Guest authors from Mazars USA LLP say brands need to address the most pressing environmental issues.
Fall 2019 seems to be sustainability season – between alarming scientific reports, student strikes, and the U.N. General Assembly, headlines have been filled with climate and sustainability-related news. Many luxury brands embrace this movement and are ready for change, while others are struggling.
Luxury has a complex relationship with sustainability
On one hand, luxury products embody durability, long lifespans and transmission from one generation to the next in contrast with the overuse of resources brought about by fast fashion. However, on the other hand, luxury goods don’t have a clean slate. They often use controversial materials, such as fur and exotic skins. They involve a lot of waste in the production and commercial stages. For example, last year Burberry admitted to having destroyed more than £100 million worth of unsold items over the past five years – revealing the issue’s extent. Furthermore, the secrecy that the industry holds around processes and materials, to protect savoir-faire and keep the aura of mystery that is key to its identity contradicts sustainable governance, which calls for transparency and open communication.
This is becoming a challenge for the industry, which is facing increasing scrutiny of its environmental and social impacts.
Regulations are rising, especially in Europe, where most luxury brands are based. The financial community increasingly considers sustainability practices as an element of risk mitigation and values sound corporate responsibility strategies. Most importantly, customers — especially Generation Y and Generation Z — are concerned about the impact of their consumption patterns on people and the environment. While the sustainability of a brand is not necessarily their first criteria for a purchasing decision, consumers have a critical eye on products through social media. They expect companies to provide solutions to environmental and social issues and are quick to shun a company with an adverse reputation. These generations are expected to represent 80 percent of luxury’s consumer base in the near future, which makes it key for brands to act on the matter.
To address these concerns, the industry needs to focus on its most pressing issues:
- Climate change. The clothing industry is responsible for 10 percent of global greenhouse gas emissions (more than aviation and shipping combined), largely from the energy-intensive processing of oil-derived textiles such as polyester and the fertilizers used to grow natural fibers;
- Chemical use and release in waterways, especially from dyeing and leather tanning processes. Recent research also identifies that synthetic fibers breakdown during the washing cycle, resulting in microplastics released in waterways;
- Waste. Tremendous figures regularly hit the headlines. The Ellen McArthur Foundation, for example, reports that in 2017 one garbage truck of textiles was landfilled or incinerated every single second around the world;
- Water consumption. Natural fibers growth and garment production are very thirsty processes, often performed in water-stressed areas, which will become more numerous with climate change;
- Respect of work ethics throughout the whole production and supply chain, especially in developing countries, and
- Animal welfare. With public concern over the conditions in which animals are raised and killed for their products. Fur is the banner of that movement, but increasing scrutiny also concerns leather, wool, mohair, angora, cashmere, exotic skins and down.
While most of the facts and concerns stated above are applicable to the fashion industry in general, luxury fashion has a particular relationship to sustainability issues. It uses more animal materials such as fur and skins and is a prime target for animal welfare considerations. Also, climate change threatens the availability of some raw materials (natural fibers in particular), decreasing alternative options for rare materials.
Luxury brands need to re-affirm their values to society and reinvent and communicate their identity and actions. Fortunately, the luxury industry’s specific business model also means that luxury companies are well equipped to adapt to sustainability requirements.
First, they have close relationships with their suppliers, which implies a long-lasting relationship, a traditional long-term view of business focused on preserving heritage and brand equity, a key asset in inventing new business models. Next, the high-quality raw materials they use are prime candidates for circular economy initiatives: recycling, upcycling and inclusion in new designs that enhance the value of luxury products.
Finally, luxury companies have a long tradition of giving back through philanthropy and community investment, a form of redistribution of their wealth (although this model is reaching its limits; now stakeholders expect exemplary business practices rather than “buying back a conscience”).
The industry is taking hold of that demand and beginning to reinvent its production models to include sustainability considerations.
Large companies transform their practices
Kering is the most obvious example, with a strong commitment and innovative transformation of its business stemming from its chief executive officer François-Henri Pinault, who said: “luxury and sustainability are one and the same.” The group’s sustainability journey began in 1996 and accelerated in the Aughts with the creation of a company-wide sustainability team, and a sustainability committee within the board of directors in 2012.
The group committed to full carbon neutrality in its operations and supply chain on Sept. 24, 2019. Kering is also paving the way on metrics and transparency with its EP&L (Environmental Profit & Loss), a proprietary tool to measure greenhouse gas emissions, water consumption, air, and water pollution, soil use and waste production along a garment’s value chain, allowing the company to make more informed decisions. Kering publishes the result of its EP&L and shares its methodology in an open-source approach, remaining the only luxury group to publish one. This leadership pays off: Kering ranked first in the luxury and apparel and accessories sectors for the second year in a row in Corporate Knights’ Global 100 rating index.
Smaller companies are also active and innovative in transforming the industry
An example of a smaller company with successful sustainable initiatives, Eileen Fisher has a sustainability journey going back two decades and chooses to operate on a quadruple bottom line: financial, environmental (with eco-materials and circular economy initiatives), social external (worker well-being) and social internal (employee well-being). Rising stars are embedding sustainability at the heart of their vision, such as designer Lina Mayorga, who exclusively uses upcycled materials and zero-waste techniques (sample yardage, end-of-roll fabrics, and cut-and-sewn waste), even including the UN’s Sustainable Development Goals in her designs.
New players are disrupting the industry with business models that challenge traditional ways of producing and consuming luxury products
For example, The RealReal offers authenticated luxury consignment. Rent the Runway is a subscription service that allows women to rent designer styles. FabScrap, a New-York based nonprofit, collects leftover materials (garments or textiles) to reuse or recycle them in a design-property appropriate manner.
Shifting gears: leadership in collaboration
In addition to these multiple isolated actions, the sector has recently called for collaboration with the creation of the Fashion Pact announced during the G7 summit in August 2019.
The Fashion Pact focuses on climate change, biodiversity protection, and oceans conservation, listing commitments in all three areas and identifying tools and areas for collaboration from signatories. So far, 32 global fashion and textile companies have signed up, representing 150 brands.
While uncertainty remains as to what the scope of this initiative is going to be and how brands will effectively work together, it is one of the first examples of collaboration of a whole industry, many of whom are known competitors, on such a large scale: an outstanding achievement towards the new ways of operating business that we need to invent to tackle pressing sustainability issues.
Sustainability is the way forward for the luxury industry. New business models, collaboration between brands, specific strategies boosting innovation in products and operations, but also measuring and reporting progress is an opportunity for brands to articulate their values to their customers and to build trust and interest. Now is a key moment of reinvention for the industry. While it was built on an image of excess, it now has an opportunity to embrace a new role as an advocate of a more durable world, aligned with its values, in what is perhaps its most impactful role: making sustainability desirable.