Luxury Brands Must Become More Sustainable Or Suffer

If a label wants to succeed in the future, environmental and social consciousness will not be optional

The message to luxury brands is simple: adapt or die. — (REUTERS)
Feb 09, 2016 at 3:13 PM ET

You might think luxury brands like Bentley, Rolex or Hermès don’t care about environmental sustainability. You might even be right. That’s going to have to change, however, as a focus on social issues is no longer optional for big brands.

Brands have to care because of changing laws and financial pressure, according to Diana Verde Nieto, founder of industry watchdog Positive Luxury and lead author of the report 2016 Predictions For the Luxury Industry: Sustainability and Innovation

2015 propelled the luxury industry forward when it comes to how they think about sustainability. The biggest shift, (and one of the most important ones to help accelerate changes from the top down), is the rise in demand from investment communities for sustainable business models. For years, investors have focused on a company’s financial performance and determined if purchasing stock was worth it based on if the company was profitable. Now, sustainable investing strategies are growing, as investors are realizing that performance is intertwined in future social and environmental impact.

There’s also a pretty big social shift influencing the markets, which can be attributed to the increasing impact of millennials who have grown up with more awareness about where there products come from, making companies feel obliged to disclose that information. Not only are millenials are more likely to work for companies that care about social issues, but they’re more likely to spend their money with those brands too. Citing the study, the Harvard Business Review says 88 percent of millenials and Gen Xers in the U.S. and the U.K. believe companies need to be “less bad,” a demand luxury goods makers will have to accommodate to stay successful.

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The social shift is also coming from high-profile tastemakers and celebrities. HBR also notes that the celeb set cares a lot more about sustainability these days than ever, citing Leonardo DiCaprio and Mark Ruffalo as celebs who have made movies about environmental issues. DiCaprio actually just met with the Pope to talk about climate change issues, and his namesake organization has been advocating for the environment since the late ’90s.

Beyond that, there’s the obvious: The environment has to be able to support production of items like gems and textiles beyond the short term, which will not be possible at the current rate of production and consumption.

The Harvard Business Review:

Finally, there’s the harsh reality of biophysical limits seriously compromising these companies’ ability to source their products. Luxury goods require digging up, growing, and processing materials throughout the value chain, and that’s all getting tougher. According to Verde Nieto, these are not just ethereal brand risks about labor or image, but actual business continuity risks. Climate change is changing water availability and crop production around the world. That affects cotton-based products and, as Verde Nieto says, cashmere and angora, for example, require a great deal of water to process.

The shift away from “blood diamonds” or precious stones that were mined in conflict zones is one example of this shift, but that’s only part of the issue. The world is fresh out of gold, according to Verde Nieto, who says that most of the gold we’re using these days is recycled. Brands, apparently, are starting to listen to all of these arguments. HBR points to luxury champagne maker Veuve Clicquot, which is now paying attention to the kind of packaging it uses (and the effect it has on the environment), and jewlery maker Tiffany won’t use “blood diamonds.” What this all amounts to is that sustainability is no longer an interesting idea companies can shallowly employ as a marketing and PR tactic. Rather, taking a more socially and environmentally aware approach is essential to the survival of luxury brands.

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