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Sustainability

Three ways to take sustainability beyond greenwashing in luxury  

Published 24 February 2022 in Sustainability • 7 min read

Luxury firms can strategize to find that sweet spot between growth and a positive social and environmental impact

The luxury goods market enjoyed a rebound in 2021. For example, LVMH’s revenue rose 46% in the first nine months of 2021, thanks in part to its ability to be agile by reconnecting with local consumers and building intimacy with wholesalers. The rebound was also due to new and unprecedented levels of wealth creation in the world, particularly in the crypto sector.      

But is such prodigious growth sustainable, and is it compatible with making a positive environmental and social impact? 

Yes, but the industry will need to continue moving away from any greenwashing, and find ways to make supporting ecological and human health as much of a concern as profitability. 

 As I have written before, the luxury industry has been guilty of sitting on its laurels and claiming it is saving the planet because, by definition, it produces sustainable products to be passed down generations. Some brands, especially in the jewelry and watchmaking sectors, still haven’t changed their ways. 

However, we are seeing an overall shift in the industry brought on by pressures from socially conscious millennials and Generation Z, the need to address climate change, and pandemic-induced upheavals. Brands are seeking new ways of showing themselves to be sustainable, from using upcycled materials and engaging in fabric innovation, to rethinking the value of the fashion show and the lavish salon. 

Doing the hard work of addressing sustainability replaced the need for speed for many businesses when the pandemic hit. As I wrote about in my book, ‘Resetting Management: Thrive with Agility in the Age of Uncertainty, with Martin Králik, Armani executives said on record that the crisis was an opportunity for top-of-the-range lines to stop imitating fast fashion and return to their original identity.  

The company has made a conscious effort to “do less and do better” by stepping away from the industry trend of accelerating production cycles and launching multiple collections every year. Meanwhile, Chloé has become the first luxury brand to be B-Corp certified.  

But much more needs to be done. Brands’ interest in circular principles continues to grow, but their progress is slowed by the limitations of recycled fibers and regulatory roadblocks, as Hong Kong-based textile exporter Novetex’s CEO Ronna Chao has pointed out. In horology, mushroom-based leathers are yet to prove their worth 

Here are three ways in which luxury brands can move on from greenwashing and embed sustainability in their company strategy: 

1.Take a purpose-driven approach 

Creating a company purpose is about defining the social and/or environmental pain points the firm wants to solve. Sustainability must be part of this, but never confused with brand purpose. Once the two are clear, it is easier for a brand to define its targets in these two areas in a precise way. Part of this work involves realigning priorities. 

Chloé serves as a great example of how this can be done. CEO Riccardo Bellini and Chief Sustainability Officer Aude Vergne revisited Chloé’s roots and brought to the fore a strong commitment to women’s freedom and progress, creating the slogan “Women forward for a fairer future”. Chloé aligned all its ESG targets around it, rebuilding its business model to one that is community-based, scientifically more sound, accountable and highly creative. 

“This is not idealism,” Bellini said at the time. “The very concept of purpose-driven is combining profitable growth with a positive contribution to the planet, society and community. Our motto is beautiful, profitable and meaningful.”  

When strategy is aligned with purpose via concrete targets, sustainability can be said to differ from activism. A deeper dive into Chloé’s plans reveals the creation of a social profit-and-loss account, akin to an environmental profit & loss (EP&L) and an industry first; an acceleration of “creative innovation” across collections through socially and ecologically sourcing materials; incorporating social entrepreneurs into its supply chain; and creating an advisory board of experts to hold the firm accountable. 

catwalk lights
“The very concept of purpose-driven is combining profitable growth with a positive contribution to the planet, society and community. Our motto is beautiful, profitable and meaningful”
- Riccardo Bellini, CEO, Chloé

2.Build coalitions around your chief sustainability officer 

The number of CSOs across Fortune 500 companies has grown more than 228%  since 2011, according to the Weinreb Group, a CSO recruiting and research firm. The role is critical and the work involved includes meeting the challenges of keeping up with the pace of science to decarbonize, and measuring the real impact on biospheres, natural ecosystems, and societies.  

In the same way that digital transformation is less successful if only the chief digital officer is accountable, chief sustainability officers will not create the right impact, especially in terms of reimagining luxury business models, if they stand alone. Luxury brands’ interests remain too vested in business operations as it is, and if the CSO operates in a silo this won’t change. 

Luxury brand leaders will need to embed accountability for change across functions and operations, in tight collaboration with the CSO. At Chloé, for instance, the CSO is not only actively supported by the CEO but also by the Creative Director, Gabriela Hearst.  

Sustainability transformation begins at the design table and Hearst pushes her design team with her “what ifs?” approach: for instance, “What if we could replace cotton altogether?” She has even declared that constraints on sourcing positive-impact materials make her more creative.  

Chanel took a similar approach. Its CSO collaborated with the chief financial officer, whose green-bond commitments in 2020 became the Trojan horse that forced everyone to make a proper plan, achieve ESG results, and be held accountable. Mission 1.5⁰, which is in line with the targets of the 2015 Paris Climate Agreement, became the new purpose of the company. Chanel’s CFO was essential in its definition. 

Naturally, to make changes stick, all employees from top to bottom should have their compensation linked to the delivery of sustainability goals. And yet, this is rarely the case. Chloé is an exception to the norm; incentives are adapted to function and some employees are rewarded according to their social engagement.  

People dream of aspiration, not frugality. The luxury sector must manage this contradiction
- Stéphane J.G. Girod

Discover IMD Program: Reinventing Luxury Lab

Future-proofing luxury in volatile times

 

3. Educate consumers globally

When prompted, consumers tend to say they care about sustainability and social responsibility, but their actions don’t always match their words. According to a recent Getty Image poll, consumers still prefer convenience over sustainability 

Costumers also increasingly buy clothes just for an Instagram snap and then return them. This comes at huge environmental costs: Chinese consumers throw away 26m tonnes of clothes every year, less than 1% of which is reused or recycled. This group – the luxury sector’s largest market in the world – does so because it is bad luck to wear second-hand clothes in China and the infrastructure in place to recycle is insubstantial. But China is not alone: the problem is global.  

Luxury, which has been rather late and reactive in terms of sustainability strategy, has the opportunity to lead the pack by educating consumers. Chanel is rolling out the infrastructure for its customers to return their used products to its boutiques. Chloé is creating content, specific to each product, that informs consumers about its sustainability impact. It is also training store employees to deliver the messages around this, to show that it is far from greenwashing.    

Ultimately, the most powerful way to educate people about responsible consumption would be to encourage them to consume less. But then how would the luxury sector continue growing? By branching into more circular business models such as second-hand, which is booming in horology. But even there, the jury is still out about whether it fuels more consumption related to the refurbishment that this market entails.  

Virtual luxury goods in the metaverse will also reduce the need for manufacturing. But the impact of the metaverse on energy consumption is currently unsustainable. And its social impact may prove negative too 

Cyril Vigneron, CEO of Cartier, evokes the dawn of an age of frugality. People dream of aspiration, not frugality, so even if he is right, the luxury sector must manage this contradiction. There will be no future for luxury without responsible consumption, and luxury brands will have to learn how to reinvent the dream within these new boundaries

Authors

Stéphane J.G Girod

Stéphane J. G. Girod

Professor of Strategy and Organizational Innovation

Stéphane J.G. Girod is Professor of Strategy and Organizational Innovation at IMD. His research, teaching and consulting interests center around agility at the strategy, organizational and leadership levels in response to disruption. At IMD, he is also Program Director of Reinventing Luxury Lab and Program Co-Director of Digital Execution. 

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