Letter from
the Chairman

Dear friends,

2016 provided further evidence of our company’s ability to create value and not only economic value but, all-importantly, value for society and the enviroment. Inditex continues to fine-tune its customer-centric creative fashion proposition, underpinned by its seamlessly integrated offline-online store model.

The key factor enabling the sustained and sustainable development of this model are the people who populate our company: a diverse universe of professionals who have in common creative talent, modesty, a passion for fashion, the ability to work hard as a team and in a responsible manner, an entrepreneurial spirit and a tireless quest to innovate. Some 162,450 people of 99 different nationalities who embrace the business ethics and culture that define our work philosophy which is in turn articulated around daily, multi-cultural engagement with and learning from our customers in the 93 markets in which we do business.

Thanks to their dedication, we are in position to report another year of growth, fuelled unquestionably by the €1.43 billion invested in expansion plans, technological innovation, logistics upgrades, as well as social sustainability and environmental policies. The Group ended the year with 279 more physical stores, to put the total at 7,292, having opened establishments in 56 markets, five of which new. In parallel, it lifted its online presence to 41 markets, thanks to inauguration of the online platform in 14 new geographies in 2016. In parallel, we refurbished or expanded 462 stores, thereby bringing 4,519 of the total store count within the eco-efficient store programme, delivering average water and energy savings of 40% and 20%, respectively. As announced, 100% of our stores will fit this profile by 2020.

We also earmarked capex to our central facilities and logistics platforms. Here it is worth highlighting the new Pull&Bear and Oysho headquarters, both of which have earned LEED Gold certification, one of the world’s most stringent green building standards. As for logistics platforms, the Bershka platform in Tordera (Barcelona) and the Zara facility in Arteixo (La Coruña) introduced new multi-shuttles, making the management of dispatch times more efficient and precise.

Staying on the technology investment front, we completed the rollout of radio frequency identification technology (RFID) at Zara and started work on its implementation across the other brands. This system will be operative in most of our format and stores by 2020, translating into better customer experience.

Inside the Annual Report we specify the progress made on the 17 United Nations Sustainable Development Goals (SGDs) for tackling climate, change, poverty and inequality and evidence our commitment to the United Nations Global Compact and its Guiding Principles on Business and Human Rights. We work shoulder to shoulder with the ILO and play an active and catalysing role in the Ethical Trading Initiative and Sustainable Apparel Coalition.

“At Inditex there are 162,450 of us committed to the ethical principles on which our work philosophy is based, driving an integrated model of brick-and-mortar stores and online sales with a social and environmental perspective in all their spheres”

On the labour rights front, it is worth highlighting the tenth anniversary of the Framework Agreement between Inditex IndustriALL Global Union, which represents over 50 million workers worldwide. The expansion in 2016 of this Framework Agreement, pioneering in the sector, has the effect of introducing union representatives in the 12 geographies or clusters around which Inditex articulates the sustainability -and the meticulous traceability and monitoring- of its production chain.

In the chapter on environmental management, we overview our plan for 2016-2020, which lays down our company’s specific commitment to achieving a circular economy. Since its rollout it has already implied the deployment of garment collection containers in Spain (with an at-home pick-up option available), Portugal, the UK, the Netherlands, Denmark, Ireland and the main Chinese cities, for recovery and/or recycling. This initiative is managed in collaboration with charitable organisations such as Caritas, the Red Cross and Oxfam, cutting-edge players in the sustainable fabric field such as Austria’s Lenzing and Spain’s Hilaturas Ferré, and prestigious international research centres such as the Massachusetts Institute of Technology (MIT), via the MISTI initiative, and multiple Spanish universities.

Thanks to this innovative thrust we have made our collections even more sustainable, introducing new fibres such as the exclusive Refibra™Lyocell, developed together with Lenzing, and our novel Join Life collections.

We are embracing recycled materials and best practices in this field. Processes aligned with the Zero Discharge Policy and Detox Commitment which imply constant monitoring of all the wet processing supply chain to deliver top quality processes coupled with best environmental practices. The fact that Greenpeace ranked Inditex as Avant Garde for its Detox 2020 efforts last year has spurred us to step up our commitment, raise the bar and redouble our efforts to stay ahead of the curve in adopting increasingly sustainable policies and systems.

Throughout last year, we also continued to work with organisations specialised in the promotion of community well-being and education, the employability of vulnerable people and the provision of emergency relief, earmarking over €40 million to our community work in 2016 and directly benefitting over one million people.

Turning to taxation, our global contribution topped €5.6 billion. We are proud to say that our corporate income tax contribution in Spain accounts for more than 2% of the state’s total corporate income tax receipts.

This fiscal responsibility is multiplied by the knock-on impact on the suppliers and auxiliary enterprises needed to facilitate our growth. Most notably in Spain, where one in four of the 9,491 new jobs generated globally in 2016 was created. The same multiplier effect applies to the jobs sustained by Inditex indirectly: in Spain, some 7,500 suppliers invoiced us €4.63 million in 2016, up €500 million from 2015, which translates into some 50,000 indirect jobs.

We hope that our refusal to conform is palpable on the following pages. We want to continue to do better and plan on retaining a 360-degree vision in order to help improve our surroundings. We are working for our customers with the clear mandate of continuing to generate value beyond the realm of the purely economic.

P. Isla
Pablo Isla