements were also marked by a significant increase in the gross margin and the reduction of expenses, where the company was able to reduce its expenses by 17% (FW). Due to its good financial performance, the company has been able to expand as it launched a new skincare in August of the year 2023. In addition, in the same financial year, it also renewed its collaboration with Adidas, one of the fashion industry giants. 

Eco-Friendly

There are sustainable claims regarding McCartney's operations in the areas in which AMDP could have an interest. The company is passionate about not only fashionable clothing but also a clean and fashionable planet. This initiative is evident in many areas of the company’s operations in the quest to reduce the impact of these operations on the environment. The company has highlighted on its website the steps that they have taken to ensure sustainability. According to the company, they strive to make the most desirable products and ensure that the production of these products has the least impact on the planet (Stella McCartney). The company is driven by its conscious values to protect the environment and, therefore, focuses on products and innovations that support this course. The company is a self-proclaimed activist of sustainability. All the stores of McCartney, as well as offices across the United Kingdom, make use of renewable energy. 45% of all the company's operations are run by renewable green energy. Additionally, the company ensures that in its collection, it uses cotton more than anything else and has been doing research on new materials that can be more environmentally friendly (Stella McCartney). 

One major philosophy of the company that aligns with sustainability is recycling. In 2012, the company reported that it recycled 34.3 metric tons of waste, making sure that it recycled as many textiles as possible. McCartney ensures that they have installed recycling systems in all their locations. Additionally, the company has been involved in green projects over the years. Recently, the company took part in the Natural Resources Defense Council, and it was named the first company in the fashion industry as well as among the companies that deal with luxury goods to contribute to such initiatives (Stella McCartney). This initiative focused on ensuring that firms reduce the amount of waste they release to the environment as well as the emissions. It also had its focus on the textile industry, which is at the top of the list of most environment-unfriendly companies polluting water and releasing chemicals, as well as using a lot of energy and water in the production process. The initiative aimed to reduce the use of water in the textile industry by 25% while also ensuring that the energy consumed in this industry goes down by 30% (Sipari). The founder asserted that she designs clothes that are meant to last, therefore avoiding anything that will become waste and end up being burnt or piled up in landfills, specifically specific products that will not damage the environment. 

Industry Appraisal

One of the industry sources that have reviewed McCartney's sustainability is sustainablereview.com. In the ReviewReview, the company has been rated “good” with four stars. This source explores the steps that the company has taken in promoting eco-friendly practices in the fashion industry. The source notes that the company has a policy that helps it prevent deforestation by ensuring sustainable sourcing using products that sway away from deforestation (SeventhQueen). Sustainable.com also notes that there is room for improvement. The source asserts that it is unclear if the company pays a living wage to its workers, which is an essential practice in enhancing social sustainability. In addition, the company needs to work on water management by setting reduction targets as well as reducing greenhouse gas emissions (SeventhQueen). Although there is room for improvement for this company, sustainable.com concludes that it shows commitment to sustainability in most of its operations, which is a great example of other companies dealing with luxury products. 

Another source that I have critically appraised McCartney's sustainability is the goodonyou. Eco, which poses the question, "How Ethical Is Stella McCartney?”. According to Good on You. Eco, the company has good environmental standards given that it utilizes material that is eco-friendly in the production process (Wolfe). It is noted that the company uses recycled polyesters and a lot of organic cotton. In this source, it is acknowledged that McCartney has already set targets to reduce greenhouse gas emissions and water use. Regarding social responsibility, this article notes that the company should direct most of its attention to this area if it is committed to embodying complete ethical practices. The source argues that it is impossible to award the company a good rating in the category of social responsibility if it cannot ensure the welfare and safety of the people who work very hard to produce the aesthetic products that have helped build the brand (Wolfe). 

Goodenow. Eco also evaluates the position of McCartney in animal welfare. The reviewers note that the founder is a lifelong vegetarian and has been on the front line fighting for animal rights for a long time. In addition, the company never uses animal products such as fur and leather in their designs; instead, it focuses on more sustainable animal materials such as wool. The overall rating of the company from this source is "Good," and it asserts that the company can be proud of its sustainability milestone (Wolfe). 

Proposal Case 

Based on the research that I have completed, we can see that McCartney shares a lot of values with AMDP. Based on its position in social and environmental responsibility, I believe you can see that this company is an attractive investment option. Although there is a problem with social responsibility regarding the treatment of workers, this is something that can be worked on. Despite this challenge, the company has been able to support its sustainability with profitability, and therefore, I recommend that you consider it the best option for AMDP to invest in. 

Works Cited

Alhaddi, Hanan. "Triple bottom line and sustainability: A literature review." Business and Management Studies 1.2 (2015): 6-10.

FW. “Stella McCartney’s Revenue Surge by 23% in FY’23.” Www.fashionatingworld.com, www.fashionatingworld.com/new1-2/stella-mccartney-s-revenue-surge-by-23-in-fy-23. Accessed 3 Mar. 2024.

Katz, Robert A., and Antony Page. "The role of social enterprise." Vt. L. Rev. 35 (2010): 59.

Lindgreen, Adam, and Valérie Swaen. "Corporate social responsibility." International journal of management reviews 12.1 (2010): 1-7.

SeventhQueen. “Is Stella McCartney Sustainable and Ethical? - Brand Sustainability Rating.” Sustainable ReviewReview, sustainablereview.com/brand-ratings/stella-mccartney/.

Sipari, Jeremias. "Sustainability in luxury fashion: case: Stella McCartney." (2022).

Stella McCartney. “Sustainability.” Www.stellamccartney.com, 2023, www.stellamccartney.com/us/en/sustainability/sustainability.html.

Wiedmann, Thomas, and Jan Minx. "A definition of ‘carbon footprint’." Ecological economics research trends 1.2008 (2008): 1-11.

Wolfe, Isabella. “How Ethical Is Stella McCartney?” Good on You, Good On You, 23 July 2018, goodonyou. eco/how-ethical-is-stella-mccartney/.