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Luxury companies are taking a more comprehensive approach to sustainability. They see that ESG strategy and business strategy are now one and the same. Firms including Burberry, Hugo Boss, Guess and others have created environmental targets that include reducing Greenhouse Gas (GhG) emissions and paving a decarbonization pathway for the fashion industry using Science-Based Targets Initiative (SBTi) methodologies. Fashion icons, in particular, have long been associated with environmental activism such as Stella McCarthy pioneering new materials to avoid using materials like leather.

To decrease carbon emissions in their operations, luxury brands are looking at innovative solutions in their supply chains, traveling less and increasing digital capabilities, such as using virtual showrooms. Many are collaborating with others to promote fair trade, responsible business practices, and charitable causes. Meanwhile, others are championing social change, ensuring fair wages, and prioritizing diversity, equity, and inclusion initiatives.

The circular economy opens new doors of sustainable opportunity. For example, “close the loop” business models drive resale and rental of luxury goods, extending the life of luxury products, reducing waste, and decreasing environmental footprints through recycling.

Close the loop business models are a perfect fit for luxury because of timeless style, durable materials, limited editions, and smaller productions. Online options will add to this growth by offering greater access, ease, and convenience for sustainable luxury solutions.

Of course, there are risks involved too. Counterfeit products, brand degradation, and poor experiences from first-time sellers or novel sales platforms could occur. Brands can mitigate such risks by building, buying, or partnering with a third-party provider to develop those capabilities and own more of the lifecycle of their goods.


Transparency’s dual role

Visibility and traceability are the two main components of transparency. Visibility illustrates when a company has a comprehensive view of all parties that play a role in its supply chain, from farms and other suppliers of raw materials used in its products, through to the companies responsible for processing, manufacturing, distribution, and logistics. Traceability details when a company is able to trace all the materials and components used in a product from their origins, through each step of processing and manufacturing, to the final good sold to a purchaser. Supply chain transparency should not be associated with having to disclose all information to everyone. Ultimately, it remains up to each company to decide what data should be disclosed to whom.

Understanding the origins and heritage of luxury goods has long been part of their appeal, but consumers want certainty on the ethical sourcing and authenticity of these products. Both are top concerns. In fact, in a recent survey, 81 percent of consumers believe ethical sourcing and production of products matter and 20 percent admit they only started caring about these issues in the last two years.

Blockchain technology can help, which is why several luxury brands are investing in this technology. For example, LVMH, Prada, and Cartier partnered to develop Aura Blockchain Consortium to provide consumers with a higher level of transparency, which gives consumers a secure way to learn more about the products they buy.

With blockchain, consumers of luxury products will be able to confirm the origins and authenticity of their items. The technology secures the transaction, building trust and strengthening the brand-consumer relationship by validating the heritage, prestige, and storytelling behind the brand. It is the consumer’s direct connection back to the original source, helping to rule out the possibility of a counterfeit item.

The excerpt was taken from the KPMG Thought Leadership publication The luxury brand paradox.