Sustainability in the Luxury Fashion Industry

Abstract

A recent study conducted by McKinsey & Co. for the Italian Chamber of Fashion outlined as sustainability should be conceived as a genuine strategic factor for the development of luxury brands. Evidence from this study demonstrates as sustainability is becoming a necessary condition [for brands] to be able to operate within sophisticated markets. For instance, the average purchase share of sustainable products by department stores is set to double in the next 5 years (rising from 23% to 40%). Nowadays, consumers of luxury goods, including younger affluent generations, are paying more attention to the environmental and social impact of their purchase decisions and are more likely to buy from a brand that resonates with their own personal values. For 68% of the people interviewed by McKinsey, sustainable development is more directly linked to tangible elements like materials, production processes and working conditions, rather than to intangibles like marketing, brand reputation or philanthropy. Despite the claims of the luxury industry, many luxury megabrands are alleged to be not transparent about their supply chains especially when it comes to the tangible elements mentioned above. This thesis aims at investigating whether luxury is compatible with sustainability and to what extent the supply chain of luxury goods can be considered sustainable according to the three dimensions of performance of the Triple Bottom Line: social, environmental and financial. The research work will be developed as follow. The conceptual framework underpinning the definitions of luxury and sustainability will be outlined in order to identify potential points of contacts, on one side, and divergencies, on the other side. An extensive literature review on the concept of Triple Bottom Line will be then carried out. The findings of this analysis will be employed to critically examine the Sustainability Reports of luxury conglomerates Kering and LVMH to assess whether the path towards sustainability is proceeding in the right direction. Other factors will also be taken into account: the company’s social and environmental policies and their implementation; the availability of information on the suppliers it uses; its reaction to issues reported in supplier facilities, and initiatives taken to address issues such as gender equality, overproduction and the payment of living wages globally. Furthermore, it will be highlighted how many luxury megabrands, such as Chanel, Dolce & Gabbana, Versace, disclose from none to very few information about their supply chains demonstrating a tremendous lack of transparency. While certain aspects of the traditional definition of luxury match with the concept of sustainability, the continuous growth of the luxury sector imposes companies choices that are far from being sustainable. More often than not, a critical analysis of figures contained in sustainability reports show that despite the efforts of luxury companies to be fully sustainable, this goal is still far from be achieved.