RAPAPORT… London-based WWF, a group that works towards ending environmental and social degradation, rated a number of luxury brands for sustianable practices that go beyond corporate responsibility. WFF released its first report called Deeper Luxury, in which authors examined environmental and social record of top luxury brands, and in particular, asked celebrities to disengage support of the brands that performed poorly.
“Luxury companies must do more to justify their value in an increasingly resource-constrained and unequal world,” authors wrote. “Despite strong commercial drivers for greater sustainability, luxury brands have been slow to recognize their responsibilities and opportunities. We call upon the luxury industry to bring to life a new definition of luxury, with deeper values expressed through social and environmental excellence. Their performance and progress on environmental, social and governance issues should be comprehensively measured and reported.”
The report ranked brands according to the group’s own sustainability environmental reporting, as well as the way in which the brands have been judged by non governmental organizations and the media. “This is the first time that anyone has conducted such an analysis, and none of these holding companies scored well,” concluded the authors.
Data sources were from the Ethical Investment Research Service and Covalence of Geneva. WWF turned this data in numerical scores, to create a total maximum possible score of 100. However they did not break down the score as one might in grade-school. The percentage scores of 100 were actually much worse the grades given. Each company’s score was expressed in grades between A+ (highest) and F (worst.)
Grades of C to C+ (60 percent to 69 percent) were given to L’Oreal, Hermes, LVMH, and Coach. WFF graded Ds (50 percent to 59 percent) to Tiffany & Co., PPR, Swatch, and Richemont, and Fs (less than 49 percent) were given to Bulgari and Tods.
“Brands may restore lost cachet by imbuing their products and services – and, indeed, the brands themselves – with deeper meanings and values, embodied in the concept of sustainability,” authors concluded.
“These companies…feature little in ethical rankings because of the limited nature of their ESG reporting. Not a single luxury conglomerate appears in investment analyst Innovest’s list of the 100 most responsible corporations of 2007, despite the fact that 23 make discretionary consumer items – more than any other type of product or service,” authors wrote.
LVMH, Hermès, L’Oréal, and Swatch were the only luxury conglomerates listed in the FTSE4Good index in 2006, but LVMH was expelled for supply chain issues in March 2007, they stated. “Appearance on these indices indicates that a company has a conscious strategic approach to the responsibilities associated with its core activities, and is communicating its efforts to external audiences. With trillions of dollars now invested according to ethical guidelines, the lack of luxury conglomerate performance on these indices will become more financially relevant.”
Anthony Kleanthous, senior policy advisor for WWF, said, “This report is a call to action for the world’s top brands to improve the way they do business. Luxury companies must do more to justify their value in an increasingly resource-constrained and unequal world. Despite strong commercial drivers for greater sustainability, luxury brands have been slow to recognize their responsibilities and opportunities. Their performance and progress on environmental, social and governance issues should be comprehensively measured and reported.”
Specifically for diamond and gold mining, the group called for: Respect for basic human rights; informed consent of affected communities; safe working conditions; respect for workers’ rights and labor standards; ensure that operations are not located in areas of armed / militarized conflict; ensure that projects do not force communities off their land; no dumping of mine wastes into oceans, rivers, lakes or streams; ensure that projects are not located in protected areas, fragile ecosystems or other areas of high conservation or ecological value; ensure that projects do not generate sulphuric acid in perpetuity; cover all costs of closing down and cleaning up mine sites; fully disclose information about the social and environmental effects of projects; allow independent verification.
Since celebrities are often leading by example, Kleanthous suggested that celebrities themselves own the responsibility “to make sure that the brands they are endorsing are not damaging the planet. Let’s face it, who wants to pay extra for a dirty brand?”
The report found that many luxury consumers are increasingly well educated and concerned about social and environmental issues. “Increasingly, successful people want the brands they use to reflect their concerns and aspirations for a better world. This is true not only in Western luxury markets, but, increasingly, amongst the affluent middle classes of Asia, Latin America and Eastern Europe,” authors concluded.
The group cited seven points about the luxury product pipeline that the affluent now consider when buying products:
— Luxury is about being and having the very best. Products that cause misery or environmental damage, now or in the future, are no longer considered by affluent consumers to be best in class.
— As new markets mature, their more affluent citizens increasingly follow international trends, including awareness and concern over social and environmental issues, and a desire for their purchases to provide meaningful experiences.
— Brands tell consumers what to care about all the time, both directly and by implication or demonstration. Examples include models selected for their body shape, fashion and personal care tips in the media, and advertising.
— Value can be provided via benefits to the people, communities and environment affected by production, marketing and distribution. These benefits help to build the intangible value of the brand.
— The luxury firms of 50 years past that have built heritage will compete with those today that build heritage their own way. Luxury brands need to see heritage as an evolving phenomenon, and work at contemporary heritage creation, by being pioneering in shaping the future.
— Changes in technology and communications, combined with the promotion of labels by luxury brands, mean that counterfeiting will continue in the face of legal challenges. Therefore, luxury brands must reconsider their emphasis on logos, and seek to connect with deeper values.
— Luxury goods involve diverse supply chains that have impacts on communities and nature throughout the world. Various stakeholders, including investors, increasingly expect verifiable and comparable information on social and environmental performance, resulting from a systematic approach. In many cases, non-luxury consumer goods companies outperform luxury brands in aspects of corporate sustainability.
The authors named future luxury product stars –that excel across the pipeline now– in Deeper Luxury including: Osklen of Brazil, OSISU of Thailand, Jeweler John Hardy of Bali; Mádara of Latvia; Linda Loudermilk of Los Angeles; Tesla Motors Inc.; and Mata de Sesimbra.
The 54 page report is available for download: