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This is one of the five chapters comprising the Vogue Business Index: Winter 2020 Update and should be read in conjunction with the others. Please use the table of contents at the bottom of the page to navigate between the chapters of the Vogue Business Index: Winter 2020 Update.
There is now greater demand than ever before for brand commitment to environmental sustainability and labour equality from consumers purchasing luxury products.
Of the luxury consumers surveyed for the Vogue Business Index: Winter 2020 update, nearly a quarter of those consider a brand’s environmental policies a mandatory factor for them to make a purchase — the highest percentage to date and double the value measures in the Spring 2020 Vogue Business Index. The same share considers a purchase based on a brand’s commitment to diversity and inclusion — a factor that has come to the forefront over the past six months. With increased interest comes increased scrutiny, and companies seen violating environmental and social policies have been highly criticised in the media and even boycotted by consumers.
Consumers are increasingly conscious of the implications of their purchases on business practices. While low prices are an attractive proposition, consumers are becoming more concerned about fair employee pay throughout brands’ supply chains as a prerequisite when making purchase decisions. During the pandemic, panicked retailers have been scrambling to cancel warehouse orders from their overseas suppliers or refusing to pay for product to get ahead of their collapsing bottom lines. These self-preservation tactics have contributed to the global jobs crisis during the pandemic, with reports suggesting that mass redundancies are hanging over manufacturers in developing countries as brands continue to delay payment or demand discounts on an unprecedented scale.
Luxury brands have increased their focus on sustainable practices since the first Vogue Business Index released in May. Chanel continues on its path towards sustainability after revealing an extensive set of sustainability goals in March; in September, it issued a sustainability-linked bond, linking the interest rate paid to the achievements of sustainability targets. Burberry and Prada have also announced similar bonds, a clear signal of the industry’s commitment to increased transparency in their sustainability policies. Previous practices such as the destruction of unsold stock also appear to be a thing of the past. Despite the number of goods in stock in the luxury market up 32 per cent over the previous year at the height of the first wave of the pandemic, no luxury brands have made headlines for destroying stock to protect brand exclusivity during the same period.
As highlighted in the Spring 2020 Vogue Business Index, the communication of social and environmental initiatives remains an issue within the fashion industry. In part, this is caused by consumers being unclear about what sustainability actually means. While nine out of 10 consumers are aware of the term “sustainability”, 43 per cent feel they do not know enough about what sustainable fashion looks like. As more than half of consumers want to know more about sustainability, brands have an opportunity and a duty to help consumers understand the definitions of sustainability and their efforts towards sustainable fashion.
ESG insights
Brands are communicating firm commitments to their environmental policies, especially those with standardised measurement frameworks such as greenhouse gas emissions (GHG). Seventy-five per cent of luxury brands have policies to reduce, or at least compensate, carbon emissions — a 10 per cent increase on the Spring 2020 Vogue Business Index. Although there is still work to do, the industry is on the right path to reduce GHG emissions by 30 per cent by 2030.
Improvement has also come from issues such as water pollution, argued to have been forgotten by the fashion industry. Proper elimination of hazardous chemicals has seen the highest increase in adoption from brands, bringing the total to 78 per cent — up 30 per cent since December 2019. Part of this rise was due to LVMH’s commitment to the Zero Discharge of Hazardous Chemicals (ZDHC) programme in its environmental report published in June 2020. Kering, who also joined the ZDHC, has gone one step further by establishing an audit framework to verify its suppliers’ compliance.
Index newcomer Stella McCartney has been a pioneer in the luxury sustainability ecosystem introducing vegan products into its line. Having transparency with consumers as a mantra has paid off, over 33 per cent of its consumers are aware of its sustainability policies — the highest in the Index. The brand has also introduced Clevercare, a five-step labelling system to help consumers care for and prolong the life of their clothing. Seventy-seven per cent of brands encourage reuse, but many are still reluctant to build resale into their business model for fear of weakening their value. However, Stella McCartney, Burberry and Gucci have previously partnered with The RealReal as the popularity of resale is surging, particularly among younger customers.
Brands’ environmental policies have never been more important to consumers. Sixty-four per cent of consumers globally consider a brand’s environmental policies an important factor when making a purchase decision on luxury fashion products — with 24 per cent considering it mandatory.
Interestingly, sustainability has polarised consumers during the pandemic. Some have immersed themselves into it, making it a critical driver for purchase, while others have disregarded it entirely. Overall, however, sustainability has grown in importance across most markets since the Spring 2020 Vogue Business Index. China has remained stable overall, but fewer consumers see it as mandatory. The UK, US and India have seen consumer interest in sustainability soar, mainly corresponding with Extinction Rebellion protests and media coverage of activist Greta Thunberg and David Attenborough’s documentaries hitting mainstream audiences. India also saw a considerable 16 per cent surge, following recent supply chain scandals and production issues with water and air pollution.
All consumer demographics have witnessed a significant rise in interest in sustainability. But while 64 per cent of Gen Z and 58 per cent of baby boomers are willing to pay more for sustainable, eco-friendly products, this rarely translates into action with just 14 per cent of luxury consumers on average being aware of brands’ sustainability policies. In addition, 32 per cent of consumers claim that brands do not provide information on whether the products they want to purchase are sustainable — highlighting a missing link in communication between what brands are doing and what reaches consumers.
The recent Black Lives Matter (BLM) movement and other earlier protests have shown how labour equality remains a challenge for most industries, including luxury fashion. While a brand’s commitment to diversity and inclusion is important for 67 per cent of consumers in the US, where the BLM protests originated, India takes the lead after years of exploitation for cheap labour (74 per cent). Despite nine out of 10 brands having diversity and inclusion policies and 78 per cent communicating a belief in providing equal opportunities to all genders, the journey to achieving both remains long. Only 33 per cent of the brands in the Winter 2020 update have published or undertaken a gender pay gap analysis within their workforce and, in the UK, no major fashion house has published data on the racial wage pay gap. In addition, only 14 per cent of consumers are aware of brands’ diversity and inclusion policies or actions. As a first step, Gucci and Ralph Lauren were among the first to appoint senior diversity and inclusion executives last year, followed by more recent appointments at Chanel and Burberry.
Consumers are also observing and prompting brands to further act upon diversity and inclusion. Sixty per cent of consumers consider a brand’s commitment to diversity and inclusion important when making a fashion purchase, with nearly half considering it mandatory. Gen Z and millennials are those more likely to consider diversity and inclusion practices as mandatory. In response to consumer demands, 83 per cent of brands have taken initiatives in support of the BLM movement, in particular on social media — a small step, but one in the right direction. As with sustainability, the hope is that brands follow consumers demands with labour equality efforts being prioritised.
Key takeaways
- Brands’ adoption of sustainability policies has grown significantly. Effective communication of these efforts to consumers remains a weakness, with few brands making any progress.
- The resale market is growing exponentially, particularly among younger consumers. Brands should consider building resale in their business model to maintain control over their brand image.
- The majority of brands have started to weigh in on social issues important to consumers, from the impact of Covid-19 to the BLM movement. Responses via social media have been insufficient to generate sufficient consumer awareness.
Conclusion
While more brands are initiating environmental policies, consumers still do not fully understand the impact of the measures implemented. On average, only 14 per cent of consumers can tell whether a brand is sustainable or not, highlighting the limited disclosure of sustainability policies. As the communication of social and environmental objectives can be a minefield, following standardised frameworks can provide a solid foundation. While the limited availability of industry standards remains an issue, adoption of those in existence also remains low. Science Based Targets is gaining momentum with Louis Vuitton committing to it in September 2020 — the first brand from the LVMH group. Louis Vuitton joins a handful of brands that are fully disclosing progress against set targets for reducing GHG emissions.
To make up for the limited industry standards, collaboration among brands is key to clarify definitions and introduce environmental benchmarks. Kering’s Environmental Profit & Loss (EP&L) methodology is one such framework on which brands could start collaborating, as the measurement tool is available to all. Other larger initiatives also exist such as the Ellen MacArthur Foundation or the Fashion Pact; however, only 65 per cent of brands have committed to these, showcasing a need for wider commitment from industry leaders. As speed is fundamental to limit the upcoming environmental crisis, only a concerted effort from the whole industry can hit the UN’s GHG reduction target to keep global warming below 1.5°C.
As consumer awareness and knowledge of climate change grow, committing to environmental policies will become a prerequisite. Moving forward, brands need to clearly demonstrate their efforts to consumers as well as progress towards the sustainability goals set, as demand for products will be a determining purchase factor — a level of disclosure offered by 62 per cent of brands. Until the level of disclosure offers sufficient transparency and is consistent across all sustainability and labour equality policies, consumers will continue to be underwhelmed by brands’ efforts.
Supply chain transparency also continues to be a hot topic for brands, as they strive to be more ethical and gain emphasis in fashion CSR reports. Nearly half of brands now provide product traceability — up from 16 per cent in December 2019. This is an area where technology may come to the aid of brands. LVMH, in partnership with Microsoft and ConsenSys, is testing the use of blockchain to guarantee full traceability of its products and help consumers trace the provenance and authenticity of luxury products.
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