WORLD NEWS: Luxury brands fail to make ethical grade

FT.com - Financial Times
By Vanessa Friedman

Some of the world's biggest luxury conglomerates have failed to make the grade in a ranking of ethical and environmental performance.
A report released today by the WWF, the conservation group, entitled "Deeper Luxury", gives Bulgari and Tod's, the Italian jewellery and accessory companies, a grade F for their "environmental, social and governance performance and reputation" in 2006 of the 10 largest publicly traded luxury conglomerates.
Their French, Swiss and US competitors do not fare much better. PPR, which owns Gucci Group, received a D, as did Swatch and Richemont, the Swiss watch and jewellery groups.
The highest grade - a C+ - was awarded to Hermès, L'Oréal, and LVMH.
There is no established methodology for assessing the industry's performance in the ethical and environmental area. To arrive at the grades, WWF collected data from analysts Ethical Investment Research Service (EIRIS), which uses company reports and information to track performance, which it may follow up with a questionnaire; and Covalence, a company that tracks public perception of a company through news reports.
The report's co-author An-thony Kleanthous, a senior po-licy adviser at WWF, said most of the luxury companies did well in some areas but were weak in others, hence the low overall scores.
PPR, for example, owns Puma, which is strong on em-ployment practices owing to the sweat shop scandals in the sports wear industry in the 1990s, but does little re-garding carbon emissions. Tod's poor showing was due to its failure to re-spond fully to EIRIS questionnaires. The company de-clined to comment yesterday.
"Honestly, I was surprised none got more than a C+," said Mr Kleanthous. "I think it comes down to the fact that luxury companies do not consider their products to be particularly damaging to the environment and there is a certain complacency in regards to the ex-plosive growth of new markets. They just don't think people are going to be asking the questions. But there has been a paradigm shift and that is just not true."
According to a recent issue of the New York-based Luxury Institute's Wealth Report, in a survey of 950 high-income American adults, "57 per cent . . . say they would pay higher prices for a brand that is recognised for socially responsible practices" and "70 per cent . . . seek out brands with superior environmental records".
"It is true this has not been a focus of PPR in the past, though that has now changed," said Laurent Claquin, PPR's senior vice- president for CSR, a department inaugurated only last September.
Mr Claquin said the department was created because PPR's chief executive, Francois-Henri Pinault, wanted to "signal his desire to do something serious in these areas", not because of the WWF report.
Mr Kleanthous said Richemont took steps in a similar direction last summer, releasing its first CSR report. The group declined to comment on the WWF publication.
The WWF report was inspired by "a desire to look at an industry that has a heavy impact on culture and the way people think", said Mr Kleanthous. "We are not trying to criticise these companies but to make a general point: responsible business practices can be a value driver, but they need to be systematically embedded in the DNA of a company," he added. "Comparison can be a powerful motivation to change."
Tiffany, Coach, Bulgari and Swatch did not return calls for comment. Hermès and Richemont declined to comment but a spokesperson for L'Oréal said: "We welcome all reports from respected organisations in this field as they are a useful tool for progress."
The spokesperson said that L'Oréal published its own sustainability report and was listed on the FTSE4 good sustainability index.
Hugh Morrison, a spokesman for LVMH, said: "We have invested a great deal in understanding the issues and developing strategies to be best in class - we certainly expect future surveys to show our continued progress in this field."
Have your say: Can luxury brands be ethical?

'Luxury Ethical' EU Consumer?

Dear All,

What does it mean to be ethical? The term ethical is very wide and often used in a very loose fashion. Primarily to tap into the consumer conscience in hope for a sales uplift to reposition the brand qualities. The overall initiative of WLEC is in put the power of consumer choice back in their hands with knowledge and understanding on the terms of 'sustainable ethical economics'.

The following top-line list is a cross-board of ethical initiatives based upon internal and external business practises within an organisation.

The World Luxury Ethical Council: Ethical policy platform

Community Relations;
Corporate Governance;
Donations and Payments;
Environment;
Human Rights;
Marketplace Ethics;
Workforce.

Mintel Consumer Research clearly shows consumers want to know which companies respond to the ethical policy concerns in their everyday business. However, in the EU, the majority of people are dubious of the 'ethical' and 'responsible' claims made by business. 71% want more information on companies to decide for themselves whether a business is ethical or not.nMintel research shows that 63% of the EU public is prepared to pay a little extra for luxury products that meet higher ethical standards. The problem is there is little consensus over what constitutes 'responsible ethical business practise'. Across the board consumers are dubious about the claims businesses make; further consumer research in the EU market shows that:

68% believe companies pretend to be ethical to sell more products and services;

73% think it's not enough for companies to simply say they are ethical: but prove it;

82% believe its better for a company to be honest with consumers rather than pretend to be always squeaky clean.

The above ethical policy list will be an audit process conducted by 3rd party organisations which are independent of the World Luxury Ethical Council. There are presently 2 organisations which have agreed to work on the screening process, one for the internal audit and the other for the external audit. Upon which a rating system will then be put into place to show the consumer where the audited organisation ranks. Each ethical policy initiative will have its own ranking and some will be higher and lower than others. Its then up to the organisation which has been audited to maintain or improve on the areas which have been rated. The information will be provided to the consumer at large and their purchasing behaviour will decide to support the product or service in terms of the ethical standards set by the audited organisation. Rankings are not static, as the audit process is an annual process to maintain membership to the WLEC.

Bottom-line, I would like to be able to put the power of consumer choice back in their hands based on knowledge re: ethical standards, which supports the overall principle of 'sustainable ethical economics'. I don't expect all organisations to be perfect, but I believe we should provide opportunity in two areas:

best practise sharing
setting industry standards

All the best

Andreas Lim

International Herald Tribune (IHT)

Dear All,

The World Luxury Ethical Council had a good article over the weekend discussing the initiatives to raise the industry standard bar for ethical business practises within the luxury market.

Please have a read and leave a comment if you would like. Thank you all for your continued support.

All the best
Andreas

Are wealthy consumers ethically inclined?

The World Luxury Ethical Council (WLEC) a non-profit organisation supporting luxury ethical brands, supports the surrey conducted in October by the Luxury Institute of New York. Found 57 percent of high-income adults surveyed (with an average household net worth of £1.6 million and average income of £154,000) would give greater consideration to purchasing a specific brand that they recognise to be ethical in their business practises. Nearly two-thirds (64 percent) of the wealthy rely on magazine, newspaper and web articles to learn about a luxury ethical brand efforts; 48 percent learn of initiatives through conversations with family and friends.

The 'Luxury Ethical Brand' represents the wealthy consumers who are prepared to pay a "significant price premium" for luxury goods and services under a brand name, which is recognised for ethical business practises. This represents internal (employee respect and pay), and external (product sourcing) initiatives according in a recently commissioned survey of high-income consumers.

Rumah, a luxury ethical homeware brand is experiencing a sales uplift supporting their ethical business practises selling at a significant price premium for high quality handcrafted 100% cashmere blankets and throws made in Nepal. Founder Andreas Lim of Rumah stated, "I am very pleased to see Rumah's business ethical platform has proven to be successful in terms of the aspirations which we try to achieve as a luxury ethical homeware brand with our trading practices. Rumah is not just about the talk but doing the walk. It is not always easy and shortcuts are tempting, but we believe in what we're doing here at Rumah and the effort is worth the prize to help set the industry standard."

Ten percent of those surveyed say they would pay a "significant price premium" for luxury ethical brands and this tendency grows greater with wealth and income. Wealthy consumers between 21 and 44 years of age also have a strong desire for being willing to pay significant premiums for luxury ethical brands, with 14 percent of the younger wealthy indicating that they would do so. High ethical standards can also bring higher selling prices for luxury ethical brands. More than half the wealthy consumers (56 percent) say they would pay a premium prices for luxury ethical brands, which represent the ethical business practises they trade on. Women once again are willing to pay for outstanding ethical business practises and higher income earners of £250,000+.

The first popular criterion to determine a luxury brand has ethical business practises is its commitment to local development in the markets they work and produce. More than half (55 percent) of the wealthy consumers surveyed overall and 61 percent those worth at least £3 million demanded this of a luxury ethical brand. Local development is an especially important contributor to a luxury ethical brand reputation for wealthy individuals younger than 45. While 65 percent of wealthy individuals say, they would seek out and purchase luxury ethical brands that excel in business ethics, values, policies, and practices. Seventy-eight percent stated they would not buy a luxury brand they perceive not to have a passing ethical grade. Women tend to avoid ethically challenged luxury brands representing 83 percent, which would not purchase them.

Environmental concerns are the second most popular way for a luxury ethical brand to present its responsible credentials to wealthy consumers. Nearly two-thirds (64 percent) of those survey say that luxury ethical brands demonstrate their environmental concern, a strong belief especially prevalent among wealthy consumers 44 and younger. Eighty-one percent of the wealthy consumers overall cited a commitment to reduce the carbon-footprint produced per unit is the most popular way in which a luxury ethical brand can represent its environmental image. The penalty for failure to uphold high environmental standards is also high - 75 percent of the wealthy consumers would not buy a luxury brand that did not show concern for the environment.

The third most popular criterion is philanthropic activities, which a luxury ethical brand supports and encourages of which 60 percent of wealthy consumers say they seek out such brands. Among the wealthy 79 percent want to see a luxury ethical brand commitment to community development, and 75 percent believe that a philanthropic brand should donate a percentage of profits to charity (especially popular among women, younger respondents and those earning more than £250,000). Women and high-income earners are the two groups most likely to pay a premium for a luxury ethical brand with a respectable philanthropic history. However, philanthropic work does not necessarily always translate into a price premium. In fact, a majority (55 percent) of wealthy consumers say that even though they may admire a luxury ethical brand's philanthropic record of accomplishment, the goods and services must still be price competitively and not a hiked-up margin added to the retail price to cover philanthropic activities.