WWF study shows luxury companies not yet socially responsible

By CAROLINE J. HOWARD, ABS-CBN News | 10/05/2008 2:13 AM

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Cover of Deeper Luxury (www.wwf.org.uk)

Whether it be a million dollar sports car, a rare sparkling gem, or a European vacation, luxury can still be afforded by the elite.

In 2007, the luxury industry was estimated to be a $150-billion dollar business. Today, research shows, a growing demand for luxury items has left it virtually untouched by the global financial slide.

"The current downturn is not affecting it. Gucci group is up. Times are still good for the luxury brand," said management consultant Dr. Jem Bendell.

Recent studies show however, that with the luxury industry expanding and becoming more accessible to a wider audience including China, luxury brands have had to appeal to another level apart from its traditional exclusive market.

Ranking luxury brands

Bendell, together with Anthony Kleanthous, wrote about this emerging trend of luxury brands in the World Wildlife Fund- United Kingdom (WWF-UK) sponsored study "Deeper Luxury."

The authors analyzed and ranked the ten largest, publicly-traded luxury brands including Gucci, Yves Saint Laurent, IWC, Garnier and Louis Vuitton and graded them on environmental, social and governance performance from A (best) to F (worst).

Most of these companied ranked no higher than C+.

French luxury group, L'Oreal topped the ranking while the Italian group Tod's came in tenth. The report shows that luxury brands have not been performing well as far as social and environmental issues go.

Bendell said luxury companies are not counted among the world's most responsible companies.

Ranking of environmental, social and governance performance and reputation of luxury corporate groups (Deeper Luxury, WWF-UK)

"Nike, which is fairly mainstream, is doing a lot on improving working conditions throughout the supply chain for the last 12 years since it was challenged in the media in the mid-90s," said Bendell.

During that same period, human rights groups accused the jewelry industry of trafficking so-called conflict diamonds or “blood diamonds” because rebel groups in Africa traded them to finance brutal civil wars.

"We haven't found luxury brands being challenged in the same way apart from conflict stones in the late 90s. There haven't been the commercial drivers for them to embrace this agenda," Bendell noted.

In light of the green lifestyle sweeping the planet however, the growing market of luxury products is also becoming more and more aware of socio-economic conditions affecting production.

And it is this aspect of consumer demand that's driving a new trend, according to Bendell.

"What the world faces is a resource crunch and a climate crisis as well as poverty and conflict," he said. "To address that we need to have more sustainable consumption, meaning people achieve well-being without using excessive resources and harming people in the process. One study showed a third of all consumers are feeling guilty about what they buy because they're aware of the environmental problems we face. There's a problem with the supply chain but they're unable to find other options."

Notable exceptions

Bendell said however that the industry is slowly taking the challenge, adding there have been some notable exceptions.

"In the last 12 months, more luxury firms have been waking up to social and environmental issues. So they're beginning to engage this agenda,” said Bendell.

“Louis Vuitton, one of the largest luxury groups, has done a lot on the environment. Over four years ago, they started a carbon inventory and analyzed how to reduce their carbon emissions,” cited Bendell.

He said some companies are redoubling their efforts by “appointing senior managers to head a portfolio and turn vague commitments into actionable programs.”

He added: "Last year, Bulgari appointed its first corporate social responsibility manager."

He also cited the investment made by companies in marketing sustainable production. "The sector that spends the largest on advertising is the luxury sector and they work with the most famous celebrities. So if they communicate credibly through their advertising, that can only help encourage sustainable consumption."

Bendell however warned of a backlash if it is not done authentically. "It will backfire on the companies and it may create more cynicism among consumers when what we need is hope and commitment for people to change," said Bendell.

Sustainable luxury industry

"Our report challenges the industry to embrace social and environmental excellence as part and parcel of being a luxury brand," Bendell said. "Luxury brands are meant to be the best in everything and consumers expect social and environmental performance to be part of that."

"In ‘Deeper Luxury,’ Bendell and Kleanthous present a clear vision and rationale for a more sustainable luxury industry," said David Valdes, WWF president and CEO.

"They point out that authentic luxury brands are those that provide the greatest positive contribution to all those affected by their creation. In order to succeed, companies that make brands should have more than an economic bottomlime and have positive aims for communities and the environment."

It is a business mindframe hinged on keeping resources sustainable.

"The biggest benefit is your protecting your raw materials. Much of these resources are finite. We have to look at our production levels, our consumption levels to understand that we are demanding a lot from the environment. What we hope to happen is for corporations to sit up and take notice. There's a trend out there. Consumers are looking for brands that are good for the environment and if you capitalize on that trend it could be good business for them as well," said Valdes.

Through the “Deeper Luxury” study, researchers hope to challenge the luxury industry to put sustainability issues at the heart of its business strategy. Along with encouraging smarter consumer choices, advocates of sustainable production also hope that luxury companies look beyond profit, while seeing the good in investing in the preservation of the planet.