Date: 2024-12-21 Page is: DBtxt003.php txt00010928
Luxury Sector
Sustainability
Andrew Winston ... Luxury Brands Can No Longer Ignore Sustainability
Burgess COMMENTARY
Peter Burgess
Andrew Winston
[I posted this blog on sustainability in the luxury goods world last week on HBR. This piece created the most social media buzz I've ever seen in 300+ blogs. I'm not 100% sure why (tell me if you know so I can replicate it!). I also saw a few more critical comments than usual -- some close watchers of luxury supply chain issues, particularly blood/conflict diamonds, expressed deep skepticism of the Kimberley Process I mention. I'll admit to not having a very deep knowledge of that NGO and its process in particular, but many companies and other NGOs rely on it. But I'd be interested in your take, if you have one...Enjoy the luxury world.]
If I asked you to picture the consumer luxury market, you might imagine jewels, sports cars, watches, premium drinks, high-end shoes and apparel, and so on. A combination of high quality, glamour, celebrity, and attitude. With a few exceptions, it’s been an industry not traditionally associated with concerns about environmental impacts, human rights, and wellness, even while those trends have been sweeping through the mainstream consumer products sector. But according to a new report, 2016 Predictions for the Luxury Industry: Sustainability and Innovation, that sustainability gap is closing fast.
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Two organizations that work closely with high-end product companies, the Luxury Institute and Positive Luxury, produced the study (disclosure: I’m on the latter’s informal advisory board, but I had no involvement in the research). Diana Verde Nieto, the founder of Positive Luxury and main author of the study, makes a compelling case that sustainability and social responsibility are no longer nice-to-have for luxury brands — they are now requirements.
The report lays out a few key pressures.
First, the direct pressure: the laws are changing. The report points to the passage of the Modern Slavery Act in the U.K. in 2015, which requires larger companies doing business in Britain to publish a board-approved, public annual slavery and human trafficking statement. This kind of law clearly drives much more transparency and tracking up the supply chain. And it’s a good thing, as 71% of U.K. retailers and suppliers think it’s likely there are slaves in their supply chain.
Second, the indirect and more powerful pressure: social norms are changing, starting with high-profile tastemakers. Celebrities are more invested than ever in sustainability. Leonardo DiCaprio and Mark Ruffalo have produced movies and started organizations to tackle climate change and promote renewable energy. Harry Potter star Emma Watson is a vocal advocate on gender equality while also appearing regularly in fashion magazines. These names and others are lending their clout to the social and environmental agenda. Given their prominence in the fashion and luxury worlds, their beliefs, statements, and demands on companies matter.
On a larger scale, the expectations of companies are changing generationally — Millennials have different views on how companies should act. The report cites research showing that “88% of UK and US Millennials and Generation Xers believe brands need to do more good, not just ‘less bad.’” This generation is questioning consumption in general – a majority say they are spending more on experiences (meaning, less emphasis on stuff), which is a threat to the luxury world. And they are driving a “clean label” trend, where companies feel pressure to explain what’s in everything and where it came from.
Third, the report highlights the fact that the investment community is waking up to the value to consumer brands of managing environmental and social issues well. There are some early shoots of evidence to back this idea up: in 2015, a Morgan Stanley analyst raised the price target on some mainstream apparel players like Nike based on their sustainability performance. The report sees this pressure coming to luxury companies soon.
Finally, there’s the harsh reality of biophysical limits seriously compromising these companies’ ability to source their products. Luxury goods require digging up, growing, and processing materials throughout the value chain, and that’s all getting tougher. According to Verde Nieto, these are not just ethereal brand risks about labor or image, but actual business continuity risks. Climate change is changing water availability and crop production around the world. That affects cotton-based products and, as Verde Nieto says, cashmere and angora, for example, require a great deal of water to process.
For gems and minerals, Verde Nieto sees a range of challenges from the energy required in production to general availability. With slight hyperbole, she says, “we’re out of gold basically (almost all the gold we use is recycled), various substances and ingredients in skin care are threatening the environment, diamonds are scarce, and exotic skins are in trouble…basically — and this is the big ‘a-ha’ — some of the raw materials, crucial to the luxury industry, are under threat.”
The leading companies in this space have been acting on many of these pressures for years. Both Tiffany and Forevermark, a Debeers company, have certified their diamonds using the independent Kimberley Process as “conflict free.” L’Oreal has quietly been making itself one of the global leaders on climate change and renewable energy. The company has already cut greenhouse gases by 50% and has new targets to be carbon neutral (without buying renewable energy credits) by 2020.
Now all the big brands are jumping in. One of the report supporters, French luxury conglomerate LVMH, has been, according to Verde Nieto, conducting extensive lifecycle analyses of their business lines. Others like Veuve Cliquot Champagne are looking hard at packaging now. They’re all figuring out where their biggest risks and opportunities lie. The report has some additional good case studies in the watch, leather, diamond, and eco-tourism realms.
None of this is easy or obvious. This industry has some tough history to reconcile. “Blood diamonds” were not just a campaigners evocative phrase, but based on real money flows to brutal dictators. Slavery is still a problem. Mines are immense operations that can impoverish people and land — or create jobs and build the economy.
But in our transparent world, the risk of not tackling sustainability is extremely high for this sector. As CSR and sustainability evangelist John Elkington told the report writers, “The implicit promise [in luxury] is that the consumer need not worry about anything. Everything is taken care of… Until it isn’t, at which point the whole impression of invulnerability and perfection can deflate.”
An unsustainable piece of clothing or jewel is, in the end, anything but flawless. As we all wake up to that reality, the luxury companies have no choice but to act.
(This post first appeared at Harvard Business Review online.)
(Andrew's book, The Big Pivot, was named a Best Business Book of the Year by Strategy+Business Magazine! Get your copy here. See also Andrew's TED talk on The Big Pivot.
If you enjoyed this blog, please sign up for Andrew Winston's RSS feed, or by email. Follow Andrew on Twitter @AndrewWinston)
http://blog.positiveluxury.com/2016/01/2016-predictions-luxury-world-sustainability-innovation/
2016 PREDICTIONS FOR THE LUXURY INDUSTRY: SUSTAINABILITY AND INNOVATION
JANUARY 20, 2016
In this report, we identify the most impactful events of 2015 and look forward to the biggest trends of 2016 in the world of luxury and sustainability.
2015 propelled the luxury industry forward when it comes to how they think about sustainability. The biggest shift, (and one of the most important ones to help accelerate changes from the top down), is the rise in demand from investment communities for sustainable business models. For years, investors have focused on a company’s financial performance and determined if purchasing stock was worth it based on if the company was profitable. Now, sustainable investing strategies are growing, as investors are realising that performance is intertwined in future social and environmental impact.
C-suites are starting to realise that in order to keep creating value, and accelerating growth they must invest in and improve how their company impacts society as a whole, and most importantly how they communicate that positive impact.
There is one group in particular that aligns with this concept more than any other. Millennials are almost three times as likely to look to work for a company because of its social and environmental practices(1).
And the demand from affluent millennials doesn’t stop at employment opportunities. 2015 saw millennials using their spending power more and more to vote for companies who positively impact society and the environment – in fact – they are twice as likely to buy from brands with strong management of environmental and social issues(2).
2015 was also the year governments and world leaders took action too. With the launch of the Sustainability Development Goals, COP 21, and the passing of the Modern Slavery Act, creating, maintaining and growing companies with a positive social and environmental impact will soon become a legal obligation.
All these changes have left luxury companies with no option but to improve as the potential for sales and stocks to plummet increases, and the hand of the law hangs over them.
With that in mind, we look forward to 2016 and the trends that will help luxury companies continue on their sustainability journey. New innovations, communication techniques and constant evaluations of how consumers view brands will allow companies to keep marching forward in the fight to stay at the top of their game in a world that demands socially and environmentally responsible brands more than ever before.
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You can purchase the full report by contacting us at hello@positiveluxury.com
JOSIE TUTTY