This Vogue Business Index article is part of our Advanced Membership package. To enjoy unlimited access to The Long View from Vogue Business and bi-monthly Market Insights Reports and webinars, sign up for Advanced Membership here.
This is one of the six chapters comprising the Vogue Business Index: Spring/Summer 2023 edition and should be read in conjunction with the others. Please use the table of contents below to navigate between the chapters of the Vogue Business Index: Spring/Summer 2023 edition.
Key takeaways:
- Drastic anti-plastic measures: Regulators are tightening rules around waste, and brands are paying attention. Many luxury players are moving to phase out single-use plastic in their packaging, but policies on microfibre pollution continue to be lacking. Public and governmental concern around this issue will only grow, so brands need to be seen to be taking action fast.
- Inflation highlights wage problems: Fashion houses are still failing to make progress on supply chain transparency to the extent that just a small minority of brands have any policy on paying workers a living wage. With the cost of living increasing worldwide and luxury profits continuing to grow, brands risk coming under additional criticism unless they can demonstrate they look after the workers their contractors hire.
- Carbon neutrality loses lustre: Kering’s big step in committing to reduce absolute greenhouse gas emissions has set new benchmarks for the industry. Can fashion brands continue to grow while cutting their overall carbon footprint? Demonstrating that they can would be a huge step forward for the industry.
Waste elimination at the forefront of ESG efforts
Bottega Veneta is once again the leader of the Vogue Business ESG pillar, thanks to strides made in the winter 2022/23 edition of the Index, which saw the Italian brand adopt lifetime warranty for its products and launch its archival fashion platform Bottega Series. The brand saw no new initiatives this edition, but with a strong score from consumers on its sustainability measures, it maintained its first-place position.
Kering stablemate Gucci is catching up fast, seeing strong progress in ESG initiatives in the past six months. The Italian brand’s recent refresh of its sustainability strategy placed more emphasis on circular fashion. Recent projects have included a resale partnership with Vestiaire Collective and the integration of unused Gucci materials via a series of collaborations with creative partners such as shoe brand Vans.
Gucci’s efforts to deal with the sizable volumes of unused fabrics and leather have matched efforts from several other Index brands. Earlier this year, Coach launched a new sub-brand called Coachtopia, which uses scraps from the cutting room floor, minimising the use of new materials, while Valentino has started selling its deadstock fabrics to other fashion designers through Valentino Sleeping Stock. LVMH and several other fashion companies have also been using Nona Source, an online resale platform for “re-sourcing” materials, which launched in 2001 to achieve similar aims.
These steps make some financial sense as they turn an oversupply of materials into a sellable asset. However, when it comes to customers no longer wanting their items, only a minority of brands are investing in technology to deal with this more challenging issue.
One major exception here is Chloé, which has started adding digital IDs (Near Field Communication tags or QR codes) to its products. Customers are now able to scan items and instantly list them for resale on Vestiaire Collective. The French luxury B Corp is one of just over a fifth of brands (22 per cent) that has a fleshed-out policy on product take-back. Key to making this a success is the ease of resale — making it a smooth, convenient process for shoppers who want to responsibly refresh their wardrobes.
Brands in the Index would do well to pay attention to other fashion players, including Nike and Cult Rain, who are using NFC chips to pair products with NFTs in a bid to heighten authenticity, as well as create additional value across the lifetime of a product. NFC-chipped products can act as a token of certification, which makes it easier to ensure a higher value through resale and reduce the labour required from human authenticators. Index brand Hugo Boss has also recently started adding tags to some of its baseball caps to twin them with an NFT, but this is aimed more at integrating clothing purchases with the metaverse rather than explicitly increasing the value for resale.
The anti-plastic revolution
Beyond deadstock fabrics, the vast volume of plastic waste that the fashion industry generates through synthetic materials and packaging continues to have a harmful and enduring environmental impact.
Regulators have been stepping up efforts to tackle plastic waste in recent years. Draft EU plans will set limits on the amount of spare room there can be in an e-commerce parcel (an empty space ratio of a maximum of 40 per cent). California lawmakers have also taken aim against single-use plastic packaging, targeting both brands and plastic manufacturers. And, in April, environmental disclosure non-profit CDP, which has worked with 20,000 companies globally to report data since 2001, also began to ask businesses to start reporting on their plastic usage.
Since the winter 2022/23 edition of the Index, 12 additional brands have set firm timelines for the phasing out of single-use plastic in their packaging. Now, 50 per cent of brands are committed to removing it, with the latest date set at 2030 — however, the other 50 per cent are yet to set a timeline. These additional pledges have caused significant movement in the ESG rankings, with Burberry going up three places and Fendi moving into the top 10. Yet, while half of the Index brands have got ahead of regulations that are now being mandated at government level, several brands are still catching up.
The next step might be brands taking an active role in encouraging recycling of their packaging, which only a handful of brands (12 per cent) have made efforts to do. Plastic usage in the products themselves is also an issue that only a minority of brands are addressing by setting a specific policy — just four Index brands set out a full policy on microfibre shedding (not including Hermès, which only uses natural products as a policy), such as opting for bio-based materials as alternatives to synthetic materials.
Inequities in payment as inflation bites
High levels of inflation remain a problem in most parts of the world (though there are some signs that these are starting to ease). Luxury fashion consumers themselves are among the least likely to be affected by inflation, and there is little evidence to suggest fewer are buying goods because of this, except perhaps in the US. Those in the luxury supply chain most likely to be detrimentally impacted by these economic conditions are the supply chain workers, few of which are publicly guaranteed a living wage by the brands that benefit from their labour.
Consumers continue to care very deeply about how a fashion brand treats its staff, with 66 per cent saying that it is important that fashion brands ensure that a living wage is paid to every worker in the supply chain. That is a marginally higher share than for any of the other sustainability measures asked about in the survey, including environmental policies (65 per cent) and diversity and inclusion (65 per cent).
Yet, the share of brands that are ensuring this continues to be in the minority, with just 13 per cent having a living wage policy for supply chain workers. A further 58 per cent have publicly committed to the much weaker position of trying to guarantee that minimum wage laws are adhered to in the countries where their garments are produced. This seems to be a low bar for an industry that thrives on luxury price tags.
Most fashion houses are aware of the need to tackle pay inequity on some level — Kate Spade and Michael Kors are now part of the 45 per cent of brands that have published a full gender pay-gap analysis, for instance. Burberry, which is a UK Real Living Wage employer, brought forward a pay rise to help employees through winter. However, greater transparency around payment within supply chains should be the next step in ensuring further progress — currently, 96 per cent of brands do not disclose the share of workers that are paid a living wage.
New benchmarks are being set
The winter 2022/2023 edition of the Index saw the share of brands setting out science-based targets to limit global warming to 1.5°C increase to 50 per cent, from just 13 per cent in summer 2022. That shift was expected, given so many brands had pledged to do this as part of the UN Fashion Charter during the COP26 environmental summit in 2021. The share of brands limiting the degree to which offsets could be used as part of its climate targets also increased from zero to 28 per cent over the same time period. However, that progress appears to have stalled, with the latest edition of the Index indicating no new brands making progress on either measure during the assessment period. Reports suggest that the Fashion Charter — set up in 2018 to provide a clear pathway for the fashion industry to achieve net-zero emissions by 2050 — is also failing to meet its targets, with a significant portion of signatories losing their accreditation for not meeting reporting requirements.
While it is unclear whether the Fashion Charter will meet its main goal, it can point to all of the stricter sustainability targets set by luxury brands as some marker of success. As industry-wide momentum stalls, big unilateral steps by fashion businesses might need to be taken instead in order to keep fashion moving towards a more sustainable future.
Last year, Kering upended what effective emission reduction targets can look like by pledging to reduce absolute greenhouse gas emissions by 40 per cent by 2025. This is a measure of efficiency by brand rather than the industry standard, where the focus is on emission intensity by product. This is important because brands can theoretically become climate or carbon-neutral despite emitting more than they used to as production volumes grow. Placing a ceiling on the volume of greenhouse gas generated by the brand removes this get-out and sets a new benchmark for major luxury players in the industry. If Kering succeeds, it will represent a proof point of how luxury businesses can grow while still reducing emissions.
Case study: What does Gucci need to do to get ESG s top spot?
Gucci began the year by announcing its new creative director Sabato De Sarno and then, in March, revealed the path it was taking to tackle waste in the fashion industry. The Italian powerhouse brand is making tentative steps towards a product take-back scheme: consumers will soon be able to return Gucci bags in signature styles to stores in exchange for vouchers, with those bags subsequently being listed on Vestiaire Collective for resale. The brand is also utilising unused material through its Gucci Continuum collections and has launched a new hub in Tuscany dedicated to helping Italian fashion become more circular.
The brand is further lifted by the ESG programme set out by parent group Kering, which is incredibly ambitious relative to current industry standards. The top four brands in the ESG pillar are all Kering brands, and none from the luxury group finish outside the top 10.
Despite Gucci’s strides in ESG, it has yet to regain its top position, which it last held in spring/summer 2022. Gucci should look towards stablemate Bottega Veneta, which overtook the brand on perception of sustainability.
Analysis of what is driving consumer views of sustainability overall shows that brands perceived to have a strong heritage and that give the wearer a significant sense of stature are largely trusted by consumers to deliver products with a low negative impact.
After an enormous amount of work, Kering brands are finally being recognised by consumers for their sustainability. Saint Laurent, Bottega Veneta and Gucci all feature among the top 10 most sustainable luxury brands in the eyes of consumers. However, the relationship between brands’ actual public efforts on ESG and how sustainable consumers perceive them remains somewhat tenuous, with heritage-led brands such as Hermès and Chanel leading on sustainability perception despite weaker ESG policies than the Kering brands.
De Sarno’s first show for Gucci will take place in September, and it is then that we will see his vision for the 100-year-old brand. Leaning into this history, demonstrating masterful craftsmanship and delivering products that scream high stature are all creative approaches that will add to the perception of Gucci as a force for sustainability.
To receive the Vogue Business newsletter, sign up here.
Comments, questions or feedback? Email us at feedback@voguebusiness.com.
You can learn more about the Vogue Business Index and Advanced Membership here.
