American Apparel

A. The main facts about the activities of the company.

American Apparel is a vertically integrated manufacturer, distributor and retailer, based in downtown Los Angeles, California. It currently employs approximately 10,000 people globally (about 5,000 in LA), and operates more than 285 retail stores in 20 countries.
Within their business model, knitting, dyeing, cutting, sewing, photography, marketing, distribution and design all happen in the company’s facilities in Los Angeles. The company operates the largest garment factory in the United States, at a time when most apparel production has moved offshore. With their recently opened stores in China, they are now selling Made in USA clothing in the largest consumer market in the world.
American Apparel leverages art, design and technology to advance the business process, while continuing to pioneer industry standards of social and environmental responsibility in the workplace.

B. The Ethical challenges this company is addressing.

In the highly competitive clothing industry, business fortunes hang by threads. Clothing manufacturing is a very tough job, but the company always tried to do things differently. In the early days American Apparel talked about "sweatshop free", not to criticize other business models, it was about attempting something new. It comes down to this: not blindly outsourcing, but rather knowing the faces of its workers and providing them the opportunity to make a fair wage. By centralizing its manufacturing operations, the company is not only increasing efficiency, but it’s being held accountable and responsible for its actions, also ensuring adherence with US environmental regulations. In addition American Apparel differentiates itself from low-cost competition with socially acceptable and sustainable production. The company is addressing a good deal of different ethical challenges. We can categorize them in three main groups: people, environment and products.

People

Worker rights
American Apparel average factory worker makes $12 to $14 dollars an hour, the highest pay worldwide for the manufacturing of apparel basics and significantly more than California’s minimum wage. For the company, higher pay means heightened efficiency, a better and more consistent quality of work, stronger employee morale, and ultimately, retention rates of skilled operators. Employees also receive benefits such as paid time off, health care, company-subsidized lunches, bus passes, free English as an additional language classes, on-site massage therapists, free bicycles and on-site bike mechanics, free parking in addition to the proper lighting and ventilation. Every floor of the factory includes free telephones where workers can make and receive long distance phone calls. After going public, the company also offered employees as much as $40 million in stock shares.

Political Activism
American Apparel regularly uses its billboards, advertisements, press contacts and even printed t-shirts to speak out about important issues. Their two biggest issues have been Immigration Reform and Gay Rights.
American Apparel has been campaigning for immigration reform for over 11 years. Immigration is an issue that weighs heavy on the hearts of its employees and family members. In addition, when California voters passed Prop 8 in 2008, American Apparel let their GBLT employees know they would support whatever they wanted to do. The company believes in freedom, expression and equality, things that are inherently condemned in the prohibition of gay marriage. Since printing a few hundred Legalize Gay t-shirts the company have given away over 50,000 of these shirts, run protest advertisements and even partnered with HRC for their enormous march on Washington.

Environment

Recycling and Creative Reuse
American Apparel strives to be as efficient as possible, creating as little waste as it can. Scrap fabric is turned into yarn for new garments when possible or used by its custodial team for cleaning.
The company loves putting creative ideas into practice. American Apparel donates truckloads of safe and curious excess materials to Trash for Teaching (TFT), a non-for-profit organization. TFT educates over 100 LA schools about resource management at the manufacturing level. Students make crafts from excess materials, while learning why reuse is the first step to sustainable practice.

Energy/Water Efficiency and Renewable Energy
The company has full retrofit of light fixtures in its factory and implemented daylight-harvesting technology, a move that saves over a million kilowatt hours of energy each year. American Apparel houses a state-of-the-art solar panel installation on the roof of the downtown LA factory. This system generates 150 kilowatts of clean, renewable power, contributing 15% of energy needs.

Products

American Apparel tries to do everything possible to minimize its ecological footprint. By creating organic products, its business minimizes the impact on the environment, while maintaining the same comfort and style American Apparel is known for. The Organic Collection is a selection of its most popular styles made from 100% USDA Certified Organic and pesticide-free cotton. The low-impact dyeing process eliminates chemical waste, providing innumerable environmental and health benefits.

C. What makes you believe this company is really ethical and why you trust it?

American Apparel sells clothes, everybody wears them. Sometimes the fashion industry seems like a bloody mess, it looks like slavery. We have chosen American Apparel because it does things so differently. No one does what they do in the way they do: not Zara, not Topshop and not H&M. The company is fiercely dedicated to manufacturing high-quality T-shirts and at the same time proving that clothing manufacturers can turn a profit without exploiting laborers and engaging in other despicable practices. We truly believe that American Apparel is in a position to take a corporate lead, to be an example of what can happen in the manufacturing sector.

Dov Charney, the founder, is very concerned with the ethics of his company. We can see how he chose to create a product that is “sweatshop free” and made in downtown LA, how he treats his workers like a big family, pays them twice the minimum wage and offers them significant benefits. You can feel this strong corporate culture even when you walk in one of American Apparel’s shops. He does all this because, he says, it makes good business sense. We think that Charney is a very inspiring businessman, as he tries to incorporate his values in the company knowing that, apart for the economic value, he can do a lot more with it. Freedom, expression and equity are clearly more important than the mere profit.

American Apparel’s industrial revolution has been in progress for nearly 10 years now and in our opinion it’s only the beginning. We think that vertical integration is not only smart for the company, but for the community, the local and regional economy, the environment, and, in turn, the customers. American Apparel is more than just a fashion company. Its great commitment for people and environment deals with different ethical issue in a very unique way. Billboards, advertisements, press contacts and even printed t-shirts speak out about important issues in a very provocative way that makes people think. We believe that the awareness of the company to be able to make a difference demonstrates their willing of taking responsibilities. We think that running a business it’s a tough job, but if we put passion in our work we can achieve greater things. When you believe in what you are doing success can come more easily. Not being afraid to take responsibility is the key. In fact American Apparel doesn’t have to do things this way, it just believes it’s the right way. Some of these initiatives may fall under the banner of "Sustainability", others may be closer to "Corporate Responsibility”. To the company, these are the natural results of its business model, which encourages responsible and informed decisions, alongside innovation.

D.The possible challenges facing the company in the future and how you think this company may improve.

It might be that the company was so adamant about the ethics they upheld that the subsequent backlash from numerous corporate scandals has rocked the company so severely.

American Apparel has been subject to sever sexual harassment lawsuits, of which four were dismissed, “thrown out” or settled while another was remanded to arbitration. The company and many media outlets have publicly accused the lawsuit against American Apparel of being extortionary attempts to "shake the company down”. Charney has stated that American Apparel hires its creatives by their sense of culture and fashion, not their resume. The unconventional corporate culture at American Apparel is responsible for the company’s creativity and rapid growth. The company has always been open about sexuality and its culture because young people like honesty.
There are also numerous stories online about the issues the company has recently had revolving around the hiring of many illegal immigrants at its Los Angeles headquarters, which flew in the face of everything the company said that it stood for.

If American Apparel does get wound up, many will cite that their over aggressive marketing and brash approach left them far too vulnerable to a scandal where their requisite hip audience will hasten the demise of a brand seemingly overnight. We think that in the future the company should be more cautious about the people they hire in order to maintain a strong ethical position according to its values, not lose their socially responsible image and credibility.