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- 3 Nov 2009

Sustainability and the Luxury Industry

Corporate social responsibility advocate and sustainable luxury advisor, Florian Gonzalez, suggests a concrete framework for luxury brands to use when developing sustainability strategies.

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2009 is the year when the word “sustainability” officially entered the luxury professionals’ lexicon and agenda. The consequences of such a dramatic acknowledgement are far-reaching and entail a revision of every single dimension of the industry, including product development, marketing, finance, distribution or human resources. This revolution is currently taking place and will obviously slowly redefine the very notion of “luxury” together with brand identities and brand perceptions.

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Luxury groups have made their “coming-out” about sustainability:

In November 2007, when the International Herald Tribune dedicated its luxury conference to “Supreme Luxury” with every brand rushing into Russia and Dubai, it was hardly predictable that, in March 2009, the same international newspaper would host a “Sustainable Luxury” conference, urging luxury brands to embrace sustainability. Now that the myth of the recession-proof luxury industry has been exposed, brand owners are revisiting their beliefs and value system as they relate to growth and profit targets and corporate culture.

At the IHT conference, Francois-Henri Pinault made a long speech which can be considered as a very encouraging and symbolic step towards sustainability. Noting that the expression “sustainable luxury” could sound like a contradiction, he considered that it was necessary to go beyond this contradiction as “growing concern for the planet and greater respect for the people all come together. Luxury and sustainable development share the same values and can support each other. There is no time for reflection or pessimism but for action. Let’s be ambitious and effective before it is too late. Luxury can and should raise awareness.”

A few months later, at the Financial Times Summit in Monte Carlo, Bernard Arnault acknowledged the importance of sustainability in a keynote speech. In noting that the ‘luxury as usual’ momentum was over, Mr. Arnault expressed the opinion that the desire for exceptional products would survive the crisis as long as innovation and creativity lead the way.. In this regard, he intends to view the growing environmental issue in the world not as a constraint but as an opportunity, and he referred to LVMH’s recent investment in Edun, a fashion company founded in 2005 “with a mission to drive sustainable employment in developing economies.” According to Mr. Arnault, a socially responsible, more demanding luxury customer is appearing to which companies will have to adapt, while preserving profitability for their shareholders.

Actions speak louder than words and sustainability experts are very cautious when it comes to corporate promises. Sustainability was first defined by the Brundtland Commission in 1987. An updated definition could be: “Physical development that achieves net positive impacts during its life cycle … by increasing economic, social and ecological capital.” (J. Birkland, 2008). Unfortunately, the lack of a universal definition of sustainability leaves space for all kinds of questionable marketing practices and deceiving propaganda. Indeed, the “green-washing” temptation is strong and a company’s financial strength, together with the stability of its ownership, are probably the best guarantees for a long term commitment to such a culture shift.

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Tentative guidelines to help make the luxury industry more sustainable:

Florian Gonzalez is suggesting the following guidelines to the luxury industry:

1. Sustainability requires to revise business models and particularly to give sustainability a role in companies’ financial valuation and targets. This is part of the so-called “triple bottom line” (people, planet, profit), expanding the traditional reporting framework to take into account ecological and social performance in addition to financial performance.

2. Sustainability requires the interest alignment of all stakeholders from ownership and top management down to staff and supply chain partners.

3. Training is key and employees shall be given incentives in order to learn and achieve concrete results in terms of sustainability.

4. A sustainable business puts sustainability into its core mission, hence luxury companies shall make their products’ sustainability a priority (vs. charity work).

5. Design can be eCo-driven and not eGo-driven (Eco-design vs. Ego-design). Sustainability shall inspire new co-design and co-creative processes in the name of ‘design activism’ (Design Activism, Alastair Fuad-Luke, 2009).

6. Fast fashion should be seen for what it is most of the time: throw-away products, waste of resources and low prices obtained thanks to poor social conditions in Asian factories. Slow fashion instead means selecting, enjoying and caring products we buy: “Consume less, live more” (The 11th Hour, a documentary by Leonardo DiCaprio).

7. Being carbon neutral is only a first step: actually reducing carbon emissions and making a positive impact (vs. just “neutral”) is the real name of the game.

8. Brands which consistently and constantly improve their sustainability credentials will reinforce customer loyalty and increase their customer base over time.

9. Profits made out of unsustainable businesses are nothing less than “ecological evasion”.

10. Sustainability requires a permanent learning process made of humility, generosity, kindness and sharing of knowledge. Companies should not be afraid of sharing best practices and creating positive externalities.

Finally, following philosopher Alain de Botton, it may be time to revisit our very notion of wealth: “The current economic crisis is forcing all of us to rethink nothing less than the meaning of life. In particular, it is prompting us to re-examine a key idea in our society: the connection between making money and being happy.”

Florian Gonzalez

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A graduate of La Sorbonne and the Paris bar, Gonzalez wrote his first environmental report 17 years ago while interning with the French Ministry of Justice before practising as a business lawyer with US law firms in Paris. After graduating from the International Luxury Brand Management MBA (ESSEC L05), Gonzalez managed and developed the global licensing portfolio of a prestigious Italian fashion brand. In 2008 his passion for sustainability convinced him to relocate to London, from where he has been advising small and big brands on sustainable luxury, while preparing the launch of his own brand next year. Also in 2010, Gonzalez will give a guest lecture on corporate social responsibility for the ESSEC LVMH Chair programme.

This excerpt was adapted from a longer article written by Florian Gonzalez, published in the October issue of Reflets, the alumni magazine of ESSEC (École Supérieure des Sciences Économiques et Commerciales).

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