LVMH: Marrying Luxury and Sustainability

Sustainability
24/01/2017 10:41

Sustainability has entered the mainstream in a signficant way, with young companies often making it a prime selling-point while well-known retailers, consumer products giants, and tech firms cater to consumers who increasingly care about sustainability. Luxury brands and their products, almost by definition, do not seem to be prime candidates for sustainability campaigns, but LVMH is looking to change that intuition in their own corner of the market. Dayana Vazquez details for América Retail the efforts of the luxury brand to build a robust sustainability program across their product line, covering fashion, wine and spirits, cosmetics, and jewelry. Vazquez explains, "The center of the corporate program is a framework it calls LIFE (LVMH Initiatives for the Environment), a “strategic backbone” for programs that address nine environmental challenges. LIFE focuses attention on the full life cycle of products, from supply chain to production excellence to designing longer-lasting and repairable products. Each brand’s strategic business plans now include a LIFE plan, with actions and targets laid out for the next five years." 

Vazquez highlights three areas of LVMH program where she detects, "great impact and innovation": managing carbon and energy, building a connection with customers around brand purpose, and working closely with suppliers. She writes, "Since 2001 LVMH has studied its life cycle carbon footprint ... The company has aggressively reduced its own energy demand and ramped up the use of clean energy. By the end of this year, 100% of the electricity for LVMH facilities in France will be renewable." She is particularluy impressed with LVMH's use of an internal carbon fund, "The most innovative part of LVMH’s carbon strategy." She explains, "Where others have collected funds internally to create a central pool of money for carbon-reducing projects, LVMH instead requires every maison to spend €15 for every ton of carbon emissions (either on-site or from grid-based electricity) on efficiency and energy reduction, clean energy, or research to understand that brand’s greenhouse gas emissions better. Like its carbon-taxing peers, LVMH has created a powerful virtuous circle of emissions reductions. In total, LVMH has invested about €6 million in the first year of the program."

LVMH is convinced that Millennials care about sustainability more than previous generations, and believes that its efforts on this front will connect with consumers. Charles Gibb, Belvedere Vodka's CEO, told Vazquez, “Until recently, marketing would focus mainly on product and brand image. But now people look for whether you’re both socially and environmentally responsible. People look at brands and ask what they do for the world. If you don’t do this stuff, you’re not a modern brand.” The third area highlighted is supply-chain sustainability, which is becoming increasingly common. Maggie Henriquez, CEO of Krug Champagne, sees the quality of the crops, and the care of the growers, are key to the success of the business. Henriquez started a program to work with growers on sustainability and quality, going plot by plot to review harvest times and implement modern best practices. Some of LVMH’s other businesses, such as jewelry brand Bulgari, have also implemented supply chain tracing programs.

Sustainability, however, does come without its share of challenges. The most common perhaps is the bottom line, such that short-term pressures on financial performance often pose a threat to sustainability initiatives, as change takes time and the results are typically longer in coming. "However," writes Vazquez, "it’s a bit easier for the brand CEOs to stay focused on the long term when some of the maisons are three centuries old. They have to plant trees today, for example, to have the right wood for casks 150 years from now." As Gibb puts it, “If you’re not thinking about the brand over a 10-year period, you’re not doing your job.” Concluding, Vazquez writes, "The challenge, then, is to make sure sustainability and beauty are inseparable. LVMH is on the right track, talking about sustainability as core to excellence, quality, and brand image — and central to how the company operates." As Sylvie Benard says, when “the marketing director, financial director, logistics director, and so on take the environment into account when making a decision, then life will be beautiful.”