This Week's Obsession: Is Luxury Sustainable by Nature?

According to LVMH’s head of image and sustainability Antoine Arnault, luxury is “sustainable by nature.” It’s a common message within the industry, where high prices and claims of artisanal manufacturing are often used as proof points for ethical and environmentally responsible operations.

Ethical Questions in the Luxury Supply Chain

And yet just this week, a Milan court placed an LVMH unit under external supervision after an inquiry alleged that subcontractors in its supply chain had exploited workers. 

Such findings are shocking, but hardly surprising. Though luxury brands like to position fashion’s environmental and social ills as a mass-market problem, the incidents are just the latest in a string of reports challenging the carefully cultivated perception that luxury goods are synonymous with ethical practices.

Despite the increasing incorporation of sustainability claims into their branding efforts, luxury brands are maintaining their traditional operational methods, relying on reputation and heritage to evade calls for greater transparency and accountability.

However, the landscape is evolving around them. Global regulations are becoming more stringent, with policymakers pushing for brands to be held more responsible for human rights and environmental violations within their supply chains. Investors are also demanding higher standards, with sustainability-focused funds urging businesses to address their environmental and social impacts. While consumers may not always align their purchases with their values, one would believe that they certainly don't wish to invest in a $10,000 handbag associated with sweatshop conditions.

At a minimum, luxury brands must adhere to strict guidelines on labor standards and human rights, improve the effectiveness of social audits, guarantee fair wages, obtain robust third-party certifications to support their sustainability claims, and cultivate transparent communication with stakeholders.

Beyond these measures, to truly uphold the notion that luxury is "sustainable by nature," brands should leverage their significant economic and cultural influence to go beyond mere compliance and ensure that their operations have a positive impact on people's lives.

While this may appear challenging in an industry where transparency and advancements in labor standards have been lacking for years, there are indications of progress.

For instance, Chloé made history in 2021 as the first luxury brand to achieve B Corp status, a certification that confirms a company meets high environmental and social standards. This qualification was just one step in a broader strategy where the company focused on its supply chains to drive positive social impact through sourcing, while also reducing its environmental footprint. Among its various initiatives, Chloé embraced a "social procurement" policy, utilizing its buying power to create opportunities and deliver social benefits. In 2020, the company established a partnership with the World Fair Trade Organization, a network of social enterprises dedicated to ethical business practices. Unlike occasional "capsule" collections, Chloé's approach is systematic, guided by concrete long-term objectives. By the conclusion of the following year, the company aims for 30% of its products to be sourced under its fair trade and social impact framework.  Bravo. 

Overproduction is Structural  

By contrast, far too many of luxury’s sustainability initiatives remain stuck in pilot mode or forgotten within a season.

And continuing to lean into the idea that their products are inherently more sustainable than cheaper labels because they make smaller quantities and design for longevity - is in fact spurious. The reality is that they have always over-produced.

Higher volumes mean better economies of scale during manufacturing. And over-ordering is viewed as cheaper than the risk of missing a sale because stock isn’t available. For luxury apparel, a 50 percent full-price sell-through rate is considered good, according to analysts.

As luxury’s biggest players have grown over the last decade, so has the value of their overstock. The cost of impaired inventory held by Kering and LVMH more than doubled between 2014 and 2023.