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."
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